Jan Investments – Update

I have been tracking my income and expenses in MoneyStepper’s spreadsheet. Although I have a few more expenses this month (Xmas gifts on credit cards and unexpected motor expenses + annual insurance payments), I have still managed to get a savings rate of 67% which I am really pleased with. According to the spreadsheet my net worth has increased by 5.7% , so a positive start to the year.

This over 50% SR may also be due to the fact that I have calculated the remainder from this year’s £15k NISA allowance limit and I have a little bit spare. I have therefore invested this ‘spare’ allowance in topping up my funds NISA this month using the dividends I received on the 8th Jan. I need to make sure I have used all my tax-free savings options this year before I buy any more shares outside a tax wrapper.

I have also received some of my late employer’s pension contributions, the Pensions Advisory Service is chasing up the remainder for me. If they do pay up that should add a few hundred pound to my personal pension account which over the next few years should accumulate some additional value towards my FI status.

I am beginning to calculate my SWR as I have been using 3.5% rather than 4%. Am I there yet?

Can I give up work?

I am really unhappy with my current job – I have raised concerns with my line manager but they are not listening. The response seems to be – “tough – go on then resign – if you dont like it as its not changing”. The basis being, I was interviewed for a specific role and given another on arrival (it should have been a “short-term” placement) but I am still there and it doesnt look like there is any plan to move me back.

They are not giving me any feedback on whether I am doing well or not in this placement – they avoid the question. Their management style is ‘bullying’ and stress inducing and so in my eyes, I am doing badly and need to do better. I seem to be getting slapped every week, as is everyone else. I am doing a job that I am not actually qualified or experience at doing – so I am making mistakes and errors due to my lack of knowledge and having to pay the price with ‘verbal slaps’ for getting it wrong or not doing it as they expect.

Team moral is low and getting lower by the week. People I am working alongside are talking of leaving due to this ‘culture’. They too seem to be doing jobs that are very different to what they were told they would be doing and are also unhappy.

The lure of FI is growing strong due to this and I am even just thinking of leaving, then look for a different job in a few months time, I am not quite sure I have reached the magic figure to say I am truely FI but I have a good comfort blanket. But then, am I really not going to work again? I will probably do something, it just will not pay as well as the job I have now.

I even received my National Trust magazine with an article about volunteering and how doing this has led to a number of volunteers taking up paid roles with the NT. Some of these people appear to have been made redundant or retired and decided that doing something different via the volunteering angle gave them the personal rewards that working for ‘The Man’ did not.

I have also seen an ad for a local volunteer for a charity I support. Maybe these could be opportunities to get a break from the ‘Office Grind’ and think about a change in my life path.

Off to ponder my choices…

UK job environment

An interesting TV programme tonight on the workings of the ‘new self-employed’ job sector. Politicians are happy to spout about the employed and how great the UK is…..but its cloaking that actual situation, with jobs being low pay and ones that companies are exploiting to reduce or remove the need to play employer NI – which ultimately means these employees will not accrue enough NI to qualify for a full UK state pension – unless they realise that they havent contributed and that they add voluntary contributions to raise them to the qualifying 30 year minimum.

Read the article here.

I am now watching the equally amusing programme on Tescos. Now I have a vested interest in Tesco as I am a shareholder and wish to gain a nice steady dividend stream from them.

Tesco has lost its way and did so some time ago (I havent bought any Tesco shares for a while due to their poor handling). Its been quite a struggle for them and the culture in the company needs to change and they need to change tack and streamline themselves like other retailers at the moment.

News and comment from Sir Terry.

Its the giant company train, that rolls itself into a corner and then finds it very hard to move quickly to react to the changes that are happening in the market sector.

The accounting issue is a bad PR case for the company with the SFO vetting the books. Not good for shareholders such as myself.

UK Pension – What are you planning to receive?

I have been reading about the changes to the UK state pension today given all the news coverage on the UK media.

Have any of the other UK based FI bloggers though about what you will do when you do give up working?

If you are going to stop working in your 30s or early 40s – have you looked at the forecast for your UK state pension?

