Jan 2018 Net Worth Update

Net Worth Updates

So after the big hits of December, being Christmas and the car deciding it wanted to fuck us about, January went as well as expected. It wasn’t dry, but we aren’t heavy drinkers anyway. Like most of the country, we have all been ill at some stage, just passing the bugs around from adult to child and back again etc etc. This month has been mainly us trying to replenish our cash reserves after the car repair job, so we are a bit behind in terms of squirrelling cash away to our LISA and SIPPs and getting the tax rebate

As expected, the big bill this month was both car insurances. As you would guess, I jumped on confused.com and entered our details, and as you can guess, both cars came in cheaper with a different insurer. Bugger. So I dutifully rang both and the conversation went something like this:

Me: I’d like to cancel my car insurance as Tesco have quoted us £318 and your renewal premium is £420

Admiral: Lets see if there is something I can do……

(typing heard in background)

Admiral: Okay we are happy to match the premium

Me: Great thanks.

It was that brief. It left me wandering what would have happened though if I had said that Tesco had come in at £200….

So I rang the other one and had the same conversation, and well they just told me to do on….so that pissed me off slightly as actually changing your car insurer with all the no claims certs and all that is a ball ache.

Anyway here is our summary for Jan 2018…

Income

Total: £4,433.50

Expenditure

Residential Property: £956.04

BTL Property: £529.78

Transportation: £740.40

£607.39 on at insurance.

General Living: £871.84

A few highlights. Food – £391.47

Childcare: £154.54

A few clothes in the sales to stockpile…

Total Expenditure Exc. Savings: £3,269.63

Savings: £708.83

Could have saved more, but I thought we should stash a bit of cash

Assets: £455,326.95

Liabilities: £283,535.46

Net Worth: £171,791.49 (+£1,670.25 / +0.98%)

KPI

Assets LTV: 62.3% (-0.3%)

Savings Rate: 16.0%

Cash in bank / Monthly expenditure: 107.9%

Passive Income / monthly expenses: 28.5%

Tax Recovery: 10.3% We are going to pump the LISAs next month, so this should start to be looking closer to our target recovery rate of 50%

February should be a good month. I am already noticing the evenings getting a little longer.

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Dec 2017 Net Worth Update

Net Worth Updates

So here is our first of our monthly updates. After years of being in stage 2 and getting rid of our long term credit card bill, and trying to build our emergency fund, it took a hammering with a car repair bill just shy of £2,000 at the start of Christmas. Basically the engine was fucked – we got a second opinion and yes – it was fucked. New car or fix it? Fix it was our choice, so we dusted off the credit card and rinsed what emergency fund we had. Great times before Christmas

Anyway he is our summary for Dec 2017…

Income

Total: £4,819.97

Expenditure

Residential Property: £945.20

BTL Property: £529.78

Transportation: £2,004

A few bus fares and fuel bills, plus the big whopping repair bill.

General Living: £1,610.60

A few highlights. Christmas – £883.30. Food – £320.73.

Childcare: £60

Savings: £976.00

Shit month, but we took a big hit on the car.

Total Expenditure Exc. Savings: £5,239.65

P&L: -£1,395.68

Not overly concerned about this as it was a Christmas present month and we took a hit, and this P&L does include the savings. Ideally we would like the P&L to be £0, as long as we are saving.

Assets: £454,398.5

Liabilities: £284,277.26

Net Worth: £170,121.24

This is a -£599.90 change from last month, but the car repair hit us for 6 as they say, or maybe just 600 quid. -0.35% for the month.

KPI

Assets LTV: 62.6%

Savings Rate: 20.2%

Cash in bank / Monthly expenditure: 57.7% (Cash reserves took a big hit by the car)

Passive Income / monthly expenses: 17.8%

Roll on January – Big things due this month are both car insurances! See you then!

