Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will be looking at Fear Setting and how this can complement or even supersede Goal Setting, as well as discussing my ongoing health problems.
In the latter part of 2019 I was undergoing physio for Achilles tendonitis in my left leg. On the instruction of my physiotherapist I was completing some basic stretches and the result was a series of fractures through my right foot. After several scans and appointments with a surgeon, it was discovered that some of the bones in my right foot had not separated as they should have done when I was born. So, as the foot was under pressure, stress fractures occurred. This knocked me sideways and it was the worst pain I’ve ever experienced. I even lost consciousness and collapsed in A&E whilst waiting to be seen.
A few weeks of rest and my foot recovered, but throughout this my left Achilles was still causing pain and discomfort. A few days ago, for lack of a better way of putting it, my Achilles “went”. I can barely put weight on the leg and am using crutches to hobble around my apartment. I’m also back on tramadol as it’s the only pain relief that makes a difference. All this means that I’m off work again, which sucks. I just need a break, not literally speaking. Since 2018 it has been one health problem after another. In addition to seeing a surgeon about my Achilles, I’m being referred to my cardiologist due to losing consciousness again.
Premium Bonds: £12,450 (no change from last week).
Stocks and Shares ISA: £8,219.00 (down £32.23 from last week).
F**k It Fund: £1,511.85 (no change from last week).
Property Value*: £173,501 (no change from last week).
Total Assets: £195,681.85 (down £32.23 from last week).
Credit Card Debt: nil (no change from last week).
Loan Debt: £3,370.33 (down £200 from last week).
Mortgage Debt: £134,279.11 (no change from last week).
Total Debt: £137,649.44 (down £200 from last week).
Total Wealth Figure**: £58,032.41 (up £167.77 from last week).
Investment Income in 2020: £0.00 (no change from last week) (Target £2,000)
*valued at £173,501 according to lender’s index.
**total assets minus total debt
It has been one of those weeks where I haven’t moved any money into investments, but I have been able to make an extra payment towards my loan. As such, my total wealth figure has increased despite my total assets decreasing slightly in value.
I wanted to take some time to discuss a concept I first discovered a few years ago called Fear Setting. I believe almost everyone must be familiar with goal setting in general, even if they do not know about things like SMART (specific, measurable, achievable, realistic and timely) goals. Goal setting relates to what you want to happen or what you want to achieve. The idea is that setting a goal helps solidify the change in behaviour needed to achieve the goal. There is some debate in the field of psychology as to whether goal setting is effective. I also have some doubts over the effectiveness of setting ends as a goal, rather than a process. For example, you could set a goal that you want to lose 50kg in a year. This would be an “ends” goal, because you are aiming for a specific end goal. You could instead set a goal that you will eat you five fruit and veg portions each day and limit yourself to one bar of chocolate a day. This is more of a behavioural goal, with the idea being that if you stick to the behaviour, the “end” will come as a result of the behaviour.
In recent years I have adopted a hybrid approach to goal setting, where I am trying to focus more on the process than the result. This has led to my investment behaviour becoming almost automatic. Fear Setting is something that really lit a fire under me, and I believe it has much more motivational potential than simple goal setting alone. I think that Fear Setting is a great way to kick start a new set of behaviours and that process-goal setting is an excellent way to maintain those behaviours.
What is Fear Setting?
I first came across Fear Setting when I watched a TED talk by Timothy Ferris. The video goes into a lot of detail but there was one specific part which resonated with me, and it’s something which encapsulates the entire point of Fear Setting. I’m talking about the cost of inaction.
When you set a goal, you must take some action to achieve that goal. Granted, you could have an abstinence goal which requires you to refrain from a behaviour, but I would suggest exercising will power and restraint is a form of action, rather than inaction. Fear Setting asks you to consider the cost of inaction; the impact on your future if you change nothing.
I know a lot of people who are unhappy with their lot in life. The frustrating thing is that when I ask what they are doing to change or improve their situation, I am answered with a shrug. There is a quote that is often credited to Albert Einstein but there is some debate over the accuracy of that credit, but the quote is still powerful: “insanity is doing the same thing over and over and expecting a different result.”
If there is something you are unhappy about in your life, ask yourself where you will be in six months, three years or five years if you carry on as you are. Does the answer please you, or upset you?
My journey to F.I.R.E. was prompted in large part by the answers I had to the Fear Setting questions. Life is too short and unique for regrets. I do not believe in any sort of afterlife. I believe this is it. We are born, and then we simply keep ourselves busy until we die. Spending your adult life doing things you don’t like is tragic. I’m not saying that everyone can be a winner, or a millionaire, or happy for the rest of their lives. What I am saying is that the only things you can control are your thoughts, feelings and (to some extent) your actions. Small changes now can have a big impact on later outcomes.
