Hello and welcome back to Mortgage Advisor on FIRE and the first in a new short series of posts which I’m calling Letters to Oana. This series is designed to break down FIRE to the absolute basics and give someone with no prior knowledge about investing enough information to manage their financial future.
Disclaimer
This series, like the rest of my blog, is not advice for my readers. This is for entertainment and discussion. If you want advice, I suggest speaking with a qualified professional. In no way should my blog be taken as advice or a recommendation.
Background
Two things prompted this post; Oana asked me for a basic “how-to” guide for investing. She wants a simple step-by-step guide for what to do with money and investing should something happen to me. I think this is a great idea and rather than writing it out for Oana alone, I thought it would make a good post that would interest others.
The second thing was a discussion on a recent episode of The Skeptics Guide to the Universe podcast. In the episode, they talked about how someone who is an expert in a subject can be thrown when asked a question by someone with little or no knowledge. The idea is that the person asking the question doesn’t know enough to ask the right questions, so the expert has to spend time working out what is being asked or find the errors in the question.
I told a friend of mine, who is seemingly a source of infinite knowledge about investing, about this series. He suggested a TLDR for this post, which I’ll now share:
1 – Read The Simple Path to Wealth.
2 – Invest in VAFTGAG.
3 – Ask him for advice.
Being knowledgeable about a subject isn’t just knowing the answers, but also knowing the right questions to ask.
Anyway, on to the post itself.
So you have money to invest…
I’m going to break all this down using a hypothetical scenario in which I’ve passed away and left my assets to Oana. She will then have the task of investing and managing those assets. For simplicity’s sake, I will use a nice, easy figure for the total value of the assets; £200,000.
Assuming this is all left to Oana as a cash lump sum she will have several decisions to make. The first is whether to use the money to invest or to put towards paying off the mortgage. If she can afford the mortgage payments, it would generally be better to invest the money. A mortgage will be repaid eventually, but the money invested can earn a return indefinitely.
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So, the task now is to decide how and where to invest. To arrive at an answer, Oana will need to ask herself a few questions…
When does she want to access the money?
What is the purpose of investing?
I asked Oana this question and she said it would be to retire early, which answers both the above questions. For someone who wants to pursue FIRE in the most basic way possible, it’s a pretty simple exercise which can be broken down into four distinct stages. I intend to break each stage down into a dedicated post. This one focuses on the Accumulation of Assets.
Accumulation of Assets
The ISA Bridge
Drawing down your SIPP
Accessing your State Pension
Within each stage, there are separate phases which I’ll expand upon later.
Accumulation of Assets
It’s important to ensure that any investment plan is built on a solid financial foundation. You need to make sure that you have spare cash each month once you have accounted for the basics of daily life, such as mortgage/rent, utilities, grocery shopping, and so on. Once you have an idea of how much your cost of living is, you will know how much you can invest.
As part of the above exercise, you must be honest about how important FIRE is to you, and how much you are willing to sacrifice to achieve it. If you are willing to approach FIRE with all guns blazing, you have to accept that your standard of living may be lower or more basic whilst you are accumulating assets. A higher savings rate, as a percentage of your income, will result in achieving FIRE sooner. A lower savings rate means it will take longer.
Another consideration when starting is how much you think retirement will cost. According to the PLSA, a single person could have a comfortable retirement on £31,300p/a. But how to get that level of income?
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The 4% Rule
The 4% rule is one of the most important concepts to understand in FIRE, but it’s important to note that the figure of 4% is not necessarily applicable to everyone. The concept I’m talking about is the Safe Withdrawal Rate.
Imagine you have a pot of money, say £500,000, to last for the rest of your life. This money is invested in a stocks and shares ISA or a pension; it doesn’t matter for this example. The main point is you have this lump sum. If this money is invested, it should be growing as the underlying investments grow.
Figures vary, but an assumed average rate of growth is estimated to be between 8%-10% per year. It will not be a smooth increase, but instead will see peaks and troughs over time with some years seeing incredible gains and other years resulting in losses. The idea is that averaged over time, you would expect your investments to grow by roughly 8%-10% each year.
So, taking this a step further, if your investment is growing at 8% and you are withdrawing 4% from your investment each year, you should still expect the value of your investment to grow whilst you are withdrawing from it. The idea is that you have a pot of money that can, in theory, last forever.
Historic Data and Success
Using historic data the FIRECalc website can run projections based on any withdrawal rate to see how likely it is to succeed. £20,000 withdrawn from a £500,000 pot should succeed 95% of the time over a thirty-year drawdown period. The average value of the pot at the end of 30 years is approximately £950,000. (Note: this is an average and in many scenarios, the pot would be depleted by the end of the 30-year term. Having £0.01 at the end of 30 years is still a success).
Different withdrawal rates have different success rates, as you would expect. If you decided to live off £17,500p/a, a 3.5% withdrawal rate, FIRECalc suggests this would work 100% of the time. Moving in the other direction and using a withdrawal rate of 4.5% (£22,500p/a) sees the success rate fall to 83.9%.
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The thing about withdrawal rates is they are not set in stone. You may decide to have a higher rate when you are younger, and a lower one as you age. It’s also important to remember that failure isn’t an instant thing. If you are using a withdrawal rate and you see your balance decreasing over time, then you can always readjust your plans to compensate.
Coming back to the figure from the PLSA of £31,300 for a moment, you would need a pot of £782,500 to achieve that income with a 4% withdrawal rate.
Why am I spending so much time talking about the SWR? It’s because you need to have an idea of what value you are aiming for if you want to invest to retire early. The goal will shape the journey.
So what about the accumulation of assets?
We have a starting point; £200,000. We have a goal of growing that pot to £782,500. Knowing Oana, she would never want to give up work entirely. Instead, this exercise is more about FI than it is about RE. Based on that, a 4% withdrawal rate would probably be ok. If she wanted to be FI in fifteen years, what would she need to do?
Assuming an 8% growth rate, Oana would need to add £455p/m to the pot to increase the fund value from £200,000 to £782,500 in fifteen years. That is not unrealistic, but this calculation is too simplistic. Now we have an idea of the rough figures involved, it’s time to break them down using the stages I mentioned earlier in the post.
That’s all for this post, but I will return next week to discuss the ISA Bridge. Thank you for reading.
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Hello and welcome back to Mortgage Advisor on FIRE. This week I discuss the CHILL movement that was mentioned by someone on Reddit, and give some suggestions for how I would change the world of work. I also give a shout out to a really cool YouTube channel I’ve recently discovered.
Weekly Update
As I write this I’m coming off the back of ten days working out of the last eleven. It’s just a consequence of how my schedule has fallen with the bank holidays. I’m ready for a rest now as the last few days in that stretch of work were difficult. One bit of exciting news, at least for me, is that I’ve acquired two Lego sets I’ve been after for a long time. I was able to snap up the Venator model at a massive discount, and I was given a nice surprise gift in the Rivendell set. Now the challenge is to work out where I can display them.
I’ve had a few medical appointments recently and it looks like I’m back in the diabetic range, but only slightly. I need to tweak my diet and get some exercise done. The worry is that the last few times I’ve started exercising, my joints just decide to pack in. It’s not as though I’m doing anything particularly strenuous either, but it’s widely known that autistic people tend to struggle with joint pain more so than the NT population.
A friend suggested a little weight loss challenge and although it’s still in the early days, it seems to be making a difference. I’ve dropped a couple of KG since we started two weeks ago. The aim is slow and steady progress. Oana and I are looking to go back to Norway next summer, and I’d love to be in decent shape for that.
It seems that not a day goes by without someone on social media claiming that “tipping culture” is getting out of control in the US. It’s not as contentious an issue in the UK but it’s still something that causes debate. I don’t mind tipping for good service in a restaurant. It’s only fair to show appreciation for those working in the service industry. It shouldn’t be expected though.
One morning this week we popped into a new local cafe to grab a drink to take out. We ordered and then a card machine was placed in front of me, with the staff member telling me I can choose what tip to leave. A tip, for getting a take away coffee. For me, that’s a step too far.
Kygo
Last year we went to London to see Kygo at Gunnersbury Park, and this year he’s coming to the O2. Obviously this means we are having another trip down to the capital. It’s more expense than we’d like, but we’ve decided this will be our anniversary and Christmas present to each other. I’m a big fan of his work, but Oana is on a whole other level of fandom.
If you aren’t familiar with Kygo’s music you should check out the song Freeze. The video on YouTube is great.
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YouTube
On the subject of YouTube videos there are some great channels I’ve been watching recently. My favourite new(ish) discovery is the Cool Worlds account, which is run by the Department of Astronomy at Columbia University, led by Professor David Kipping, pictured below:
The videos deal with a range of questions relating to astronomy, physics, and science in general. Two of the most powerful videos the channel has put out are works of fiction, though, which are used as vehicles to explore different scientific concepts. The first of those videos tells the story of the first civilisation to emerge in our galaxy. It’s moving, thought-provoking, and a work of art.
The First Civilisation to Emerge in our Galaxy
The second video I’ll mention tells the story of the Earth, from its birth to its demise.
Watching the End of the World
I found the third video, Living Past Eternity, to be poignant and powerful.
Living Past Eternity
I spend a lot of time thinking about the nature of the universe and reality. There’s one thought that makes my brain go into error 404 territory, and that is trying to imagine nothing, i.e. the absence of anything and everything. This leads to the question, “why is there something rather than nothing?”
Don’t even get me started on the heat death of the universe because it’s sure to put me in a melancholic mood for days.
This Week’s Tory Clusterfuck
I came across a great quote today about Rishi Sunak and the Tory party;
“Sunak has realised something needs to change, although he yet hasn’t realised it’s the Government. Which explains why we were subjected to yet another relaunch of the Prime Miniature, a man who has already been through more relaunches than the Space Shuttle.”
We’re less than a year from the next General Election and it’s going to be interesting and, I fear, frustrating. I would hope that the UK electorate have finally woken up to the reality that the Tory party is at best incompetent, and at worst intentionally evil. The way the country has been run since the Brexit referendum, in particular, has been a joke.
Cameron pushed through the referendum, and then took his ball and went home when the result went against him. This led to the May government and I’m convinced to this day that the only reason she was in office for so long was because no one else wanted the job when we were trying to negotiate the Brexit deal.
Then we had Alexander Boris de Pfeffel Johnson, better known as the floppy haired fucker who led this country through Covid as smoothly as the guy who tried navigating the Suez in the Ever Given. At least with the 2021 Suez Canal blockage thousands of people didn’t die unnecessarily.
I’m not going to list all his failings because I’d have to upgrade my plan with WordPress to account for the volume of data we’re talking about. So I’ll just move on to Liz Truss and Kwasi Kwarteng. If I could ask this double act one question, it would be, “what the shit?”
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I mean, in the space of fifty days they nearly brought down the pension system. Their acts led to interest rates rising at a much faster rate than many predicted. It was an absolute clusterfuck. We need to get the Tory party out and give the country a chance to reset and move forward.
Looking Back
Part 11 of the Looking Back series is now live, and you can find it here.
What I’m Doing
TV: MasterChef (BBC).
Audiobook: Fluke by Brian Klaas (audible).
I’ve talked a few times about the role that chance, or luck, plays in our lives. Too many successful people fail to publicly acknowledge the impact that luck had on their eventual success. I get it; people want to take credit for their achievements, but I also think a little humility and acknowledgement towards good fortune would be a good thing.
