July roundup

Its been quite a strange month. It’s 3 months since I stopped working and have actually enjoyed the time off. I have managed to get quite a few jobs done on the house and have been able to go out cycling at least twice a week. It’s been great having the flexibility to take time in the normal working week to do activities and not be worried about having to get back for 9am Monday morning after a weekend away.

I cycled this morning – a nice 20 miler in the sunshine. I have also had an interview for a job !!!

What?? I thought you were ‘retired’. Well, sort of; I have had a nice 3 month break and a job was advertised that was so close to home I just had to check it out…so close I could walk/cycle there!! . I have been interviewed and asked back for the second round. I may not get this role but it was one of those situations where they don’t come up often and I didn’t want to sit and wonder in the future if I should have gone and had a go at it. I have been considering my ‘retirement’ as a ‘semi-retired’ form, where I could pop in and out of jobs over the years enabling my to choose when to work and accrue more NI credits to get my full state pension.

I could be back in the rat race before I know it – but – I will be back under my terms if I do. I can earn some additional income and accumulate some more money into my Honey Pot and also sort out my BTL – so far I have made no money out of the new tenant as they have raised so many maintenance issues it has cancelled out all the rent ( I am not sure if they are breaking everything they touch or if it is just bad luck). It hasn’t left enough to pay the mortgage so this is coming out of the rent account balance. This goes to show how BTL isn’t a gravy train of money and issues can arise that dent the income. I hope that things get better over the next few months otherwise this tenant will be a loss maker.

The good news on the expenses front is that I have managed to get my groceries expenses under my £100 budget for the first time. I have been making my own yogurt and changing my buying habits to reduce any possible wastage – not that I wasted much anyway.

Walking and cycling as much as possible has meant that I have had no fuel purchases for my car this month either. I haven’t had a look at the mileage but I know it’s low. I did my volunteering this month and needed the car to get to the location. I had a great time and feel somewhat refreshed after doing things I enjoy.

The bad news is that my eyes are hurting big time. All that cycling has resulted in fly debris and according to my doctor I now have dry eye syndrome (so I have drops to ease this) and need to get an eye test. Now when I was working I would have qualified for a free eye test, now that I am not working I will have to pay unless I can find a voucher for a free test. I guess I will need glasses this time so that will increase my expenses next month.

Any Frugals out there who know the best optician to use (reasonable frame/lens prices!)  and any free eye test vouchers? I have found a Boots voucher for a free eye check but not sure they have a good price selection should I need to get glasses – I don’t wear any at the moment but age is now catching up with me.

Overall, a happy month and it will be interesting to see what next month brings and if I will be ending next month as an employee and back in the rat race. Time will tell…..

Net Worth – interesting results……

I have been continuing to fill in MoneyStepper’s Savings Challenge spreadsheet to see how I am doing.

I have not entered the challenge and have been using the spreadsheet to track my savings rate from the beginning of the year, now that I have given up my job, I have been looking at the Net Worth aspect and how that is being affected by the non-working status.

Interesting news, I had a net worth that was +9% YTD in the month I quit the job. I have just plugged in the figures for this month and I now have a net worth that is  +12% YTD. That is pretty good considering that I am in draw-down mode and yet my investments still seem to be growing which is a relief….

Some of this is due to my ex-employer shares which have risen again, up over £1 in the last few days, I receive another dividend payment from them soon which I will use as income. I have just sold some while they were ex-div as I need to diversify, just missed the recent rise too! Doh! 😦 …..Happy with the profit made though so cannot complain! Using my CGT allowances for this year to trickle out profits.

Although it is tempting to hold on to these shares, it means I am too exposed to one company and I cannot risk having all my eggs in one basket however good they are doing. I now need to move the sale funds into another investment in something that probably will not provide such a good income return but provide the diversification I need to secure my portfolio. I was going to buy some shares outside an ISA but the budget changes on dividend taxation may make it better for me to place the proceeds into an ISA wrapped investment. I need to do some number crunching to see if it really is a good idea or not – “to ISA-wrap or not”…?

State Pension and National Insurance contributions

I have received yet another NI contributions query from the HMRC. Yet more forms to fill in and return

When I was going through the redundancy wash-cycle last year, the payroll aspect of the sale was completely messed up by the selling parent company. It resulted in the HMRC system having duplicate records – suggesting that I was employed in TWO identical jobs with the same company with the same employee ID at the same time. This caused the HMRC system to generate a negative tax code and also trigger NI contribution queries. It took a while to sort this out with the respective departments!

I have now received yet another form requesting details on my employers and employment dates. It looks like they think I have had 4 employers in the last year, plus a duplicate entry for one of them. I have just spent some time digging through all the paperwork to get all the details to fill in this form and return – again.