I feel that I wasted a large part of my life so far. I look back at my 19th to 23rd years and get so frustrated at wasting that time, but I had to go through that difficult time to get to where I am now. There are a lot of positives to my life. I am financially comfortable. I have great parents. I have a girlfriend whom I love very much. I have a cat who, in the year I’ve had him, has brought so much joy and fun to my life. I have a few friends whom I respect and value greatly. Despite all this, I feel unfulfilled. For almost my entire adult life I have felt stuck in second gear, like I have more to offer but no outlet for it. As we live in a capitalist society, money is the key to survival. I need money because money is what buys my freedom to choose, and with my freedom to choose comes my ability to really sink or swim on my own terms. When I asked myself where I would be in six months, a year, or even ten years down the line if I didn’t change anything, the answer was terrifying. I don’t want to be that person who is just killing time until death.
I’ve said many times that there is not enough financial education in the UK. In school, children will learn about many interesting things of which only a small fraction will have real world relevance. I’m not one of those people that will say we shouldn’t teach photosynthesis, Shakespeare or about the water cycle because hardly anyone will use it when they are older. As much as I believe we need to do more for children with respect to financial education, I don’t think it should be at the expense of any one subject in school.
Although having money is generally seen as a positive thing, learning about money is often seen as dry or dull to study. One form of financial education that could appeal to younger people is video. I was recently forwarded a link to a short YouTube video that gives an excellent introduction to budgeting and saving. I’ve embedded the video below:
I particularly like the explanation of simple interest and compound interest.
Thank you for reading again this week. Fingers crossed that no major typos or leaps in logic were present, considering I’m high as a kite on pain medication as I type this.
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Hello and welcome back to Mortgage Advisor on F.I.R.E. There’s a lot to talk about this week, including a fantastic meal out for my girlfriend’s birthday, a couple of complaints I have had to make as a customer, a case of cold/Warrior Flu and some developments on a potential career change.
One of my vices is food, and I love fine dining. To some people it may come across as pretentious, but I love how food can become an art form. The way simple ingredients can be elevated in the right hands is incredible, and when this is mixed with the right atmosphere and service it can be such a memorable experience. In Sheffield there is a restaurant called Rafters and a few months ago myself and my girlfriend ate there for our anniversary. We agreed it was the best meal we have eaten in Sheffield and so I decided to surprise my girlfriend with a meal for her birthday. We went for drinks in their cocktail bar and their Experience One menu. It was an amazing night except for the sudden onset of a cold/Warrior Flu midway through the dinner service. That cold kept me off work all this week, but the meal was truly spectacular.
The meal started with a selection of small plates, alongside Thornbridge Stout and Black Treacle Bread, with a Henderson’s Relish Butter. Since watching Rome, I find it impossible to eat any bread without saying “Good bread, this.” My girlfriend found it funny at first, but several years later it seems to be wearing thin.
A selection of small starters including soft boiled quail eggs, chicken in filo, and cheese tarts.
Salt baked celeriac.
We then had Salt Baked Celeriac with nasturtium and hazelnut pesto, and a brown butter hollandaise. The next course was Moss Valley Port, with fermented barley followed by a chocolate, hazelnut and coffee dessert and an extra cheese course. With fine dining restaurants it is normal to have a few smaller courses in between the main dishes. Although each dish looks small, by the end of the meal you are well fed. It is the little things that set these types of restaurants apart. They realised we liked the bread, and so they sent us home with a free loaf from the kitchen. They saw on the booking it was a birthday meal, and so they made my girlfriend’s dessert a little fancier. It is these smaller touches which set Rafters apart from Joro, another fine dining restaurant in Sheffield. When dining in Joro, it seems like the expectation is that you should thank them for dining there. I’ve eaten in Michelin starred restaurants in other countries and it’s the service as much as the food which sets them apart.
The cheese course, chocolate dessert, a creme fraiche sorbet with orange curd and the pork main course.
As you are probably aware, from the title of the blog at least, I’m a mortgage advisor. There is potential for me to transition into investment advice in the next year or two and I’ve spent the day in Manchester meeting with a manager in that area. Over the coming months I will find out if I will receive funding to qualify to give that advice. It’s an exciting opportunity and I could really see myself thriving in that environment. For the meeting today I realised I would need to wear a suit but with my health problems over the last year or two, my other suits are a little tight. So, I decided to buy a new suit.
I did not want to spend a fortune and went to Next thinking I would get a simple suit that would see me through to when I can fit back in my other suits. I picked a suit off the shop floor and checked with a lady at the counter that I was fine to use the fitting rooms. I was quite shocked a few minutes later when a male member of staff opened the curtain on the fitting room with myself standing there in my boxer shorts. I was angry. It was not so much about another guy seeing me in my boxer shorts, but it could have been anyone in the fitting room from a child to an elderly man. It could have been someone with anxiety. The point is you don’t just start opening changing rooms at random.
I made a complaint in store, but the “manager” did not seem particularly bothered. I spoke with Next’s customer service helpline and they registered the complaint and sent me a £25 gift card. I bought a suit elsewhere but the whole incident made me very angry. It could have just been an innocent mistake, or it could have been predatory behaviour from a sexual deviant. I did not see the member of staff again as he had vanished from the shop floor by the time I was dressed.