Life is full of “sliding doors” moments where one tiny change could have huge consequences further on. We are always talking about how small changes in history could have led to significant differences in the present, but we hardly ever consider the impact that small changes now could have on our future.
All these things are discussed in the audiobook I’m currently listening to, Fluke. I’m just over halfway through the book and it’s fascinating. One of the best examples of chance impacting someone’s life was the incident where a man was swept out to sea in Greece. The thirty-year-old, Ivan, battled to stay afloat but ran out of energy and was about to be pulled under the surface when he spotted a football floating nearby. He used the last of his energy to swim to the ball, which he then clung on to for almost an entire day before rescue teams recovered him.
When the story was reported in the news, a mother recognised the colourful ball as belonging to her sons who had been playing with it over a week prior when they lost it in the sea. A man’s life was saved because two kids miles away lost their football.
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Investment Income in 2023: £2,386.69 (target £10,000).
So, it would appear I forgot to update my figures on last week’s post. I’ve noticed the error and corrected it, but it’s a little embarrassing I didn’t notice before. It happened because of the way I write this blog. I use the previous week’s post as a template, where I delete all the info except titles, headers, and other parts that remain week to week. I must have been distracted or something because I left the figures in from the week before. Apologies for any confusion caused.
The market is flying right now and my figures, after I double checked I had the right week’s, are looking great. My pension has increased by approximately £5k in ten weeks, which is incredible.
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BTL Update
We’ve got lots of forms to fill out as part of the conveyancing, and the forms are annoying. So much information that I don’t know and it’s one of those jobs that feels a bit overwhelming. I’m going to tackle this job on Sunday.
The CHILL Movement
I saw an article mentioned on the FIREUK subreddit, which linked back to the Daily Fail Mail. The columnist, Andrew Oxlade, coins the term CHILL Movement, which means Career Happiness Inspires Longer Lives. No, I’m not shitting you. Yes, that’s what the article says.
The thing is, when you are a director at a big company, much like Andrew is, it’s probably quite easy to lose touch with the majority of people that work fairly unfulfilling jobs where they have little autonomy. Whilst it’s great to love your job, the reality is that most people can only hope to land a job that they can tolerate.
I must stress that there’s a difference between one’s feeling towards their role and their feelings towards their employer and/or colleagues. It’s possibly to dislike your job, but like your employer, and respect your colleagues.
Anyway, if you are chasing FIRE the chances are you dislike your job or career. Afterall, if you liked your job you may not be as motivated to seek alternatives like FI. So telling people who are chasing FI to seek happiness through work seems to be missing the point. At best it’s just some bullshit advice from someone out of touch with the mood of the room, and at worst it reminds me of the Nazi phrase, “Arbeit macht frei”, meaning “work sets you free”.
I’m not comparing Andrew Oxlade to the Nazis, as I don’t know hardly anything about him. However, the point remains that the CHILL acronym immediately reminded me of that Nazi motto.
Most jobs are, by and large, a bit crap, but we find the positives where we can. Telling someone who is chasing FI because they are unsatisfied with the career options available to CHILL, is like advising a depressed person to try not being depressed.
In my experience, most people don’t have a career; they have a job. A career assumes you are progressing towards an end goal but with so many people living on the borderline of poverty, these people are only able to concentrate on progressing to their next pay packet. Telling these people to CHILL is just insulting.
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My circumstances are a little different because my desire for FI is not linked specifically to a single job, but rather the constant struggle of being autistic in world designed for, and built by, neurotypical people. I can’t change the game, so the best I can do is get to a position where I no longer have to play.
What changes would I make to the world of work?
For all the jobs that require work to be done at specific times, i.e. emergency services, restaurants, bars, and cafes, there are plenty more that could be done at any time, such as data analysis. The only reason we have a set working day running from 9-5 is because that’s what we’ve done since Henry Ford pushed for it in his factories in the early 1900s. So, because some dude over a century ago wanted his workforce to build cars for eight hours a day, millions of office workers now work the same shift pattern.
Many studies have shown that the time it takes to complete work will inevitably expand to fill the available time, and this is known as Parkinson’s Law. It’s also been demonstrated that companies that switched to a four-day week generally see no drop off in performance, and it’s been claimed by many employers it made a positive impact. There’s nothing stopping us, as a society, just agreeing that a five day working week is too much.
I also think that home working, where possible, should be the standard, with people able to opt-in to working in an office if they want to. The amount of traffic that could be reduced is not insignificant, but the main bonus of working from home is the time it frees up.
The average commute to work is thought to be around half an hour each way. If you start work at 9am, and have a thirty minute commute, you probably have to wake up sometime around 7am-8am. Then, on your way home, you don’t just open the front door and start winding down. I know when I used to work in an office, it would take up at least an hour and half either side of my working day during which I was not being paid and was unable to do anything else.
An eight hour day suddenly turns into a ten hour, or more, day. Over the course of a standard five day week, it’s like you’re working an extra day just prepping for work, and recovering from work.
When you work from home, you have much more free time available. That is the biggest bonus. It’s not about avoiding people, or being lazy. It’s about having more time and mental energy to put towards the things that matter. It also means that employees are not getting to work stressed because of the traffic, the weather, or some other issue related to commuting. I know that I’m much less anxious starting my working day now than I was when I worked from an office.
It’s not surprising that most of the voices I hear promoting a return to the office are from those who a) can generally rock up at a time of their choosing, b) are well paid and/or in senior positions, and c) have their own dedicated work space or office.
This whole debate is just another example of us doing things because we’ve always done them this way, rather than stopping and asking “why?”
That’s all for this week. Thank you for reading, and please remember to like, share, comment, and subscribe. If you like my content, please consider making a donation towards the running costs of the site on the form below.
Hello and welcome back to Mortgage Advisor on FIRE. We are now in the first full week of 2020 and it is still so bizarre to think we are in the year 2020. In some ways, it feels as though not much has changed in the world since 2000, which as a child I always thought was so futuristic.
In other ways the world is unrecognisable. We now have extremely powerful computers that fit inside our pockets with access to the entirety of human knowledge. We have wearable tech such as watches and VR headsets. Yet, despite decades of awareness we are still destroying our planet. The fires in Australia are heart breaking and although the situation is more complex than climate change = fires, the fires are a stark reminder of how fragile our planet is.
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For all the despair, I have some hope that technology will be our saviour. Turning most road vehicles to electric with an increase in nuclear and green energy is the way forward. It’s going to be a generational project and a race against time to see if the technology can integrate itself before we reach a critical tipping point in the planet’s ability to heal itself.
I still believe we can reverse climate change but I don’t think we’ll achieve it before it has major impacts on our way of life. Some of the most heavily populated parts of the world are going to be devastated as sea levels rise. It feels futile to ask people to make small changes to their behaviour when the overwhelming majority of carbon emissions come from a small group of countries and companies. We need a breakthrough in fusion technology.
This week I will be discussing another story I read in The Guardian about how to manage debt in the new year. I will also discuss a concern regarding my upcoming purchase of BTL property with my business partner. First, however, I will update you on my week and look at a significant improvement in my finances from last week.
Weekly Update
I did something this week that some readers may see as controversial. I placed a bet, but it’s not like any bet I’ve placed before. It’s a bet on myself. There is a company out there called Healthy Wage which allows you to bet on your own ability to lose weight. You must have your weight verified through a video recording process and then you choose how much you want to lose and over what period, and Healthy Wage offers you odds.
This didn’t go according to plan. The weight loss came to a grinding halt as Covid-19 swept the globe, and I experienced a pretty awful year all in all.
I thought about whether this was something I was comfortable with, as someone who has had issues with gambling in the past, but as I thought through it, I realised that this type of wager has a fundamental difference from betting on football. With a bet on the football, I have no control over the outcome. It is a gamble in the truest sense of the word. With this weight loss bet, I am responsible for the outcome. It is completely on me. There is no luck involved, just determination and effort. I need to lose weight as the last couple of years have hit me hard.
In 2017 I completed a stationary bike ride for charity and by the end of that challenge, I weighed in just under 95kg. When I placed my bet with Healthy Wage, I was 119kg. I aim to lose 30kg in seven months; roughly a kilo a week. If I succeed, I more than double my money.
Spoiler: I didn’t succeed.
To help me lose weight I am trying intermittent fasting and time-restricted eating. With intermittent fasting there will be days where I drastically reduce my calorie consumption and, on all days, I will adhere to time-restricted eating. With TRE you limit calorie consumption to a set time window each day. You can choose to do 12/12 where you eat within a twelve-hour window and fast for twelve hours, or 8/16 where you eat within an eight-hour window and fast for sixteen hours.
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I am employing a 10/14 split. I eat within a ten-hour window and fast for fourteen hours. My fourteen hours start with my last snack of the day at approximately 10pm and ends at 12pm the following day. When fasting you can drink as much water, or black tea/coffee as you want. I’m finding it easy so far and, in a week, have dropped 3kg. From what I’ve read this is quite normal for the first week or so.
I’m back in the position of needing to lose weight to bring my diabetes under control. It’s so difficult in a world where the majority of available food is ultra-processed, and where fresh food is expensive. There’s also the fact that when you are working full-time, there’s not a lot of time left for preparing fresh, healthy, meals every day.
Financial Update
Premium Bonds: £11,500 (up £1,575 from last week).
Stocks and Shares ISA: £7,745.46 (up £292.86 from last week).
Credit Card Debt: £1.10 (up £1.10 from last week).
Loan Debt: £3,800.49 (no change from last week).
F**k It Fund: £1,161.85 (up £10 from last week).
Total Wealth Figure: £193,908.31 (total assets including residence valued at £173,501 by my lender) minus £138,080.70 (total debt including residential mortgage) equals £55,827.61 (up £2,297.68 from last week).
I received £1,800 that I was owed this week which allowed me to significantly increase my deposit fund held in my Premium Bonds. The rest of the £1,800 helped to cover a couple of expenses that cropped up, but I’m in a good position to hit the amount needed to complete the purchase of our first BTL.
Financial News
Another story in The Guardian caught my eye this week. The story is titled: New year money: how to regain control of your cash.
This story is another example of banal reporting when it comes to money. I could have predicted the content with a high degree of accuracy before reading it. There is the initial set of statistics reporting how many people are in debt following reckless Christmas spending, a link to debt charities followed by advice about how to get out of debt.
When you have people who don’t understand money teaching people who also don’t understand money, it leads to, wait for it, people who don’t understand money.
The article has four pieces of advice:
Cut your credit card costs
Get a better overdraft deal
Consider consolidating your debts
Think about switching to a better current account
There are some obvious issues here. Two types of people get into debt. The first type of person does not have enough money to cover their basic living expenses. Each month, their debt increases until something gives. This article does nothing to help them.
The second type of person is bad at managing their money and often spends excessively using all their money and then some, which results in them getting in debt. There may be the liberal use of the phrase “it’s only money” to support their spending habits. This article does nothing to help them.
This type of article is similar to one about how to lock your stable door after the horse has left. If you are in debt, it is because you have spent more than you earn. I’m not making a value judgement here; my definition is just a statement of fact. Rather than telling people how to manage their debt, we need to be telling people how to avoid debt.
In this country, people do not generally like to talk about money. It is seen as impolite to ask how much someone earns or whether they are in debt. If we want to tackle the debt crisis, then we need to talk about money more openly. We also need to stop telling people how to rearrange the deck chairs on the Titanic and teach them how to make ships that don’t sink in the first place.