Given this confusion on my NI contributions, I thought I would direct this back at them so have requested an NI contributions record and details on my State Pension forecast. I want to know how many years I actually have and how many I need to be entitled to a full State Pension. I was contracted-out for a few years, so this will have an impact on the State Pension I will be entitled to so want to understand what I will currently qualify for and if I remain in the world of FI freedom – what can I pay voluntarily to top up.

It will be interesting reading when I get a response – one for a future post 🙂

BTL – Update

Well, my new tenant is denting my rental income by reporting loads of things wrong with the property and wanting them fixed. I’ve had nearly £1,000 worth of expenses on the BTL this month with maintenance costs in addition to annual insurance and gas certificate renewals. This goes to illustrate that BTL isn’t straightforward.

Since I started out with this BTL “Project” I have cumulatively made 3% from the original investment – excluding tax considerations. I do wonder if this is really a good way of investing and the budget changes may make this a losing game. It sounds as though it will only work for those who own the property outright. Everyone says that BTL is for the long-term,  I did speak to a few landlords before I took the plunge who gave me the highlights and lowlights of being a landlord. I have planned to stick this out until the end of the mortgage fixed interest term and then review whether I continue to be a landlord or sell up. Interest rates, new tax rules and financial situation at the time will only tell.

I guess I feel a little frustrated as I can see these expenses on this month’s budget sheet and although it is coming out of my rental account it does show how unforeseen expenses can knock your spending when you are trying to live off a passive income stream.

My 1 in 100,000 chance

While out cycling the other day I was lucky to see an albino squirrel I managed to get a good look before it ran off up the nearest tree. There used to be one living at the local reservoir where I go cycling (I had seen that one too) but it hasn’t been seen in months – I don’t this is the same one, this one looked too young. I had a quick look to see what the odds are of finding one and its 1 in 100,000. so my luck was in.

A nice spot that I wouldn’t have had if I had been stuck in the office jail. Oh, the benefits of freedom.

I also bumped into the local wildlife trust guys and had a chat and they gave me a leaflet about helping out. Unpaid work but a chance to met some local people of a like-minded nature. The free-o-meter is starting to kick in and show the benefits of not working. I had a look at the wildlife trust website the other week, their part-time paid jobs are not suitable as I would have to work at the weekends and I would like these free – I will keep an eye out though to see if there is any part-time working going in the future that suits.

That is one of the benefits of an FI fund, it provides that buffer that enable you to have choices. It gives you the breathing space so you don’t have to rush in and take the first job that turns up or continue to work in a role that does not suit. Bliss…  🙂 🙂

Spending – frugality

I am now focusing on my monthly expenses as I need to keep these down to keep within budgets and ideally, reduce my spending down by 8% overall so that I can officially be FI – as based on my original calculations I am just short of my target but jumped off the treadmill anyway.

I wondered how being at home all day in comparison to going out to work would impact my utilities costs. At the moment it has not made any difference. It is the summer though so it will be more appropriate to evaluate this in the autumn/winter. My recent bills show that water costs have remained the same (I am on a water meter) and my gas/electricity are lower. Some of this is due to the summer and part of it is down to the fact that my fridge thermostat had broken and was pretty much constantly on. Something you don’t notice when you are out all day – but soon notice when you are home 🙂 So I swapped the fridge for the one that I had been storing in my garage from my old house as a spare. I took the old one down the tip, the ‘new’ one is pretty old too (it must be about 10yrs old) but seems to be using less electricity based on my smart meter and the recent bill backs this up. I doubt this fridge will last too long so will keep an eye on discounts and sales to pick up a new ‘eco’ fridge when my finances allow.

The next two months will be hard on my outgoings as I have two family birthdays this month and insurance renewals – this month and next. This month I have to renew my BTL insurance – in typical style – I have gone online to get a quote and then my renewal email came through – if I just renew it blindly it will cost me £50 more than going for one of the new quotes – and that is with the same insurance company and, from what I can see, exactly the same policy. It is silly that a renewal is pushed up so much, I will be taking out one of the quotations instead.

I expect to be in the same position next month when my residential home insurance comes up. Last year the difference between the quotation and the renewal (for exactly the same policy/company) was £80! Yes, that is 30% difference based on the total cost of the policy. It just show shopping around makes a big difference and what really annoys me is that if you renew it still doesn’t make any difference to the policy terms – they still impose a XX-day claims exclusion period from the start of the policy (depends on the policy) – that annoys me too as it means that if anything happens during that XX-day period around your renewal date you are not covered – something that people don’t notice in the policy when they blindly renew, it is quite often in the small print terms and yet another way of getting out of playing out when the need arises – it is just unfair and wrong. The insurance companies should factor this into the costs for offering the policy not put these ‘get-out-of-paying’ clauses into the policies. (enough of my ranting 🙂 )

My food bills are the main area I need to work on, I spend too much each week on food. I buy fresh fruit and veg and this is costing me too much. I don’t waste any if at all possible, I will cook and freeze the fruit/veg if it looks like I will not be use in time to prevent it from being binned. I have started buying frozen veg instead where I can to reduce these costs. Cheaper, yet as good nutritionally as fresh and easier to keep.

