Pensions Planning: The NUMBER

DT2001

barnstar2077 said:

trevjl said:

SouthCoastBoy said:

I have come to the conclusion I most probably won't use all my money, which I'm very happy about. It means I don't really need to budget for one off capital expenditure items. I know it is a fortunate position but I've worked and saved hard for a very long time.

So much so I'm paying for 6 of us to go to australia next Christmas I'm budgeting 25 to 30k 

I could have written this - substitute Oz for USA last year 10 of us, and it did come out top end - I don't have any reserve, pot, budget for cap ex. I have never quite understood on here the obsession with a new roof !
I am fortunate to have a decent DC & ISA and a DB in 3 years. I work on the theory that if I cant afford a cap ex then I should not have retired. I can't think of any cap ex that would make a life changing hole in my budget. New car ? what is that, most expensive car I have ever paid for was a  Ford Granada MkII in 1986 £2700, last car 2009 Astra £1900 !!

Are you saying that you don't have a separate pot for one off purchases, like new cars, white goods etc?

When I retire I plan on having a separate pot so that I know exactly what I have as spending money every month.  Otherwise a new boiler etc would mean having to cut back on fun activities for a few months.

The only way it would work differently for me would be if my monthly spending allowance was exceptionally high to start with.  Which would be inefficient, as I can retire earlier on less with a separate pot for one off big expenses. 

SCB is quite cautious and his priority I think is peace of mind whereas yours is retiring early?

I must admit I hadn’t intended to have a separate pot for one off purchases but envisaged having cash (be it cash ISAs, PBs or similar) to cover a few (3/4) years expenses which could be used. It is my hope to build a new home so hope not to need to spend too much on the property.

barnstar2077

DT2001 said:

barnstar2077 said:

trevjl said:

SouthCoastBoy said:

I have come to the conclusion I most probably won't use all my money, which I'm very happy about. It means I don't really need to budget for one off capital expenditure items. I know it is a fortunate position but I've worked and saved hard for a very long time.

So much so I'm paying for 6 of us to go to australia next Christmas I'm budgeting 25 to 30k 

I could have written this - substitute Oz for USA last year 10 of us, and it did come out top end - I don't have any reserve, pot, budget for cap ex. I have never quite understood on here the obsession with a new roof !
I am fortunate to have a decent DC & ISA and a DB in 3 years. I work on the theory that if I cant afford a cap ex then I should not have retired. I can't think of any cap ex that would make a life changing hole in my budget. New car ? what is that, most expensive car I have ever paid for was a  Ford Granada MkII in 1986 £2700, last car 2009 Astra £1900 !!

Are you saying that you don't have a separate pot for one off purchases, like new cars, white goods etc?

When I retire I plan on having a separate pot so that I know exactly what I have as spending money every month.  Otherwise a new boiler etc would mean having to cut back on fun activities for a few months.

The only way it would work differently for me would be if my monthly spending allowance was exceptionally high to start with.  Which would be inefficient, as I can retire earlier on less with a separate pot for one off big expenses. 

SCB is quite cautious and his priority I think is peace of mind whereas yours is retiring early?

I must admit I hadn’t intended to have a separate pot for one off purchases but envisaged having cash (be it cash ISAs, PBs or similar) to cover a few (3/4) years expenses which could be used. It is my hope to build a new home so hope not to need to spend too much on the property.

I was referring to Trevj's comments about new rooves and "I don't have any reserve, pot, budget for cap ex" etc. 

trevjl

barnstar2077 said:

trevjl said:

SouthCoastBoy said:

I have come to the conclusion I most probably won't use all my money, which I'm very happy about. It means I don't really need to budget for one off capital expenditure items. I know it is a fortunate position but I've worked and saved hard for a very long time.

So much so I'm paying for 6 of us to go to australia next Christmas I'm budgeting 25 to 30k 

I could have written this - substitute Oz for USA last year 10 of us, and it did come out top end - I don't have any reserve, pot, budget for cap ex. I have never quite understood on here the obsession with a new roof !
I am fortunate to have a decent DC & ISA and a DB in 3 years. I work on the theory that if I cant afford a cap ex then I should not have retired. I can't think of any cap ex that would make a life changing hole in my budget. New car ? what is that, most expensive car I have ever paid for was a  Ford Granada MkII in 1986 £2700, last car 2009 Astra £1900 !!

Are you saying that you don't have a separate pot for one off purchases, like new cars, white goods etc?

When I retire I plan on having a separate pot so that I know exactly what I have as spending money every month.  Otherwise a new boiler etc would mean having to cut back on fun activities for a few months.

