Hello and welcome back to Mortgage Advisor on F.I.R.E. A week is a long time. When I posted last week, the coronavirus was raging and it’s only worsened since then. I’m not going to focus too much on the virus itself in this part, but rather look at the opportunities the virus presents for investors whilst discussing the different things people can do to protect themselves financially during this crisis.
Lots of people are worried about their mortgage at a time like this, and so I’ve spent most of the week reassuring people. It’s felt rewarding, playing a small part in helping people with their mortgage. I’m not helping anywhere near as much as those on the front line such as medical professionals, retail workers and those in public transport. We’re all playing our part though, or at least we should be. Just because your part might not be as immediately important or significant as what a doctor or nurse is doing, it does not diminish what you are doing. In a time like this, you are either helping or hindering; there is no middle ground.
There have been reports of people coughing and spitting at police and emergency service personnel. I’m constantly surprised, although I shouldn’t be, at just how low some people can be. Pandemic or not, if you deliberately cough or spit in the face of another person, you don’t deserve any treatment or protection - you deserve to be prosecuted.
The scale of this pandemic is horrifying. It’s amazing how quickly your mind adjusts to a new reality though. In the last few days I’ve seen groups of three or four people walking together and my opinion of them is formed, although they could be part of a shared household and have every right to be out together. When I listen to my audiobook, and I hear about people in crowded areas like bars and restaurants, I have a strange feeling of nostalgia mixed with a sensation of a world we no longer know.
It’s going to be interesting to see what the long term impacts on society and culture will be once this pandemic is defeated. Will there be a release of people into the cities? Will there be street parties to celebrate the end of our social isolation? Will there be a greater sense of community? Or, will things revert to “normal”. Another possibility is that society maintains its social isolation. That is a depressing thought.
This virus will result in many changes to everyday life. It’s probably going to change in ways we can’t predict. There may be new types of jobs created. New industries even. There could be new technology, apps and games built through our enforced social isolation. We could even see new belief systems or philosophies developed.
One way or another, it will be a very different world we wake to when this virus is beaten.
Premium Bonds: £15,000 (no change from last update).
Stocks and Shares ISA: £6,616.52 (up £262.68 from last update).
F**k It Fund: £1,879.51 (no change from last update).
Property Value: £181,626 (no change from last update).
Total Assets: £205,122.03 (up £262.68 from last update).
Credit Card Debt: £2,216.24 (up £484.10 from last update).
Loan Debt: £2,871.56 (down £35.28 from last update).
Residential Mortgage: £133,673.84 (no change from last update).
Total Debts: £138,761.64 (up £448.82 from last update).
Total Wealth Figure: £66,360.39 (down £186.14 from last update).
We are still seeing the instability in the markets due to the coronavirus. Since last week I have invested a further £660 into my ISA. Soon after, the stock prices dropped a little. I’m not concerned though, as I’m playing the long game. Those stocks I bought were massively undervalued and in time I will see gains far greater than the sum invested.
You will notice that my credit card balance increased significantly. My girlfriend’s phone died and she needed a new one. I can’t complain as she had her old phone for the best part of seven years. She tried buying one using her card but for some reason the retailer kept declining it. It’s strange as we both have our cards with the same card provider, and when I tried mine the order went through without issue.
I’m working on something which should see my loan and credit card balances reduced to zero by the next update. However, the coronavirus might delay my plans. I’m having to take that possibility day by day at the moment.
The financial impact of coronavirus is going to be staggering. A lot of people are going to lose their jobs or businesses. Many people are going to deplete savings. Even more people are going to run up debts on credit cards and short-term loans. The financial consequences of this pandemic are going to run, and run. We will still be dealing with this into the latter part of this decade. My grim prediction is that we will probably see a surge in suicides in the months that follow the virus subsiding as people face up to the financial reality of the new world. It’s a terrifying time. I would hope that human goodness prevails and lenders take a sympathetic stance towards those with credit cards and short-term loans. A good first step would be to drastically reduce interest rates on those products, or possibly grant zero percent terms for the next twelve months or so. I doubt this will happen. I think we will instead see eligibility criteria for loans and credit cards reduced and interest rates hiked.
