Onwards to freedom!

SuperSecretSquirrel

Thanks for posting ajmoney, and thanks for reading the whole thing too! I'll look forward to seeing your mortgage neutral and early retirement plans

Following on swiftly from yesterday's mortgage neutral excitement it's now time for our quarterly net worth update!

Here's how things stand today:

House Value - £125,000.00
Cash - £43,624.25
Pensions - £36,364.27
Car Value - £12,050.00
S&S - £4,003.58
Mortgage - £43,631.13
Tax Due - £3,659.21
Student Loan - £5,126.05
Total - £168,625.71

It seems we're twelve and a half grand better off than three months ago... Way more than we earned in that time. How is that even possible? Well, sadly, it's not. The truth is, the numbers lie!

There's a definite flaw in my plan to post quarterly net worth updates. I overestimate self assessment tax as I would much rather have surplus easy access cash on hand when settling my tax bill than a shortfall. I simply set aside 50% of all self employment profits throughout the year safe in the knowledge that my self employed income tax plus national insurance plus student loan repayments should always total a fair bit less than the 50% squirrelled away. The difference between what has been set aside and what is actually due once my tax return is finalised I consider a nice bonus and a welcome boost to savings. This is a fairly sensible thing to do, and most importantly it's really really simple to manage. It turns out I had overestimated my tax due by a whopping 3k back in January. That £3k that didn't have to be paid out is of course very welcome to remain in our savings accounts, but it does mean the net worth figures for January were out by a fair bit.

In addition to this, over £1.5k of January's payment to hmrc was in fact student loan repayment. Back in January that amount was included as a liability in the tax due category but the student loan liability was not reduced accordingly, so it was double counted. The only way around these problems is to accurately calculate my self assessment tax and national insurance and student loan amounts throughout the year. I don't really want to do that as the time could be better spent on other things, and it just feels better overestimating. Having accepted the shortcomings of my current system I think I'll just carry on regardless for now I figure January's net worth total was over 4.5k lower than it should have been. Today's net worth total will be a little lower than it should be, but to a far lesser extent as I am now making tax payments on account and also earning less!

So, how do the categories compare against last quarter?

Cash is down by nearly £16k. That's fair enough, large outgoings included a huge tax bill, buying a car, and overpaying the mortgage by the maximum amount allowed without charges. Nothing to be concerned about.

Pensions are up over £5k. That's insane. Only about half of that amount has actually been paid in as contributions, the other half is on paper capital growth. I'm expecting this to be a really rocky ride so there will no doubt be some big "losses" to talk about in future updates but for now I'm happy to enjoy the increase

Car value is up about £3k as we've bought a second car. We now have two depreciating assets parked on the drive slowly eating away at our net worth

Stocks and shares value up by nearly £1k. £750 of that has been paid in via monthly drip feed, the other £200 or so is on paper capital growth (this includes reinvested dividends). As with the pensions this is bound to fluctuate, but since it's earmarked for some distant future I'm happy to enjoy the ride!

Mortgage reduced by nearly £7k, lots of overpayments early in the year! Just the standard monthly payments left to come off between now and January - BOOOOORING!

Tax due, massively reduced as I've paid the 2013-14 bill in full plus made a payment on account for 2014-15. Self employed income is dropping so I think between the payment on account made in January and the further payment on account to be made in July I'll have very little to pay in January 2016 - in fact I might even be due a rebate!

Student loan, the amount paid off via self assessment has been credited. A little comes off each month via PAYE but there'll be no real noticeable progress until my next self assessment payment. Since this is sat at just 1.5% I'm happy to keep it hanging around for now

Overall, I think we're actually about £8k ahead of where we were three months ago, and I'm very happy with that

cookie9

Congratulations SSS you have done great things.

turtlemoose

Just....wow. Well done!

lavinia21

well done sss you have done amazing in terms of how to celebrate how about getting something nice for the home that you can use or something to keep for the future.

SuperSecretSquirrel

Thanks for posting cookie, turtlemoose and lavinia Your suggestion is a good one lavinia, just need to find something that we would like to keep hold of as a memento. Right now we're on a spring decluttering drive so more interested in getting rid of stuff than buying anything

I've now filled in my tax return for 2013-2014. It could be a little bit out as I've not received my p60 or p11d yet, but honestly it should be very close to being correct. I've manually totted up the payslips for the year to calculate expected p60 values, and I've used the governments online car tax calculator for the p11d, the difference between what I have calculated for now and the final tax return that I'll be submitting should hopefully be in the pennies!

The amount due to hmrc on 1st April should have been £1,334.36 (a lot more has already been collected via paye and payment on account!)

£1,234 of the amount due to hmrc will be paid off my student loan, so to avoid double counting I figure the correct student loan amount on 1st April should have been £3,892.05.

The corrected snapshot for 1st April 2015 is:

House Value - £125,000.00
Cash - £43,624.25
Pensions - £36,364.27
Car Value - £12,050.00
S&S - £4,003.58
Mortgage - £43,631.13
Due to HMRC - £1,334.36
Student Loan - £3,892.05
Total - £172,184.56

I might just have to have a go at putting together a tax calculator spreadsheet as I'm overestimating self employed tax/ni/sl by way too much currently

In mortgage news, we dropped into a lower 1k bracket when the standard monthly repayment went out earlier this month Mortgage balance is now £42,933.94, and we are £2,546.10 ahead of mortgage neutral in liquid assets

I feel the need for a short term target so I don't risk losing focus. Since we would like to eventually have a 10k permanent emergency fund and no mortgage, I guess being 10k ahead of mortgage neutral is a good thing to aim for. We could then in theory pay off the mortgage in full and still have our 10k emergency fund on hand. What's amazing is that 10k with no mortgage to pay would equate to near enough twelve months living expenses if we were both out of work - as far as imaginary employment disaster planning goes, that's pretty solid We can't make any overpayments between now and January without being charged an erc, so I think mortgage neutral plus 10k is a good savings target for the end of this year

Luckyinlife

really great assets SSS :] well done dropping into the low 1ks :]

im the same self employed i generally save around 30% from all money earned from what i do even before expenses tax allowance ect this way i always have more than i actually need and what ever is left over i give it to myself as a bonus works for me :]

Emergency fund for me this is one of the most important things to be to give me time to adapt if i ever need to or look for other work

turtlemoose

Fantastic to read, SSS!

I don't know much about being SE, but could something like this help?

I like your new target! (turned a teensy bit green in envy though ) How long have you given yourself to hit it?

edinburgher

That sounds like a very good target, currently re-evaluating our £5k fund in light of baby + home maintenance catastrophes!

lavinia21

sounds like a great plan.

Yorkielass

Just caught up - brilliant work SSS!