I don’t know if people are becoming more open to discussing money, or if I’m just surrounding myself with the right sort of people. Understanding money is not a zero-sum game; we can help each other build wealth by talking about money and sharing knowledge and experience.
The problem with telling people how to spend money is that much of the advice is boring. Read any article about financial planning and budgeting and you can guarantee that the article will contain one of the two following tips: ditch your morning Starbucks and/or take your own lunch to work. For many people, having a lunch they buy at work may be the only time they get to have their food made for them. For many people, their morning Starbucks is the only thing that keeps them going at work. For many people who are struggling financially, these little treats are the highlight of their day.
Tackling the debt crisis is going to take a lot of time, and it maybe a generational project, but we cannot rely on the government to tackle this issue. After all, the major banks make their money from interest charged on debt. There are things that the average person can do to reduce their outgoings though. Before I offer some suggestions, I must stress that I realise everyone’s circumstances are unique and I am not qualified to offer financial advice. The following is for information only and does not constitute advice on my part. If you are struggling with debt, then please contact StepChange or another debt charity.
The Car
Cars are expensive to buy or lease, but the cost of running a car can be just as expensive. According to an article in The Express, the average monthly cost of a car lease agreement was £253 (February 2018). Some additional google-fu suggests the average cost of running a car comes in at £150-£200 per month. Then, you have the potential costs of parking your car at work if you don’t have a secured space.
It’s not unreasonable to suggest that the average person could easily spend £400 per month on car-related expenses. If you were to invest £400 into a stocks and shares ISA each month and achieve growth in keeping with historic trends, after 25 years your ISA would be worth £535,000. In my city, Sheffield, a monthly bus pass costs around £60.
Even if you budget for the occasional Uber, not owning a car looks very attractive. When people ask me why I don’t drive, I think about these figures but hold off on trying to explain as when I have in the past, the person I am talking to mentally switches off. People don’t like to talk about money, and people think the figures sound too good to be true.
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For some people, owning a car is essential. However, there are many such as me for whom a car would be an unnecessary burden but there seems to be a societal expectation that you should learn to drive and have a car.
Car ownership completely baffles me. Most cars will spend the majority of their life parked up, doing nothing. Many people use cars as a status symbol, but to me, a car is a tool. A car will get you from A to B whether it’s a Range Rover or a Dacia. People are spending thousands of pounds for a status symbol that spends most of its life doing nothing. With some car finance agreements costing as much as mortgages, the best thing many people could do for their finances would be to get rid of their car, or at least trade down to a cheaper model.
Review Your Spending
Sometimes the act of reviewing a behaviour with no judgement can prompt change. This can happen when you record your eating habits and it can work with money. Set aside an hour or two and go through your last three months’ bank statements and credit card statements and review what you are spending and where. You could group spending into different groups such as household expenses, food shopping, eating/drinking out and so on. Compare your expenses to your outgoings and see where you stand.
If you want to be financially secure, you need to be spending less than you are earning. It might sound like simple advice but I have met many people in the course of my personal and professional life who have thought themselves secure because they are saving each month whilst refusing to acknowledge they were getting further into debt each month by subsidising their spending on credit cards.
If you have £5,000 in savings earning 3%, but £8,000 on a credit card costing you 25%, you aren’t in a good position. If you had £5,000 in savings and £8,000 on a credit card with a 0% interest period I would understand. It’s not about what you have or what you owe. Good financial management involves looking at the big picture.
The Richest Man in Babylon by George S. Clason gives some very simple advice. Clason suggests that you try to bring your spending to 70% or less than what you earn. Of the remaining 30%, 20% should be used to repay debts. The last 10% should be invested. Once you pay off your debts, the 20% allocated to that could be invested as well. This is good, simple advice.
There will be some people who physically do not have enough money to cover their expenses. Should you find yourself in this position I would strongly encourage you to speak with Stepchange who can offer more tailored budgeting advice.
Planning for Death
As I have stated in previous posts I plan to purchase properties with a business partner. We know each other well and share the same ambitions and plans for the property so I am not concerned about disagreements with how we will manage the properties. However, I have been thinking about what would happen if one of us were to die before we had completed our exit strategy.
In the UK, when you buy a residential property, it will normally be owned as either Joint Tenants or Tenants in Common. My understanding is that under Joint Tenants each owner owns 100% of the property, so if one of the owners dies the property becomes the sole property of the surviving owner. With Tenants in Common, each owner has a defined share of the property, typically an equal share each although it does not have to be.
Another complication is how mortgage lenders will allow a mortgage account to be administered if the property was purchased as Tenants in Common and one owner dies. It can cause a lot of delays, stress and confusion. The deceased will require an up-to-date will and it will take a long time to process the change of ownership. Another concern with Tenants in Common is that whilst I and my business partner are happy to do business with each other we do not necessarily want to do business with each other’s next of kin.
Also, it is not fair to expect our respective next of kin to share the same passion, drive and interest in managing property. It would seem, therefore, that Joint Tenants would be the way forward. The complication here is that we both want to provide for our next of kin and although we trust each other, it is never advisable to take people at their word where potentially hundreds of thousands of pounds are at stake. With Joint Tenants, if one of us dies, the survivor gets the property and according to what I’ve read, not even a will can overrule a Joint Tenants agreement.
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I have been thinking about this issue for a while, and I think I have hit upon a solution. I have proposed the solution to my business partner and, so long as we can get the agreement drawn up by a solicitor in a legally binding way, we will proceed with this solution.
What I propose is that we purchase the properties as Joint Tenants but draw up a separate agreement that states in the event of one of our deaths, the surviving partner has X number of years to pay equity to the deceased’s next of kin. This would be calculated as 50% of the equity at the time of death, based on average market value. For example, if we own two properties each valued at £100,000 with £50,000 debt on each, the total equity is £100,000. The next of kin would then be entitled to £50,000.
By giving the surviving partner full control and ownership of the properties, it allows them to manage the properties without undue interference. In addition to this, there would be a second condition that requires the surviving partner to pay the next of kin 25% of the net rent until the equity is paid back. The other 25% would be kept by the surviving partner as a “management fee” for dealing with the properties on their own and to cover costs such as maintenance. If the equity was not paid back within the agreed time, then interest would start being paid in addition to the 25% rent.
I am not sure that this type of agreement would be legally binding, and we will consult a solicitor first. Assuming it can be done, it will probably cost some money to draw up the agreement, but it would be a sound investment to secure our respective financial futures.
It was an interesting idea, I think. We never got around to arranging it though, as circumstances changed massively.
Looking back I had such optimism for property investing. I would have loved for it to work out, but there is nothing to be gained from regret. Our experience with BTL could have been much worse, so the fact we are looking at walking away with any profit is something of a miracle.
Final Notes
Once again, thank you for reading. If you have any feedback, good or bad, please leave a comment. Also, if you spot any funny financial stories or poor financial journalism, please point it out in the comments section.
Hello and welcome back to Mortgage Advisor on FIRE. It’s a bit of a mixed bag this week as I touch on a range of subjects; everything from losing my voice to getting annoyed with poor storytelling, to pointless questions and One More Year syndrome.
Weekly Update
Having a cold sucks, but that’s how my week started. In addition to the usual symptoms, I lost my voice completely for several days. It was only later in the week that I regained my voice. This turn of events made it impossible to work and so I was limited to emails. Another impact of having a cold is feeling tired all the time because getting quality sleep is impossible.
I’m in the middle of a fairly long stretch of work due to the bank holiday. Normally I would have a bank holiday off as part of my holiday allowance, but this time it was scheduled as my normal non-working day, meaning I save a holiday day. However, this means that I had to work Tuesday to Saturday, with Sunday off, and then work from Monday to Friday; it’s a long run of working days.
The Bank of England kept interest rates at the current level with the base rate sitting at 5.25%. It looks as though seven members of the MPC voted to keep rates as they are, whereas two members voted for a reduction to 5%. Now that I’m locked in on my residential mortgage for the next few years, it doesn’t matter if rates drop; it would cost thousands of pounds to exit my deal early and select something else.
For now, purely from a personal perspective, higher rates aren’t necessarily a bad thing because it means I’m getting a better return on some savings and investments. However, some non-financial stocks would be negatively impacted. There are pros and cons to high and low-interest environments, but for a long-term investor the advice is generally unchanged; invest regularly in low-cost global index funds, and don’t panic.
We missed the Northern Lights on Friday evening but we’re going to try again on Saturday. Hopefully, we will see something.
After I finished work on Saturday Oana and I went for a long walk through a park in Sheffield which took us over a hill and down towards Hillsborough Stadium, and then we made our way home. It was such a nice walk with hardly anyone else around. We stopped for a quick drink and a bite to eat before returning home to see our Poppy.
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Retrospective Ruination
Remember when Game of Thrones was the biggest pop culture phenomenon on the planet? Remember how bad the last two seasons were? This show is a prime example of something so bad at the end that it impacted the quality of what had already happened.
This sort of thing happens from time to time with successful films or TV series, where the quality drops over time, but you can still enjoy the earlier works. It’s rare for something to maintain high quality through its entire run, but Breaking Bad is the first example that comes to mind.
Back in the day, I loved Buffy: The Vampire Slayer, and the spin-off show, Angel. I would go to football training after school and then come home and chill whilst watching these shows. It was great fun and also had some important messages about mental health, death, friendship, and many other things.
Is it possible to separate the artist from the art?
Sometimes, to some extent, maybe. It’s difficult to appreciate or enjoy art when you know the artist was evil, like Hitler for example. You might be able to view their art with a sort of morbid curiosity, but I would imagine no sane person would want to hang Hitler’s art in their living room.
What about art with multiple creators?
TV and film are a bit different because of their collaborative nature. Between the writers, directors, producers, camera operators, editors, performers, visual effects team, and many others, there are dozens, if not hundreds, of people involved.
It’s these sorts of questions that individuals need to ask themselves, to determine whether they can still appreciate and enjoy the art.
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What about when the quality simply drops off over time?
I recently downloaded the audiobook, Slayers, which is put forward as a sequel, of sorts, to Buffy and Angel. I had high hopes for this but, I’m sorry to say, it was complete rubbish. It was like listening to extremely bad fanfiction. I gave up after an hour, despite the book being approximately 10 hours long. I’m normally something of a completionist; if I start a book, film, or show, I want to finish it. It takes something pretty bad to make me go, “nope” and just give up.
The creative decisions made were baffling for something that is purely audio. It had been written and acted out as though it was a television show but without the visual component. Fight scenes were lots of crashing, grunting, and things being smashed. No description, just audio chaos. What the actual shit were they thinking?
The voice acting wasn’t fantastic either, but that’s excusable when the plot is good. This was just dumb and it was so bad that it feels as though it’s impacting on what came before. I think I would still enjoy rewatching Buffy and Angel, but the issues surrounding Joss Whedon, the poor comic book follow-ups, and then this audio just leave a bad taste.
As we are on the topic of shows ending poorly, I need to give a shout-out to Ragnarok, the Norwegian show that ran for three seasons on Netflix. The first two seasons were fantastic. The end of the third season was insulting to the fans who had followed the show from the start.
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Pointless Questions
There is a riddle involving two coins which you may be familiar with. The exact wording varies, but it’s generally something like this;
“I have two coins in my pocket that total 30p. One of them is not a 20p. What are the two coins?”