If you are struggling with debt, I strongly advise you to seek help and support from a qualified organisation such as StepChange (https://www.stepchange.org/) or the National Debtline (https://www.nationaldebtline.org/). If your mental health is suffering, please reach out to one of the support lines listed on this NHS page: https://www.nhs.uk/conditions/stress-anxiety-depression/mental-health-helplines/.
The Importance of an Emergency Fund and Budgeting
The only way to financial security and independence is through budgeting. I’m not talking about scrimping and saving. I’m talking about having a full and clear picture of your spending. I can tell you from memory how much all my bills are and when they are collected by direct debit. I can tell you, to within ten-percent or so, how much we spend a month on household shopping. I know all my expenses, and I know my income. That’s the first step of budgeting.
There’s a theory in dieting that the simple act of recording what you eat changes your eating behaviour. I suppose it’s like the Observer Effect in physics; the act of observation changes the observed. I believe this can be applied to money. I always suggest people take it a step further though, or should I say a step backward. For those looking to get a handle on their spending, it’s best to look back over previous spending. Have a look at your last month of spending (three months would be better, but not everyone has the patience for that) and categorise it into things like household shopping, leisure/recreation, take-aways/eating out etc. The figures can be a revelation. Then, be more mindful of your spending going forward. I don’t generally subscribe to the belief that you have to cut down on your morning latte or a weekly take-away, so long as it all fits into the bigger picture. A latte once a day is not going to break the bank so long as you are not throwing £200 away at the weekend on heavy nights out. It’s all about context.
If you don’t know what you’re spending, you don’t know what you need to survive a week, month or year without income. I’ve heard wealth defined not as a monetary amount but as a function of time. Your wealth is how long you can survive at your current standard of living without any income. My wealth is two-years, give or take a month or two. It’s reassuring to know that if push comes to shove, I could get by for a while without worrying about the mortgage or food. This outcome is a result of following the process (something I have talked about before). By following a process of budgeting I knew where I needed to cut down and where I needed to deploy my money. This has led, over time, to the accumulation of a decent sized pot of capital. It’s why I don’t sweat paying a few hundred pounds for a new phone for my partner. I know that this can easily be clawed back. Personally speaking, I’m not in negative equity. I only got to this point by following the process.
Layers of Defence
The first step to defend yourself against a sudden drop, or complete loss, of income is to have an emergency fund of liquid cash. I call my pot of money the F**k It Fund. I know that if the shit hits the fan, I can call upon that cash with just a working day of notice required. For anything that requires an instant financial response, I have a credit card with a very respectable credit limit. This is the first line of defence.
My second line of defence is made up of stocks and bonds. These are income generating assets that I would rather not cash in, but I know I can still raise a decent sum from them; enough to survive for months if necessary.
The third, and final line of defence, is my financial education. In many ways this is the most important line of defence. I understand how finance works. I know from my job that many people think they know how money, debt and investments work, but they don’t. There is a term for this inflated sense of expertise; the Dunning-Kruger effect. I’m not saying I’m an expert but I have enough knowledge and experience to navigate the financial system. I also have enough knowledge and experience to be fairly confident that if I had to seek employment in the world of finance, I would probably be successful. The most important thing about this line of defence is that it can only grow stronger. You can’t lose your knowledge and experience like you can money, stocks or bonds. Your knowledge and experience can only grow; it can’t diminish.
Look after your garden and it will look after you.
Tending the Garden
Imagine you have a garden ready for planting. You plant a seed that over time grows into a fruit tree. You take more seeds from the fruit and plant those. You have two more trees. The three fruit trees provide more fruit, and from their seeds you grow another six trees. Those six trees allow you to plant more seeds, and so your garden grows. This is how methodical investment works. Each unit of currency buys a stock. That stock grows and pays dividends. Those dividends are reinvested, buying more units of stock. Over time, your holding grows. At first, the growth is small, but over time the pace of growth accelerates. There will be times when the pace drops off, when the market stalls or when a strong wind blows a fruit tree over. But the market, like nature, bounces back. Tend to your investments like you would a garden. Trim and prune where necessary, but don’t go digging your garden up every few weeks as you will never give anything a chance to grow and yield fruit.
