Only freedom will do

AlexLK

edinburgher wrote: »

Our net worth is simply the sum of our assets and liabilities (liabilities entered as negatives on the spreadsheet for the sake of simplicity).

So it's: Home equity + Defined benefit pension*25 (career average/FS pensions are worth a fortune) + 3 Stakeholder pensions + 2 SIPPs + S&S ISA + Cash held + P2P monies

Minus Mortgage + Credit cards

For home equity calculation, we use the mortgage vs. the midpoint of the last valuation and the Zoopla figure. Last valuation was £200k, Zoopla says £242k, so £221k seems perfectly reasonable based on improvements and a recent sale on our street at £250k for a house that was maybe a teensy bit better finished.

A lot of people on FI journeys won't count their home equity as part of their net worth, but as it's one of our 3 largest assets, I can't see why not. The argument is always 'well I need somewhere to live'. That's a very valid point, but Mrs E and I would be perfectly happy in a 2 bed tenement flat or a small cottage at £100k or so if we didn't have DD's schooling to think of. So for me, it's just another asset, if someone makes me the right offer they are welcome to it

If that is my net worth (I have no pensions, so just property equity - mortgage + savings) then I'm have a four figure -ive balance, which isn't as bad as I thought it would be. Counting other assets (cars (but not the Land Rover), watches, other things that are worth ££££s but I don't really "need"), it edges into a +ive balance of c. £60,000 with the house sold and mortgage gone. Like you I see the house I have a personal interest in as another asset but for different reasons. Calculation is much appreciated as I did wonder just how bad things were not counting family money / business interests.

edinburgher wrote: »

£500 paid into S&S ISA, just over 1% of our gross salaries for the year. This + pension payments will give us a savings rate for the year of 26% gross (or 36% net, which is a nicer way to think about it, as I'm only trying to replace net earnings!) :dance:

A good start, will need to try and find a few ways to top up our savings and investments for the year.

That sounds like really good going.

I don't really count savings against my income as my savings all come from additional income. If I get a job working in a school part time I think I'll just save everything I make from that and live from my company salary, taking any dividends when / if I need to. Probably need to speak to the tax lady really as I find working this kind of thing out very difficult.

gallygirl

AlexLK wrote: »

Counting other assets (cars (but not the Land Rover), watches, other things that are worth ££££s but I don't really "need"), it edges into a +ive balance of c. £60,000 with the house sold and mortgage gone.

Alex the only reason the rest of us don't count cars & watches in our net worth is because they don't up the equation by upwards of £50k :rotfl:. Regardless of what the figure is, it's a good reality check on how you're doing. I expect there are a lot of people living visibly 'richer' lives (i.e. flash houses/cars etc) who have virtually no net worth due to loans, credit card debt and massive mortgages.

Are you off work all week Ed?

Suffolk_lass

edinburgher wrote: »

We may as well make use of salary sacrifice while we still have it and it allows us to avoid student loan repayments as well

Hello edinburgher :wave:

I've been reading your diary for just over a year now, lurking quietly, but I need to ask you why you are not paying down your student loans or counting them as a liability in your net worth calculations please?

Our DS incurred one year of student debt before giving up a music degree because there was nothing new in it, just over three years ago and his annual statement of loan has increased by around 20% in the intervening period thanks to no payments to reduce it and the power of compound interest. I am interested in your rationale, if you don't mind sharing it please.

By the way, I really enjoy the bits of your diary where you talk through your rationale for the decisions you are making re your finances (I do like hearing about the family and house too but my continued financial "education" revolves around your decisions re your finances.

Happy New Year!
SL

Secret_Saving_Squirrel

Good luck with the blender! I have a few items on too.

AlexLK

gallygirl wrote: »

Alex the only reason the rest of us don't count cars & watches in our net worth is because they don't up the equation by upwards of £50k :rotfl:. Regardless of what the figure is, it's a good reality check on how you're doing. I expect there are a lot of people living visibly 'richer' lives (i.e. flash houses/cars etc) who have virtually no net worth due to loans, credit card debt and massive mortgages.

Are you off work all week Ed?

It's just a different type of investment really.