In another example of poor service, I had to make a complaint to Virgin Money about the credit card I have with them. I run my card at an almost constant zero balance. I spend on the card to collect airmiles but hate leaving a balance on there for more than a couple of days. A few weeks ago, I spent £2,000 on new furniture but ended up cancelling the order. No big deal, the retailer was very accommodating and was happy to refund the order. However, the money had to go back to the original payment method. I called Virgin Money and explained that my card was at zero balance but a refund of £2,000 would be received in a few days. I wanted to know if this would cause a problem as credit cards are not supposed to have a positive balance. The advisor assured me it would not be a problem and I could either leave the balance as credit and use it up over time or have the money sent to my account. At no point was there any mention of fees for this.
A few days later, when the refund hit my account, I called up to move the money to my current account. At no point was I told there would be a fee. I was somewhat surprised to see a fee of £85 for a “money transfer” hit my account a couple of days after the transfer. I called up and queried the charge and was told it was because I had requested a cash advance. It was at this point I became quite frustrated and explained I was not borrowing money but was receiving a refund and at no point was I told this would result in a fee. I quoted the times and dates of my previous two calls and was told it would take five working days to investigate. I explained this was not acceptable. The total call time of both calls was less than fifteen minutes. I stated I would hold the line whilst they listened to the calls and rectified the mistake. Twenty minutes later it was confirmed I was not told about the fees and that they would be cancelled. Fair enough, I got what I wanted but it should not have taken the call in the first place. The lesson here is always check your statement and always question fees or charges. Although I got the fee back, it has shaken my confidence in Virgin Money as on two occasions I was not told about the fee.
Premium Bonds: £12,450 (up £950 from last week).
Stocks and Shares ISA: £8,251.23 (up £445.52 from last week).
F**k It Fund: £1,511.85 (up £350 from last week).
Property Value*: £173,501 (no change from last week).
Total Assets: £195,714.08 (up £1,745.52 from last week).
Credit Card Debt: £197.96 (up £197.96 from last week).
Loan Debt: £3,570.33 (down £230.16 from last week).
Mortgage Debt: £134,279.11 (no change from last week).
Total Debt: £138,047.40 (down £32.20 from last week).
Total Wealth Figure**: £57,666.68 (up £1,777.72 from last week).
Investment Income in 2020: £0.00 (Target £2,000)
*valued at £173,501 according to lender’s index.
**total assets minus total debt
It’s been quite the week with increases made to my different pots. My credit card will be back at zero next week, it’s just with feeling ill I have not made the payment yet. I am getting so close to my deposit target that I will have to start thinking about how to reallocate funds once I get my Premium Bonds up to £14,850. I am thinking that I might hammer the loan for a few months to clear it in full before throwing more money into my ISA before saving again for the second BTL deposit. I still have some time to decide on this though.
There was an interesting documentary on the BBC this week which looked at Property Investment Courses. The show focused on the story of Danny Butcher, a 37-year-old from Doncaster who killed himself after spending over £10,000 on property training courses. I’m not going to comment too much on the show, or this specific tragedy. I don’t know all the facts and I’m fully aware that any undercover investigation is coming from an agenda. However, it does seem strange that there is no regulation of businesses that offer property training courses. There is not a large leap from offering training to offering advice; and to offer financial advice you need to be regulated.
A few years ago, I attended a free seminar with a friend who is also a mortgage advisor. This was a property investing seminar and it was basically one big plug for the paid courses. As finance professionals we were sceptical of the claims being made but as I looked around the room I could see people who were desperate to make money and from talking to them in the breaks, it was obvious they lacked the knowledge and experience to realise that you don’t have to spend thousands of pounds for material that is often freely available online. I’m not bashing all property investment courses. I know there are some courses out there that add value for those who already have a foundation of knowledge and experience, and I am a passionate advocate for financial education in general. I just do not believe you have to spend insane sums of money to educate yourself. I’ve read dozens of books on finance and investing, but the total I’ve spent on those books is a fraction of what one of these courses would cost.
I would love to see accurate figures for the number of people that attend property investment courses and a follow up as to how many of those people make money from property over the following years. I’m not opposed to the concept of courses for property investing but I suspect the real value is in very specific courses that help people systemise HMOs, or Serviced Accommodation as opposed to courses that teach people how to use Rightmove.
My sympathy is with anyone who has spent money on these types of courses based on inflated promises. Property investing can be very rewarding but it’s hard work and it requires a lot of research. If something sounds too good to be true, it probably is.
Thank you for reading and if you have any feedback or suggestions for future discussions, please leave a comment. Next week I will have a look at Fear Setting and how this has helped me progress towards my goals.
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will be reviewing a couple of books I have read since the last post, and in addition to the usual financial update I will talk a little about how I have restructured my Stocks and Shares ISA.
The past week has been a bit of a blur. My day job, as a mortgage advisor, has been extremely busy but it has been a good kind of busy. I have had some great conversations with people, and I have received several pieces of excellent feedback from people I have advised. Helping people understand mortgages, and finance generally, is something I enjoy and it’s a large part of why I look forward to writing this blog each week.
