Ydobon's Independence Referendum

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Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Wed Aug 12, 2015 1:27 am

That's the one egg, it has been a doddle to use so far, although my average rate probably isn't as high as people who have been 'in' for years. I think I'm floating at about 5.9%. I basically treat it as a proxy for cash, which I can't get so great a rate on (now that our TSB accounts are all maxed). I know that's naughty (treating it as cash), but the provision fund is a great comfort.

I was a long term Zopa user (several years), but found that rates just kept falling. I'm not sure how they compare with Ratesetter, but they used to always be a few points below them.

I have also experimented with Bondora, which is a European P2P lender, but I bailed out relatively quickly. Despite very high headline rates, I didn't like the amount of administration required (international money transfers, currency risk, the fact that they would only return money to my bank account who have terrible rates etc. etc.)

Funding Circle also seems popular, but I'm not entirely convinced by lending to businesses unless the loans are asset backed. In addition, the higher interest rates on offer have me uncertain as to whether a) the loans are just riskier per se or b) it's just more expensive for businesses to access finance in the UK?

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Thu Aug 27, 2015 4:33 am

Oops, I am short one update, will rectify this evening.

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Tue Oct 06, 2015 5:21 am

I am annoyed with myself. Big life changes (moving to a more expensive family house at the end of October) mean that I have gotten out of the habit of tracking our savings rate and net worth. It's especially disappointing as I haven't forgotten to track spends, so can only see one side of the picture, as it were.

This is just an excuse, I forget that with FI comes the need to be exceptionally focused at times!

I will get back to it at the end of October.

On the positive side, I am hoping that our move will make the idea of ERE more palatable to my wife. We will be getting the space we need to raise a family, a suburban life in an area with enough character to avoid the and a reasonable enough mortgage bill that we'll still have plenty of money left to invest.

I have recently discovered that one of her key worries is running out of money. At the same time, I have been discussing investments (particularly P2P lending, where she seems to like the drip drip of interest). Now all I have to do is show where her fears and my plan to allay said fears will meet in the middle. It was a real Eureka! moment, not something that I experience that often during an argument ;)

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Wed Oct 28, 2015 3:20 am

Quick straw poll - do people include savings interest/P2P interest/dividend income/bank account bonuses/cashback in their 'income' calculation when calculating savings rate for the month?

George the original one
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Re: Ydobon's Independence Referendum

Postby George the original one » Wed Oct 28, 2015 9:59 am

Nope, as that's part of the investment pile doing its own accumulation and could be used for replacing wage income. Savings rate is what you keep out of your wages.

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GandK
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Re: Ydobon's Independence Referendum

Postby GandK » Wed Oct 28, 2015 10:43 am

George the original one wrote:Nope, as that's part of the investment pile doing its own accumulation and could be used for replacing wage income. Savings rate is what you keep out of your wages.

+1. It's part of your return percentage if it stays in that account and you reinvest it.

I would only call that "income" if I took it out of my account and spent it (on something besides another investment).

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cmonkey
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Re: Ydobon's Independence Referendum

Postby cmonkey » Wed Oct 28, 2015 1:33 pm

+2 for me. Although I do count cash back from credit card as income simply because it offsets the expense. I could just not log the expense, but then it gets confusing. It depends how you track finances. Ultimately, it isn't much at all since I never use my card anymore so it counts nothing for my savings rate.

steveo73
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Re: Ydobon's Independence Referendum

Postby steveo73 » Wed Oct 28, 2015 2:51 pm

Ydobon wrote:Quick straw poll - do people include savings interest/P2P interest/dividend income/bank account bonuses/cashback in their 'income' calculation when calculating savings rate for the month?


I include it in savings and income. I don't really track expenses though. So if I earn $5k in dividends I put that down as income and if I don't save it it also ends up being part of my spending. I don't count any asset depreciation or appreciation.

Basically I calculate my savings rate as "savings/income" where savings is all savings that I make and income is all income including dividends and interest (interest doesn't really count because I get so little of it). My expenses become income - savings. I also have an emergency fund which I consider spending.

jacob
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Re: Ydobon's Independence Referendum

Postby jacob » Wed Oct 28, 2015 3:17 pm

Accounting is just a somewhat arbitrary method for seeing where the money goes. If you calculate savings rate as the ratio to earned income, it's useful in the sense that a savings rate of 100% signals financial independence (because once you're FI you're presumably saving all your earned income.)

However, if you're already FI, then this method doesn't make a lot of sense anymore (consider that your savings rate would go UP if your earned income goes down! Not very intuitive.). Perhaps then you'd be more interested in how bad-ass or efficient you are with all your earnings vis-a-vis expenses in which case your baseline would be all forms of income and gains.