Are you planning/expecting to receive a UK state pension when you reach the relevant state retirement age or are you planning to put money into a private pension fund and use your FI funds to provide you an income instead?

If you are banking on receiving the new flat rate UK state pension when you reach state retirement then you need to look at how many qualifying years you have accumulated.

In my case, I have only accumulated 24 years so far and the new minimum to qualify for the full entitlement is 30yrs – so I need to contribute for another 6yrs to gain access to the ‘full’ entitlement of £150 per week full payment under this new scheme.

As I want to be FI before 6yrs is up, I will need to look at how I can reach the 30yr mark. As I will not have a job, I will not be paying any PAYE and therefore no National Insurance. I would be classed as ‘unemployed not claiming benefits‘ under HMRC rules.

To make sure I cover this additional 6 yr period, I need to pay voluntary NI contributions which are currently a flat rate of £13.90 per week [2015 published figure from HMRC site].

So if I factor in an annual or quarterly payment of this value to the HMRC, I will qualify for the full fixed UK state pension.

NOTE: when I become FI, I wil be considered ‘unemployed not claiming benefits‘ this also means that I will be restricted by the HMRC on what I can pay into a private pension. The HMRC like to cap the contributions that you can make and still get tax relief, you can contribute more but you will not get the tax relief. So while I am on the payroll – I will be making a few strategic pension contributions while I can to gain my tax relief.

I will be adding the voluntary NI contributions to my post FI expenses sheet so that I can make sure I have enough of an FI fund to cover this. Yes, I may actually work at different points between now and state retirement – just for the fun of it!! (Wow…that sounds good…working for fun rather than blind necessity) Any work which qualifies for NI payments will be a bonus to the contributing years.

What are your expectations when you reach true state retirement age?

Please leave a reply, it would be great to see how others are approaching this aspect of pension planning.

A great post on “How to Quit your Job” – Transition

How to quit your job

Just read the above post by TEA – so good I just had to post a link and say, can’t wait for the day.

I am really starting to look at whether I can leave my job this year. I may not be fully FI but I am far enough along the way to at least give up work for a while and may be find some part time work later on.

The current job isn’t engaging or inspiring and now that I have started to experience the ‘bully’ – “not listening, just do it” management response. I want to leave. I am fed up of being in and seeing others in this situation – where you have to some how just make things work using whatever sticky tape you can find to get it done in 2 weeks when it really needs 3 months just because their plan only allows for 2 weeks.

The “How much is enough” question does keep haunting me. I forget that although my money app tells me how much I am spending as expenses each month, I am also spending on things that I will not need to once I stop working.

My fuel expenses – may go down [or get worse] depending on how much travel I want to do with my free time.

My food expenses – those lunches and coffees at work will go. Not that I spend much on this anyway – part of my frugal ways 🙂

I can actually start looking at gardening and growing my own food, it would form part of my day, working on my garden (I could possibly get an allotment long-term – huge waiting list in my local area though) and growing my own food will reduce my food expenses.

My clothing expenses will reduce – I can stop buying clothes for work.

I can get a dog – up until now my only pet has been a cat because they are independent and can look after themselves during those long working/commuting days and weekends!  A dog requires you to be present and they are dependent on you to provide food, walks, company and training but can give back such a great reward in the form of companionship and love.

I can go back to interests I had when I was younger – drawing, painting and photography. If I can get back to a good standard I could possibly make this a side hustle income stream. Knowing I don’t have to sell to earn my food some how helps those creative juices.

Saving on some expenses and having new ones that don’t go over my expense thresholds will keep me on the FI path. If I balance each increase with a reduction on something else, I should come out a winner.

 

More January expenses

When it rains it pours

That’s the saying and it holds true for me this month so far.

Comments from co-workers at work suggesting our managers are bullies and deaf which is something that really annoys me about working and gives me that added incentive to gain FI status. It was this type of culture I didn’t want to end up working under. Ah well, I will stick it out at the moment, I’m only on one weeks notice so anything can happen. I have money in the bank due to my FI plans so it is not a disaster if I lose my job. I was talking to a new starter at work last week – a contractor – comparing career backgrounds and he suggested I go contracting. I would get work easily.

