The reformed materialists

Where are you and where are you going?
ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

@Bankai, thanks for your comment. You're right that in England and Wales there is provision for 100% additional council tax charged on empty properties. My understanding though is that if the property is furnished and is inhabited then the penalty wouldn't be levied. Most councils don't have the resources to gather sufficient accurate data. Our property will be furnished and we would come and go throughout the year as would our children, to pick up mail, etc. There's a whole sequence of decisions that we need to make: location for good transport and low council tax, convenience for spending time with our children, etc. As this would effectively be an investment in our marriage, provided we get the balance between cost and aesthetics right, then I'm ok about writing off the loss of investment income (on the asset value) and running costs as an enabler for the rest of our extreme retirement lifestyle even though I'd rather be purist and not own property at all.

ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

It’s about time I posted an update.

With the UK in lockdown for most of this year, it has been relatively easy to restrict our spending and to save money. I'm pleased that I am resisting the temptation to buy stuff. I bought a grey t-shirt and a casual shirt in the end-of-summer sales, but nothing else.

In July, with restrictions eased, DW booked a long weekend away to explore some low cost housing areas in England, based on our desktop research plus have an enjoyable break sight-seeing and eating out. We spent two nights near Manchester and one in Wigan and visited Accrington, Burnley, Clitheroe, Southport and Lytham – smallish market towns which are either rural and great for hill-walking or on the coast. We liked Clitheroe, but had concerns about its remoteness. Lytham was vibrant with a lot to offer, but its location is an hour too far north and west and the thought of the extra hours spent travelling to/from friends and family put us off! Thinking about living within walking distance of work/shops/etc., an ideal location would be Stretford, Manchester, near the football and cricket stadia. There are some really nice apartments available within our budget.

Our architect’s recommended contractor has provided ballpark budget figures for house refurb work which are scarily high and around double my forecast. We’re rethinking and will get another local builder to quote and may explore selling ‘off market’ to someone looking for a ‘project’. It’s a source of frustration that reality TV shows can achieve amazing transformations on modest budgets yet when we attempt some modest refurb work it is priced higher than the TV show features pay for adding extensions and new kitchens!

I bit the bullet with my Nissan LEAF. I identified a few months ago that I had a chunk of capital tied up in a car which didn’t really meet our needs any longer (insufficient range for leisure trips). I had it serviced and MOT tested (statutory roadworthiness) then sold it to a car-buying website to liberate £10k in cash (crystallising £4k depreciation over 4 years ownership).

I then had to find a replacement, older and cheap to run with a longer touring range. I landed on a 2007 Mazda MX-5 for £2k after walking away from a battered Toyata iQ. Amusingly, when I changed the insurance cover, the company refunded £61 as the Mazda is a lower risk! I have since passed a few hours on owner forums reading up how to maintain the car myself, which looks very straight-forward. So I enter the world of ‘bangernomics’, a mindset introduced by motoring writer James Ruppert who has published several books on his idea, which are well worth reading and compatible with ERE (own classics). It has been very enjoyable driving with the roof down during the warm, dry days of summer. It also survived a heavy downpour without leaking. I have changed the fluids and the brake pads and all’s well. Paying £50 for a tank of fuel is a shock after 6 years of LEAF ownership!

We spent four days on the Isle of Man in July. We both like the laid back feel, low levels of litter and graffiti and the polite and friendly locals we interacted with. It would still be my preferred retirement location, however, DW is yet to be convinced that daily flights and multiple ferry services will enable us to visit our kids on the mainland regularly.

We made a short trip to Somerset, on which we eliminated Taunton from our list but liked Wells. We also visited Chichester, which came across as a London commuter satellite close to the sea. I found the place fairly charmless and DW didn’t find the buzz she was hoping for.

I changed my electricity tariff because the time-of-use one has been skewed by wholesale energy price increases. We are now on 'Octopus Go' which has four hours reduced rate electricity in the middle of the night, which we'll use for the washing machine, dishwasher and for recharging our battery electric car. Doing comparisons, I noticed that reduced car usage in lockdown has reduced our electricity consumption by 5,000 kWh compared to the previous year. That explains how our electricity bills haven't increased!

