Kipling's Journal

Where are you and where are you going?
Jin+Guice
Posts: 548
Joined: Sat Jun 30, 2018 8:15 am

Re: Kipling's Journal

Post by Jin+Guice »

Man, you have so much saved! Do you have a number in mind? Do you know what you want to do when you retire?

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@ Jin+Guice A fair amount saved, but most of it is in pension funds so inaccessible until I am 58 (12 years from now). I have about 3 years bare-bones expenses in available funds. I need to get that up to 10 before pulling the plug. There is also the possibility of a house move on the horizon in a couple of years, which would require a large stash of cash to cope with. So, head down and saving is the focus of the next couple of years. When your top marginal tax rate is above 60%, it feels like it takes a lot of effort to save! I know that I am fortunate to be in the position of earning so much money. I know that there are reasons why the UK has a progressive tax system. But I was surprised by how much I was upset, when I had worked my socks off one year and got a £10k bonus, that that turned into £3.8k net. An interesting insight into my own psychology.

JollyScot
Posts: 83
Joined: Thu Feb 26, 2015 3:44 am

Re: Kipling's Journal

Post by JollyScot »

I know what you mean about the taxes in the UK. It seems there is a reasonably good set of systems in place if you keep what you earn below the £50,000 mark. Once you start getting above that then a pretty big portion goes away. Now that I am over the not needing to work mark taxes are sufficiently high that I would be unlikely to consider going full time or working. It is just not worth sacrificing the time I have for the portion I would take home.

My share of annual expenses £7.5k
Full time expected tax bill £80k-£90k (if labour win next election £120k-£140k depending on how my investments do :shock: )

So I would be spending 10x-15x my annual expenses on funding the system that I really don't have much time for. As such they will end up with whatever I need to pay on my investment returns, which will probably come at the lower income brackets.

The UK has some serious brakes in place if you want to build wealth by exchanging your time only. Pensions are one of the quick ones which I see you have taken advantage of well. The other (for now) is to be a business owner or investor.

Have you not been hit by that £500k cap that they introduced though.

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

Assets and liabilities check 02/01/20

Assets

Property - £387,000
Saleable collections - £15,000

Pension 1 - £27,000
Pension 2 - £513,000
Pension 3 - £83,000
Pension 4 - £91,000

ISAs - £37,000
NS&I - £27,000
Cash at bank - £4,000
Loans out- £12,000
Tax refund due - £4,000 -edit to include-

Gross - £1,200,000

Liabilities

Credit card - £5,000

Net - £1,195,000

I spent £7,943 in December. £4,462 of that was on wine for future drinking, an extreme amount even for me but a lot of low-ball auction bids I had put in in advance came in good and so at least that is a project that is now largely done. £930 was a prepayment for a holiday next summer (10% cheaper if booked before year end). £558 on flat expenses including a new iron. £410 for a number of meals out (mainly pleasurable). £310 was for Christmas and birthday presents. The other £1,273 went on food costs at home (the new hob wasn't installed until shortly before Christmas); mandatory travel, and miscellaneous expenses.

I bought some more premium bonds and the stock markets ticked up so despite this level of spending I ended the month richer. Nevertheless I very much need to reflect and refocus on what is important to me. So, a separate post will follow on my efforts to meet my ERE goals for the year.
Last edited by Kipling on Tue Jan 14, 2020 4:06 am, edited 3 times in total.

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@JollyScot- the UK pensions lifetime allowance is currently £1,055,000 and is sort-of-index linked and so I am unlikely ever to trouble that. The annual pensions investment cap is £50,000 falling to £10,000 for high earners, but if you have not fully utilised your allowances in the three previous tax years, you can count back and 'top up' to the extent you have room left to do so. Having done all that I can properly to mitigate my tax liabilities by maximising SIPPs and ISA for the year I view the very large amounts of tax that I pay (circa 15 JAFILs this year) as a price that I just have to pay; the rules are the rules and as the recipient of a high income I am in the category of people about whom the populace, politicians, and the civil service are all largely unsympathetic. I can contribute, leave the country, or simply stop. I entirely respect the people who decide to leave the country. What I hope to do is stop but, to stop, first I need to stop spending it all...