Absolutely agree with the reality check. I knew mine wasn't going to be wonderful not counting family assets but I was curious and won't be beating myself up over it.

I read something about (I think) 1/3 of the population have no savings / other fall back. Possibly not true but it did make me think that some people don't have the luxury of being able to pick and choose work.

On another note I thought this may be the place to ask ...

I was thinking about if I take up a 3 day per week teaching post in 2018 (yes, I know a long way off and I may change my mind) of saving the money from the wage that would provide. However, today I wondered if I could invest the whole wage into the teacher's pension scheme as I believe that it's tax free and the school would also put money into it making for a seriously good investment with the only caveat being I have to wait until I'm 55(?) to get hold of the money. Presumably, this would also free my c.£12,000 personal tax allowance to use as I do now for my Director's salary as I would not see the money from the school? I realise I need to speak to my tax advisor but just wondered whether in principle this could work and is legal.

From what I can tell at the moment if I took the teaching post and saved the wage I would have to pay income tax on everything I take as a Director as the personal allowance would be used on the teaching salary?

edinburgher

gallygirl wrote: »

Are you off work all week Ed?

Yes GG, I've got 3 daddy daughter days to look forward to starting tomorrow, Mrs E has to go back to work

Suffolk_lass wrote: »

Hello edinburgher :wave:

I've been reading your diary for just over a year now, lurking quietly, but I need to ask you why you are not paying down your student loans or counting them as a liability in your net worth calculations please?

Our DS incurred one year of student debt before giving up a music degree because there was nothing new in it, just over three years ago and his annual statement of loan has increased by around 20% in the intervening period thanks to no payments to reduce it and the power of compound interest. I am interested in your rationale, if you don't mind sharing it please.

Happy New Year Suffolk Lass :beer:

• I consider student loan repayments to be a graduate tax and as long as it benefits me, I'll do everything I can to legally reduce tax!
• I borrowed approximately £12,000 when I was a student, which went up for a few years and has now fallen to approximately £10,000
• Unlike your son's near-commercial interest rate, I think I am currently paying 1.25% on my loans. We have a mortgage of roughly £175k @ 3.6% - student loans barely register on my radar in comparison!
• Mrs E is currently on a part time salary as she looks after DD 2 days a week, I need to save every £ I can and student loan repayments aren't high up my list of priorities
• If I don't have a job, I don't have to repay my student loans, so there would be nothing to stop me living from tax free investment income and paying nowt if they were still hanging around when I retire (early or otherwise). I don't feel any ethical objection to leaving a few ££££ sitting unpaid, I've been making payments since I graduated 13? years ago

AlexLK wrote: »

I knew mine wasn't going to be wonderful not counting family assets but I was curious and won't be beating myself up over it.

From what I can tell at the moment if I took the teaching post and saved the wage I would have to pay income tax on everything I take as a Director as the personal allowance would be used on the teaching salary?

Never rely on 'family assets' until they become your assets (along the lines of not counting chickens until they hatch)!

You are free to pay your entire teaching salary into a pension. You can pay 100% of your wages into a pension, up to £40k? a year and not passing the lifetime allowance for pensions. While this would allow you to avoid tax, yes, I'm 99.99% sure it will use up your personal allowance.

You'd also need to check *how* money is paid into your pension. If it's via salary sacrifice, you cannot make payments that would take you below national minimum wage. Excuse my ignorance, but no idea what this is, about £13k? So say you were on £16k, you'd be limited to £3k worth of payments (if you use salary sacrifice). If not salary sacrifice, you can pay in as much as you like keeping in mind the limits in the previous paragraph.

Your tax person will be able to give you the formal steer on this, can't see her disagreeing with the bulk of what I've said though.

edinburgher

A beautiful day spent in the Borders town where I spent a largely happy childhood. The weather was grim, but we had a lovely meal in a popular pub restaurant and found the cutesy cottage where I grew up.

Always a funny mix of emotions going back. On the one hand, I love the area, remember my first home, first school, historic landmarks etc. On the other hand, I remember leaving it as well, my parents getting divorced and all the acrimony that went with that.