Unless you think such exercises are fun, the most commonly used metric is annual expenses / after-tax job income. This is close enough for government work and would work for everybody but special cases. Put it another way, if the exact method matters, you're likely screwing around at the edge of the domain space where the simplified model no longer works.

thrifty++
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Re: Ydobon's Independence Referendum

Postby thrifty++ » Thu Oct 29, 2015 2:17 am

Nope. Nor do I include any other bits of random income. I want to put pressure on myself to get my savings percentage up.

IlliniDave
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Re: Ydobon's Independence Referendum

Postby IlliniDave » Thu Oct 29, 2015 7:09 am

Ydobon wrote:Quick straw poll - do people include savings interest/P2P interest/dividend income/bank account bonuses/cashback in their 'income' calculation when calculating savings rate for the month?


I do not, either as income or as savings. I ignore investment returns/losses completely. I look at my paycheck and all my investment contributions from that paycheck (I don't count money that goes into my bank savings account which, while technically savings, is usually for intermediate-term expenses or purchases). Then I compute two numbers. One is (Total Investment Contributions/Gross Income) and the other is (Total Investment Contributions/Income net of income+payroll tax). Those are both a little squishy because some of my investing is done on a pre-tax, tax-deferred basis; but they give me a feel for how I'm doing overall and how I'm doing once the government gets done with me.

Actually, I only compute those numbers annually. My income is fairly steady (salaryman) so I just track/set incremental goals in dollars. The savings rates are interesting, but in the end it's dollars into the financial asset pile that drive my readiness.

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Thu Oct 29, 2015 7:23 am

Thanks all, we appear to have a pretty strong consensus.

Tinkering around with my spreadsheets after a frustrating month in which I managed to save very little (house purchase), but in which my net worth went up by £££££ (house sale at higher than expected value, P2P investment returns kicking in).

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vexed87
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Re: Ydobon's Independence Referendum

Postby vexed87 » Thu Oct 29, 2015 7:47 am

I have had a few of these month recently where savings rate falls for various reasons. I think if you are buying tangible assets, you should worry less about your savings rate, as long as your purchases are not wasteful (over priced plywood sofas, depreciating luxury cars etc), hopefully your assets will serve you well and these expenses will not be repeated too often. The only exception I can think of is if most of your money is going on consumables (i.e. luxury holidays), you may well be doing something wrong.

When buying a chest of drawers or the wood working tools to produce your own, or paying down a mortgage, your money isn't vanishing into thin air. It's doing something useful and if it helps save money in the future, it's money well spent. If your asset purchases are well thought out, you should be able to recover your money spent if you ever decide you don't want to keep those assets any more. Some assets can be great hedges against inflation. Just think about things like timeless oak furniture, analogue HiFi speakers, 20kg of rice purchased before a drought etc.

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Thu Oct 29, 2015 8:36 am

I don't regret the asset we've purchased, I just regret the cost ;)

I will be sure and look out for that rice drought tho.

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vexed87
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Re: Ydobon's Independence Referendum

Postby vexed87 » Thu Oct 29, 2015 9:39 am

Ydobon wrote:I will be sure and look out for that rice drought tho.


You can be very cantankerous Ydobon :twisted:

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Thu Oct 29, 2015 9:44 am

Constant sarcasm is Britain's gift to the world, I am simply embracing my culture :D

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Thu Feb 04, 2016 6:22 am

I haven't been very good at updating this diary, have I?

I would say that the dust has settled on what is likely to be our most expensive purchase ever (£215,000 on a house, approximately $311,000). Behind the dust, however, are a malevolent horde of home improvement demons, brandishing credit card debt and contractor invoices.

Since moving in we have added solar PV panels, replaced the boiler, had large amounts of the electrics replaced, the roof repaired, trees felled and will be having the bathroom replaced next week. This has come at a cost, somewhere in the region of £13,000. After the bathroom is finished we will perhaps be at the half way point in terms of cost, although in terms of work to complete we'll be at maybe 1/3.

We have enough cash available to pay off all credit card bills + pay for the rest (just), but things are very challenging as wife is currently not working as she looks after our beautiful baby daughter. 3 months to go and she will be earning an income again.

I am trying to 'man up' to my financial future (do they use that phrase in the US?) and am making the best of what is, for the moment, a very confusing and expensive time. To demonstrate, the 'highlight' of this months finances will be going from 301 years to FI to 285 :lol:

  • Restarted contributions into S&S ISA (tax privileged account)
  • Opened new pensions for wife and I (using low cost SIPPs to hold bonds that will help to reduce portfolio volatility as we are currently 100% equity in work pensions)
  • Started setting aside £78/month for our daughter, this will hopefully provide a nest egg of £20,000 by the time she reaches the age of majority
  • Dramatically cut my personal spends (for example, I was paid 11 days ago, I've spent less than £15 on stuff/experiences since then)
  • Replaced every light bulb in the house with LEDs + had the electrician install low power downlights in a few rooms
  • Plan to start a compost bin just as soon as we stop getting all of the secondhand storms from the US!