Our decluttering resumes this month with a listathon planned for ebay today.

ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

Another month of austere living/high saving.
Our new electricity tariff is going well. We are managing 45% of our consumption on the low 'night' rate.
The weather has got much colder since the end of September. We are using our central heating system minimally, to take the chill off the house. I’m wearing long legged underwear and multiple layers on my upper body to cope with 16ºC room temperatures. I’ve found that resting my feet on a cushion on the floor helps keeps them warmer.

I came across author Tim Leffel, who has written a pretty good book about geo-arbitrage (‘A Better Life at half the price’). I picked up a used copy and have ploughed my way through it. It’s pretty well researched with quotes from migrants in the countries featured and it has improved my knowledge of central America! There’s lots of good content on his website too.

Our decluttering was paused due to us going away for the schools’ half-term break and I’m getting back into the groove of photographing and listing surplus clutter this week. Our 10-day break was a real tonic, with lots of opportunity to increase our vitamin D levels for winter!
I was surprised to find out that Dubai has introduced a retirement visa with fairly modest income and capital requirements. This could be interesting to us as the weather there certainly beats Isle of Man. Consulting numbeo.com, the cost of living is 23% lower although the complication for UK citizens is losing free healthcare. DW is less negative about UAE than Isle of Man (dozens of flights daily to the UK) and she reckons that family would want to visit us there. We would probably spend the hot summer months in the UK (watching cricket amongst other things). I’m aware of the tension between planning to move to Dubai and pure ERE theory, which is dismissive of tourism and travel, however, it will satisfy a long-standing wish I’ve had to live abroad, sampling a different culture, also somewhere where the weather is warmer and sunnier than the UK. Dubai, like Isle of Man, is a low-tax economy with no inheritance tax. The Tim Leffel book suggested that, when travelling, couples discuss whether they could live where they are staying. In Abu Dhabi, I asked DW and she said she'd need to see a supermarket to be certain. We visited a Carrefour, which stocked most of the stuff we buy at home, plus many world foods that we had never seen, and she decided that she could live there!

We have tidied up our bank accounts and closed some that I opened to take advantage of interest rates that were attractive at the time (those were the days!). I have also activated a pension from a corporate role I held around 30 years ago and will shortly be receiving a nice lump sum.
From reading @Jacob’s recycled blog posts daily, I have reframed my status in that I stopped working to earn a living at least 15 years ago and have been in semi-retirement since. The pretence of being gainfully employed is a face-saver! My retirement goals are to catch up on my reading (I read four ebooks while away, borrowed online from my county's library) and exercise my design and construction skills making furniture for our new (downsized) home.

I picked up on @Jacob’s recommendation of ‘Good Boatkeeping’ as I hoped it would provide lots of pointers to help guide our decluttering and downsizing. Having skimmed it briefly, it looks good. The one stand-out thing I learned right away was how to catch mice in a poly bag! A relevant piece of knowledge, because with the colder evenings, the field mice around our house start looking for somewhere warm to sleep and we have been trapping two per night (one in the kitchen and one in a bathroom).

I have resumed running again and am halfway through the ‘couch to 5k’ program, covering around 3km when I go out every other day. After an 18-month lay off for health reasons, my heart rate rockets when I get running. I’m able to breathe fine through my nose while maintaining a 7 minute/km pace, which is good, but the heart needs to strengthen up some.

ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

I have kept up the running and have been easy on myself by taking a break over the holiday season.

December was expensive for motoring costs as DW’s car needed an expensive repair to pass its MOT test and my Mazda needed a new coil spring for its MOT.

We went away for the holidays and took DD with us for a break in the sunny United Arab Emirates. It proved to be a really relaxing break, although our saving ratio dipped! I didn’t need convincing that it’s great to spend time somewhere warmer than the UK during winter.

In conversation with DW, she’s onboard with a mainly nomadic lifestyle, which will mean we spend our winters in Asia when travel is normalised again.