With the current economic crisis, those seeds are cheap to buy; as cheap as they’ve been in years. Now is the ideal time to plant seeds. It might take time for the fruit to grow and the longer you let it grow the juicer it will be when you pick it. If you invest in FTSE100 index trackers and US equity trackers (I would suggest using Vanguard as their fees are low), then I’m confident that we will see gains in the coming months and years.
As always, do the research and make sure you can afford to invest. There is no point getting into debt to invest. Any investment comes with the risk that you could need that money further down the line and when you cash your investments in the value could be lower. If you get into debt to invest, or invest without understanding the investment you are just gambling and when you gamble the house always wins. With any investment, there are two parties; the person buying the investment and the person selling. In any game there is a winner and a loser. If you don’t fully understand the investment, guaranteed you are the loser.
I hope you have a safe week. Until next time, thanks for reading Mortgage Advisor on F.I.R.E.
Hello and welcome back to Mortgage Advisor on F.I.R.E. There’s a lot to discuss this week. I will talk a little about conspiracy theories and why they are dangerous, and then move on to my financial response to the Coronacrisis.
It’s been my first week back in work following my return from India. I’m so relieved that I made it back to the UK, as had I been any later there is a very real chance I would still be stuck abroad. It must be so frustrating for all those who are trapped away from their homes at the moment. I know my girlfriend is feeling the distance from her family.
In terms of distance, the importance of social distancing at this time cannot be overstated. It should not even be that difficult in an age of video calling and social media. It’s annoying that so many people have not heeded advice until now, purely thinking of themselves instead of thinking how they may be the carrier that passes the virus on to other, more vulnerable, people. Tragically, people will die because of this thoughtlessness. One of the best pieces of advice I saw was to act as if you were already infected. If you were already infected you avoid contact with other people and become a hermit for a couple of weeks, or at least I hope you would.
“IT’S ALL A PLOY TO GET US MASS VACCINATED!”
I keep seeing people posting things like this on social media, claiming that the coronavirus is all a ploy to get us mass vaccinated. The thing I’m not clear on, and after questioning the people posting this, I don’t they are clear on it either, is what we are supposed to be getting vaccinated against and also, why?
“Why?” is a question that shuts down most crackpot theories. Another conspiracy theory I’ve come across is that this is all a hoax to force society to self-isolate. I ask again, why? What would be the point? What would be achieved?
Another way to shut down these theories is to ask people what their sources are. Most of these conspiracy theories come from unverified sources lacking general credibility, and this is just a polite way of saying “some dude off Facebook.”
Conspiracy theories can be fun. There are several theories which I’ve gone down the rabbit hole with, including the 9/11 theories, the sinking of the Titanic, the Phantom Time hypothesis, and even Flat Earth theories. The thing is, for me it is entertainment and a way to sharpen my critical thinking skills. There is a host of research in the psychological literature that shows if you believe in one conspiracy theory, you are more likely to believe in other conspiracy theories. For the most part, it’s pretty harmless to society as a whole. If you choose to believe the Moon landings were faked, or that the Earth is flat you aren’t really harming anyone, with the exception you might be socially isolating yourself (although Flat Earth has a large community now). There are some conspiracy theories, though, which can be extremely harmful to the extent they can cause death.
Anti-vaxxers are fucking idiots. Let’s just get this out of the way first. There is not a shred of credible, peer-reviewed, evidence that links vaccines to things like autism. Every single argument from anti-vaxxers can be deconstructed quite easily by the medical establishment. Vaccines are safe, and they save lives every day.
A few days ago, someone I know shared a status on Facebook which was one of the typical “things were better back in the day” posts. It described how their parents used to use the same knife and chopping board to cut fresh chicken and then butter bread. It described how their packed lunch for school was not kept cool. It also described how they were not given antibiotics and sterilisation kits for bee stings (I think it’s rare that a bee sting gets infected, but I digress). Anyway, it was one of those posts that got my back up a bit because on the face of it, it’s pretty inoffensive but when you drill down it has the potential to be dangerous.
Let’s take a trip back through time. According to the ONS, Infant (aged under 1 year) mortality has dropped from 9.4 to 3.9 per 1,000 live births over the last three decades. Life expectancy has also improved substantially in the last few decades, as per the charts below from the ONS.