As is the tradition, I picked up some wonderful Christmas cards for Mrs E and DD in the sales, two lovely pop up ones for a couple of £. We also found a lovely little glass reindeer decoration for £1.95 in a little gift shop on the high street.

I am pooped after the driving, 100 miles is quite a lot for me in one day.

We really needed a nice day, this Christmas has been abject and has frankly put me down in the dumps. I must keep reminding myself that of 30+ Christmases, only 3 have been this bad :rotfl:

AlexLK

edinburgher wrote: »

Never rely on 'family assets' until they become your assets (along the lines of not counting chickens until they hatch)!

You are free to pay your entire teaching salary into a pension. You can pay 100% of your wages into a pension, up to £40k? a year and not passing the lifetime allowance for pensions. While this would allow you to avoid tax, yes, I'm 99.99% sure it will use up your personal allowance.

You'd also need to check *how* money is paid into your pension. If it's via salary sacrifice, you cannot make payments that would take you below national minimum wage. Excuse my ignorance, but no idea what this is, about £13k? So say you were on £16k, you'd be limited to £3k worth of payments (if you use salary sacrifice). If not salary sacrifice, you can pay in as much as you like keeping in mind the limits in the previous paragraph.

Your tax person will be able to give you the formal steer on this, can't see her disagreeing with the bulk of what I've said though.

The family business / assets are somewhat complicated but some are now technically 'mine' as well as my parents'. I suppose that should be counted too as it is money I have a say over and could be relied upon if it was really needed. I do want to ensure my son has at least as much as my parents will pass to me, so apart from taking a small salary for work I do managing property, I'd rather the family money built. Don't want to waste it all on cars, boats and planes, as tempting as that is. To be honest, I'm terrified of the time coming when I have to take sole control. The strange thing is not many years ago I'd have lived a very different lifestyle if I had the same position and responsibility. Can't say I trust myself with any amount of money that is unaccounted for anymore.

Thanks for the advice, it gives me something to think about and seek further advice from the tax lady at a later date.

If it is salary sacrifice would I be able to sacrifice the whole teaching salary as I take a Director's salary of over the NMW? It seems a win-win situation by avoiding tax and the school effectively giving me free money to save even if I won't be able to claim the personal allowance from the Director's salary.

edinburgher wrote: »

A beautiful day spent in the Borders town where I spent a largely happy childhood. The weather was grim, but we had a lovely meal in a popular pub restaurant and found the cutesy cottage where I grew up.

Always a funny mix of emotions going back. On the one hand, I love the area, remember my first home, first school, historic landmarks etc. On the other hand, I remember leaving it as well, my parents getting divorced and all the acrimony that went with that.

As is the tradition, I picked up some wonderful Christmas cards for Mrs E and DD in the sales, two lovely pop up ones for a couple of £. We also found a lovely little glass reindeer decoration for £1.95 in a little gift shop on the high street.

I am pooped after the driving, 100 miles is quite a lot for me in one day.

We really needed a nice day, this Christmas has been abject and has frankly put me down in the dumps. I must keep reminding myself that of 30+ Christmases, only 3 have been this bad :rotfl:

Sounds like mostly a nice day out. You've reminded me that when I was a boy, my aunt used to buy all Christmas cards after the event for the year after as they went on sale. She bought them for her family and for me to take some home to my parents for them to use, also.

Sorry to hear you've had a bad Christmas.

Suffolk_lass

Thanks edinburgher, I had forgotten the interest rates change between some "generations" of students - it was all free with a maintenance grant in my day (still should be, imho). DS has recently started a new FT job and is earmarking £650/mth before getting used to a "normal" nmw income and £100 of that will start to trickle down his loan.

I admire your active approach to clearing stuff out. I am prevaricating about starting to clear stuff out and list un-necessary possessions but I know it has to be done - along with the filing boxes that need sorting through. The GCHQ Puzzle book is far more appealing at the moment though, even if it makes me feel a bit stupid!

SL

LadyGnome

Happy New Year Ed
What are you planning on studying?
I am sure you will be glad when the renovation work is finished - it always feels like you are hemorrhaging cash when you are doing a place up. An uncomfortable feeling for an instinctive saver!