2020

[Nomad]

Despite almost always have a fairly well-paid job in IT, I was never very good with money.
My main hobbies involved purchasing either computing equipment or music equipment. This included guitars, amps, keyboards, microphones, pre-amps etc. Along with this, I always enjoyed going out for ‘a drink’ with friends – invariably this was as you suspect many drinks and much was spent.

Now, however, I’m getting on a bit being 50 years of age and I’ve managed to somewhat put a break on these habits. Instead, I’m interested in investing and retirement planning, mainly in the form of self-invested pensions. At present, I am putting a heroic 58% of my salary into my pension and my employer then adds an extra 7%.

I’m able to do this because at present I’m single and my house has no mortgage and my expenses are very low. My retirement target is around Spring/Summer 2020 when l will be 52. I’m hoping to enjoy a long and healthy retirement as my parents are both still kicking in their 80’s.

At present, my numbers are as follows – with figures in UK pounds

So here are 25th May's figures in pounds
Pensions £141k
House £95k
Savings £22k
Old car £3.7k
Stuff £3.7k
Loan -£7.4k
Net = £258.0k or 64% of target.

[2Birds1Stone]

Are pensions insured/guaranteed/COLA in the UK?

Here in the US it looks like some will go belly up, leaving participants hanging. Personally I like the autonomy of being able to invest/withdraw funds how I see fit, if you want an annuity you could do that with a portion of investments.

Do you have/plan on having heirs?

[Nomad]

@2Birds1Stone
In the UK financial accounts like pensions and bank accounts are guaranteed for the first 85k pounds or about $113k dollars.
So you are best having more than one account/pension in lumps up to that size with different institutions.

Also, you don't have to buy an annuity. You can go now choose 'income drawdown', which is a far better financial proposition for most people.
However, the first 25% you withdraw from your pension is totally tax free.

I have a son, he is grown up now - hopefully, I don't need to pass on my money in the near future...

[Nomad]

These are the numbers for 31st August.
Pensions £149.2k
House £95k
Savings £24.5k
Car £3.4k
Stuff £3.7k
Loan -£7.0k
Net = £268.8k or up £10.8k / 3.9% (67% of target)

[Bankai]

Up over £10k in 3 months - very nice indeed!

Since you are prioritising pension contributions over post-tax accounts (ISA), I presume you're higher rate taxpayer and also reasonably close to 55. What's your drawdown plan for the pension and what's your target year/NW for retirement? Also, do you include state pension in your calculations?

[Nomad]

Currently I'm chucking in £2250 in my pension each month via salary sacrifice - its very tax efficient and means I can't spend it.
My employer puts in £350 to bump it to £2600.

Also, i put in £250 into a regular savings account.

You guessed correctly I would be a higher rate tax payer if I didn't sacrifice any salary. I'm 50.5.

The plan is to take 25% out tax free at the age 55 and put it into a normal investment account.
Then drawdown about 12000 a year from the remaining pension pot to minimise on income tax costs.

I have a rule of thumb for spending and that is [AGE] x [NET WORTH] / 12000 = [MONTHLY ALLOWANCE].
This figure is currently 50.5 * 275800 / 12000 = £1160.
When that figures get's above £1500 I will think about going part-time - then retireing completey.
The projection is that I will get to £1520 at age 52.25
Note, this is not the usual calculation that people use of 3% or 4% or savings.
One advantage of this is that it factors in your age. If someone is aged 80 do they really need 25x salary to
retire, how many years do they think they really have?

I do factor in state pension at I will be elligible for that at age 67.

[Nomad]

Last time I'd forgotten about a loan I was paying on via direct debit for about 7.0k.
Need to tweak the prior entries.
That has now been cleared and the numbers are:
Pensions
a) £36.8
b) £84.6
c) £41.3
Pensions total = £162.7
House £95k
Savings and stuff £10.2
new car £9.0
Net = £276.9k (69% of target)

[Nomad]

Would you find elaborating...

The formula I found was [AGE] X [NET WORTH] / 1000 = [YEARLY ALLOWANCE]
and changing it from yearly to monthly obviously changes the 1000 to a 12000.
The key thing to notice is that if your happen to be 40 years old, this is the same as the 4% rule.
If you are 30, this is the same as the 3% rule. e.g. [NET WORTH] * [AGE / 1000] makes it more obvious.
The key assumption behind the rule is that the younger you are, the less of your capital you can spend and
conversely the older you are, the more of your remaining capital you can spend - no-one lives forever.
The other assumption is the you don't assume your money will grow at this rate, you assume investments grow at a fixed 3 or 4 percent fixed rate
but spending from year 41 an onwards may slowly out strip growth. However when you start to receive defined benefits such as state pension this
will reverse and you will be net-gaining money once again.
The final assumption is, once a year perhaps on your birthday, you take stock and work out what you can spend over the coming year - it will be
slightly more or less than last - depending on returns etc.
This works well if you factor in any final salary scheme/defined benefits you may have and state pension - which are all fixed amounts.
There are also ways of tweaking it such as taking the average of this result and the fixed 4 percent rule.