There is a survival bias when people look back at the past. People can look back now and say “well, I survived so cross contamination from food preparation was not dangerous” or “I survived playing in the dirt” and so on. The thing is, of course you survived because you’re here to say it. What about all those that did not survive?
So, coming back to my point a couple of paragraphs ago. Why are statements on Facebook, promoting the unhygienic past, dangerous? It’s because it subtly promotes a return to that way of life. If just one parent decides to make their child’s cheese sandwich with the same equipment they prepared raw chicken, there is an increased risk that child will die at an early age. The same principle applies to those who do not vaccinate their children.
How does this relate to the coronavirus conspiracy theories? Well, if people are posting BS theories that are not backed up by credible evidence, it runs the risk of convincing other, uninformed, people to disregard government and medical advice. If people do not practice social distancing then we are in this for a longer period of time. For most people, the virus will be an inconvenience, but if you are one of those people disregarding medical advice you risk passing the virus on to the elderly or those with compromised immune systems such as cancer patients.
Another thing to remember, if you think the actions by the government are heavy-handed, is that it’s easier to scale back an overreaction than it is to ramp up an underreaction. These measures might be extreme, but I have little sympathy when we are having to explain how you should wash your hands in the year 2020. I wash my hands regularly and thoroughly, and I’ve had people comment on it before. The thing is, for the last twenty years or so I have always washed my hands according to NHS guidelines. I see people come out of bathroom stalls and then just flick their hand briefly under a tap. This is not washing your hands.
Now that I have vented, let’s move on to the financial update.
Premium Bonds: £15,000 (up £1,275 from last update). Target Met.
Stocks and Shares ISA: £6,353.84 (down £725.71 from last update).
F**k It Fund:£1,879.51 (up £265 from last update).
Property Value: £181,626 (no change from last update).
Total Assets: £204,859.35 (up £814.29 from last update).
Credit Card Debt: £1,732.14 (down £27.80 from last update).
Loan Debt: £2,906.84 (down £29.38 from last update).
Residential Mortgage: £133,673.84 (no change from last update).
Total Debts: £138,312.82 (down £57.18 from last update).
Total Wealth Figure: £66,546.53 (up £871.47 from last update).
The ISA is continuing to take a pasting, but I’m not worried. This is a good thing for long-term, regular investors as it means we get more from pound-cost-averaging, which I will come back to shortly. I have now hit my target of £15,000 in Premium Bonds, which was going to be used for a BTL deposit. However, those plans are on hold. I’ve spoken with my business partner and we’ve agreed to hold our plans until there is more clarity about the impact of Covid-19 on the property market.
In my last post I argued for the need for flexibility when investing. I have also promoted the concept of process goals over outcome goals, as I believe if you stick to a general process (i.e. regularly investing and continual financial education) you will achieve financial independence. I still believe that. I have small outcome goals that help direct the path my process goals will take me on, such as raising enough money to pay my half of a BTL deposit. The outcomes are just signposts though, that I’m on the right path.
With Coronavirus spreading as it is, many people are finding themselves in uncertain financial times. There are many resources out there to help if you are struggling with debt, or budgeting. These include:
Money Advice Service
Do not suffer alone if you are struggling. If you are in financial difficulties, please contact one of the above organisations for help and advice. If you are going to struggle meeting your mortgage payments, please contact your lender as soon as possible. In the first instance, use their website. I know some lenders are offering payment holidays you can apply for over their website. This will help reduce the strain on those working in the offices who are dealing with long queues of calls. If you do apply for a payment holiday, please make sure you understand the implications of this before agreeing to it.
Although the Coronavirus is primarily a physical issue, the impact it will have on the mental health of the nation should not be underestimated. Although we are to remain socially distant, it does not mean we should be emotionally distant. Talk to those around you. Be kind. If we continue to be there for each other emotionally we may end up saving lives.