The only way it would work differently for me would be if my monthly spending allowance was exceptionally high to start with.  Which would be inefficient, as I can retire earlier on less with a separate pot for one off big expenses. 

Correct, I have no pots for anything, if I need it I buy it, personally I don't need to have it in pots. I have a detailed spending spreadsheet onto which all expenditure goes, thats the only way i keep account of things, seems to work for me.

Pat38493

trevjl said:

barnstar2077 said:

trevjl said:

SouthCoastBoy said:

I have come to the conclusion I most probably won't use all my money, which I'm very happy about. It means I don't really need to budget for one off capital expenditure items. I know it is a fortunate position but I've worked and saved hard for a very long time.

So much so I'm paying for 6 of us to go to australia next Christmas I'm budgeting 25 to 30k 

I could have written this - substitute Oz for USA last year 10 of us, and it did come out top end - I don't have any reserve, pot, budget for cap ex. I have never quite understood on here the obsession with a new roof !
I am fortunate to have a decent DC & ISA and a DB in 3 years. I work on the theory that if I cant afford a cap ex then I should not have retired. I can't think of any cap ex that would make a life changing hole in my budget. New car ? what is that, most expensive car I have ever paid for was a  Ford Granada MkII in 1986 £2700, last car 2009 Astra £1900 !!

Are you saying that you don't have a separate pot for one off purchases, like new cars, white goods etc?

When I retire I plan on having a separate pot so that I know exactly what I have as spending money every month.  Otherwise a new boiler etc would mean having to cut back on fun activities for a few months.

The only way it would work differently for me would be if my monthly spending allowance was exceptionally high to start with.  Which would be inefficient, as I can retire earlier on less with a separate pot for one off big expenses. 

Correct, I have no pots for anything, if I need it I buy it, personally I don't need to have it in pots. I have a detailed spending spreadsheet onto which all expenditure goes, thats the only way i keep account of things, seems to work for me.

This was discussed on another thread recently I think - there were several posters who said that as part of their spending plan, they included an annual amount for capital spending which is equivalent to the average they would spend per year..  e.g. if they spend £10K on a new car every 10 years, it would include £1K in the annual spend.

This results in them being under budget in most years, and over budget in the year they bought a new car for example, but in theory it all comes out in the wash.

Another approach is to have an actual separate pot of money for capital purchases.

trevjl

I can see that working for people, but for me I will worry about a new roof when there is a big hole in it. I tend not to worry about things that may or may not happen or things I can't control.

SouthCoastBoy

My position on one off capital expenses in retirement are if you can't afford them you are most probably not in the position to retire. As previously mentioned I have no particular pot for them however I have enough surplus cash so they are not a concern

LL_USS

I suppose many of us here know quite well different options for financial planning, it's just what works best for each individual/ household.

I used to think I would separate my money into different pots so I would only spend within each of these, effectively, "budgets". Yet when I thought about how to manage various pots in terms of how to keep or increase their values against inflation, it felt too much for me. Especially when I had already been familiar with my ins and outs, and had saved enough to feel less worried about unexpected large sums going out, then I only manage pots of different managing/investment methods, rather than pots for different expenditures. For example different ISAs, which one(s) for long-term holding, which can be fixed a year, which one(s) flexible so I can add in and take out money when I want, which one(s) beyond ISA/LISA, with high rate(s) but total interests still under the allowance threshold before paying tax.... 

All my main (categories of) expenditures are in a spreadsheet and I have yearly estimates for the big ones like holidays, house maintenance... and keep an eye on them if any go higher than what the normal contingencies allow. Most direct debits for bills go out on 1st of the month, from the salary I have just been paid at the end of the month before. Groceries and other expenditures are all on credit cards, which are then automatically paid from my salary a month after the costs incur (if a high amount, such as holiday booking, when my salary is not enough, then I move some money from my flexible ISA for e.g. to pay). Any money leftover each month will go straight into saving accounts (I have a note of the order which ones to pay in first, which is reviewed regularly; for e.g. now first pay in Virgin regular saving with 10% rate but if the flexible ISA is falling short of the yearly allowance then I'll favour topping that ISA account before the deadline). Perhaps this is still not most effective or efficient to others, but this is what I know and what's working for me.

I like the idea of stoozing. Yet it's too stressful for me to keep an eye on the borrowed amount(s) and moving it/ them around. But others may think it's easy enough to manage, with notifications on their excels and calendars. I myself have my calendar full of notifications such as "pay xyz" "move back xyz to main bank account", together with monthly in-payments for two/ three regular saving accounts..... so I cannot handle more :-:smile:

DT2001

LL_USS said:

I suppose many of us here know quite well different options for financial planning, it's just what works best for each individual/ household.