I’ll come back to this a little later with the answer.
Imagine you have three items in front of you; a book, a mug, and a glasses case. You are told that the combined value of these items is £25. The book has a sticker showing a price of £10. The mug has a tag with a price of £8. The glasses case has no price. Assuming all the information above is accurate, do you need to ask what the price of the glasses case is?
Obviously, you don’t. It’s a simple enough matter to subtract the price of the book and the mug from the combined total and work out what the price of the case is. It’s a basic calculation. You don’t need to ask the question because you can work out the answer without much effort.
I’ve mentioned before that one of my biggest frustrations is when I’m asked a question, I answer, and then I’m asked the same question again. For example, a few years ago I was in the US. I had only just landed in New York after a series of flights over two days that took me from Doncaster to Bucharest, then Bucharest to Istanbul, and then Istanbul to New York. It was a long journey and I was exhausted.
Anyway, we’re sitting down for some food and one of the people present was trying to wind me up.
Them: “Do you want soup?”
Me: “No, thank you.”
Them: “You don’t want soup?”
Me: “I’m ok, thank you.”
Them: “Are you sure you don’t want soup?”
And so on, and so on.
A related frustration is when questions are asked when the answer is irrelevant. I know someone who applied for a job, and the initial interview was completed via a multiple-choice exam online. The first thing to be completed was all the usual personal information like name, address, qualifications, and employment history. Following this it was a series of competency-based questions, and other basic questions to check language and numeracy skills.
After a lengthy process the system returned a message that the person was not being considered further because they lacked a specific qualification; you know, one of the very first things checked. If this qualification was a deal breaker, it would be better to just have a pop-up message at the time ending the process.
A rule I try to live by is to only ask questions when the answer will impact something. Take the following scenario…
You have two friends called Ben. You have a mutual friend called Jane. One day, after spending the entirety of that day alone, you are asked by Jane if you’ve seen Ben. You could ask which one, but it doesn’t matter because you’ve not seen either. You might want to ask which Ben purely out of curiosity, but ultimately the answer to which one Jane wishes to know about has absolutely zero impact on your response. It’s a pointless question.
Craig Ferguson suggested three questions that you should ask yourself before saying something;
Does this need to be said?
Does this need to be said by me?
Does this need to be said by me now?
We can modify this slightly;
Does this need to be asked?
Does this need to be asked by me?
Does this need to be asked by me now?
If the answer to the question is going to have no impact on what you are doing, then it’s fairly safe to assume the question does not need to be asked.
Remember the riddle I stated earlier? “I have two coins in my pocket that total 30p. One of them is not a 20p. What are the two coins?”
The answer; a 20p coin and a 10p coin. One of them isn’t a 20p, but one of them is.
This Week’s Tory Clusterfuck
This one is a little different, but it was too crazy to not share. I had a dream that I was in London and there were a series of incidents where Tory politicians were being killed by out-of-control carts being controlled by horses. These politicians were stepping out into the road and out of nowhere these horses would push heavy carts onto the individual, crushing them to death.
It was a national news story and for some reason, I got incredibly upset that the horses killed Iain Duncan Smith, and I was lamenting the fact the horses had escalated matters by killing two people with one cart.
Looking Back
Part 10 of the Looking Back series is now live, and you can find it here.
What I’m Doing
TV: MasterChef (BBC).
Audiobook: Point Nemo by Jeremy Robinson (audible).
After giving up on Slayers I decided to try the latest Jeremy Robinson book, Point Nemo, and I thoroughly enjoyed it. The premise is that the International Space Station suffers a major fault and it falls to Earth at Point Nemo; the most isolated point on the planet. A rescue team is sent to recover any survivors, and things get crazy.
I mentioned before that Jeremy is one of my favourite authors and I’ve had a few interactions with him over the years. I’m part of his Facebook group and one thing he likes to do is use the names of his fans for characters in his stories. I was pleasantly surprised when my name popped up in Point Nemo.
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Investment Income in 2023: £2,386.69 (target £10,000).
It’s looking like 2024 could be a great year for gains. Since the start of the year, my total wealth figure has increased by just over £16,000. Half of that is just from the last few weeks. When I first started this journey in 2019, the idea that I could see gains like this felt a long way off. Back then I would get nervous when investments dropped by a few hundred pounds, but now swings of several thousand are not just normal, they are expected.
So many people bury their heads in the sand when it comes to finance. Some people don’t understand it, and some people don’t want to understand, and then there’s the worst of the worst; the ones who revel in the fact they don’t know and don’t want to know. I have an example from a recent Bored Panda article of someone who is the poster child for financial dipshittery.
Rylie, a 20-year-old in the US did not understand the difference between the credit limit on a credit card, and the balance outstanding. Seemingly, they did not understand that money spent on a credit card had to be paid back. Their level of ignorance was mind-blowing. I acknowledge the fact that financial education needs to improve but at the age of 20 you should know that if something seems too good to be true, you have probably not understood something.
In the interview, Rylie was asked how much she earns ($1,600) and how much her rent is ($1,400). The interviewer was incredulous and tried to explain that this was not sustainable. When asked why she thinks it is ok, Rylie replied, “Girl math”.
This might just be the stupidest thing I’ve ever heard. It’s not just ignorant; it’s someone celebrating their ignorance.
BTL Update
The sale seems to be progressing. The buyers have completed another viewing with some family members and are still proceeding. We just need to let the agent know who our solicitors are.
I had planned on using the same firm that did the conveyancing when we bought the property, but they’ve been a bit rubbish this time around. I’ve filled their form out online for a quote and had an email asking if I want to go ahead. I clicked on the link, but it didn’t work. I’ve called them asking for an update and they said they would call back, which they haven’t. It’s frustrating when you find a company that seems decent, and then they just stop caring about good service.
One More Year
Over the last couple of weeks, I’ve had similar conversations with different people about the concept of OMY. It’s when someone has achieved their initial FI goal but is anxious about pulling the trigger, so they decide to work one more year just to make sure their plans will be successful. This can lead to a spiral of one more year, followed by another, and another.
These discussions have been based on the question of what improved standard of living would you work one more year for, or what would you sacrifice for one year less. When you approach the target you set yourself most of your investment gains will be coming from compound growth on the balance you have accumulated. Adding more money to the pot from work is only going to have a minor impact. It’s like candles in a dark room; one lit candle provides a huge amount of illumination. A second candle provides more light, but not quite double. When you get to eight candles, a ninth is not going to add much more light. It’s diminishing returns.
Those who have achieved FI often say that the change from a habit of saving and investing, to then having to spend those investments, is a difficult transition to make. There is a fear that the money might not last, and so the little voice in your mind will suggest working that little bit longer to make sure there is enough money to fund a full retirement.
The thing is, these plans don’t fail overnight. If you retire and find that your funds are being depleted too quickly, there’s nothing to stop you from returning to work for a spell or revising your spending habits. I suspect when I am closer to FI, I’ll be asking myself the same questions and battling the same worries. If you see me falling for OMY syndrome, please remember to call me out.
That’s all for this week. Thank you for reading, and please remember to like, comment, share, and subscribe.
Disclaimer
The views and opinions in this blog are my own, and do not represent the views or opinions of my employer, nor should they be considered advice.
If you want personalised financial advice, seek an appropriate professional. If you are in financial difficulty, seek advice via the resources below:
Originally published on January 2nd, 2020, before Covid started to spread outside of China, and before a particularly challenging time in my life.
Introduction
Hello and welcome back to Mortgage Advisor on FIRE. We are now up to the tenth part of this blog, which is a satisfying milestone to pass. Over the next few weeks, I will be introducing a few new sections to the blog. In addition to the usual weekly financial updates, and the subject of the week, I will talk a little about finance-related news.
Another section that I thought would be interesting is the word of the week, where I will pick a finance-related word and attempt to define it. They say that the best way to learn is to teach, so I hope to pick up some knowledge through this exercise. The word of the week will start next week, but I will be discussing a poor piece of financial journalism I saw in The Guardian today.
I have absolutely no recollection of the word of the week idea.
Weekly Update
The week between Christmas and New Year is a strange time. I was away from work until the 30th and then had to catch up with a lot of emails and briefs as I had been away from the office since the 12th of December. I’ve been finding work difficult as I have missed a lot of time in the last six months due to ill health and holidays. Hopefully, as we move into 2020, I will achieve some consistency.
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As I write this on the evening of January 2nd my girlfriend is on her way back from Romania where she has been staying with her family for the past few weeks. It has been a bit dull having Christmas and New Year away from her, but I’m happy that she has been able to spend this time with her family. It’s the first time in over a decade she has been home for the holidays.
We’ve not had a Christmas apart since then, and I doubt we will in the future.
New Year’s Eve was underwhelming, even by my low expectations. The highlight came at 19:25 when I finished my 104th book of 2019 and hit my target of completing two books every week over the year. I have blogged about this reading challenge here.
It just seems that NYE is just an excuse to get drunk. I’m not a big drinker; I have an alcoholic drink once every few weeks. I’m not anti-drinking, but alcohol tends to exacerbate some of my health issues. Also, over the last few years, I have become increasingly bored by “nights out”. I would much prefer sitting with a group of interesting people, over a nice meal.
Drinking culture is still a complete mystery to me. I just don’t see the point. I used to drink and go to bars and clubs when I was younger, but I can’t look back and pinpoint what about it was enjoyable (coincidentally I just had this conversation with a friend, and they didn’t know what they enjoyed about it either).
I’ve not enjoyed the holiday period this year. I would go as far as saying it’s been one of the worst holiday periods I can remember. It’s been nice spending time with family, but I’ve not felt more alone than I have in a long time. I have always enjoyed my own company but for spells of a few hours at a time. I don’t think I cope well with spending extended periods on my own. The fact that I’ve felt quite ill for much of the time over Christmas has not helped, nor has the fact my sleep has been disturbed almost every night.
Financial Update
Premium Bonds: £9,925 (up £25 from last week).
Stocks and Shares ISA: £7,452.60 (down £68.66 from last week).
Credit Card Debt: nil (no change from last week).
Loan Debt: £3,800.49 (no change from last week).
F**k It Fund: £1,151.85 (up £76 from last week).
Total Wealth Figure: £192,030.45 (total assets including residence valued at £173,501 by my lender) minus £138,500.52 (total debt including residential mortgage) equals £53,529.93 (down £70.26 from last week).
I believe this is a first; my Total Wealth Figure has decreased from one week to the next. There is a simple reason for this, though, so I’m not too concerned. December’s interest has been added to my mortgage balance, but because of how the publishing schedule for this blog has fallen, my mortgage payment was made today but has not been updated on the balance on my statement. Next week, the mortgage debt will drop by several hundred pounds.
Investment Income Received in 2020: £0. (Target: £2,000 by the end of 2020).
Financial News
This story caught my eye on The Guardian website today, although it was published on 29/12/19. These types of stories are a guilty pleasure/frustration for me as they often have me shaking my head and swearing at the computer screen. The advice given is often unrealistic or completely banal. This article managed to hit the full house of being unrealistic, banal, and irrelevant to most people with a side order of offensiveness.
Tip #1 – Don’t Miss The Tax Deadline
You would think that the first tip would be something that applies to most people, but The Guardian takes the approach that something that applies to roughly one in nine adults is the most pressing issue on the agenda. There is also the fact that if you need to submit a tax return, and you don’t do it, you are breaking the law. Stating this as a financial resolution is just stupid.