I have just finished reading The Little Book of Common Sense Investing by John C. Bogle, the creator of Vanguard and the first index investment fund. Index investing is something I am a promoter of, and some of you may recall my earlier entry where I talk about the differences between active investing and passive investing. With active investing, through managed investment funds, you are relying on a fund manager to consistently beat the market and in return you will pay them fees that can be at least twenty times that of a passive fund. There is a wealth of research out there showing that index funds outperform actively managed funds over the long term. Yes, there are exceptions in the short term but if you are investing in funds you are almost certainly concerned with returns over a ten year period as a minimum, and the chances of you selecting an actively managed fund that outperforms an index are similar to those of winning the jackpot on the lottery. An index fund mirrors the market, so you can never beat the market but at the same time you can never lose to the market. You simply track the market.
Although I did not learn a huge amount of new information in Mr Bogle’s book, as I’ve heard or read several summaries of his opinions, it was still a fascinating insight into Mr Bogle’s thoughts and beliefs. I have provided a link to the book on Amazon below:
So far in 2020 I have read some fantastic fiction, with two books impressing me and jumping straight on to my favourite fiction list. The books are Station Eleven by Emily St. John Mandel and Normal People by Sally Rooney. Station Eleven takes place in different times and looks at the lives of people before, during and after a flu pandemic ravages the world. It’s not a typical end-of-the-world book though. The flu pandemic is in the background, and what follows is a psychological piece that discusses everything from art and literature, to love and the morals of killing to stay alive. It is a thoughtful and understated story and quite moving.
Normal People was a raw and unflinching look at two psychologically damaged teenagers, and their assorted friends and family. Sally Rooney creates some of the most three-dimensional, flawed and realistic characters I’ve encountered in fiction. Whilst reading the book, I experienced it so vividly. I could not put it down. When it was done, I just sat in silence for a while. A very emotional story; melancholic but also hopeful. I think it will be considered a classic in time to come.
After I finished both works, I found out they are being made into shows for television. In some ways, I’m excited to see what is produced, but on the other hand a poorly made show could threaten my memories of how I enjoyed the them. Links to both novels are below:
Premium Bonds: £11,500 (no change from last week).
Stocks and Shares ISA: £7,805.71 (up £60.25 from last week).
F**k It Fund: £1,161.85 (no change from last week).
Property Value*: £173,501 (no change from last week).
Total Assets: £193,968.56 (up £60.25 from last week).
Credit Card Debt: nil (down £1.10 from last week).
Loan Debt: £3,800.49 (no change from last week).
Mortgage Debt: £134,279.11 (no change from last week).
Total Debt: £138,079.60 (down £1.10 from last week).
Total Wealth Figure**: £55,888.96 (up £61.35 from last week).
Investment Income in 2020 (Target £2,000): £0.00 (no change from last week)
*according to lender’s index.
**total assets minus total debt
I’ve amended the format of the financial update slightly. I think the new layout makes more sense and is cleaner, and clearer.
Financial News and Opinion
Restructuring my ISA
I’ve made some changes to my Stocks and Shares ISA since my last update. I have sold my units in three funds because I felt that I needed to rebalance my asset allocation, and I’ve sold the three funds that had the highest fees, which were 0.2% and above. My preferred ceiling for fees in a fund is 0.15%, but some of my funds have fees much lower than that. For example, the Vanguard FTSE 100 Index has ongoing fees of just 0.06%.
Another change I have made is to the way my fees are collected. To date, I had simply gone with the default option for fee collection which takes fees from investment income first, and then collects from residual cash and finally from the sale of stock in your portfolio. I spoke with an advisor at my ISA provider and he offered an alternative which I was extremely happy with. I have set up a separate share dealing account which runs alongside my ISA. I have credited that account with cash and my default fee collection option is to now take cash from the share dealing account. This makes the ISA cleaner and all income generated in the ISA will stay in the ISA, and all fees will be collected externally. This is no more, or less expensive, but it just feels easier. Also, it makes it easier to monitor the fees as I only have to check the share dealing balance periodically.
I’ve embedded images from my Stocks and Shares ISA so that my asset allocation can be reviewed. I am heavily weighted in favour of stocks, with over 99% of my ISA allocated to that asset class. Almost 60% of my ISA is held in US stocks and funds. The subject of stock to bond ratios has been debated at length with some experts calling for a 50/50 split, and others a 90/10 split in favour of stock. There are also those who argue that the split should be based on age and that the older you get, the more you should lean towards bonds for preservation of capital and a more stable cash flow. Another option is to start with the number 100, subtract your age in years and whatever is left should be the percentage of your portfolio in stock with the remainder in bonds. For example, a 25-year-old would have 75% of their portfolio in stock and 25% in bonds.
Asset allocation in my ISA.
Looking under the hood of my investments.
I’m of the view that a more aggressive strategy is best, but that’s because I’m open to “risk”, whatever that means. The concept of risk means different things to different people. I’m in this for the long haul and so I’m relaxed about stock volatility. If prices go down, I can buy more for my money. I also have plenty of time to see my stocks bounce back. If I was approaching my 60s or 70s, I would probably hold a different view. I’m aiming for a rough 90/10 split going forward and will be rebalancing my ISA in the coming months.