I have expenses on my car this month. The fog light is broken, a stone some time over Christmas. I have a quote and the car is booked in to be fixed. I should really get the windscreen done too. It has a chip, it’s not bad so I am waiting as long as possible until I get it repaired (through car insurance) as I have already had a few more stones kick up and hit it so would rather not end up on a monthly repair cycle due to this winter season.

My car will need its first MOT this year so motor costs will be a regular expense throughout this year. At least I am not commuting 2,500+ miles per month which was the situation last year so the servicing interval will extend.

My shower is playing up in my own house now, so I may have to find someone to fix this. Plumbers in the UK are so unreliable, I haven’t found a good one yet in my local area.

I have been filling in MoneyStepper’s 2015 challenge sheet and although I do have these expenses, I am still running at a 41% savings rate for Jan. Again, the dividend income I have received this month has helped to offset costs. Any money left at the end of the month I will look to invest in another share purchase. Which shares? I don’t know at the moment. I could increase my current holdings or spread my exposure by buying into another sector.

While I am still working, I am trying to increase payments into my pension while I am allowed to. Once I give up work, I am limited to £3,600 gross.

You can receive 20% tax relief even if you don’t pay tax. The maximum you can contribute is £3,600 gross – a payment of £2,880 to which the taxman adds £720. This is the case even for people who don’t pay tax, such as children and non-earning spouses.

While I can receive the extra 20% tax relief to my pension contributions and get another 20% from being a high rate tax payer through my tax return, it seems like a good way to save as normal savings accounts are paying out so poorly and there doesn’t look like there is any immediate end to this poor return.

With the changes to the pension rules, these could become drawdown accounts rather than buying an annuity. I have a [now very rare] final salary pension from a previous employer which will not pay out until I am 65. This will give me approx £12k per year – although what this is really worth when I get there is another thing – probably only the equivalent of £6k now! I have another 20 years before I will find out 🙂

Oh the joys of rentals

The new year has started and I have expenses on my rental property. January always seems to be an expensive month for me.

I am so glad I have this managed through an agency, I know it means I am paying more as I lose some of the income due to fees but they take all the calls and get repairs done quickly and at a good price (trade) – better than I can get privately. I have no intention of becoming a professional landlord with a portfolio of properties.

The tenant says the shower is playing up – so the agent is going to send someone round to check it out and see if its a repair or a replace. Just the typical wear and tear, I also have my tax bill to pay this month.

My accountant has sorted out the rental income/expenses and due to other issues with my tax code, I don’t have a big bill to pay for the last tax year – this one will be a different matter.

I am just hoping that the tenants are happy and renew the tenancy this year for another 12 months. That would help to stablise my income stream for the year.

I have had a good month with dividend payments this month so these expenses will be offset by dividend income to balance them out.

The beginning of Jan 2015

Well, I have received my first dividends for the new year, so I now have £1,300 to re-invest into some more shares. I will need to start looking at which shares look like the best option in terms of share price v dividend yield. I am concentrating on dividend shares and building my passive income to eventually equal my expenses to enable me to give up full-time work. I have NISAs, pensions and other savings but getting an income out of dividends and my rental will give me a baseline with everything else being an ‘extra’.

I have also heard that I will be receiving another special dividend in Feb for one of my share holdings so I will be getting another £1,000 that month too. So good news to start the year, I should be getting a small dividend payment from Glaxo this month, I did increase my holdings in Glaxo when the share price was down in Nov/Dec but they don’t qualify for this dividend.

A bumper 2 months of dividends to start the year, my dividend income will drop considerably after that 😦

The down side is that I have some unexpected expenses this month – my car – I have a cracked windscreen and broken fog light – fallout from the winter conditions we have just experienced in the UK. I need a car to commute to work so no ability to cycle and cut down my cuts. The only positive part of all this is that I am not commuting long distances as I was in Jan 2014, I don’t have a fuel card any more either but with the drop in fuel prices and the much reduced commuting distance I do feel like this is a positive rather than a negative aspect to the car. I will try and get a good price for the repairs and soldier on.