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

2019 in review, and plans for 2020

Net worth - a good year (against previous year)

Assets

Property - £387,000 (390,000)
Saleable collections - £15,000 (13,000)
Pension 1 - £27,000 (13,000)
Pension 2 - £513,000 (447,000)
Pension 3 - £83,000 (84,000)
Pension 4 - £91,000 (71,000)
ISAs - £37,000 (16,000)
NS&I - £27,000 (25,000)
Cash at bank - £4,000 (0)
Loans out- £12,000 (12,000)
Tax refund due - £4,000 (0)

Gross - £1,200,000 (1,071,000)

Liabilities

Credit card - £5,000 (6,000)

Net - £1,195,000 (1,065,000)

Overall +130,000 of which more than half was capital gains and dividends on shares held in tax free accounts- a good year on the stock market now has more impact on me than saving even at high income levels

Spending - a very bad year (against budget)

• Wine 27k (8.5k) - fail - I followed a vinous interest down a rabbit hole. This was just too much.
• Holidays 12k (8k) - fail - over time I have become more philosophical about this spending, as it brought some good memories
• Food 7k (6k) - pass - this was close enough, and some small changes should enable me to reduce it a little - I spent almost 1.5k on cheese [!]
• Flat 7k (4.5k) - pass - most of this is service charge and council tax, and the service charge was up, so it's not like I did anything wrong
• Clothes 3.5 k (3.5k) - pass - maintenance of a professional wardrobe is expensive
• Club, societies, collections 4k (3k) - pass - I took on some responsibilities in relation to one of them which comes with some costs
• Tubes, trains, taxis 2.5k (3k) - pass - this is just a cost of being here in London
• Personal care 2.5k (3k) - fail - didn't have enough sessions with my personal trainer, so the underspend is not a win
• Meals and drinks out 4.5k (3k) - fail - need to just say no
• New computer etc. 0.5k (2k) - fail - really need to buy new laptop, it's visibly failing
• Misc. 2k (1.5k) - pass - I bought an antique table for more money than I should have spent but I use it every day and I like it so...

Overall 72.5k (46k)

Comparison with previous years

2013 £45,979 - lowest month's expenditure was £1,891 (October)
2014 £37,044 - lowest month's expenditure was £1,092 (February)
2015 £39,954 - lowest month's expenditure was £1,810 (February)
2016 £101,286 - lowest month's expenditure was £2,005 (February) - I refurbed my flat in this year and excluding that expenditure was about £38k
2017 £53,677 - lowest month's expenditure was £2,625 (September)
2018 £50,637 - lowest month's expenditure was £2,813 (December)
2019 £72,898 - lowest month's expenditure was £3,865 (October)

Ouch, ouch, ouch. The lifestyle inflation is real, and needs to go into reverse. 2020 budget needs to be realistic, but also lower than this year.

• Wine 8k
• Holidays 10k - will include a couple of weeks in the US
• Food 6k
• Flat 7k
• Clothes 6k - some expensive professional wardrobe purchases upcoming
• Club, societies, collections 4k
• Tubes, trains, taxis 2.5k
• Personal care 3k
• Meals and drinks out 3k
• New computer etc. 2k
• Misc. 1.5k

Total 53k

If I can come in lower than in 2017, I will award myself a pass. And, try to do better the year after.

Health and happiness and environment - pass

I ended the past year only 2 pounds lighter than I started but with much better aerobic fitness. [Thank you to the great Michael Johnson, one of the voice options on the NHS 'Couch to 5k' app; somehow, when MJ tells me that I am going to run for a set period of time, and that I can run for that set period of time, I believe him.] Target for this year - to drop 10 pounds while maintaining this new higher level of aerobic fitness. I am exercising 5-6 days a week consistently (over the past two months) now, putting this first and getting it done in the mornings. I have booked into a week-long residential boot camp in the spring to give me a further boost.