DW asked a tree/landscape gardener to quote for cutting back some hedges on our property boundary. He was taken by surprise by the size of our garden (it’s an acre and a quarter) and enthused about how it’s just what property developers look for. So DW suggested that we bin off the plans to renovate the house and offer it for sale as a ‘project’ instead of putting savings at risk in the refurb. I’m happy with that so we are now full steam ahead disposing of clutter. DW is also now relaxed about selling before we find a new home and is happy for us to rent (she had been insisting on home ownership). I have been re-reading the J.L.Collins blog posts and discussions about renting being financially more advantageous than owning property.

We took off to East Anglia last weekend, to visit Bury St. Edmunds (quite pleasant but so remote) and Cambridge. A few years ago we investigated moving to Cambridge but dismissed the idea as property prices are similar to our area (we would aim to take equity out of the move), but rentals are comparable. An advantage Cambridge has is that it’s less than an hour from London by train – good for us going to concerts, etc. and also where DD lives.

In the car it was good to talk through our options and how maybe we should keep our toes in the property market by owning an apartment that we rent out until we need to make use of it ourselves. With that agreed, we have arranged for us to view some apartments in a good location that we saw last summer, this coming Friday. That's a significant breakthrough, because until this point DW has insisted that we live in a home that we own.

We did a four-mile walk around the centre of Cambridge on Sunday and talked about our home-finding project. We reviewed the places we have visited and our shared conclusions are still consistent. We thought that Bury St. Edmunds was pleasant, if not very diverse, but had no compelling attraction for us and it’s a long way from anywhere. Cambridge has charm, life and energy but is dominated by students half the year. We could live in either city, however, the prospect didn’t excite us.

The last few days have been a blur of online property searches, looking at one to two-bedroom flats for rental in various towns and cities in the south of England (the north is too cold for us!). DW has a requirement that when we step outside the property we should be somewhere we can walk that’s pleasant and interesting – seaside/port/marina or historic architecture in particular. The new home must be within walking distance of shops, bars, restaurants, etc. It’s somewhat overwhelming when you can afford to live wherever you wish. We talk about places and often agree there’s no strong reason for us to live there (job/family ties/etc.). Reading other forum posts, choosing where to live in the US appears more straight forward because of the weather and geography. The UK is much of a muchness!

It’s a strange process we’re working through. A blend of part analysis, random research and daydreaming! I’m reluctant to invoke my manager’s brain and set arbitrary goals for decisions because there’s such a strong emotional element to reaching agreement. My hunch is that if we stick at the search something will become obvious and the stars will align eventually!

ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

Finances - we are doing fine, I’m comfortably confident that we have enough assets to support us in retirement as soon as we can extricate ourselves from our ongoing commitments. With the part-time work DW and I do, we are running a surplus over our living expenses, which we have used to fund some trips abroad this year as part of our research into retirement options. That said, our net worth in US dollars has fallen with the pound sterling!

Looking for inspiration to move forward on selling off our chattles on the way to relocating and downsizing, I revisited Tim Ferriss’s writing to get some pointers on getting things done. On his website I chanced upon his - 4 hour body and slow carb diet. Following the slow carb diet is effective in trimming off the excess pounds. Ferriss advocates avoiding all foods which are (or could be) white and eating a mix of proteins, pulses and veggies in combination, preparing the same meal repeatedly. Ferriss is an avowed red wine drinker so recommends two glasses per day, which mitigates the grind of food restrictions. I did reach a point after six weeks when I couldn’t face eggs and baked beans for breakfast any more! From Tim’s blog I read Neil Strauss’s ‘Emergency’ which sparked an interest in perpetual travel and, in particular, low-tax countries which offer residence visas. I have taken a look at UAE, Bahrain and Malaysia in addition to closer-to-home Portugal. Following online links has consolidated a plan that we will spend our spring/summers plus Christmas in the UK and the rest of the year travelling. I’m drawn to Malaysia but don’t see the value in applying for Malaysia My Second Home (MM2H) as we wouldn’t want to be there full time and I’m not sure we want to buy property there and keep funds in a local bank. Malaysia has a generous 90-day tourist visa which would allow us to spend our winters in the tropics. I think that being UK-based with extended trips to warmer places will give us the balance and flexibility we require to stay close to our son and daughter. The ‘what happens if we are ill’ question haunts us!