FIRE Stage 3 – Because you’re worth it

Uncategorized

You have your tracking set up, you have no unsecured debt, you have your emergency fund. You are pretty much    bullet proof. Financially anyway. However, if you were to decide to sell everything you own? How much would you get? This is your net worth. Assets (what you own) minus Liabilities (what you owe). Your collection of 1 Direction singles is not an asset, but your collection of David Bowie 7 inchers in pristine condition may be. Anyway, exactly what constitutes an asset and a liability is for another day.

This stage is simply about getting the gap ( your net worth) between your assets and liabilities as big as possible. Buckle up, you’re in for a long ride. At least a decade.

You have to speculate to accumulate. A classic piece of disinformation. True – you do have to speculate to accumulate shit loads of cash quickly, but a patient careful approach will result in accumulation without any speculation or even day to day management.

You should now have two things. A nice cushion to prevent using any credit facility. A nice chunk of your monthly budget you can keep for yourself.

There are two main parts of this accumulation stage both working simultaneously.

Get rid of your mortgage(s)

As mentioned this is by far the longest stage of all. Your mortgage payment will be the biggest single payment you make any month. You cannot leave stage 3 with a mortgage. Thems the rules.

You are probably on some sort of fixed rate deal and you should have a mortgage that allows overpayments during this deal. Most allow 10% of the outstanding balance per annum.

Your mortgage will have a sort code and account number. Get it and do two things. Firstly, set up a monthly standing order for the day after payday to send a % of your savable income to your mortgage account. This is in addition to the contractual obligation. Secondly, set up your mortgage account as a payee on your internet banking. Every time you have a spare quid or two, send it that way. Every time you walk past Costa and resist the urge for a latte, reward yourself by whipping out your phone and throwing the £2.65 towards your mortgage account. Other coffee shops are available. If you have 53p left at the end of the month. Send it to your mortgage account. Return your current account to zero and start afresh next month.

Invest the rest

We pay £10.64 a week to United Utilities for our water. That’s ok – we own United Utilities.

We buy our petrol from shell and BP. We own both.

We get our energy from Eon. We own them.

Our mortgage is with HSBC. We own the bank.

We own every supermarket and every clothes shop we shop in. Including the ones we don’t. Louis Vuitton. Yeah we own that too.

Walk through any shopping centre or financial district in any city in any free market economy in the world. Chances are we will own nearly every business. We may probably own the building that they all pay rent to.

Oh and guess what – every penny of profit we get from all these businesses we own is tax free for the rest of our life. I don’t have time to decide which businesses to buy, nor the expertise so we buy them all and pay someone to do this for us.

I wish we owned 100% of all of them! If so, you would definitely know my name and I definitely would have quit teaching by now! We would own more than any other human being on the planet put together. I would know every president and every celebrity. Life would be good. I would also be a big assassination risk.

Thankfully I don’t own all this stuff. That’s just sheer greed. But we both own a tiny tiny teeny bit of more than 7,500 companies. Most of them global corporations.

So what is happening? I’m going to be quite controversial here and say that I think Unit trusts are as close to socialism as capitalism can get. Certainly unit trusts with Vanguard are pretty much as close to socialism as capitalism can get. Yes we can debate the ethics of global corporations with regard to this, but that’s for the politicians to thrash out. As a member of a unit trust we share the costs and risks of investing our money with everyone else in the fund and we share the rewards. We, as a collective buy shares of every company in the world. Some will succeed and some will fail but as a whole, the value of all these holdings will rise over time. Of course these values may fall, sometimes sharply (think 2007/8), which is why this is a bad home for your emergency fund. I only hold passive vanguard funds and will detail my strategy and holdings in another post.

So go into your ISA and arrange the rest of your savable income to go into passive low cost unit trusts on the day after payday. Again, further detail will be for another post.

Congratulations – you will now easily own a share in nearly every major corporation in the world. Maybe you’ll have to settle for not having a piece of the Chinese state energy company. Sorry – Warren Buffet can’t get that one, or can he? But these holdings will rise over time to such an extent to which you will be able to live off the profits YOUR companies make for YOU. Every minute of every day. While you sleep, drive, wee, cook, clean, exercise. YOUR companies are taking money off global wage slaves and making profits for YOU.

