Onwards to freedom!

edinburgher

SuperSecretSquirrel wrote: »

Of course I may be underestimating the money required to help two growing children along in life, but have no plans to give them too much as I have seen the end result of too much well meaning generosity and it's not pretty!

Think we're probably aiming for slightly higher spends (maybe as much as £2k/month), but we're *not* aiming to pay off the mortgage. Some sort of downsize/wee house somewhere sunny/boat scenario, probably. I quite like aspects of the lifestyles of all these digital nomad types on the American PF blogs, but they're all a bit nauseating and photogenic :rotfl:

How much is too much in your opinion? We are hoping that DD's nest egg will be sufficient for either 4 years of uni, or the deposit on a flat somewhere safe, but not fancy. That strikes me as a level that could change her life without ruining it?

SuperSecretSquirrel

NM, breaking up the journey to 55 sounds great to me, I always like to have a short/medium term target in mind, I find it's easier to focus on something "near"

Thanks for posting SSS! I really enjoy following your diary, it's nice to read about a couple that have already done it and come out the other side! Your flexible approach to retirement sounds ideal to me - I can certainly imagine us working in retirement as and when required, or as and when we feel like it

How much is too much is a very personal choice I guess Ed, hard to put a figure on it. I've known people in their early twenties that have been gifted mortgage free houses, presumably to set them up for life - exact opposite achieved, it's all gone now. Then you have trust fund babies that never need to work a day in their lives... On a more day to day level, I've known someone that never heard the word "no" from their not particularly wealthy parents, given everything on a plate... They had perfectly average academic ability, average wage followed, this resulted in massive debt and a very bad gambling addiction. I can't help but think they've been killed with kindness. A respect for money, the feeling of having earnt it, the joy that comes from delayed gratification, that average wage would have been plenty for them to have a happy, satisfied life. I don't want to rob my children of that "struggle" (even if it is just a perceived struggle as BOMAD would likely strike in a dire situation) as I think it's entirely necessary in order to become a well functioning adult. I would try my hardest to hold off if it were a relatively minor but unpleasant nonetheless learnable situation - sometimes a small financial loss turns into a huge lifelong lesson worth many multiples of what was originally lost (I have a few of these in my past, perhaps as a result I've never suffered any big financial problems) - but I fear OH may be too much of a soft touch, so major conversations in this area in the future no doubt!

Anyway, I digress, I think we can all identify what is way too much (even then it's subjective), but the border between just right and too much is fuzzier. As usual I think I'm in the same ballpark as you on this. I think I would wish to cover rent while at university for 3 years for each child, with the student loan covering tuition, groceries, and beer, and the option of a part time job to buy extra beer if required. Pretty much the same as OH and I were given. Having some student loan debt was beneficial to me in the long run, so not something I'd aim to avoid on the children's behalf. If they were entirely switched on financially by that age and opted to live with us and commute to the nearest university in order to minimise future debt, I'd be more than happy for them to swerve the loan entirely and have us fund the tuition. If university wasn't on the cards, the pot of gold would be earmarked for other sensible causes e.g. deposit on a house or startup capital for a business. Of course this is so far in the future it's impossible to plan for with any certainty, but worth thinking about.

I guess if we underestimated massively we'd follow SSS's lead and take short term contracts on an as needed basis to make up the difference. Though as I've said before, I think I'd be perfectly happy working 2-3 days a week til the day I died (assumes a lot about my future health I know!) so maybe I'll never retire in the traditional sense.

Time to end on a seemingly hypocritical note. I find it extremely difficult to accept anything that could be perceived as charity. I won't accept lavish gifts. The only thing I've ever accepted from anyone beyond the age of 18 is my (lowest possible) rent paid while at university, and I had a hard time with that. We refused any financial help from our parents (both sides) when buying our house, I now recognise this as stupid, pretty much everyone accepts a boost to their deposit, and by graciously refusing I've doomed us to a longer full time working life. I still don't think I could accept the money now though, and I think finally owning the place lock stock and barrel at a reasonably young age will feel all the sweeter as a result of having done it all ourselves. I guess maybe I have a chip on my shoulder Anyway, on to the hypocritical bit - OH and MIL have swapped cars, it makes all kinds of sense in terms of suitability, but I'm having difficulty with the fact that our new car is worth a few thousand pounds more than the old one, and it was a straight swap, MIL refusing any cash on top to make it a fair deal (I totally appreciate that she is doing this out of kindness). I know I should be happy, our net worth has effectively gone up overnight, but it feels like we're cheating. Effectively, the guy who won't accept lavish gifts has just had a nicer car foisted upon his household. Oh the humanity!!! I know this sounds entirely ridiculous. Maybe I should go find a real problem