I used to think I would separate my money into different pots so I would only spend within each of these, effectively, "budgets". Yet when I thought about how to manage various pots in terms of how to keep or increase their values against inflation, it felt too much for me. Especially when I had already been familiar with my ins and outs, and had saved enough to feel less worried about unexpected large sums going out, then I only manage pots of different managing/investment methods, rather than pots for different expenditures. For example different ISAs, which one(s) for long-term holding, which can be fixed a year, which one(s) flexible so I can add in and take out money when I want, which one(s) beyond ISA/LISA, with high rate(s) but total interests still under the allowance threshold before paying tax.... 

All my main (categories of) expenditures are in a spreadsheet and I have yearly estimates for the big ones like holidays, house maintenance... and keep an eye on them if any go higher than what the normal contingencies allow. Most direct debits for bills go out on 1st of the month, from the salary I have just been paid at the end of the month before. Groceries and other expenditures are all on credit cards, which are then automatically paid from my salary a month after the costs incur (if a high amount, such as holiday booking, when my salary is not enough, then I move some money from my flexible ISA for e.g. to pay). Any money leftover each month will go straight into saving accounts (I have a note of the order which ones to pay in first, which is reviewed regularly; for e.g. now first pay in Virgin regular saving with 10% rate but if the flexible ISA is falling short of the yearly allowance then I'll favour topping that ISA account before the deadline). Perhaps this is still not most effective or efficient to others, but this is what I know and what's working for me.

I like the idea of stoozing. Yet it's too stressful for me to keep an eye on the borrowed amount(s) and moving it/ them around. But others may think it's easy enough to manage, with notifications on their excels and calendars. I myself have my calendar full of notifications such as "pay xyz" "move back xyz to main bank account", together with monthly in-payments for two/ three regular saving accounts..... so I cannot handle more :-:smile:

It is about working out what works for you. This can change over time.
When I was young and single and living at home my priority was saving for a deposit. I chased the extra 0.5% on building society interest rates (when everything was in passbooks), subscribed to new share issues and kept a close eye on my spending.

When I bought my first property I knew down to the last pound where my money was being allocated including saving for the next goal.

Once my situation changed with marriage and children the budgeting became at lot looser. A general pot for ‘normal’ expenditure and a rainy day fund. Our income was quite variable being self employed with no regular contracts so a longer term (annual tot up financial well being) approach suited the situation. We were both aware of our bank account balances so we didn’t ignore budgeting completely. It helps that we both love looking for value and wouldn’t spend on anything major without a discussion.

Over the last few years we have had my income (£9k DB, rent £6/7k, FIT £3k and SE £3/4K) covering all ‘necessary’ expenditure and OH’s variable self employed income for travel and saving. I have a total assets worksheet (actually a piece of paper) and monitor its long term growth and short term wobbles. If the trend had been the wrong wayI would have gathered more detailed information on spending.

Now having read various threads on here to check my  “we’ll cut our cloth accordingly” plan I am working on giving away capital rather than excess income (following the proposed change to DC pension fund treatment in 2027). To this end I had considered putting together a much more detailed budget (trying to guess when children will finally leave home and how much we are subsidising them!) but have come with plan C. Plan C involves downsizing to an energy efficient property, realising more capital to ensure of creating an empty nest whilst having a much higher % of net worth in investments (75%). This will provide more than enough income so I will continue, in what some will see, as a haphazard approach to budgeting.

LL_USS

@DT2001 we seem to consider a similar plan - giving away capital sooner rather than later and downsizing to a smaller property as soon as I have an empty nest. Just have to find a way to present the capital giving-away as a mix of gift + loan so my soon-to-be grown-up children still feel like it's (mostly) my money and they need to work hard as everyone else and as I did, whilst they wouldn't have to sell the house if something happened to me leading to a helfty IHT.

Pat38493

LL_USS said:

@DT2001 we seem to consider a similar plan - giving away capital sooner rather than later and downsizing to a smaller property as soon as I have an empty nest. Just have to find a way to present the capital giving-away as a mix of gift + loan so my soon-to-be grown-up children still feel like it's (mostly) my money and they need to work hard as everyone else and as I did, whilst they wouldn't have to sell the house if something happened to me leading to a helfty IHT.

We have been trying to downsize to an lower cost property a bit further away from the City for about 8 months - so far we have had significant interest and viewings, and even some theoretical offers, but nobody who is actually in a position to proceed - it can take a long time I guess.

One downsized, we plan to have some money set aside to help the kids if they need it at some point in future.  However if we urgently needed this money for some other unforseen and unavoidable purpose, out needs would take priority.