Other assets are available. We own some rental property but are currently over exposed in this area, so for us stocks and shares are the way to go. Wine. Fine art. Precious metals. All options but not for a plebeian like me.

As well as having no residential mortgages you can’t exit stage 3 unless you have 25x your annual living expenses in cash/bonds/stocks. I’ll explain why on another post. Anyway, we personally are in stage 3 and will be for a long long time!

Goals for 2018

Appraisal

Accountability. One of the shittest buzzwords in teaching. “Holding people accountable”. This blog is all about holding myself accountable and there feels something permanent about setting goals and publishing them for all 7 billion people on the planet outside of North Korea. If your reading this from within the “Peoples Democratic” Republic, what’s it like?

So anyway, 2018, what’s it all about?

Financial

#1. Net Worth – £210,000

This will represent around a £40,000 increase from where we are at. Our contractual mortgage payments (which I class as debt servicing, not saving) will auto-increase the Net Worth by around £5,000 anyway, so we need to add £35,000. I currently have approximately £15,000 of private pension value from previous employments, and don’t include these in my Net worth calculations, but once I transfer them “in-house” into my Hargreaves Lansdown SIPP, I will include them, so essentially we are left with a challenge of £20,000 of saved income transferred to our Assets & Liabilities account, just a bit shy of £2,000 per month. We are of course at the mercy of the UK property market.

#2. Hit a savings rate of 40%

We class savings as optional Mortgage overpayments, Equity Investments & Emergency fund payments, minus any emergency withdrawals, Equity withdrawals or Loan income.

I divide this figure by our post tax income and this is my savings rate.

#3. Reduce all credit card debt to zero

We end every month in credit, and we end every month with zero on our “day to day” credit card, but we do have around £1,400 on our long term 0% credit card, due to a new boiler this month. I’d rather put my money to better uses so I’ll only be paying this off gradually as 2018 progresses. For this to happen no money must be added to the credit balance and for that to happen #4 must happen….

#4. Build the emergency fund to cover the last three month expenses.

Our 0% credit card is serving as our emergency fund for now. Many people are happy with this but I don’t want to put my family in a situation where Barclays have us by the balls, and besides, if the shit hits the global economic fan, our steady stream of 0% cash transfer offers will probably dry up. A goal for 2018 is for us to build up our cash emergency fund which comprises of our cash in hand, funds held in a Zopa account plus a UK government bond index fund. Our target is for this to be three months worth of expenses, as teaching is a relatively secure profession, though it is admittedly getting less secure by the day.

#5. Recover 50% of all income tax paid through tax efficient investments.

As anyone in the UK can earn £11,500-ish tax free, if both of us work, that means we can earn £23,000 without incurring any income tax. Despite what any of us leftie leaning teachers may say about the Tories, there is no doubt that this is a tax policy that helps low income family’s budgets. We feel we can live off close to the £23,000…we will see. Any excess will try to be put in our LISAs and our SIPPs, which will recover some of the income tax paid above £11,500. If we could lock away every penny of income above £11,500 we would effectively be living income tax free (for now). I would like us to recover/reclaim at least 50% of all our income tax paid. No investment wrapper in the UK will return your NI payments and neither should it.

Personal

#6. Hit 85kg

I have been on the 5:2 diet for a year now. Shifted from 105kg to 90kg. 5 to go. All I want is to step on the scales at one point in 2018 and see them under 85kg, without pushing down on the window sill…

#7. Have a date once a month.

With the other half of course. A night out, with no kids. Simple, but important.

#8. Run 5 half marathons, one under 1.45

PB currently at 1.50.40. 5 minutes to shave off. Cant ever see myself doing a 26.2 so I will stick with my 13.1’s….

#9. Read at least one book a month

This is a very conservative number, but we will see. I churn through books during holidays, but when I am in term time….its all about simply surviving till the end..

So there it is….my performance management appraisal targets for the next year! Naturally, like my appraisal statement at the day job, teaching will get in the way….not that that will be any excuse.

Happy 2018!