My parents are in their eighties and both are fairly alert but have some health problems. In any one year typically one of them will have an operation that incapacitates them for a period of time (weeks). I try to be a supportive child without being asked, and to provide wise counsel when I am asked. I was throughout the past year in a stable personal relationship, from which I derive pleasure, and which continues. My previous girlfriend, who I have high regard for and with whom I still spend time socially, is also in a very happy relationship with her new partner which is great. I have several, mainly separate, small groups of friends with whom I enjoy spending time centred around my hobbies. Target for this year- to continue the same.

I am not very happy at work. The work itself is fulfilling. I have had a couple of big wins in cases I have been working on, where the outcomes meaningfully and positively affect large (in one case very large) numbers of people. I am enjoying watching a couple of proteges in the firm develop and am giving them chances to shine which they are taking. But I do not like the direction my firm is going in, and I am having difficulties with my immediate management including, but not limited to, getting screwed on pay, and so since I cannot change, within the firm, either the direction or the management I need to leave and go work somewhere else. I have reached out to a specialist recruiter and have a couple of first interviews lined up the next few weeks.

Summary

I asked myself the other day what it was I did want. In truth all I want to do is go and live in a cottage in the country with cats and books and good food and wine and occasional social visits from friends. I must remember that the purpose of work is to allow me to achieve that. Spending to alleviate my professional unhappiness retards progress towards the goal.

ember
Posts: 11
Joined: Sat Oct 05, 2019 5:41 am

Re: Kipling's Journal

Post by ember »

Hi Kipling!

Your vision of the cottage in the country with cats, books, food, wine etc sounds wonderful. Have you considered getting a hammock?

It seems to me that the only significant difference between this year's budget and last year's actual figures is the wine budget, so nail that down and you'll be well on your way. I imagine you have a fair bit of wine accumulated now?

How much do you think you will need to live on when you decide to retire? You're almost at £1.2m already - is it possible that you're almost there? ;)

User avatar
Bankai
Posts: 610
Joined: Fri Jul 25, 2014 5:28 am

Re: Kipling's Journal

Post by Bankai »

Your financial situation is really strong.

Looking at your expenses, they are likely to go down quite dramatically once you move to the cottage. You'll have collected all the wine you ever need. Travel is likely to go down since you won't need it as an escape from work. Clothes will go down dramatically. Commuting will be gone, although might be replaced by a car. You likely won't have easy access to PT so you might get a home gym instead (one-off expense). Eating out will be pretty much gone as well. Looking at what's remaining, you might go down to £25k or less without even trying - meaning you already have 50x your future annual expenses (minus cash to buy a cottage). Assuming everything into FTSE100, dividend yield alone would be £50k+ pa (at 4%+ current yield) on your 1.2m.

Are you sure you can't retire already? Are you targetting any specific number or date?

Nomad
Posts: 222
Joined: Wed May 16, 2018 5:23 pm
Location: UK

Re: Kipling's Journal

Post by Nomad »

Looking at your numbers, you have a ton of money but your spending actually went up.
So last year you were spending 4.3% of your net worth and this year it was 6% of your increased net worth.

In your field is it possible to do a career break / hiatus / sabbatical? How about renting a cottage or trying a few sequentially over the summer?

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@ ember - a hammock also needs to go in the budget...

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@bankai - it partly depends on how much the cottage costs. Depending on where it is, that could be anything from 300-700k. The other challenge I have is that most of my money is locked away until I am 58 (pension) so I need to build up non-pension assets to sustain me over the interim. That's emphatically the focus for 2020-2022.

Kipling
Posts: 50
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@nomad- I am acutely aware that the figures are moving the wrong way. Sabbatical/hiatus/career break not, alas, an option given what I do, although were I to move firms I might end up on gardening leave for a few months. If so, I will be in a cottage, within days, for a trial. I presume I can rent a cat too...

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