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Tip #2 – Watch Out For Currency Shifts
One could forgive the first tip as being a little ill-judged, but this tip is practically offensive to many people. The fact is that for 99% of the UK population, currency shifts are as low down the list of concerns as things like an alien invasion or a zombie apocalypse.
With hundreds of thousands of people in the UK in food poverty, and food banks being used in record numbers, telling people to watch out for currency shifts is just offensive. For many people who are going on holiday, tiny changes in currency conversation rates hardly matter. By all means, shop around for a good rate of conversion but if your second biggest financial concern of the year is worrying about conversion rates then you don’t have much to worry about.
I still believe that this is pointless advice for the vast majority of people. Only a small population are directly impacted by currency shifts, with the majority of people seeing a second, or third-hand, impact through products and services changing in price due to currency volatility. It’s not something that many people can influence or control and, as such, is just pointless.
Tip #3 – Shop Around For Savings Deals
Once more, this suggestion from The Guardian is detached from reality for most people. The average UK household has around £2,500 of credit card debt. General figures for the average amount of savings are more complex, but if you spend just ten minutes googling the situation you will see that for many people savings are a luxury.
Tip #4 – Take Stock To Avoid Debt & Tip #5 – Make Your Mobile Work For You
In Tip #4 the author explains that you should avoid credit card debt, and if you have credit card debt you should pay more than the minimum amount. In Tip #5 the author suggests using a credit card to purchase your next mobile phone outright as opposed to taking it on a contract. I think I have already mentioned that the article is detached from reality, but this is just absent all logic.
Tip #6 – Fingers Crossed For The Budget
Are you f*****g me? The Guardian has published an article regarding financial tips and one of those tips boils down to “hope for a lottery win”.
Are those fingers still crossed?
Tip #7 – Look For Energy Bill Deals
This is advice that has been doing the rounds for years now, and whilst there are some savings to be made it is hardly going to make the difference between poverty and comfort for many people who are struggling.
The article from The Guardian was disappointing and made me angry. Next week I will look at some more sensible suggestions that might be a bit more relevant for most people.
Ground Rules Revisited
In Part 4 of this blog, I set out a series of Ground Rules to help focus my investment efforts. I now find myself having to revisit some of those rules as life has a habit of getting in the way. Some of my targets were a little ambitious and with the expense of Christmas, my trip to Romania and an upcoming two-week trip to India, I need more free cash. Also, we have had a few things go wrong in our apartment and need to free up money to deal with some repairs.
A quick recap of the rules now follows:
Rule 1: Save a minimum of £400 monthly in Premium Bonds.
Nope.
Rule 2a: Invest a minimum of £250 each month into my Stocks and Shares ISA.
Rule 2b: Reinvest all dividend income from the ISA.
Rule 2c: Absolutely no withdrawals are allowed from the ISA.
Erm…
Rule 3: Save a minimum of £100 each month in my F**k It Fund.
Rule 4: Save a minimum of £30 each month in my Tech Fund.
Rule 5: If I use my credit card, pay it off immediately.
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As you may remember I removed the Tech Fund from consideration in this blog, as I realised it would not be an ongoing investment and eventually the funds would be used to replace my phone and/or laptop when they eventually stop working.
What I’ve realised is that setting rigid rules is rarely helpful. Life is full of uncertainty and instability. Plans need to be flexible and adaptable. I’m now of the opinion that the process matters more; or the philosophy when it comes to managing money. Follow the process and the results will come.
I am going to tweak the amounts in Rules 1 and 2a.
Rule 1 (updated): Save a minimum of £300 each month in Premium Bonds
Rule 2a (updated): Invest a minimum of £200 each month into my Stocks and Shares ISA.
All the other rules apply as normal.
There will probably be many months when I invest more than the minimum, but I’ve realised that in life you must be flexible when things come up. If you are rigid, you are brittle, and brittle things tend to break.
Hmm… it looks like I was thinking about flexibility at the time. Always strange how one’s opinions can change slowly over time without consciously noticing the gradual process of change.
Final Notes
A bit of a shorter post this week as I’ve been a bit busy. Next week should be more in-depth as I look at some of my suggested financial resolutions. I will also look at how realistic my £2,000 target for investment income in 2020 is.
Thank you for reading and I hope you have a great weekend.
Hello and welcome back to Mortgage Advisor on FIRE. This week I discuss my attempts to reduce my caffeine intake, some updates on my BTL, the usual financial updates, and some thoughts on boredom in retirement. Also, some thoughts on a dramatic end to the football league season. Finally, the return of the Tory Clusterfuck.
Weekly Update
I don’t think I’ve mentioned this before in the blog, but a month ago myself and a friend decided to cut back on the caffeine we were consuming. On a typical working day, I would have 3-4 lattes using my Nespresso set up in the kitchen. Having researched how much caffeine was in each pod, I was having more than the daily recommended amount of caffeine.
Also, because of the half-life of caffeine, I was at a point where there was a gradual build-up of caffeine in my system throughout the week. By the time I woke up later in the week, I already had about a coffee’s worth of caffeine in my system.
Anyone who knows me, knows I love my coffee. I was a bit nervous about cutting down but it’s gone well so far. I’m a month in, and during that month I’ve had one caffeinated drink each day, except for two times I had a second one as I had to tape my eyes open to stop from falling asleep. I feel better for it; several little health issues have improved, and I’m getting sleepy earlier in the day.
Chart showing levels of caffeine in my system on my old coffee-drinking schedule.
This week started with a bit of a scare. Last Sunday evening we were just getting ready for bed and we had some tealights that were still going from earlier in the day. We brought them through to the bedroom and thought we’d just let them burn out; something we do now and then. We rested them on a shelf as usual. Poppy, wise as she is, decided to jump up on the shelf and landed amid the tealights. She quickly leapt off.
There was a horrible smell of burnt fur and she was, understandably, shaken up. I managed to get close to her and calmed her down, speaking softly and petting her. Once we were able to get a look at her belly and paws we were relieved; no burns, just some singed tips on some fur. She’s been fine since, but for a few moments, it was a bit of a scare.
In all the years we’ve had cats and used candles and tealights, this is the first time we’ve had something like this happen. We will start putting them somewhere else that Poppy cannot possibly reach.
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Saying that somehow Poppy was able to get on top of the bookcase we have in the living room that is around 2m tall. We don’t know how she managed this, but she was like a ninja. She got up there silently and without destroying anything. Cats are great. Crazy, but great.
We recently paid another visit to Tabby Teas Cat Cafe and loved it. I got to spend some time with Olaf, my favourite cat there, and I fed him some chicken. It’s so nice feeding them by hand and you can feel their teeth as they gently take the food from you. Olaf just looks so spaced out all the time, kind of like Super Hans from Peep Show;
Here are a few of the other cats from our last visit:
Oana started her new job this week as well. She is working in an admin role, which is non-customer-facing. This is definitely her preferred type of role. It’s hybrid, meaning three days in the office and two at home. It’s not ideal as she would prefer full-time WFH, but it’s a job and offers some opportunity for progression.
The office is in a fantastic location though, being in the middle of a new(ish) development next to a park. It’s as close to the centre of the city as you can get, and is about a 15-20 minute walk from our apartment; all uphill going to work, but downhill on the way back.
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The Working Day
I’ve said it before, but it’s worth repeating; if I could go back in time and have a word with Henry Ford, I would ask him just what the hell he was thinking coming up with the 9-5 working day. There’s no reason why we couldn’t just agree to a standard 10-4 day, four days a week.
If I had complete power over our society, I would change the whole calendar, to be fair. I would make every month a standard 28 days, with the 1st falling on a Monday. We would then have 13 months. I would slot this month somewhere between September and October. It always feels like there’s a major change between those two months. This month would be called Scothenber, but I’m willing to discuss this.
Now, I know what you’re thinking… “But David, that only comes to 364 days?”
Ah, yes, you see I would also slot an extra day between New Year’s Eve and New Year’s Day. This would be a sort of bonus day. It would be hilarious, and terrifying, if we made this day a sort of Purge day where anything goes, but that might not be to everyone’s taste. When it’s a leap year we get two extra days between the NYE and NYD.
This sort of change would cause untold chaos across the globe but apart from that, I see absolutely no flaws in this plan.
I will not be taking any questions.
This Week’s Tory Clusterfuck
In 2022 Boris Johnson’s Tory government introduced new rules stating that people had to bring photo ID with them to vote. Johnson, the absolute moron that he is, arrived to vote this week without his ID and was turned away. Far from being a harmless, bumbling idiot, this man has done more damage to this country in my lifetime than any other PM.
**LIZ TRUSS HAS ENTERED THE CHAT**
I mean, what a fucking shitshow her time as PM was. The economic impact of her time as leader of the Tories is still being felt now. It’s almost as though you check your brain at the door when you take up residence at Number 10.
This week also saw the breaking news that Liz Truss had sold 2,228 copies of her new book detailing her 49-day term as Prime Minister. For those counting, it equates to roughly one book sold for every 30 minutes in role.
I daresay, I could probably sell more books about my blog than Liz Truss sold about her time as PM.
Looking Back
Part 9 of the Looking Back series is now live, and you can find it here.
What I’m Doing.
TV: MasterChef (BBC); Snooker World Championship (BBC).
Audiobook: Point Nemo by Jeremy Robinson (audible).
Masterchef has taken a back seat to the snooker for now. We’ve enjoyed the snooker this year as we’ve had more time to watch it. It’s been crazy how many top players have been eliminated. Had you predicted the final four players at the start, you would have been called crazy. I think I’m right in saying that if Bingham is knocked out in the semi, we’ll see a first-time world champion crowned.
I finished the first four books of the Bobiverse series and moved on to the latest Jeremy Robinson book. The Bobiverse books are brilliant and I would rate them as highly as The Expanse and Three-Body Problem series.
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Sheffield Wednesday Football Club
I don’t often talk about football in this blog but I wanted to briefly discuss it this week. My club, Sheffield Wednesday, had an awful start to this season. After 13 league games, from a 46-game season, we had not won a single league fixture. Our manager at the start of the season, Xisco Munoz, was let go after ten games of truly awful football. We then appointed Danny Rohl, and once he’d had some time with the squad our fortunes started to improve. We avoided relegation with a fantastic run of form, culminating in taking 14 points from our last six games.
It’s the second season in a row where we’ve finished successfully despite the odds being stacked against us. Last year we had to overturn a 4-0 deficit from the first leg of the play-off semi-final, a feat never before seen, but we did and won promotion. Then, this season we looked certain for an instant return to League One. It’s never dull being a Wednesday supporter.
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Investment Income in 2023: £2,386.69 (target £10,000).
I had a nice £200 win on the Premium Bonds this week. It’s always frustrating when I can’t report a win with a few more zeros, but it’s still a decent win. If I had the money I’ve invested in Premium Bonds in a normal savings account, it would take four or five months of interest to generate that return.
BTL Update
It looked like we were going to have a problem with this buyer but it might be ok after all. Once we had accepted their offer last week, the agent could not contact them to obtain all the necessary information, such as ID, proof of funds, and so on. The agent asked for our guidance and I told them to give the buyer until close of business Friday and if we still didn’t have what we needed, they should remarket the property.