Decluttering has been a slow, hard grind. The Sigmoid curve from the ERE book proved itself to be true for me. I concluded that I need to treat decluttering as a 9 to 5 job. I have managed to accumulate a random assortment of high fidelity separates over the past few decades. Fortunately, I also stored their original boxes, so I decided to list them on eBay at a rate that I could support. This is where the ‘it’s a job’ mindset has really helped. The goal is to shift boxes and the value realised isn’t so important. To clarify the mindset which helps - it is not about realising maximum value but disposing of ‘things’ which are taking up valuable space in our home, so that we can present a minimalist vibe when we put our house on the market and beneficially have less stuff to move when we actually downsize. Having someone pay us to take our clutter off our hands is a bonus. That said, I’m wary of selling anything too cheap for someone else to profit at our expense.
There have been some challenging people who made ridiculously low offers (below the starting price) on auction items soon after a sale has started. Why would a seller accept a low offer before the bidding has got going?

Another interesting challenge has been overseas interest. Most mornings when I open my inbox there has been a message asking the cost of shipping an item to South Korea or Hong Kong. It’s a ton of work to get the item weighed, the box measured and to work through shipping quotes online. One item (a pair of loudspeakers) I offered as ‘buyer collects only’ as I don’t have the boxes for them, so I had to find the cost of a shipping crate and internal packaging materials before I could get a shipping cost. I don’t enjoy being on the receiving end of an assumption that I will do whatever I’m asked to get a sale along with the pressure of knowing that the buyer may be fickle with the feedback they leave. Maybe I should be firmer and reply ’sorry, I don’t have the bandwidth to handle export shipping’.

I have got into a rhythm of responding to eBay messages in the morning, then printing shipping labels and posting/dropping off items at a courier collection point before lunch. In the afternoon I take product photos and prepare listings (which I put up on Thursdays and Sundays). So far, the clutter that I have disposed of has converted into £3900. Interestingly, some of the items sold for more than their original purchase prices! In fact, the eBay selling is pretty much a full-time activity, responding to queries and offers, I find that I need to check on messages every few hours. I have a couple of high end (audiophile) pieces, which I don’t think are suitable for selling on eBay, so I’ll have to find another market place. Then on to the vinyl LP collection and the compact discs! DW has been a trojan by looking up our books on a ‘we buy your books’ app and has sorted them between those with some value and the titles the merchant isn’t interested in buying. We have boxed up the latter and taken them to a charity shop (thrift store).

Retirement location: we have a shortlist of places in the UK. We are not interested in lowest property price locations, because they are cheap for a reason - not many people want to live there. DW and I had a few days away and in conversation DW said she doesn’t want to be somewhere where the skies are grey and it rains a lot. Having looked up rainfall stats, York and the south coast (between Southampton and Brighton) fare well along with Cambridge and London.

York is particularly attractive because of the historic buildings and interesting and beautiful places to go walking. Generally, it’s strong for culture (concerts, theatre, the arts) and eating out. We viewed two apartment developments in the city which we found interesting. Unfortunately, we aren’t in a position to commit as we haven’t marketed our home yet and the UK property purchase tax (Stamp Duty and Land Tax) penalises existing property owners who buy a second home. We also visited Lymington, which is a pretty town in a lovely area (the New Forest). I’m not sure there is enough going on to keep us occupied. We spent a night in Portsmouth, which has more going for it than I had appreciated. DW spends spare moments browsing property websites with random search criteria which turn up interesting options. She was energised by factory conversions in the jewellery quarter of Birmingham for a time.

The big plus point in keeping a UK presence is healthcare which is provided free at the point of delivery by the government. The big negative that we face is inheritance tax (IHT) which is charged at 40 per cent on our estate. True, there are allowances that will exempt the value of a home (up to £500k) and husband/spouse allowances will exempt £1 million from tax. UK tax rules restrict the size of cash gifts to children and impose a seven-year rule on gifts. We may seek specialist advice on trusts and family investment companies, but chatting with our daughter, who is a solicitor, the prospects appear to be grim. The alternative of relocating to Isle of Man or Alderney or Sark has some appeal, however, those places have high costs of living plus the expense of flights to the mainland if we wish to travel anywhere interesting.