[Nomad]

Here are the broad brush numbers for the last month.

Pensions
a) £36.8k (same)
b) £83.7k (down 0.9)
c) £44.3k (up 3.0)
Pensions total = £164.8k

House £95k (same)

Savings and stuff £10.2k
Car £8.8k (down 0.2)

Net = £278.8k up £1.9k (69% of target)

[Nomad]

For the first time, I've attempted to track actual spending.

House
84.15 Gas/Elec
23.00 Phone/Internet
21.25 Water
16.00 Boiler
12.83 TV
11.80 Insurance
9.99 Netflix

Shopping
167.76 Groceries

Me
44.00 Gym
27.60 Books
12.00 Mobile
2.20 Bank Charge

Car
138.37 Car Juice
2.50 Parking

Entertainment
140.00 Cash → Spent
126.65 Restaurants inc. Birthday
101.23 Bars
55.00 Hotel
41.77 Off Licence
11.70 Gig Ticket

Sub-Totals
476.35 Entertainment 45.4%
179.02 House 17.1%
167.76 Shopping 16.0%
140.87 Car 13.4%
85.8 Me 8.2%

Grand-Total
1049.80 All Spending.

Income
1367 Salary
2598 Pension
3965 Total

Effective Saving Rate is: 1050 / 3965 = 73.5 %

NOTE: some spending such as car insurance is just paid in one hit on the month it's due.
Maybe I should factor that in to each month.

[prognastat]

It might be worth spreading the cost of lump sums in your budget at least to get an idea of what those categories are actually costing you each month.

[chenda]

I'm going to guess your annual expenditure is going to be around £15000 a year. Need to consider long term maintenance on the house, replacement car (assuming you're going to keep one) insurance etc. Also Christmas and holidays if you do that.

And I'm curious where on earth in the UK you can find a house so cheap ?!

[Nomad]

And I'm curious where on earth in the UK you can find a house so cheap ?!

It is in the North...

[Nomad]

Here are the approximate numbers for the end of the month - about a week early.
The only slightly out of the ordinary expense this month was paying off the small amount that remained on my student loan.
It's a bit of a landmark because, I'm now totally debt free.

Pensions
a) £36.8k (same - it's defined benefits scheme)
b) £84.9k (up 1.2k)
c) £48.2k (up 3.9k)
Pensions total = £169.9k

House £95k (same)

Savings and stuff £9.5k
Car £8.6k (down 0.2)

Net = £283.0k up £4.2k since last month. (70% of target)

[Nomad]

I've started a collecting various points in order to finance future holidays.
It turns out if I have a Tesco current card, I collect their club card points at 2 per pound in Tesco and 1 per pound elsewhere.
Then I can convert each of those points into Avios Air Miles or Virgin Atlantic Air Miles at about 3.5 miles per point.
This looks to be a good freebie for money that would be spent anyway.

[Nomad]

My journal has been going for a year, hear are the numbers from a year ago.
Pensions £141k
House £95k
Savings £22k
Old car £3.7k
Stuff £3.7k
Loan -£7.4k
Net = £258.0k

Let's glue Savings, Stuff and Loan together into -> savings plus stuff £18.3
Pensions £141k
House £95k
Old car £3.7k
Savings plus stuff £18.3k
Net = £258.0k

Now a record of my latest numbers, assuming today is the 25th.
Pensions
a) £36815 (same)
b) £85420 (up 520)
c) £50172 (up 1972)
Pensions total = £172392 (up £2492 for the month - up £31392 for the year).

House £95000 (same - same as last year)

Savings plus stuff £9500 (same since last month - down £8800 for the year)
Car £8500 (down £100 for the month - new car up £4800 in value since last year)

Totals
Net = £285392 (up £2392 for the month - up £27392 for the year) (71% of target)

[Nomad]