I have also started to grow my own food: lettuce, chives, broad beans and tomatoes. The lettuce is a small success – it has provided some leaves but not enough – it was attacked by snails 😦 . The chives are a resounding success as they are growing well and providing a great source of ‘onion’ flavour to my dishes. The tomatoes are still a ‘work-in-progress’ they are just beginning to flower, they are a bit behind but now seem to be picking up and I should get some tomatoes from them at the end of next month or the month after. I grow them in my conservatory and in previous years this has been a great location and had provided a good crop.

I have been making my own flatbreads and pittas and these have worked out really well. I use recipes posted by Thrifty Lesley and these are now my favorite forms of bread. I very rarely buy bread.

Is it a seasonal thing?

I was going to go out for a bike ride today (trying to do at least 2 rides a week as part of a fitness routine) but its raining at the moment. Instead, I thought I would catch up on some blog reading. It is the summer and quite a few bloggers have been away on holiday so postings have been quiet over the past few weeks – every one is rightly enjoying the sun and hot weather either in the UK (where it is too rare and must be enjoyed when it occurs) and abroad.

Something I have noticed when reading the blogs recently is how many of the UK FI group have their birthdays around now. There seems to be a common thread to birthday notes in the blogs over both June and July – my birthday was in June – does that say something about us – is there a natural behavioral trait in Summer born humans that means we are more likely to be targeting financial security and freedom from the work treadmill?

Has anyone else noticed this one? Maybe it is the security thing?

Maybe it has something to do with the fact that at school Summer born children are the youngest in the year stream and have to work harder to keep up with the older children? I am not sure if anyone had seen anything in educational research on this?

It just seems to stick out as a common theme. I used to have a boss whose birthday was 10 days before mine and he became disillusioned by work when he was passed over for a promotion so left ‘to become a day-trader’. Basically he decided he had “Enough” to give up the day job and go and do something else with his time – freedom from the workplace – playing golf. Last time I saw him which was some years ago now, he was happy and content and actually looked much healthier than he did when he was working – to give you an idea – the team endearingly called him ‘Mr Burns’ as he was stooped and looked like he had the pressures of the world on his shoulders. Not so after he had escaped the workplace.

Right, the rain seems to have stopped – so off to try and get a ride in.

New BBC programme – Right on the Money

I thought I would watch the new program on money management. Its about time TV started looking at finances and saving rather than having loads of daytime TV that is full of spending – property make-overs, holidays, inspirational living etc….

I took the test on their website to test your money personality – surprise, surprise I come out as a secure saver which contains the following comment :

Independence Seeker : Money means freedom….they use it to escape the daily grind – through weekends away, expensive hobbies or even breaking free from paid employment. Seekers must not forget about future events such as retirement and unforeseen life events.

The couples they featured are using ‘retail spending’ as their hobby and to provide ‘happiness’. They are bitten by the consumer bug and can’t see that they are impulse buying, they have houses full of stuff they don’t really need or use. They are collecting things just to ‘feel’ good about themselves – the emotional crutch. What is shocking is that some are actually starting the month on the verge of an overdraft as soon as their salary is paid in – ouch!

It is difficult for some to stop the impulse when they are bombarded with all the consumer marketing to ‘spend, spend, spend’ and ‘live now’ mantras. I know people who work all week then spend the whole weekend out shopping spending money on things they don’t really need, they do it just to have something to do with their free time.

I know its a struggle, the status anxiety/jealousy kicks in.

An example from my own life:

My friend has currently moved house (bigger & better) and is spending money on doing it up; new kitchen, all the rooms redecorated, new wood-burner stove (something I would like – and have mentioned to her in the past – but for frugal reasons..lol), new furniture and is now getting the garden re-landscaped. She just loves showing me around and telling me about all the changes being made. Oh…and just bought a new car (just happens to be the same make/model as mine but younger)! Its like they have won the lottery. Some of this money has come from her husband recently retiring and getting a large lump sum payment and some an inheritance she received last year. The rest will be from a brilliant annual bonus (she hasn’t said but I bet they got a great bonus this year given company results) and company share saves.

She has a well paid job – working at one of my ex-employers – which is where I first met her. I use to have a well-paid job there too so know the benefits. I could feel jealous of all this (I think I am – my green-eyed monster is active) : she has a job she enjoys, a lovely husband, a new house, new car and just come back from a great holiday abroad.