Gambling and Credit Cards
In a move that has needed to happen for a long time, gambling with credit cards is to be banned in the UK. This is so far overdue it is just tragic. I have posted before about issues I have had with gambling in the past and to my shame, I have used credit cards to gamble with. This was a decade ago and I only stopped because my card provider blocked gambling from their end. I gambled on and off for a few years with my own funds but never got into debt for it again. Not everyone has been so lucky.
There are countless stories of people who have gambled online, using credit cards, and found themselves heavily in debt. Gambling is a social evil, and online gambling is the deepest level of evil. You can open an account with minimal checks and lose thousands of pounds within minutes. It’s a terrifying thought. I haven’t gambled in a long time, but there is still something in the back of my mind that acknowledges in the wrong circumstances I could slip into the habit once more.
What makes gambling so insidious is that unlike many other addictions, it can be almost completely hidden until the addict reaches breaking point. Those who are addicted to alcohol or other drugs normally have signs of their addiction. Gambling is an invisible addiction. All the addict needs are a smartphone and an internet connection. The fact it is so easy to open accounts with the dozens of betting sites out there and spend so much money without adequate controls is a failure of our society. Responding with arguments such as “you can’t control how people spend their money” or “people should just pull themselves together” misses the point completely. We are talking about companies spending millions on research about how to hook people into throwing their money away. We are talking about teams of people working out how best to trap vulnerable people into a spiral of addiction. With gambling addiction, we are talking about the behavioural addiction with the highest rate of attempted suicide.
The figures for gambling are worrying. In the United States, it is estimated that around 2-3% of the population has a gambling addiction. That is roughly six-million people. In the UK, it is estimated to be anywhere from a quarter to half a million. Of those, one-in-five will attempt suicide because of their addiction. This is not a case of people “pulling themselves together” but of people needing help from their society. With any addiction, will power alone will not work. If the means to act on the behavioural addiction are freely available, then it is more likely the behaviour will take place. Banning credit cards for gambling is a step in the right direction, but it’s the first step of what should be a long journey.
I am enough of a realist to acknowledge gambling will not be banned outright. There is too much money being made. In the UK, betting companies make billions in profit each year. Denise Coates, who runs Bet365, was paid around £300,000,000.00 in one year. Let that figure sink in for a moment. What I would like to see is all gambling means tested. You must sign up and provide photographic ID and be logged on a central database. Then, once your finances are assessed, a decision is made on how much you can gamble across all licenced operators within the UK. This would probably bankrupt several operators, but strangely I just don’t care.
Thank you for reading part twelve of this blog. Next week I will have a closer look at financial myths, common misconceptions and how to budget for long-term expenses.
Hello and welcome back to Mortgage Advisor on F.I.R.E. We are now in the first full week of 2020 and it is still so bizarre to think we are in 2020. In some ways it feels as though not much has changed in the world since 2000, which as a child I always thought was so futuristic, but we now have extremely powerful computers that fit inside our pocket with access to the history and entirety of human knowledge. We have wearable tech such as watches and VR headsets. Yet, despite decades of awareness we are still destroying our planet. The fires in Australia are heart breaking and although the situation is more complex than Climate Change = fires, the fires are a stark reminder of how fragile our planet is. For all the despair, I have some hope that technology will be our saviour. Turning most road vehicles to electric with an increase in nuclear and green energy is the way forward. It’s going to be a generational project and a race against time to see if the technology can integrate itself before we reach a critical tipping point in the planet’s ability to heal itself.
This week I will be discussing another story I read in The Guardian about how to manage debt in the new year. I will also discuss a concern regarding my upcoming purchase of BTL property with my business partner. First, however, I will update you on my week and look at a significant improvement in my finances from last week.
I did something this week which some readers may see as controversial. I placed a bet, but it’s not like any bet I’ve placed before. It’s a bet on myself. There is a company out there called Healthy Wage which allows you to bet on your own ability to lose weight. You must have your weight verified through a video recording process and then you choose how much you want to lose and over what period, and Healthy Wage offer you odds. I thought about whether this was something I was comfortable with, as someone who has had issues with gambling in the past, but as I thought through it, I realised that this type of wager has a fundamental difference to betting on football. With a bet on the football, I have no control over the outcome. It is a gamble in the truest sense of the word. With this bet on my weight loss, I am totally responsible for the outcome. It is completely on me. There is no luck involved, just determination and effort. I need to lose weight as the last couple of years have hit me hard. In 2017 I completed a stationary bike ride for charity and by the end of that challenge I weighed in just under 95kg. When I placed my bet with Healthy Wage, I was 119kg. My aim is to lose 30kg in seven months; roughly a kilo a week. If I succeed, I more than double my money.
To help me lose weight I am trying intermittent fasting and time restricted eating. With intermittent fasting there will be days where I drastically reduce my calorie consumption and, on all days, I will adhere to time restricted eating. With TRE you limit calorie consumption to a set window of time each day. You can choose to do 12/12 where you eat within a twelve-hour window and fast for twelve hours, or 8/16 where you eat within an eight-hour window and fast for sixteen hours. I am employing a 10/14 split. I eat within a ten-hour window and fast for fourteen hours. My fourteen hours start with my last snack of the day at approximately 10pm and ends at 12pm the following day. When fasting you can drink as much water, or black tea/coffee as you want. I’m finding it easy so far and, in a week, have dropped 3kg. From what I’ve read this is quite normal for the first week or so.