ThriftyRob
Posts: 148
Joined: Wed Jul 01, 2020 7:20 am

Re: The reformed materialists

Post by ThriftyRob »

I see from @jacob's handy sticky post on this forum that I am pretty delinquent on the regular posting recommendation. Apologies, life has been very busy.

The eBay grind continues. After grousing about pernickety buyers last time, I decided I would see the good in everyone. I bit my tongue in a dispute about shipping costs to the US, when the buyer made a stipulation about extra packaging after we had agreed the deal (which increased my shipping cost). I swallowed the loss and he did come back and enquire about buying a few more items. We got stuck on payment methods – I’m reluctant to receive funds by Paypal because of their transaction fees (and it must be said, the risk of a fraudulent dispute and chargeback) and he isn’t prepared to make a bank transfer. The fact he asked me to under-declare the value on the customs form is a red flag!
I have recouped around £6000 from eBay sales so far which is helping offset rising living costs! I have revived a dormant bank account and am getting close to getting a dormant business bank account resuscitated.

The ebay activity inflicts urgent actions into my schedule - like shipping on the day after the sale. With other commitments I have been stretched further than I like. I am rigorous about scheduling time for rest and sleep so my 'to do' list has been rolling over. I decided to quit editing a quarterly magazine because the deadlines and hassle don't justify the rewards. Plus my focus on getting it published comes at the expense of delaying or deferring other activities which are more important for DW and I - things like fixing the lawnmower and sweeping leaves in the garden.

We had a week away in the sun at the end of October. I read ‘Nomad Capitalist’ by Andrew Henderson. His writing style is pretty full-on and he doesn’t hold back on opinions, however, the underlying themes and messages resonated with me. A big theme in his book is relocating to low-tax jurisdictions to enjoy the benefit of compounding without tax being sliced off your income, in his words ‘go where you’re treated best’. Since getting back I have been in touch with a firm of tax and wealth planning advisors and am also having a dialogue with a lawyer who specialises in inheritance tax (IHT) and UK tax generally. I ran my numbers through an IHT calculator on a firm of accountants’ website and the potential liability was a scary number!

I had a no-charge initial conversation with a tax lawyer. It will be tough for DW and I (though not impossible) to meet the criteria for UK tax non-residence. But we would have to adapt our plans: not even the most bijou pied-a-terre would be allowed and we would have to forego a UK forwarding address and UK bank accounts. Plus restrictions on the number of nights we can spend in the UK. Maybe Isle of Man and Sark come back in the running?

The other big action I took from reading the Henderson book is to investigate setting up an offshore bank account to better diversify. I contacted a bank in Singapore who replied quickly with their minimum account opening criteria, which I have demonstrated that we can meet. They haven’t been in touch since. I have also done some online research into Swiss private banks, however, I’m not sure that’s the way forward for us. Mentioning Swiss banks to our children was met with anxiety!

Our next step is to structure our defences against IHT to protect our kids’ inheritance. Following that we need to implement an investment strategy. With interest rates above 4% in the UK on term savings, achieving a 4% return off the proceeds of our house sale plus our savings is going to generate a meaty five-figure sum each year to add to our pensions which we can draw soon. The advisors I have spoken to so far, conservatively claim they can achieve 8%, so we’re in for a healthy phase of due diligence.

One investment advisor proposed something that looks uncannily like the permanent portfolio, with active investment in equities and avoiding index tracker funds. I guess I’m also going through the evaluation of the question ‘is the advisor’s fee of 1.3 per cent per annum worth paying or could my investment decisions perform well enough to meet our needs?’

I have to also admit, that with the burden of the UK tax liability, another option is ‘f*** it, let’s just indulge and have a good time!’. It’s also very clear from our conversation with the tax lawyer that giving money away to our children should be tax efficient – so long as we survive seven years after the gift! DW and I will have some interesting conversations over a bottle of wine when we are enjoying the Christmas/new year downtime.

There has been a lot of talk in the UK newspaper personal finance pages about house prices being due for a fall following the UK’s government turbulence. We are heading for testing the market in the spring, once the holiday season is past. There’s a lot more clutter to be cleared before we can call the estate agents in to value our house!

Merry Christmas and a happy and prosperous new year to all!

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