She does have her own status issues, I am not sure how long I will remain her friend as I am a frugal FI seeker who isn’t spending money on theatre/house/clothes/holidays and currently not working. She may dump me soon as I just don’t have the aspiration status that she wants to surround herself with. I was talking to her about getting a dog and spending some time out during my ‘work-free’ period, it would do my health good and relax me….well, what has she done? She has bought a dog – a puppy that her husband is now going to be looking after.

I shouldn’t view this as a kick at me but it does feel like one. She is the only friend I have left and now I feel that she isn’t the sort of person I should have around me.

With these kinds of environments. it does make it hard to escape the social pressures. I know that for me, my FI decisions are actually restricting my social circles and I will lose out in the short term – but hopefully I can gain some new true friends who are more suited to my new way of life – once I work out what that new life looks like.

Savings – frugality

I have been reasonably frugal with my living costs enabling me to save over 50% per month in the past. The main reason my savings rate was so high was because I don’t have a mortgage on my residential home. I only have a mortgage on the BTL and the rental fees cover this.

Now that I am not working I have started to see a reduction in my living costs as all those hidden expenses (coffee at work, etc…) have disappeared. I do occasionally shop at Aldi, it is not the nearest shop and so I only use it when I am passing by. Normally I walk to my nearest supermarket, so I did wonder how my local supermarket compared..

I thought I would compare the prices after my shop at Aldi this week, as I dropped in while driving by, I bought a few basics such as butter and milk. I have started making my own yogurt which means I have to buy the basic components which saves me about 50% on the price of buying branded yogurt.

The Aldi shop was as usual full and a big queue at the checkout as only 2 tills on. The shopping experience here is very much discount store – with you having to rummage around the store to find what you want. It is always a bit of an experience as although its a small store and you can see the walls clearly, it has signs up warning the customers about pick-pockets operating in the store and to watch your purse!!

Anyhow I used mySupermarket.co.uk to compare costs with my local supermarket, for things like milk it was pretty much a match, the savings started to kick in with the other products, butter ( £1.49 Aldi v. £3.25 local supermarket). I treated myself to a pre-cooked whole chicken – a luxury as I don’t do this very often. This chicken provides a number of meals over the week and by buying it pre-cooked I don’t have to roast it in my oven or worry about the bacteria aspects, I just store it in the fridge. This cooked chicken cost £3.99 at Aldi at my local supermarket this would have cost me £5.

Overall my total Aldi bill came to £8.83, the same products at my local supermarket would have cost £13.19, as saving of £4.36!!! A pretty impressive, 30%.

 

UK Budget Update

Well, sounds as though there are quite a few changes that will have an impact on my FI goals.

1) BTL – the taxation on this will be changing. I need to understand how this will affect the income generated. It may make this an unprofitable option, I need to understand the details and discuss this with someone more financially savvy. I may need to sell the property once the mortgage ‘redemption hook’ has expired so I can get my money back (minus costs) and invest that into something else. It mentions the mortgage interest relief being capped, this could make quite a difference to the overall return.

2) Share Dividends – I hold shares outside an ISA – basically because I have lots of shares from an old employer, gained through share save schemes. These earn quite a good income at the moment which is funding my current freedom, more than the £5,000 tax-free allowance proposed. Trying to sell them and move the money into tax free accounts will require me to look for a good account that allows me to hold both shares and funds in one place. My current active NISA account will only permit me to invest in funds, it does not let me buy individual shares and hold within the account. I could just sell the shares in chunks over the next few years to use the CGT  & NISA annual limits and move this cash into income funds instead, better diversification.

Some things to ponder based on the announcements. I am sure there are more aspects to the budget which will impact me, including the changes to the tax thresholds which could work to my advantage. It sounds as though my Honey Pot will not earn the income returns that I require. Most of the FI calculators I have found all look at gross values and taxation is ignored. I try to factor in some of this by reducing the return rate inputs but this may not be good enough. Any good calculators out there I could use to crunch the numbers?

3) Insurance Premium Tax – well that’s a nice one. Everyone has to pay for insurance (house, car, travel, etc…). Just as premiums were starting to come down in some areas this tax hit will put them back up again. I will try and get as many of my insurance policies renewed before the increase date: Nov 2015.

4) Pension Tax relief – The government want you to pay into your pension but are capping the amount of tax relief so double taxation on pensions continues. They want to encourage people to save but are not giving the carrots that are needed to do so. It is unclear who is affected by this cap whether it is just high-earners or everyone.

Maybe going back to work will be necessary after all; to gain my full State Pension entitlement I will need to earn another 13 years of NI credits anyway – unless I can pay voluntary top-ups annually from the Honey Pot income stream.