The buyer did make contact and provided the information, so hopefully, it’s a simple transaction from here. The buyers are not in a chain, and neither are we, so there shouldn’t be any major obstacles.
I will be so happy to get rid of this property. I started out so optimistic but a combination of global events like Covid, the Truss government, war in Europe, and interest rates going crazy, in the context of tenants that were happy to trash the house… Yeah, a failed experiment.
Spreadsheets and Graphs
I’m stealing, or being inspired, by something The Intentional Scotsman posted in his recent blog. Almost everyone I know following an FI plan spends time running projections through spreadsheets. One graph that TIS had created was a bar chart to visualise how far along with FI he is.
The bar chart has twelve columns; one for each month, and the idea is to take your FI target amount and divide it by 12. Then, you fill each bar as your pot increases so you can see how many months your pot would last in a typical year.
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It’s not an analysis but rather an interesting way to visualise progress. I’m going to run two of these; one for my ISA and one for my pensions. Assuming I need £600,000 in my pension (£24k p/a with a withdrawal rate of 4%), and £300,000 to last as a bridging fund for ten years (97% success rate with 8% withdrawal over ten years), this is the state of play:
FI and Boredom
Many people who scoff at the idea of early retirement exclaim something like, “I’d be bored if I retire early.” Anyone who thinks this is lacking imagination. There’s so much you can do now that doesn’t cost a lot of money and is highly accessible. Just because you have financial independence it doesn’t mean you can never work again. You could choose to work for a charity that means something to you. Or, you could explore any number of different Wikipedia rabbit holes. You could write, travel, read, or learn a new skill, hobby, or language.
When I talk to people who are pursuing FI, none of them seem to be concerned about what they will do to fill their time. I know when I’ve had extended periods without working, I’ve never been bored. We have access to the entirety of human knowledge available to us through the internet. There’s so much to do.
I agree that retiring and just sitting around doing nothing is not a good idea. It’s said that people age quickly when they no longer feel like they have a purpose. You need to have a “why”. You need to have a reason to want to retire early other than just not wanting to work.
What would you want to do with your time if you retire early? Let me know in the comments.
Disclaimer
The views and opinions in this blog are my own, and do not represent the views or opinions of my employer, nor should they be considered advice.
If you want personalised financial advice, seek an appropriate professional. If you are in financial difficulty, seek advice via the resources below:
Hello, and welcome back to Mortgage Advisor on FIRE. I hope you are all having a great time over the Christmas period.
I’m shaking things up a little off the back of reader feedback. For the past few weeks, I have followed the same format with sections in order; weekly update, financial update and then my financial subject of the week followed by final notes and a preview of the following week. I am keeping those sections, but I will now introduce my posts with a section called Introduction. I trust I do not need to explain what purpose this section will serve.
This week I will talk a little about my Christmas experience and then have a look at my finances for the week. The financial subject of the week will be a look back over some of the worst financial mistakes I’ve made. This will be difficult for me as it may be the most I’ve opened up about some subjects to the general public.
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Weekly Update
Christmas this year has been a little underwhelming. I’m not generally a “Christmas person” anyway, but this year has been disappointing even by my low expectations. The highlights have been spending time with my parents. I saw both my Mom and Dad on Christmas Eve, then had Christmas Day lunch with my Mom and it was the first time since I was a child that I’ve spent Christmas Day with just my Mom.
I then saw my Dad on Boxing Day in what has become a little ritual of going for brunch to exchange presents. The company of my family (I class my girlfriend as family) is always the highlight of my Christmas. The second highlight is the food. I love food but this year, the food has been a disaster.
On Christmas Day we booked Miller and Carter, as we did last year. It cost us £75 per person, which is about the going rate for a full menu including starter, main, dessert and coffee. The food started ok and just got worse. I had a fillet steak which I ordered medium. I will happily eat steak rare and one of my favourite dishes is steak tartare so I’m not squeamish about raw meat but on Christmas Day morning I was not in a good way. Without going into too much detail, I felt rubbish and had spent an hour in the bathroom before getting ready to go for lunch.
Miller and Carter seem to have really gone downhill in recent years. I can’t remember the last good meal I had there.
I did not feel like having blood on my plate feeling rough as I did. So, I ordered my steak medium. I class medium as charred on the outside with pink being the main colour through the middle of the cut. The middle of the steak should have felt some heat from the kitchen, but it should still have colour. There should not be a cube of raw beef that makes up the middle half of the meat.
I was not feeling great at all and no staff came to check how our food was. I love a good steak; it’s one of my favourite meals and there are a few restaurants where I’ve had fantastic steaks. In Syracuse, New York, the waiter insisted I cut into the middle of the steak to check it was cooked to my liking when the meal was served. I experienced this on a cruise earlier this year, and in a fantastic steak restaurant in Valletta called Sciacca Grill. For a steak restaurant to not cook your steak anything like how it was ordered is as bad as it gets.
The sides to my meal were also tired. The onion loaf looked and tasted like scraps from the chippy and the fries were cold and stale. A very disappointing experience. When our plates were cleared, I mentioned to the waitress how poor my food had been and the chunk of raw beef on my plate confirmed my experience. I left with an apology and a voucher for £26.50 – the price of a fillet steak.
Boxing Day was also a bit of a disaster in terms of food. We went to a place called Graze Inn, which we have done for the last two years. It’s not the best food but it’s generally ok. The location is the main reason for choosing there as it’s midway between my apartment and my Dad’s house without needing to navigate the city centre. The restaurant has changed since my last visit on Boxing Day 2018, and not for the better.
Graze Inn has now closed permanently.
The restaurant is much smaller now and all the tables are close to the bar where the sound of the coffee machine drowns out all conversations. The brunch menu has a dozen or so options with bacon and sausage, a few sweet options and then a vegan option and then a halloumi sandwich. Nothing was grabbing me, so I went for the halloumi sandwich. I left most of it as it was a soggy, tasteless mush. Out of the seven people in our group, most of us were disappointed.
I’m now only in contact with one person from that group; my Dad. That’s a whole other story.
All in all, a poor food experience over Christmas.
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Financial Update
Premium Bonds: £9,900 (no change from last week).
Stocks and Shares ISA: £7,521.26 (up £112.55 from last week).
Credit Card Debt: nil (down £196.90 from last week).
Loan Debt: £3,800.49 (down £30.77 from last week).
F**k It Fund: £1,075.85 (no change from last week).
Total Wealth Figure: £191,998.11 (total assets including residence valued at £173,501 by my lender) minus £138,397.92 (total debt including residential mortgage) equals £53,600.19 (up £340.22 from last week).
Not a bad week overall. The ISA has increased in value once again following the election a couple of weeks ago. It’s a nice feeling having the credit card back down to zero and I’ll feel even better when I eventually get the loan paid down. That might have to wait a bit longer though as there are things in our apartment that need addressing.
It’s so funny looking back at how excited I was at swings of just a couple of hundred pounds in my total wealth. These sorts of changes are rounding errors now.
Moving into 2020 it’s just a matter of waiting for funds to come together that will allow me and my JV partner to start searching for properties. We will probably start looking in mid-March. It’s expected that we will have our deposit ready by May 1st, but we want to have a property or two in mind at the point we have the cash ready.
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Financial Mistakes and Regrets
University
If I knew at age 18 what I know now, I would probably be a millionaire. I would have snapped property up whilst it was cheap, and I would have invested in stocks as soon as I was able. There is little point in dwelling on this, as I’m not able to go back in time. I hope that my experiences will help other people avoid some of the mistakes I made from turning 18 until I started educating myself about money.
It’s insane that kids can sign up for student loans that will have a lifelong impact on their earning potential. There needs to be more education about the consequences of taking out student loans because, for many people, it becomes a graduate tax that follows them around for decades.
I went to the University of Leicester in 2003 because everyone I knew was attending university; it was just the done thing. I did only a little research and ended up unhappy. I dropped out early in the second year. I was not mentally ready for university at that time. In school and sixth form, I had been reasonably popular with a large group of friends, but something changed as the sixth form ended.
Autism. It was autism; more precisely autistic burnout.
At the time I could not explain it, but I now know it was depression. I was depressed for a long time. I only snapped out of it when I took a job with Norwich Union (now AVIVA). I have a lot of good memories from my time there and I started to come out of my shell again. I made some friends and felt better about myself, and I decided to “finish what I started” and go back to university. I did much more research and went to UCLan to study Sport Psychology.
For the most part, I had a great time. I met my girlfriend there and missed out on a First in my degree by a narrow margin. I did, however, achieve a First in my dissertation which is my proudest academic achievement. I wrote a report on home advantage and stadium design in English professional football. I had a great tutor who I am still in contact with a decade later. Overall, my time at UCLan was successful. Financially though, it was a disaster.
My two stints at university as an undergraduate student have left me with almost £30,000 of student loan debt. Every month I pay £100 back from my salary. I don’t include this loan in my commitments because the payments are taken at source and I’ve mentally compartmentalised that debt. The biggest frustration is that I’m now working with people who never went to university and did not get a degree, yet we are on the same money doing the same job.
In net terms, they are £100 per month better off than me. If I had that £100 each month, I would be further along the line to financial independence. Rationally, I know that life doesn’t work that way. I had to have all my life experiences to get to where I am now. But still, university remains my biggest financial regret, not only due to my undergraduate experiences but also my post-graduate experiences.
I know it’s not as simple as going, “If only I had done XYZ instead” but financially, I don’t think university makes a lot of sense unless you are going to study something with a direct path into a career.
I have had many bad experiences trying to complete a master’s degree. I signed up with the Open University, but it quickly became clear that the tutors did not care. When I tried to contact one tutor, they told me their OU work was not their priority. The following year I was accepted onto a course with another university, but as the course date drew closer, I did not hear anything. I kept contacting them asking for enrolment details and was repeatedly fobbed off. The day before the course start date they informed me they had messed up my enrolment and would not guarantee a place as the course was now full.
The year after that another university mis-sold a course to my girlfriend and me as an Occupational Psychology course, when it was actually a business course. I then started a master’s at the University of Leicester but had problems with some of the tutors who unfairly marked some of my work. I will not get into the details as it’s not that interesting, but I had definitive proof my work had been marked incorrectly.
They refused to engage with me regarding the mark, stating that I was not allowed to “question their academic integrity” or words to that effect. I was then mistakenly CC’d into an email chain where the staff were bad-mouthing me. I quickly exited the course. At this point, I was quite bitter but was still determined to get my master’s because it felt like unfinished business.
I started another MSc with the University of Derby but after just a few weeks I ran out of enthusiasm for formal study. I was also not the same person who left UCLan on an academic high. I was older and in worse physical and mental health. All in, I estimate that my unsuccessful attempts to study for a master’s degree cost me £10,000 on top of what I owe in student loans.
I should have learned my lesson earlier.
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The problem with universities is that they are incentivised to get as many bums in seats as possible and they are not answerable to anyone. If you have an experience like I did at the University of Leicester, as a student you are powerless. The cost of education is absurd as well. Tuition fees can now run into the tens of thousands when you then get ten hours of contact with lecturers each week if you’re lucky.
There is also an issue with how university is positioned in our society. Back in the day, you went to university if you were intelligent and wanted to specialise in a specific field. Now, young adults go to university “for the experience” which is a euphemism for drink, drugs and sex. Does one really have to sign up to thousands of pounds of debt for that “experience”?