Premium Bonds: £11,500 (up £1,575 from last week).
Stocks and Shares ISA: £7,745.46 (up £292.86 from last week).
Credit Card Debt: £1.10 (up £1.10 from last week).
Loan Debt: £3,800.49 (no change from last week).
F**k It Fund: £1,161.85 (up £10 from last week).
Total Wealth Figure: £193,908.31 (total assets including residence valued at £173,501 by my lender) minus £138,080.70 (total debt including residential mortgage) equals £55,827.61 (up £2,297.68 from last week).
A graph showing the increase in value of my ISA. The vertical axis is in £ and the horizontal axis shows each week.
A graph showing the increase in my Total Wealth Figure over the course of this blog.
I received £1,800 that I was owed this week which allowed me to significantly increase my deposit fund held in my Premium Bonds. The rest of the £1,800 helped to cover a couple of expenses that cropped up, but I’m in a good position to hit the amount needed to complete the purchase of our first BTL.
Another story in The Guardian caught my eye this week. The story is titled: New year money: how to regain control of your cash.
This story is another example of banal reporting when it comes to money. I could have predicted the content with a high degree of accuracy before reading it. There is the initial set of statistics reporting how many people are in debt following reckless Christmas spending, a link to debt charities followed by advice about how to get out of debt.
The article has four pieces of advice:
There are some obvious issues here. There are two types of people that get into debt. The first type of person is one that literally does not have enough money to cover their basic living expenses. Each month, their debt increases until something gives. This article does nothing to help them.
The second type of person is bad at managing their money and often spends excessively using all their money and then some, which results in them getting in debt. There may be the liberal use of the phrase “it’s only money” to support their spending habits. This article does nothing to help them.
This type of article is like having an article about how to lock your stable door after the horse has left. If you are in debt, it is because you have spent more than you earn. I’m not making a value judgement here; my definition is just a statement of fact. Rather than telling people how to manage their debt, we need to be telling people how to avoid debt.
In this country people do not generally like to talk about money. It is seen as impolite to ask how much someone earns or whether they are in debt. If we really want to tackle the debt crisis, then we need to talk about money more openly. We also need to stop telling people how to rearrange the deck chairs on the Titanic, and teach them how to make ships that don’t sink in the first place.
The problem with telling people how to spend money is that much of the advice is boring. Read any article about financial planning and budgeting and you can guarantee that the article will contain one of the two following tips: ditch your morning Starbucks and/or take your own lunch to work. For many people, having a lunch they buy at work may be the only time they get to have their food made for them. For many people, their morning Starbucks is the only thing that keeps them going at work. For many people who are struggling financially, these little treats are the highlight of their day.
Tackling the debt crisis is going to take a lot of time, and it maybe a generational project, but we cannot rely on government to tackle this issue. After all, the major banks make their money from interest charged on debt. There are things that the average person can do to reduce their outgoings though. Before I offer some suggestions, I must stress that I realise everyone’s circumstances are unique and I am not qualified to offer financial advice. The following is for information only and does not constitute advice on my part. If you are struggling with debt, then please contact StepChange or another debt charity.
Cars are expensive to buy or lease, but the cost of running a car can be just as expensive. According to an article in The Express, the average monthly cost of a car lease agreement was £253 (February 2018). Some additional google-fu suggests the average cost of running a car come in at £150-£200 per month. Then, you have potential costs of parking your car at work if you don’t have a secured space. It’s not unreasonable to suggest that the average person could easily spend £400 per month on car related expenses. If you were to invest £400 into a stocks and shares ISA each month and achieve growth in keeping with historic trends, after 25 years your ISA would be worth £535,000. In my city, Sheffield, a monthly bus pass costs around £60.
Even if you budget for the occasional Uber, not owning a car looks very attractive. When people ask me why I don’t drive, I think about these figures but hold off on trying to explain as when I have in the past, the person I am talking to mentally switches off. People don’t like to talk about money, and people think the figures sound too good to be true.
For some people, owning a car is essential. However, there are many such as me for whom a car would be an unnecessary burden but there seems to be a societal expectation that you should learn to drive and have a car.
Review Your Spending
Sometimes the act of reviewing a behaviour with no judgement can prompt change. This can happen when you record your eating habits and it can work with money. Set aside an hour or two and go through your last three months bank statements and credit card statements and review what you are spending and where. You could group spending into different groups such as household expenses, food shopping, eating/drinking out and so on. Compare your expenses to your outgoings and see where you stand.
If you want to be financially secure, you need to be spending less than you are earning. It mind sound like simple advice but I have met many people in the course of my personal and professional life who have thought themselves secure because they are saving each month whilst refusing to acknowledge they were getting further into debt each month by subsidising their spending on credit cards.
The Richest Man in Babylon by George S. Clason gives some very simple advice. Clason suggests that you try to bring your spending to 70% or less than what you earn. Of the remaining 30%, 20% should be used to repay debts. The last 10% should be invested. Once you pay off your debts, the 20% allocated to that could be invested as well. This is good, simple advice.