If you are struggling with your mental health, please reach out to your friends and family, or to one of the organisations listed on the NHS link here:
I have seen more than a few BTL portfolio landlords, and Rent-to-Rent landlords state they are struggling as their tenants are unable to pay rent having lost their jobs due to the Coronavirus. I made a point, which caused some controversy, that if you are in financial difficulty because your tenants have missed one payment, then you have overstretched yourself and are guilty of the same lack of contingency planning you accuse your tenants of. I see many landlords who operate under the mindset of “more, more, more” and will leverage to the maximum degree to obtain as many properties as possible. I hope this will be a wake-up call that more isn’t always better. One thing I have discussed in depth with my business partner is the need for a significant contingency fund should anything go wrong with our first BTL. I would not be able to sleep at night if I did not have at least six-months of funds behind me.
Pound Cost Averaging
A few weeks ago I explained this concept, and I think now is a good time to revisit it. The stock market is taking an absolute hammering at the moment with many shares tanking. There are some signs that the collapse may have bottomed out, but it’s my personal view that stocks could fall even further. We are only in the first few weeks of the Coronavirus impacting business in the UK, and Europe as a whole. As more businesses close their doors and more people lose their jobs, I suspect we may see more than one high-profile casualty in the stock market as well as significant further falls across the board.
The basic concept of pound-cost-averaging is that you spread your investment in stocks out over time. The frequency isn’t all that important, you could spread the investment out weekly, monthly, quarterly etc but remember that trading fees can impact on the overall cost of each stock. Personally, I invest monthly as it matches the frequency of my salary.
An Example (trading fees and taxes ignored for simplicity)
Month 1: You invest £1,000 in a stock priced at £20 per unit. You purchase 50 units.
Month 2: You invest £1,000 in the same stock which is now priced at £17 per unit. You purchase 58 units, and have £14 left over.
Month 3: You invest £1,014 in the same stock which is now priced at £18.50. You purchase 54 units. You have £15 left over.
Month 4: You invest £1,015 in the same stock which is now priced at £22. You purchase 46 units. You have £3 left over.
In total you have purchased 208 units at a cost of approximately £4,000. The average (mean) cost of each unit of stock was £19.23. This is pound-cost-averaging.
If you had instead saved your £4,000 and invested in month 4 in one lump sum, your £4,000 would have purchased just 181 units.
As the quote goes; “It’s not timing the market, but time in the market that counts.”
Now that I’ve saved my deposit for the first BTL, I’m going to switch my focus to investing aggressively in the stock market. Although I invest heavily in index funds, I also have a small selection of individual stocks that I invest in. I believe in the long-term future of these stocks and some of them have lost 50% of their value since the start of the Coronacrisis. There are bargains to be had. Even if you look at index funds only, the Vanguard FTSE100 Index Fund has lost approx 25% of its value in the last month. It may drop further, but I firmly believe it will bounce back in time. The Vanguard Global Bond Index has remained fairly static throughout the last month, but in the past week or so it has started to drop but by a much smaller amount than the stock market.
As I stated before, I firmly believe this is a great time to invest in the stock market as long as you have done your research. If you invest without research, you are just gambling.
The most important thing now is to stay calm, and be prepared. This applies to your finances, your health, and your work. We are in uncharted waters and we don’t know for certain how this virus is going to impact us in the short, medium and long-term. The only way we get through this is together. Be there for the people you care about and please try not to scaremonger.
I hope you have found this part of the blog interesting and if you have any questions or feedback, please leave a comment.
It's been a few weeks since I last updated this blog. Part 17 was posted on 21/02/2020 and I'm frustrated at the gap between posts. This week I will explain a little about the reasons for the gap. I will also look at the impact of the coronavirus on my investment strategy. First of all, the weekly update.
I was thinking I should rename this section "Weekly Updates" but I did not want to confuse matters unnecessarily. In Part 17 I explained that I would be leaving for India, but what I did not realise was that I had the departure dates mixed up. I thought I was flying on Saturday 29/02/2020 but I was flying the day before, and Friday is the normal posting day for this blog. Part 18, as a result, was lost in the mix. To be honest, I had a draft of Part 18 ready but it was not my best writing and I think it's best to just leave it in my saved files. The plan, as mentioned in a previous post, was to have a guest blogger post an update whilst I was in India but that did not come to pass either. With a very limited internet connection in India I was not able to post anything. So, apologies for the gap between posts. I have not given up on this blog and am still passionate about the project and the journey to financial independence.
