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….

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2 thoughts on “The beginning of Jan 2015

  1. Hi
    Good news on your dividends. I have all mine automatically re-invested in my funds so I haven’t really been taking much notice of how much I am getting. I think this is the year to start thinking about yield more carefully rather than just capital growth.

    Hopefully you will be able to get a plan in place for paying off your BTL mortgage in the most efficient way. We paid ours off last year with some of my husband’s pension lump sum but I’m sure you won’t have to wait that long 🙂 It does make a tremendous difference when all the rental income is yours and doesn’t have to be paid back out again.

    • Thanks Cerridwen,
      I have realised that I have some spare NISA allowance so reinvested my dividend money from Jan2015 into there first. This dividend income is outside a tax-wrapper (mainly because the majority of shares are from share options and sharesaves from previous employment).

      I have been looking at yield for a little while now, the idea is to see how much passive income I can generate which can ultimately be used when I leave my job. That was the core reason behind the BTL – that and somewhere to put my redundancy money that would earn nothing in a savings account. This passive income can be used to supplement any SWR drawdown and I can then leave my NISA to grow tax-free. I have the option in my NISA of auto-investing or paying out the dividends. At the moment I am planning to leave my NISA dividends on auto as much as possible.

      At the moment I am taking all my passive income from taxable sources and reinvesting into NISAs, pension top-ups and more shares(taxable). My annual statement for the BTL dropped through the letterbox the other day and it details how to pay down the capital. As the mortgage is on a deal, I am limited as to how much I can pay down each year without incurring a penalty.
      I will get a special dividend payment next month and am looking to get this paid into the BTL so I can start snowballing that down and as you say, start collecting more of the monthly rent (accounting for tax due on it of course!).

      When I give up my job, I will drop down from the high rate tax band so that will help to reduce my tax bill and mean that I can keep more of this income. I am wondering whether to use some of my pension funds to pay off the BTL in a few years time – I still have 8 years to go before I can access my pension funds.

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