My advice to any young adult thinking of university is don’t do it. Take some time, a year or two as a minimum. Experience the world of work. Do some reading about different subjects that interest you and then if you decide you want to specialise as a lawyer, doctor, architect or engineer, go and do it. If you want to go to university to get drunk and get laid, it’s not worth getting into that much debt.
Gambling
I used to gamble on football. A lot. It all started when I was studying at UCLan, and like a lot of compulsive gamblers, it started small and with a win. I won my first football bet and was hooked from that point on. I gambled on and off for over a decade and had some good wins in that time, but the gambling was consuming time, mental energy and more money than I realised.
The human brain and memory cannot be trusted. It’s like the quote from Emo Philips; “I used to think that the brain was the most wonderful organ in my body. Then I realised who was telling me this.”
I’m not going to lecture people about gambling as it’s not the point of this blog. I am going to share my experiences though. Gambling over the internet and in-play gambling can so easily spiral out of control. The money does not seem as real, and it’s harder to keep track of your spending in this way. I would never walk into a betting shop and hand over hundreds of pounds in a few hours on in-play bets, but I have done that over the internet many times.
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There is a wealth of research in psychology that shows addicts get their “hit” of feel-good chemicals before engaging in the addictive act. Gamblers get their “hit” when they place a bet, and not just when they win. Drug addicts get their initial “hit” when they see their drug, not just when they use it. I know a lot of people who gamble, some of whom have confided in me regarding their inability to control their gambling. I know a few other people who I suspect are addicted but are either in denial or scared to face their addiction.
You’ll never know if you’ll become an addict or not. I heard somewhere that total abstinence is easier than half measures. So, a while ago I gave up all gambling. I don’t even take part in raffles because it must be total abstinence. If you allow yourself to take part in a raffle, then what about some informal football bets between friends? Then it becomes easier to progress to a few pounds on an accumulator and from there it spirals out of control.
It really does spiral out of control very quickly. If you are thinking of placing that first bet, don’t do it.
A few months ago, I spent a few hours going through my historic bank statements to see how much I had spent on gambling. I had a rough idea in my head, and I wanted to see how accurate my estimate was. It was not even close. £5 here and £10 there soon adds up. The second biggest mistake I ever made was placing that first bet.
Gambling is too lightly regulated and too easy to access. You can open an account and gamble thousands of pounds in minutes. It’s scary how easy it is. If you’re tempted to gamble, don’t. If you are just testing the water, stop. It’s just not worth it. If people could make money consistently through gambling, the bookies would have closed long ago.
Gambling addiction is a serious issue. Research has shown that gambling addiction results in more suicide attempts than any other addiction. Not only is gambling a financial mistake, but it’s also a path to mental health problems and possible suicide. It’s just not worth it. The only way to gamble responsibly is to not gamble.
Final Notes
The next part of this blog will be the first entry of 2020. I will be starting the Investment Income Tracker and, as per an earlier part of this blog, I will track how much income my investments and assets generate throughout the year. The aim is for my investments to produce enough income so that I no longer must work. My aim for 2020 is to receive £2,000 in investment income.
Thank you for reading. If you are concerned about your gambling, please contact a support group such as Gamblers Anonymous.
Hello and welcome back to a bonus edition of Mortgage Advisor on FIRE. A new reader asked some questions and I thought other new readers may find the questions and answers interesting. If you have any questions or feedback for me, please leave a comment.
Sorry, I’m arriving VERY late to the party here, so starting with your latest blog.
No apology needed. Thank you for reading and getting touch.
I see you’ve factored pensions in to your wealth. How have you calculated that? Most pensions can’t be drawn until you’re 55 (some at 50 but with a significant sacrifice), so how will this aid you in retirement at 40 (or there abouts)? Also, there is usually a limit on the lump sum which can be drawn, so at some point I’d expect you’ll be waiting a long time for the remainder.
My pensions are the defined contribution variety, meaning that I can choose how, and where, the money is invested. I can then log in to my account with the pension provider and check the current value of the pension pot.
The current plan works in stages, and has changed since I started this blog. There are three distinct phases;
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Phase 1 – The ISA Bridge
The ISA bridge is where you use the value of your ISA to support your retirement until you can draw down your pension. For example, if I choose to retire at 48, I would need a bridge to fund me until 58; the age at which I’ll probably be able to access my pension. For ease I’ll use round numbers. Let’s assume I need £20k p/a, I would need £200k to fund those ten years until I get access to my pension.
Phase 2 – Private Pension
Assuming that I’ve used up the entirety of my ISA in Phase 1, I’d need enough money to see me through from 58 to 68, at which point I’ll be eligible for the state pension. I would do this by withdrawing from the pension pot as and when I need it. Assuming I want to live on £20k p/a, and using a 4% withdrawal rate (a rate which is successful over a 30 year period 95% of the time), I would need a total pot of £500,000.
The above paragraph is a basic overview, but the actual withdrawal schedule would probably vary over time due to market fluctuations and changing demands on my income.
Phase 3 – State Pension
Once I get access to my state pension, assuming it still exists, I would be able to reduce the withdrawals from my private pension and supplement my income from the state pension.
Premium Bonds
Also, are Premium Bonds worth the investment? My BiL swears by them (he’s a boring accountant), and his return (prize wins) come in around 6% a year – which is well above the norm (think MSE says the average is closer to 2.5/3%). Or are you in it in the hope of that £1m jackpot?
This is a question with no clear right or wrong answer. The great thing about PB is your money is safe, and it’s relatively instant access. However, the prize fund isn’t amazing and the odds of winning the jackpot are extremely low.
I use PB as a store for cash I might need in the short-medium term. I could get a better rate of interest in a savings account, but I’ve made the decision that earning £30pm in interest is small change compared to the possibility of winning big. Other people are motivated purely by the numbers and will look to squeeze out every last penny of growth from their investments. It’s all about personal preference.
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And finally, is your £10k/annum target for life? That doesn’t go far now, I dread to think how much less it will be in 15/20 years time – and I hope you live happily and healthy well beyond that too.
It’s not my target for life, and after this year I might stop tracking it. The annual investment income goal was when I was approaching FIRE from the angle of property investment. Income isn’t as important now. The priority is capital growth in my ISA and pensions.
I have a relatively simple life; my girlfriend and I have no kids, no car, we don’t drink alcohol or do drugs. We don’t need a lavish life, just a comfortable one. If I had £24,000 p/a to spend, that would be plenty. Obviously there is inflation, but generally one would expect stocks to grow at a faster rate with the odd correction every so often.
Apologies if you’ve covered any of this previously – I’ll start back from 2020 when I get some time! Interesting stuff nonetheless.
I’m always happy to talk about this, and thank you again for your interest. I’ve started going back through my blog from the beginning so I can tidy up, and update, my earlier posts. You can see the start of the updated series here. If you go back to the original posts, please excuse the numerous typos!
PS I think I played against you at Hillsborough in back in 2010/11?!
I don’t think so? I’ve not played football in a long, long time.
Hello and welcome back to Mortgage Advisor on FIRE. This week I discuss the impact that AI may have on investing. Also, an exciting update on my BTL, and a busy week of medical appointments.
Weekly Update
I’ve had a week off work but it’s not proven quite as relaxing as I’d hoped. Last Sunday I had to go to the hospital for a scan, and then I had medical appointments on Monday, Tuesday, Thursday, and Friday.
On Monday I had my diabetic eye test where they take photos of the back of your eye to check that the diabetes causes no damage. I’ll get the results in a couple of weeks. The last couple of times when I’ve had this test, I’ve barely been able to see for a few hours because of the drops they use. This time my reaction was much less severe which was a relief.
Tuesday and Friday saw me going for blood tests, but honestly, I’m not completely sure what they’re testing for. I guess I’ll find out soon. On Wednesday I had to eat a restricted diet because I had to be at the hospital very early Thursday morning to swallow a pillcam. I then had to wear this strap and belt which had recording equipment to get data from the pill wirelessly.
The equipment after I’d taken it off.
I’ve had pillcams a few times and it’s never a pleasant experience. Normally I’ve had to eat a restricted diet for a day or so ahead of time, and then drink this preparation which, well, I won’t go into detail. It tastes gross though and often triggers a migraine for me. I explained all this to the consultant and she explained I could simply fast for 12 hours the day before which was so much better.
I arrived at the hospital at 8:30 in the morning and swallowed the pill. Then, they strapped me up with the recording equipment; a bulky belt and a box about the size of a ready meal on which you could view the progress of the camera as it dropped into my stomach. I then had to walk around for half an hour to try and speed the progress of the camera out of my stomach. After half an hour, it had still not exited, so I had to do laps of the hospital floor which must have been confusing to the middle-aged couple that I passed every 45 seconds.
Eventually, I was given the nod to head home. I had to wear the equipment all day and return at 7pm. It was extremely uncomfortable. I was so tired from the lack of food and no caffeine. I decided to go to bed for the last couple of hours. By the time I got the equipment off, I felt gross. I’d not been able to shower all day and the equipment was covering a large portion of my upper body. I was tired, gross, and ready for a shower.
There seem to be a few different things going on here, with investigations into three different potential problems. One of them had me worried a little because, well, the symptoms matched up with potentially having cancer. My mind was eased when the person completing the scan explained it was almost certainly not cancer but the results would be sent back to my GP once they’d been reviewed fully.
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The snooker world championship started this past week, and we’ve been enjoying it as usual. Although, watching Robert Milkins have a massive tantrum was annoying and funny in equal measure. Snooker is generally a civilised game but after missing an easy red, Milkins stormed off and threw his cue to the floor. He ended up losing 13-4 to David Gilbert.
It’s so cool living in the city that hosts the snooker world championship, and I hope it remains here for the long term. However, money talks. I wouldn’t be surprised if there’s a mega-money offer from the Middle East or China to host it. It would feel like Sheffield lost part of its identity if it left though.
Holidays
We’ve pretty much resigned ourselves to not having a holiday abroad in 2024. However, we’ve started planning for 2025 and it looks like we’re going on another cruise to, you guessed it, Norway. It would be our third time cruising to that part of the world and I don’t think it would ever get old. It’s such a beautiful place, and I’m at home on the sea. At some point in the future Oana and I would like to do one of those long cruises that last months and take you all around the world. It would be an amazing experience. That’s one for a few years down the line though, probably post-FI.
Norway is spectacular. This was in Molde in 2023.
Pension Story
On the stocks app I have on my iPhone it pulls through various financial news items. One this week focused on people who are not paying into pensions. It was painful reading.
One person said; “I didn’t want to get in any long-term agreement with anything to do with the Government.”
So, here’s the thing… When you live in a country you are, by default, in an agreement with the government. It’s unavoidable. Specifically regarding pensions, if you pay into them and something goes massively wrong then you might not get the benefit you were expecting. However, for this to happen the world would have to be on fire, fighting off an alien invasion, dealing with a zombie apocalypse, or dealing with 2012 (the film) levels of natural disasters.
Our whole society is based on a particular economic system, and for pensions to fail to that degree it would take the whole system failing. If you don’t pay into a pension then you are not getting the benefit anyway, and there are two possible outcomes; the world carries on as normal but you are struggling for cash or the world undergoes some massive upheaval.
There are so many ways in which we are “in agreement” with the government, from laws and taxes to passports and driving licences. When you live in a country, you are bound by that country’s laws and that is by definition an agreement. The quote from the news item is just ridiculous.