India was quite the disappointment. I am going to write a separate blog detailing the trip for another part of this site, and so will not go into too much detail here. In brief, the main issues stemmed from the agents messing us around. We had booked a "luxury" package but it was far from luxury. Also, we knew this was a trip that involved some travelling between cities but in the eleven days we had in India I calculated that we spent approximately seventy hours on the coach. The hotels ranged from adequate to terrible. In one hotel we had an issue where our room had no hot water and it took over two hours for the hotel to move us to a different room. This was late at night after a long day in dirty streets. The hotel's conduct during this issue was disgraceful. Another hotel had no power or water from the time we checked in at around 19:00 until almost 22:00. This meant after a long day on the road we had no toilet facilities, showers or even lighting. Another hotel marketed as five-star could not accept card payments, something not disclosed at check-in, which meant that when it came to pay bills, many guests were having heated conversations about paying their expenses.
The Tour Guide was spineless as well. There was a group of thirty-six travelers and there was a real division within the group. One of the travelers insisted on sitting next to the driver in the forward cabin of the coach, and we could see him distract the driver several times. We narrowly avoided accidents on multiple occasions but the Tour Guide said he could not do anything about it. We challenged the other traveler but he refused to change seats. I was quite vocal about this issue and another traveler started making comments about me to other members of the group. I was told about this, and I calmly confronted the woman to ask if she wanted to clear the air. She became abusive and I told her to mind her own business in future. She then sent her husband to speak to me, but I made it quite clear to them both I would not tolerate their nonsense further. All of this made the trip pretty underwhelming.
A small selection of photos from India.
Initially, I quite liked our Tour Guide but after just a couple of days my opinion of him shifted. Early on in the trip we were offered an upgraded meal plan that would include dinner at the hotels in addition to breakfast. This would be at the cost of £10 per person, per night. We accepted the offer. Nothing was mentioned in detail about payment, so I assumed that it would just be a card payment to the travel agent or local tour operator. Now for a little tangent....
The Indian currency is the Rupee. You cannot buy the Rupee outside of India. The currency is highly regulated and you are not permitted to transport the currency across India's borders. I have cash across three banks, as well as a credit card. Two of my bank account providers do not charge for using their debit cards abroad or for foreign ATM withdrawals. However, I had to try many different ATMs to find one that would work. When they did work, the daily withdrawal limit was 10,000 Rupees, which is roughly £110. This has to pay for general expenses, lunches and so on. It does not leave much room to accumulate the cash needed to pay for the meal plan in Rupees. Also, it was not just me having an issue with ATMs not working. On several occasions there was a queue of people from our group all trying to draw money from Indian ATMs but they would not work for any of us. I called my banks and they stated they had no record of attempted withdrawals, which meant the issue was probably that the connection timed out between the Indian banks and the UK banks. The card readers in shops and restaurants were no better. Our Tour Guide was well aware of all these problems.
When we were in Jaipur, one of our last destinations, we were told that we needed to make payment in cash. We ended up being driven round the city in a Tuk Tuk trying to find an ATM that would work. We did not succeed. I explained this to our Tour Guide; he would either have to find a way to allow a card payment or online transfer. After some debate, I was sent a link to make an online payment. However, the hotel we were at by this point had no wi-fi. On the coach the next day, the Guide used his phone as a hotspot. I spent an hour, as we were driving through the Indian countryside trying to make the payment but the signal kept cutting out. I eventually gave up. I was only able to make the payment on the last day. The Guide kept pestering me to give him the money. I ended up asking him if he thought I have some magic power to summon cash out of thin air, and I think he got the message.
On the positive side, my girlfriend and I spent time together away from the pressures of day-to-day life. We made the best of our time together and got to experience another culture and way of life. We saw the Taj Mahal, and several forts and temples steeped in history. We also made some great friends in our group including Jane and Melvyn, a retired couple from the Birmingham area. We met Tess, a lady living not far from us in South Yorkshire. We also spent time with a lovely Indian family, and our joint dinners at several of the hotels were great fun. I also spoke briefly with some other members of the group who seemed like interesting people whom I would like to have known better, but the time pressures of such a trip made it difficult. I hate being so negative about travelling. I love travelling, and even when things don't go to plan, there are normally ways to rescue the situation. Both my girlfriend and myself agree though, this was our least enjoyable trip in the thirteen years we have been together. We feel like we need a holiday just to recover from this trip.