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Re: Ydobon's Independence Referendum

Postby themodernchap » Mon Feb 08, 2016 9:29 am

Congrats on the house purchase! The solar PV will pay for itself before long. If you are still interested in P2P check out Wellesley. They have a mini bond paying 8% and they do P2P bridging loans.

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Mon Feb 08, 2016 9:50 am

themodernchap wrote:Congrats on the house purchase! The solar PV will pay for itself before long. If you are still interested in P2P check out Wellesley. They have a mini bond paying 8% and they do P2P bridging loans.


Thanks for that - I'll counter suggest with try Rate Setter for a 15%+ return in one year if you invest £1,000 (let me know if you want a referral and I'll split my cut), Money Thing or Saving Stream for 12-13% secured loans.

Solar PV felt like a big mistake for the month of December (we rushed it in to avoid a tariff cut), but it's starting to tick up quite quickly now.

themodernchap
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Re: Ydobon's Independence Referendum

Postby themodernchap » Mon Feb 08, 2016 9:56 am

Those both sound amazing. Looks like I have some research to do. PM me.

Is it cheaper to get it installed in the winter at all? Hopefully we get a summer, then you'll be laughing. Are you going to be feeding back into the grid?

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Mon Feb 08, 2016 11:01 am

themodernchap wrote:Those both sound amazing. Looks like I have some research to do. PM me.

Is it cheaper to get it installed in the winter at all? Hopefully we get a summer, then you'll be laughing. Are you going to be feeding back into the grid?


No cheaper to get it installed in winter unfortunately, but the UK govt. cut the incentive for feeding back to the grid somewhat brutally (12.x p/kWh to 4.x p/kWh). As it's a 20 year inflation indexed incentive, it was worth taking a generation hit for a few months to protect the better rate.

We do feed back to the grid, but with current metering arrangements, there's no way of showing how much, so it's assumed that 50% is sent back. On a nice sunny day when we have the washing machine, tumble drier, hoover and TV on that definitely isn't the case :D

Will PM you re. the P2P stuff.

themodernchap
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Re: Ydobon's Independence Referendum

Postby themodernchap » Tue Feb 09, 2016 7:26 am

I'm hoping to end up off grid, and I'm hopefully going to be retraining as a spark, the ideal of feeding back is attractive but so is the idea of being off grid entirely. Hard to do in an urban property, much easier in the countryside.

Do you have any capacity for storing power or does it just feed an inverter and get used rather than your supply? I want to experiment and turn everything off and use just solar to see if the meter stops.

Edit: how many panels and do you know what kind of wattage /amperage is being generated at hypothetical max output?

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Tue Feb 09, 2016 9:40 am

themodernchap wrote:I'm hoping to end up off grid, and I'm hopefully going to be retraining as a spark, the ideal of feeding back is attractive but so is the idea of being off grid entirely. Hard to do in an urban property, much easier in the countryside.

Do you have any capacity for storing power or does it just feed an inverter and get used rather than your supply? I want to experiment and turn everything off and use just solar to see if the meter stops.

Edit: how many panels and do you know what kind of wattage /amperage is being generated at hypothetical max output?


The inverter option. To answer your question, the meter goes backwards on a sunny day! 11 * 285W panels.

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Tue May 03, 2016 6:11 am

My savings rate may not be negative this month (the first month where this is the case 7 months after buying our new house)!

I am on tenterhooks :D

Ydobon
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Re: Ydobon's Independence Referendum

Postby Ydobon » Wed Mar 15, 2017 4:45 am

Time for an update :)

  • 75%? of home renovations complete, we have stopped using credit to pay for work, which has greatly reduced my stress levels as we are paying as we go. This slows down the pace of work, which is allowing me to spend more time with my wife and daughter (who is now a confident toddler)
  • No debt bar our mortgage and one rewards credit card that is paid off monthly
  • When I posted last May, our NW was one month away from hitting its lowest level since I started tracking it (this hit in June 2016). Since then, it has grown by over 50% thanks to several one-time factors (house price inflation, defined benefit pension updated with 5 years worth of indexation increases, massive stockmarket rise, currency devaluation)
  • We now pay 25% into retirement accounts, which are great value for us (due to reduced tax, national insurance and student loan repayments, each £1 saved costs in the region of £0.66. This will go up to 30% in April
  • Several spreadsheet and portfolio updates led to a total refresh of how we invest. We now treat our defined benefit pensions as a bond fund and are 100% in equities for everything else
  • The share of our NW that is in equities just passed our home equity for the first time, I am very excited by the pivot away from house rich/other assets poor
  • I have started re-training for a career in finance, although progress is slow at the moment


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