So far:
25/05/2018, £258000, 64%, Working
31/08/2018, £268800
01/01/2019, £274000
24/02/2019, £276900
28/03/2019, £278800
24/04/2019, £283000
25/05/2019, £285392
15/06/2019, £290918
22/06/2019, £297681
30/06/2019, £297865
14/07/2019, £302327
17/07/2019, £303837
24/07/2019, £303270
31/07/2019, £307230
31/08/2019, £309084
03/09/2019, £310699
11/09/2019, £306892
18/09/2019, £308192
29/09/2019, £308699
31/10/2019, £303991
26/10/2019, £306443
14/12/2019, £328388
22/12/2019, £335578
03/01/2020, £337526
10/01/2020, £339803
14/01/2020, £342859
17/01/2020, £343983
19/01/2020, £344139
31/01/2020, £341541, 85.4%
07/02/2020, £345762, 86%
16/02/2020, £346224, 86%
18/02/2020, £348129, 87%, Highest.
29/02/2020, £335794, 84%, Crashing...
05/03/2020, £340785, 85%
08/03/2020, £337629, 84%
10/03/2020, £329163, 82%
16/03/2020, £315878, 79%, Low Point!
25/03/2020, £322109, 80%
31/03/2020, £324377, 81%, Stopped working.
08/04/2020, £329095, 82%
10/04/2020, £329965, 82%
15/04/2020, £330643, 82%
18/04/2020, £332370, 83%
21/04/2020, £335913, 83%
28/04/2020, £336032, 84%
30/04/2020, £337422, 84%
08/05/2020, £335223, 83%
12/05/2020, £337501, 84%
15/05/2020, £335901, 83%
19/05/2020, £339011, 84%
21/05/2020, £342011, 85%
29/05/2020, £345226, 86%
06/06/2020, £345740, 86%
15/06/2020, £343687, 85.9%
18/06/2020, £347702, 86.9%
19/06/2020, £348513, 87.1% higher than the previous peak of 18/02/2020
24/06/2020, £350817, 87.7%
27/06/2020, £349952, 87.5%
03/07/2020, £350654, 87.7%
07/07/2020, £351704, 87.9%
09/07/2020, £353304, 88.3% Unnatural exuberance?
18/07/2020, £354231, 88.6%
24/07/2020, £356083, 89.0% go 50/50 equities and non-equities.
31/07/2020, £351894, 88.0%
05/08/2020, £357264, 89.3% precious metals explode.
13/08/2020, £354309, 88.6%
14/08/2020, £354567, 88.6%
31/08/2020, £355067, 88.8% 45% in equities. 55% in bonds, commodities, real estate.
25/09/2020, £350663, 87.7% markets starting to crash?
30/09/2020, £353543, 88.4% 43% in equties.
15/10/2020, £355760, 88.9% 38% in equities...
31/10/2020, £347526, 86.9%
05/11/2020, £351500, 87.9% post US election.
07/11/2020, £353653, 88.4%
30/11/2020, £354003, 88.5%
08/12/2020, £358300, 89.6% a new high, vaccine news?
01/01/2021, £357223, 89.3%
09/01/2021, £358805, 89.7% latest high...
22/01/2021, £360000, 90.0% new peak, bracing for equity crash...
31/01/2021, £356614, 89.2%
04/02/2021, £361111, 90.3%
28/02/2021, £354508, 88.6%
31/03/2021, £357433, 89.4%
13/04/2021, £364826, 91.2%
29/04/2021, £365635, 91.4%
30/08/2021, £364050, 91.0%
30/09/2021, £359335, 89.8%
30/10/2021, £366454, 91.6%
24/11/2021, £368165, 92.0%
30/11/2021, £365371, 91.3%
31/12/2021. £364182, 91.0%, unretired!
31/01/2022, £364728, 91.1%
24/02/2022, £369839, 92.5%
28/02/2022, £372795, 93.2%

[Nomad]

(post duplicated)

[Nomad]

This is my second attempt at tracking monthly spending. The house section now includes council tax.
There is an alarming amount of 'cash' transaction in the entertainment section which is principally beers, restaurants and taxis.
Probably need to address that issue.

House
91.45 Council Tax
84.15 Gas/Elec
23.00 Phone/Internet
21.25 Water
18.81 Boiler
11.80 Home Insurance
9.99 NetFlix
9.99 Spotify (now cancelled)

Car
117.72 Fuel

Shopping
245.24 Food/Drink Shopping

Me
44.00 Gym
27.60 Online Book Subscription
12.30 Mobile Phone

Entertainment
275.00 Cash – unaccounted!?
87.32 Specifically beer
41.80 Festival Ticket
5.55 Fast Food

Random
23.10 Garden Stuff
16.00 Charity
21.76 Present

Sub-Totals
House 270.44 (22.77%)
Car 117.72 (9.91%)
Shopping 245.24 (20.65%)
Me 83.9 (7.06%)
Entertainment 409.67 (34.49%)
Random 60.86 (5.12%)

Grand-Total
1187.83

Not sure how this all compares other people.

[Gilberto de Piento]

Entertainment
275.00 Cash – unaccounted!?

I will paraphrase something C40 told me a long time ago. Cash is not spending. In your case this category is something like 25% of your spending. Figure out what is going on there.