SuperSecretSquirrel

It's that time again

Here's the situation as of 1st February 2017:

[SIZE=2][FONT=Courier New]               CURRENTVALUE       +/-MTH       +/-QTR
House Value:   [COLOR=Blue]+£125,000.00[/COLOR]        £0.00        £0.00
Cash:           [COLOR=Blue]+£44,975.53[/COLOR]   -£2,249.49   -£2,914.39
Pensions:       [COLOR=Blue]+£62,523.84[/COLOR]   +£1,199.79   +£3,169.29
Car Value:      [COLOR=Blue]+£16,725.00[/COLOR]   +£7,825.00   +£7,525.00
S&S:            [COLOR=Blue]+£14,055.09[/COLOR]     +£741.72   +£2,217.37
Mortgage:       [COLOR=DarkRed]-£22,438.21[/COLOR]   +£3,224.51   +£4,650.35
Due to HMRC:       [COLOR=DarkRed]-£428.86[/COLOR]      -£48.60      +£93.59
Student Loan:    [COLOR=DarkRed]-£2,066.43[/COLOR]      +£71.94     +£206.24
[B]Total:         +£238,345.96  +£10,764.87  +£14,947.45[/B][/FONT][/SIZE]

79.4% of the way to 300k net worth (2020 challenge), 18.0% mortgage ltv, £36,163.55 beyond mortgage neutral in liquid assets, 13.4% financially independent.

Cash is down this month as I've been making the most of the annual mortgage overpayment allowance Pensions paid into as usual (and the value creeped up a little on top). Car value has increased dramatically - approx 6k of that due to the generous car swap with MIL and the remainder due to my previous value estimates being lower than they should have been (from now on I'll be doing a monthly online valuation based on mileage and condition to get a fairly accurate value). Usual S&S monthly automated investment made (and again the value creeped up a little on top). Mortgage down thanks to OP's and a standard monthly repayment - sadly (but also a little woohoo at the same time) the 2017 OP allowance is pretty much all used up now. Tax estimate crept up a little as a small amount was earned from side hustling. Student loan dropped a little thanks to the automatic salary deduction.

All told a pretty normal month, apart from the car swap, and the shifting of cash savings into the mortgage account.

Very pleased to have dropped below 20% LTV Also enjoyed colouring in a few bricks on my spreadsheet house this month

Just waiting for baby to make an appearance now! :eek:

NorthernMonkey1

£3k up excluding the car is a good month.

If you're only 13% towards FI, but have >100k in cash and pensions, you must be predicting the need for a huge pile of cash in order to retire

SuperSecretSquirrel

Thanks NM.

The FI figure is based on our current outgoings. Once mortgage repayments and childcare fees drop out of the equation the amount required will fall and the freedom percentage will shoot up

I calculate the FI percentage as: (interest accruing assets) / (monthly outgoings * 300). This equates to the commonly discussed 4% withdrawal figure for FI.

To get my "interest accruing assets" figure I simply deduct house and car values from net worth. It's a bit simplistic, but it's the best I can come up with Plugging our current values into the formula I get (238345.96 - 125000 - 16725) / (2400 * 300) = 13.4%

The £2400pm current spending feels high, I might have to revisit my SoA soon...

In early semi retirement the figures might be closer to (337500) / (1500 * 300) = 75%

Or if cautious and wanting to achieve full FI before jumping (450000) / (1500 * 300) = 100%

SuperSecretSquirrel

February mortgage repayment has dropped the balance below 22k, that's another block coloured in on the spreadsheet house

If I decide to pay the balance off in full in January 2018, that would mean there are only 10 monthly repayments left! :eek:

I may end up paying most of it off and repaying £10 a month or so until the term ends, not quite decided yet. Even then though, I'd consider us mortgage free.

Cash ISA maturing in May. Interest rates on the cash ISAs currently available are all pants. In the past I've avoided withdrawals from cash ISA, but the annual payment threshold is so high now I'm quite happy to withdraw safe in the knowledge that it won't take many years to pay back in if interest rates improve.