There will be some people who physically do not have enough money to cover their expenses. Should you find yourself in this position I would strongly encourage you to speak with Stepchange who can offer more tailored budgeting advice.
Planning for Death
As I have stated in previous posts my plan is to purchase properties with a business partner. We know each other well and share the same ambitions and plans for the property and so, I am not concerned about disagreements with how we will manage the properties. However, I have been thinking about what happens if one of us was to die before we had completed our exit strategy.
In the UK, when you buy a residential property, it will normally be owned as either Joint Tenants or Tenants in Common. My understanding is that under Joint Tenants each owner owns 100% of the property, so that if one of the owners dies the property becomes the sole property of the surviving owner. With Tenants in Common, each owner has a defined share of the property, typically an equal share each although it does not have to be.
Another complication is how mortgage lenders will allow a mortgage account to be administered if the property was purchased as Tenants in Common and one owner dies. It can cause a lot of delays, stress and confusion. The deceased will require an up to date will and it will take a long time to process the change of ownership. Another concern with Tenants in Common, is that whilst I and my business partner are happy to do business with each other we do not necessarily want to do business with each other’s next of kin. Also, it is not fair to expect our respective next of kin to share the same passion, drive and interest in managing property. It would seem, therefore, that Joint Tenants would be the way forward. The complication here is that we both want to provide for our next of kin, and although we trust each other, it is never advisable to take people at their word where potentially hundreds of thousands of pounds are at stake. With Joint Tenants, if one of us dies, the survivor gets the property and according to what I’ve read, not even a will can overrule a Joint Tenants agreement.
I have been thinking about this issue for a while, and I think I have hit upon a solution. I have proposed the solution to my business partner and, so long as we can get the agreement drawn up by solicitor in a legally binding way, we will proceed with this solution.
What I propose is that we purchase the properties as Joint Tenants but draw up a separate agreement that states in the event of one of our deaths, the surviving partner has X number of years to pay equity to the deceased’s next of kin. This would be calculated as 50% of the equity at time of death, based on average market value. For example, if we own two properties each valued at £100,000 with £50,000 debt on each, the total equity is £100,000. The next of kin would then be entitled to £50,000. By giving the surviving partner full control and ownership of the properties, it allows them to manage the properties without undue interference. In addition to this, there would be a second condition that requires the surviving partner to pay the next of kin 25% of the net rent until the equity is paid back. The other 25% would be kept by the surviving partner as a “management fee” for dealing with the properties on their own and to cover costs such as maintenance. If the equity was not paid back within the agreed time, then interest would start being paid in addition to the 25% rent.
I am not sure that this type of agreement would be legally binding, and we will consult a solicitor first. Assuming it can be done, it will probably cost some money to draw up the agreement, but it would be a sound investment to secure our respective financial futures.
Once again, thank you for reading. If you have any feedback, good or bad, please leave a comment. Also, if you spot any funny financial stories or poor financial journalism, please point it out in the comments section.
Hello and welcome back to Mortgage Advisor on F.I.R.E. We are now up to the tenth part in this blog, which is a satisfying milestone to pass. Over the next few weeks I will be introducing a few new sections to the blog. In addition to the usual weekly and financial updates, and the subject of the week, I will talk a little about finance related news. Another section that I thought would be interesting is the word of the week, where I will pick a finance related word and attempt to define it. They say that the best way to learn is to teach, so I hope to pick up some knowledge through this exercise. The word of the week will start from next week, but I will be discussing a poor piece of financial journalism I saw in The Guardian today.
The week between Christmas and New Year is a strange time. I was away from work until the 30th and then had to catch up with a lot of emails and briefs as I had been away from the office since 12th December. I’ve been finding work difficult as I have missed a lot of time in the last six months due to ill health and holidays. Hopefully as we move into 2020, I will achieve some consistency. As I write this on the evening of January 2nd my girlfriend is on her way back from Romania where she has been staying with her family for the past few weeks. It has been a bit dull having Christmas and New Year away from her, but I’m happy that she has been able to spend this time with her family. It’s the first time in over a decade she has been home for the holidays.
New Years Eve was a bit underwhelming, even by my own low expectations. The highlight came at 19:25 when I finished my 104th book of 2019 and hit my target of completing two books every week over the year. I have blogged about this reading challenge here.
It just seems that NYE is just an excuse to get drunk. I’m not a big drinker; I have an alcoholic drink once every few weeks. I’m not anti-drinking, but alcohol tends to exacerbate some of my health issues. Also, over the last few years I have become increasingly bored by “nights out”. I would much prefer sitting with a group of interesting people, over a nice meal.
I’ve not enjoyed the holiday period this year. I would go as far as saying it’s been one of the worst holiday periods I can remember. It’s been nice spending time with family, but I’ve not felt more alone than I have in a long time. I have always enjoyed my own company, but for spells of a few hours at a time. I don’t think I cope well spending extended periods of time on my own. The fact that I’ve felt quite ill for much of the time over Christmas has not helped, nor has the fact my sleep has been disturbed almost every night.
Premium Bonds: £9,925 (up £25 from last week).