Premium Bonds: £13,725 (no change from last update).
Stocks and Shares ISA: £7,079.55 (down £1,533.87 from last update).
F**k It Fund: £1,614.51 (up £1.40 from last update).
Property Value: £181,626 (no change from last update).
Total Assets: £204,045.06 (down £1,532.47 from last update)
Credit Card Debt: £1,759.94 (up £1,759.94 from last update).
Loan Debt: £2,936.22 (down £400 from last update).
Residential Mortgage: £133,673.84 (down £286.73 from last update).
Total Debts: £138,370.00 (up £1,039.10 from last update).
Total Wealth Figure: £65,675.06 (down £2,571.57 from last update).
You will notice two massive changes since the last update. My credit card balance has increased significantly. As I've stated previously, I normally run my credit card at a zero balance where it is paid off as soon as it is used. India threw a spanner in the works as we had to spend much more than expected. Also, with my bank cards not working properly in India I had to rely more on the credit card even though it charged me a fee for non-sterling transactions. It's probably going to take a couple of months to reduce that balance back down to zero, but it will get there.
My ISA has taken a pasting with the stock market slump due to the coronavirus. I'm not concerned though; it's actually an exciting time. It's like Black Friday for stocks and there are many, many deals to be had. For short-term investors, day-traders and speculators, this sort of drop in the stock market is terrifying. For long-term investors it's a great time to start snapping up shares. The stock market will bounce back; it always does.
A sharp drop in the value of my ISA, but it's only a blip. Patience is the key.
A Soft Reboot
"No plan survives contact with the enemy."
~ paraphrased from quote by Field Marshal Helmuth Karl Bernhard Graf von Moltke.
I've spoken before about the need for flexible plans and goals that are process based rather than outcome based. Our trip to India ended up being a bigger speed-bump in the road than expected. Also, the rise of Covid-19 is something that I could not realistically plan for. I need to reassess my financial priorities and look to streamline as much as possible over the coming months. I have a devised a new plan of action which involves ticking off the financial goals that I'm closest to achieving first, thus freeing up the money that would otherwise be committed to those goals.
Throughout all this I will also be investing in my stocks and shares ISA. Depending on dividend income I may be able to hit the targets mentioned above a little earlier, but I'm not counting on that.
Investing in Stocks: Now is the time to buy.
"The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people."
~ Warren Buffett.
Investing can be complicated. It can involve detailed analysis of economic trends, balance sheets and dozens of other factors. Sometimes though, it is very simple.
These mass selloffs which we see in the stock market at times of crisis are a case in point, and amateur investors need a reminder of just what the stock market it. What I'm about to say, sounds like common sense. However, the more you let the point sink in, the more relevance you will observe to the market right now. Here goes;
When you buy stock, someone else is selling. When you sell stock, someone else is buying.
The stock market is a middle man. You don't buy or sell stock to or from the stock market as an institution but rather through the stock market to another individual or business. When you choose to sell stocks in a panic, someone else is rubbing their hands together as they sense the opportunity for a bargain. The cynic in my thinks that a lot of the experts you see on the news promoting stock market catastrophe are the ones who will be logging into their trading accounts shortly after to start hoovering up shares that have plummeted in value.
When the stock market falls, it's a chance to make money. I did this just after the Brexit Referendum in 2016 and made a tidy profit. I will probably make some money from this plunge as well. You make your money in stocks when you buy, not necessarily when you sell, as a long-term investor may not sell. My strategy is to buy, hold, and take the dividends. When the stock market falls, I get more for my money; more units of the stock and more dividends further down the line.
Apologies again for the gap between posting on this blog. Normal service should now resume. However, I am making a change to the posting schedule from next week. Instead of posting on a Friday, I am moving the posting day to Sunday each week. I have a few things on at the moment with studying for my Financial Advisor qualifications and posting on a Sunday just makes more sense for my circumstances. Thank you for reading.