The plan was to spread the ISA cash over any remaining high interest current accounts, and place what was left over in premium bonds for a short while. That money will be withdrawn to settle up the mortgage in January, and potentially spent settling my stooze cards soon after if I decide against balance transferring, so wouldn't be languishing in PBs for long.

In light of the PB interest rate dropping below that of my student loan however, I figured I might make a voluntary SLC overpayment afterall. I've also got the green light from OH to open a couple of no effort high interest current accounts in her name, so 6k can be stored there at 3% (I've exhausted all the good accounts I want to open in my own name).

Opening the two new accounts may appear to go against the plan of simplifying our financial setup, but there's no monthly funding or direct debit requirements, and there are lots of other accounts that will be closing soon. Two in May, two in June, one in July, one in August, one in September, and a couple later in 2018. Some of these are regular savers, and if there are new issues offering decent interest available they might be swapped for new, others will simply be closed and not replaced. Looking forward to slimming down the financial spreadsheet a little in the coming months

BaconandEggs

I'm enjoying reading your progress!

SuperSecretSquirrel wrote: »

I may end up paying most of it off and repaying £10 a month or so until the term ends, not quite decided yet. Even then though, I'd consider us mortgage free.

What is the advantage of this?

SuperSecretSquirrel

Thanks for reading along and posting BaconandEggs

I'm not sure there is an advantage if I'm honest, something to look into nearer the time. I believe the mortgage has a redemption fee at the end, need to check the T&Cs to see if there's a higher fee for early redemption. There's the potential for moving house at some point, and if this were to require a small mortgage, porting and extending our existing mortgage might be cheaper than applying for a new one. According to the mse credit club, repaying the mortgage in full could impact credit scores, and some people have been moved to prepayment meters due to them not having a mortgage and their utility companies therefore assuming they were renting!

Finally, similar to the "one more year syndrome" facing early retiree's, there seems to be a weird Stockroom Syndrome effect in play. Whenever redeeming in full is discussed, OH seems keen to keep the mortgage open with a nominal balance, but without any practical reasons for doing so. I think it's just a hearsay thing, lots of people have done this so you just end up feeling there must be a good reason for doing the same. I'm equally convinced in the idiocy of crowds as I am the wisdom of crowds, so who knows...

edinburgher

Save me a search SSS - what's your approach to asset allocation? Straightforward, or something a bit more complicated?

SuperSecretSquirrel

edinburgher wrote: »

Save me a search SSS - what's your approach to asset allocation? Straightforward, or something a bit more complicated?

Hi Ed

Monthly S&S ISA investment of £550 to VLS80, and £100 to a mixture of other low cost funds with an approximate 70/30 split between equities/bonds (a hybrid of monevator pound stretcher and slow and steady portfolios). I don't rebalance any more, just leave them to it. I'll probably drop down to VLS80 exclusively at some point, let them take care of it all for me

My pension is very hands off. I choose one of three risk bands and they do the rest. I'm in the riskiest band, beyond that I don't recall any detail, but I know I looked into it quite closely a little while ago and what they class as risky isn't something that makes me uncomfortable in the least. I don't know much about OHs pension, other than a monthly check on value, but we'll address this soon, the monthly check on value has sparked something in her, all of a sudden pensions are interesting

Our house value is what it is. We might end up allocating more here if we move to a bigger/better place, but that's not a conscious investment in property decision, it's just a bigger/better houses cost more so you end up with less cash in order to pay for it if you want/need it decision.

Cars can't be considered investments (neither are classics), they just depreciate away to nothing. Less an asset allocation, more a cost of living our lives as we like to. I'd be happy with lower value cars, OH would not, it's not a status thing (our cars are very much bog standard family cars, just that one of them is quite new and therefore expensive), more a perceived safety and reliability thing.

I'm happy to hold in cash anything that can beat inflation. Anything beyond that I try to move into S&S now. There is a small issue on the horizon, I'll have more cash than I can save at 3%+ for a few months, but I can't afford to increase my S&S investment to swallow up the excess as I will need that cash to pay off mortgage and stooze cards soon after, and don't wish to start down the slippery slope of cashing in investments. I'll park some of this cash at below inflation rates for a little while if necessary, but it'll be pretty short term