Stocks and Shares ISA: £7,452.60 (down £68.66 from last week).
Credit Card Debt: nil (no change from last week).
Loan Debt: £3,800.49 (no change from last week).
F**k It Fund: £1,151.85 (up £76 from last week).
Total Wealth Figure: £192,030.45 (total assets including residence valued at £173,501 by my lender) minus £138,500.52 (total debt including residential mortgage) equals £53,529.93 (down £70.26 from last week).
I believe this is a first; my Total Wealth Figure has decreased from one week to the next. There is a simple reason for this, though, so I’m not too concerned. December’s interest has been added to my mortgage balance, but because of how the publishing schedule for this blog has fallen, my mortgage payment was made today but has not updated on the balance on my statement. Next week, the mortgage debt will drop by several hundred pounds.
Investment Income Received in 2020: £0. (Target: £2,000 by end of 2020).
This story caught my eye on The Guardian website today, although it was published on 29/12/19. These types of stories are a guilty pleasure/frustration for me as they often have me shaking my head and swearing at the computer screen. The advice given is often unrealistic or completely banal. This article managed to hit the full house of being unrealistic, banal, irrelevant to most people with a side order of offensiveness.
Tip #1 – Don’t miss the tax deadline
You would think that the first tip would be something that applies to most people, but The Guardian takes the approach that something that applies to roughly one-in-nine adults is the most pressing issue on the agenda. There is also the fact that if you need to submit a tax return, and you don’t do it, you are breaking the law. Stating this as a financial resolution is just stupid.
Tip #2 – Watch out for currency shifts
One could forgive the first tip as being a little ill-judged, but this tip is practically offensive to many people. The fact is that for 99% of the UK population, currency shifts are as low down the list of concerns as things like alien invasion or a zombie apocalypse. With hundreds of thousands of people in the UK in food poverty, and food banks being used in record numbers, telling people to watch out for currency shifts is just offensive. For many people that are going on holiday, tiny changes in currency conversation rates hardly matter. By all means, shop around for a good rate of conversion but if your second biggest financial concern of the year is worrying about conversion rates then you don’t really have much to worry about.
Tip #3 – Shop around for savings deals
Once more, this suggestion from The Guardian is detached from the reality for most people. The average UK household has around £2,500 of credit card debt. General figures for the average amount of savings are more complex, but if you spend just ten minutes googling the situation you will see that for many people savings are a luxury.
Tip #4 – Take stock to avoid debt & Tip #5 Make your mobile work for you
In Tip #4 the author explains that you should avoid credit card debt, and if you have credit card debt you should pay more than the minimum amount. In Tip #5 the author suggests using a credit card to purchase your next mobile phone outright as opposed to taking it on a contract. I think I have already mentioned that the article is detached from reality, but this is just absent all logic.
Tip #6 – Fingers crossed for the budget
Are you f*****g me? The Guardian has published an article regarding financial tips and one of those tips basically boils down to “hope for a lottery win”.
Tip #7 – Look for energy bill deals
This is advice that has been doing the rounds for years now, and whilst there are some savings to be made it is hardly going to make the difference between poverty and comfort for many people who are struggling.
The article from The Guardian was disappointing and made me angry. Next week I will look at some more sensible suggestions that might be a bit more relevant for most people.
Ground Rules Revisited
In Part 4 of this blog I set out a series of Ground Rules to help focus my investment efforts. I now find myself having to revisit some of those rules as life has a habit of getting in the way. Some of my targets were a little ambitious and with the expense of Christmas, my trip to Romania and an upcoming two-week trip to India, I need more free cash. Also, we have had a few things go wrong in our apartment and need to free up money to deal with some repairs.
A quick recap of the rules now follows:
Rule 1: Save a minimum of £400 each month in Premium Bonds.
Rule 2a: Invest a minimum of £250 each month into my Stocks and Shares ISA.
Rule 2b: Reinvest all dividend income from the ISA.
Rule 2c: Absolutely no withdrawals allowed from the ISA.
Rule 3: Save a minimum of £100 each month in my F**k It Fund.
Rule 4: Save a minimum of £30 each month in my Tech Fund.
Rule 5: If I use my credit card, pay it off immediately.
As you may remember I removed the Tech Fund from consideration in this blog, as I realised it would not be an ongoing investment and eventually the funds would be used to replace my phone and/or laptop when they eventually stop working.
I am going to tweak the amounts in Rule 1 and 2a.
Rule 1 (updated): Save a minimum of £300 each month in Premium Bonds
Rule 2a (updated): Invest a minimum of £200 each month into my Stocks and Shares ISA.
All the other rules apply as normal.
There will probably be many months when I invest more than the minimum, but I’ve realised that in life you must be flexible when things come up. If you are rigid, you are brittle, and things that are brittle tend to break.
A bit of a shorter post this week as I’ve been a bit busy. Next week should be more in-depth as I look at some of my suggested financial resolutions. I will also look at how realistic my £2,000 target for investment income in 2020 is.
Thank you for reading and I hope you have a great weekend.
Link to The Guardian story discussed in this blog: https://www.theguardian.com/money/2019/dec/29/top-financial-resolutions-for-2020