I have booked my summer holiday too (accommodation that is) – not very financially savvy as its a holiday in the UK – and based on costs I could get an all-inclusive holiday abroad for that price. This just goes to show how expensive UK holidays are. Having the holiday booked gives me a goal to look forward too later in the year.

My only big debt is my BTL mortgage and I am pondering paying down some of the capital on that (as I have cash that is earning nothing in savings accounts) so that over the next few years the income yield begins to grow so that as I near the crossover point with passive income, my rental income will increase and I will drop into a lower tax band and gain a bit from this too. Timing will be important so I need to start researching this and determine the best way to paydown this mortgage. The rental income currently confortably supports the mortgage payments. I cannot predict the future so I have no idea when I will have a void period on this BTL so need to account for this in my budgets. The current agreement is up for renewal in May so will have to wait and see if the tenant wants to renew or move on.

I am trying to include a minimal pension contribution into my expenses for passive income calculations as non-workers can contribute a minimum annual amount which will help to bolster my pension investment until I reach the relevant pension access age. MMM has a free app which calculates when you will reach FI, based on this I could reach FI in less than 5 years which means I still have another 4+ years before I can touch the first of my pension pots. That one will not really give me much income, current projections are forecasting an ANNUAL pension of £800 which really will not be much to live off, although the changes announced by the chancellor may mean that I am better off taking lump sums out. I have excluded this pension from the free app calculations. I have tried to be conservative with the numbers too as the app is based on US figures and UK is obviously a very different investment environment.

Off to research….

My goals review for 2015

Mmm….

Have been spending some time think about this as I have set personal goals last year which have been reasonably successful. Those based on exercise and travel have not done so well, maybe because I havent had that much free time to invest in this and my focus has ended up on saving and finding a job after the turmoil of the past 8 months of the year.

I have been reading a few blogs, the one that has really taken my interest over the new year period has been MoneyStepper, (thanks Weenie!) this site has been quite interesting reading and the 2015 challenge spreadsheet is something I have downloaded and I am filling in. I have not entered the challenge but will fill this in offline and track my progress through the year. Doing this has made me thing about my financial goals for this year. Based on the information entered for Jan so far, I am running on a 60% savings rate – which is really good and one I want to keep up throughout the year.

My goals this year will include – increasing my net worth and increasing/maintaining a minimum of 60% savings rate.

I changed my investment strategy from active to passive funds during the last year and as a consequence I have seen my income gains (dividends reinvestment) drop as the passive funds are trackers so with the bad market conditions I have actually lost money over the months in which I have been investing. I have been tracking my passive income as well as my savings rate and this has increased nicely this year. Under my passive income tracking, my move on the ISA front has meant that my ISA income has dropped so combined with the poor cash performance, my ISA passive income has dropped a whopping -65%!

I do wonder if any of these trackers will pick up this year as the outlook for the UK index still sounds grim. If this is the case then I will not see any capital growth in the index prices and will continue to only see gains from my active dividend/income funds. The NISA passive income will continue to take a hit and I have been concentrating on this as an ultimate income source so I could give up working full-time. The moment all my NISA income is being re-invested but I can request that this is changed to a payout so I would then get an income stream from my NISA holdings.

My non-NISA dividend income has grown really well over the past year as I have been purchasing income shares and the corresponding dividends have been reinvested when they have reached a sizable re-investment value to make the investment costs worthy.

A lot of these non-ISA shares are from sharesaves when I worked for an old employer. I hold quite a lot of shares from this employer and they have done really well this year, even issuing special dividends.

My non-ISA dividend income has increase 145% between 2013 and 2014 – That can’t continue?

My cash savings has dropped 20% between 2013 and 2014 – which shows that money needs to be placed somewhere else to have any chance of keeping any pace with inflation.

Well I will work on drawing up some more goals and post a summary for the year ahead.