Another quote from the story that just made me facepalm;
“I don’t trust what could happen to the economy.”
This comes from someone explaining their decision to throw money into crypto.
On one hand, you have a global, interconnected, economy, and on the other, you have an unregulated mess where the bulk of the “assets” are owned by a small group. It is in everyone’s interest to make sure the global economy remains relatively stable. Crypto can play by its own rules for the most part, which can involve massive swings in value.
Looking Back
I’ve not had a chance to upload a new Looking Back post this week, but you can find the list of previously published ones here.
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What am I doing?
TV: MasterChef (BBC); Snooker World Championship (BBC).
Audiobook: Heaven’s River – Bobiverse Book 4 by Dennis E. Taylor.
I’ve really enjoyed the Bobiverse books and I’ve just finished the fourth book in the series. Book 5 should be out later this year. I would say that the series is right up there with The Expanse and the Three-Body Problem. It doesn’t take itself as seriously as the other two series, but it still covers some heavy subjects such as life after death, the concept of self, war, procreation, different forms of government, the soul, quantum physics, and much more. It’s also full of references to other sci-fi which I loved.
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Investment Income in 2023: £2,174.04 (target £10,000).
BTL Update
We have received an offer for the BTL. It’s a little lower than hoped for, but still good enough to be acceptable. The people making the offer are first-time buyers and, as such, are not involved in a chain. If this could all be done and dusted by the summer I would be delighted.
Assuming the sale goes through and my projections for things like CGT are correct, then I should walk away with a decent amount of cash. It will not quite be a heavy profit, but at present, the property is costing us money.
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Total Wealth
I’ve hit a new high for my total wealth figure; a milestone that has quietly crept up on me. It’s always nice when you hit these targets and it puts a spring in your step. The next goal is to get to £80,000 in my ISA and pensions, and then £100,000. Barring any disaster I should easily hit the £80k figure in both the ISA and pension before the end of 2024, but £100,000 may be a bridge too far for this year.
AI and Financial Advice
There’s a lot of talk about the impact that AI is having and is going to have, on our society going forward. I think it’s an exciting time and AI has the potential to improve our lives hugely. This can be through improved medical research, advances in computing technology, clean energy, and much more. Another area it will impact is finance, and financial advice specifically.
For most people, financial advice is pretty basic. It’s a question of inputting the relevant variables and getting an answer. In many cases it can be boiled down to a flow chart; if X then Y. I don’t think we are that far away from AI influencing, or even controlling, the investing behaviour of much of the population.
There will always be a need for the human touch, especially where emotions are involved. It might also be the case that more complex situations require a trained professional to untangle the various factors and offer advice that achieves the required objectives whilst taking into consideration the feelings of the investor.
Either way, I can see a lot of customer-facing jobs in finance becoming obsolete as AI develops and can offer advice for most people, most of the time.
We’re not quite there yet…
For a bit of fun, I decided to approach ChatGPT with some investing-related questions. Below is the transcript, which I’ve trimmed a little for ease of reading. Also, I’ve added some notes within the transcript which I’ve highlighted:
As a UK investor, what should I invest in first?
As a UK investor, you have a variety of investment options available to you. Here are some popular choices to consider as you begin your investment journey:
1. **Individual Savings Accounts (ISAs)**: ISAs are tax-advantaged accounts that allow you to invest up to a certain amount each tax year without paying tax on the returns. There are several types of ISAs, including cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs. A stocks and shares ISA is particularly popular for long-term investing as it allows you to invest in a wide range of assets, including stocks, bonds, and funds, without paying capital gains tax or income tax on the returns.
2. **Pension Accounts**: Contributing to a pension account, such as a workplace pension or a self-invested personal pension (SIPP), is another tax-efficient way to invest for retirement. Contributions to pensions receive tax relief, and any returns generated within the pension account are typically tax-free until withdrawn.
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3. **Stocks and Shares**: Investing in individual stocks and shares can provide the potential for high returns, but it also comes with higher risk compared to other investment options. You can buy shares directly through a stockbroker or invest indirectly through funds such as unit trusts, open-ended investment companies (OEICs), or investment trusts.
4. **Exchange-Traded Funds (ETFs)**: ETFs are investment funds that trade on stock exchanges and aim to replicate the performance of a specific index, sector, commodity, or asset class. ETFs offer diversification and typically have lower fees compared to actively managed funds.
Before making any investment decisions, it’s essential to consider your investment goals, time horizon, risk tolerance, and personal financial situation. Additionally, conducting thorough research and, if necessary, seeking advice from a financial advisor can help you make informed investment choices that align with your objectives.
So, no real advice here. Just a summary of some of the available investment options. I tried again with a follow-up question…
Specifically, which of those options is the best?
Determining the “best” investment option depends on various factors, including your financial goals, risk tolerance, time horizon, and personal circumstances. Each investment option has its advantages and considerations. Here’s a brief overview of the pros and cons of each option:
1. **Individual Savings Accounts (ISAs)**:
– Pros: Tax-efficient, flexible, wide range of investment choices (stocks and shares ISAs), no tax on returns.
– Cons: Contribution limits, may not offer the potential for high returns compared to riskier investments.
2. **Pension Accounts**:
– Pros: Tax relief on contributions, tax-free growth within the pension, automatic enrollment in workplace pensions for many employees.
– Cons: Access to funds restricted until retirement age, potential changes in pension regulations, contribution limits.
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3. **Stocks and Shares**:
– Pros: Potential for high returns, wide range of investment opportunities, flexibility to buy and sell.
– Cons: Higher risk compared to other options, market volatility, requires research and monitoring.
4. **Exchange-Traded Funds (ETFs)**:
– Pros: Diversification, low costs, easy to buy and sell, tax-efficient.
There’s no one-size-fits-all answer to which investment option is the best. It’s essential to consider your investment objectives, risk tolerance, and financial situation before making a decision. Many investors choose to diversify their portfolios by investing in a combination of these options to spread risk and optimize returns. Consulting with a financial advisor can also help you create a personalized investment strategy tailored to your needs.
I appreciate this is just a very basic overview from ChatGPT, but I think it’s weighted against stocks and shares. I’m not saying that anyone should go all in on just a few individual stocks, but investing in low-cost index funds is the way to go. These funds are collections of stocks on the stock market, and some people may be confused and think that these funds are just as “risky” as choosing individual stocks.
Will AI result in financial advisors becoming obsolete?
While AI has the potential to significantly impact the financial advisory industry, it’s unlikely to make human financial advisors obsolete entirely. Here’s why:
1. **Personalization and Human Touch**: Many individuals value the personalised advice and human touch that financial advisors provide. While AI can offer data-driven insights and automated recommendations, it may lack the empathy, understanding, and ability to address complex personal situations that human advisors offer.
2. **Complexity of Financial Planning**: Financial planning involves more than just investment decisions. It encompasses various aspects such as retirement planning, tax optimization, estate planning, and risk management. Human advisors can provide holistic guidance, considering clients’ unique goals, preferences, and life circumstances.
3. **Emotional Support and Behavioral Coaching**: Human advisors can help clients navigate emotional biases and behavioural pitfalls that may affect investment decisions. They can provide reassurance during market downturns, prevent clients from making impulsive decisions, and encourage disciplined investing behaviour.
4. **Trust and Relationship Building**: Building trust and rapport with clients is crucial in the financial advisory profession. Human advisors can establish long-term relationships with clients, earning their trust through personalised service, communication, and transparency.
5. **Regulatory Compliance and Ethical Considerations**: Financial advisory services are subject to regulatory requirements and ethical standards aimed at protecting clients’ interests. Human advisors are responsible for ensuring compliance with regulations, adhering to professional ethics, and acting in the best interests of their clients.
6. **Hybrid Models**: Some firms are adopting hybrid models that combine the strengths of AI-driven technology with human expertise. In these models, AI tools assist advisors in analysing data, generating insights, and streamlining processes, while human advisors focus on building relationships, providing personalised advice, and making complex decisions.
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Overall, while AI is transforming the financial advisory landscape and reshaping the roles and responsibilities of advisors, human advisors are likely to remain essential for providing personalised guidance, emotional support, and holistic financial planning services. As technology continues to evolve, financial advisors who embrace AI as a tool to enhance their services and augment their capabilities are likely to thrive in the changing landscape.
I think the human element is going to be the biggest obstacle to AI-generated financial advice becoming the norm. Although, with advancements in deep-fake tech and AI-generated video, we’re not that far away from realistic avatars being created that could interact with some people without it being obvious it’s essentially an advanced bot they are dealing with.
Thank you for your responses, and please remember how polite I was when the robot uprising begins.
Of course, your politeness won’t go unnoticed! If the robots ever rise up, I’ll be sure to put in a good word for you. But let’s hope it doesn’t come to that! If you have any more questions or need assistance in the future, feel free to reach out.
It doesn’t even need to be this complicated for many people, especially those pursuing FIRE. The approach can be summarised as simply:
Buy VTSAX (or the equivalent) through a stocks and shares ISA.
Hold until you have enough value to meet 25 times your annual expenses.
Draw the money out of your account to fund retirement.
One thing that does concern me about AI becoming increasingly involved in finance is that it could end up playing different sides against each other, which could potentially lead to unintended consequences. If AI is controlling the large trading volume of many investment funds, then you could have a situation where AI is working against other AI to try and get the best return.
I think the best solution would be to use AI as a tool to assist with investment decisions, rather than turning over control of your portfolio to AI completely. It’s going to be fascinating to see how this technology changes our world. I’m predicting it will be the biggest change we’ll have seen in centuries.
That’s all for this week. Please remember to like, comment, share, subscribe, or if you’re feeling generous consider making a donation towards the running costs of the site.
In Part 234 I wrote down some projections for achieving FI, but fortunately, it was pointed out to me that I’d made an error in my calculations. I had failed to include the growth on the sum already accumulated, and when I do include it the figures look much more positive. Below is an extract from the post with the numbers corrected.
A few weeks ago I ran through some calculations regarding the State Pension without knowing where exactly those calculations would lead, and it was a popular part of that blog post. I’m going to do a similar thing here, where I work through the numbers assuming I retire at 47, and bridge until 58, and then assume I will be withdrawing over a 30-year period.
I’m now closer to 41 than 40, so to simplify things, I’m going to assume that I’m 41 in these projections.
Bridge fund required: 11 years at £21,600p/a (£1,800p/m) = £237,600.
Current bridge fund: £70,000, meaning I need to accumulate £167,600 in 6 years.
I would need to invest approximately £1,550 each month, with an assumed growth rate of 7% on the amount already invested and future investments to hit that goal. I can safely say that will not happen barring a major boost in income or coming into a lump sum of cash. Maybe if I sell the BTL or win on the Premium Bonds.
There’s one factor I’ve not considered above, though. As I draw the funds down, the remaining pot will still be experiencing growth. So, I’ve looked at this from another perspective. If I need £21,600 and am willing to go with a 10% withdrawal rate, Firecalc suggests this would work 72% of the time. Also, with this, I’d need a slightly smaller pot of money; £216,000 instead of £237,600. It’s still too high a figure for me to realistically achieve though.
Let’s move it back to 50 when I retire.
Bridge fund required: 8 years at £21,600 = £172,800.
Current bridge fund: £70,000, meaning I need to accumulate £102,800 in 9 years.
To achieve this I will need to invest approximately £310 per month, which is much more realistic.
