Saving half my salary!

darkidoe

GenghisKhan wrote: »

Thanks for the hat-tip BLB53.

To the OP.

As BLB mentions I started with next to nothing 8.7 years ago and called myself financially independent (giving me the option of retiring early) 2 weeks ago at age 43. You have 7 years to go if you want to meet your plan but you have a start and also look to have a much coveted DB pension (I didn't). I averaged savings of 52.2% of gross (not take home).

Your post only contains limited information but what are some of my personal learnings now that I'm at the end of my journey. Of course please DYOR and all that.

Firstly, psychologically:
- It's important to start and then be prepared to learn. You've done that so you're already well ahead of most.
- Saving big chunks of income for the long term is going to take some determination as it's a lonely path. Many of those around you in equivalent circles are going to spending the lot including ramping standard of living with any earnings increase.
- Never become a victim or it will all fall apart.

Secondly, mechanically:
- You're already saving 50% of net but can you improve on that. If I look at my net I saved circa 82% for many years. This is critical because by learning to spend less you can save harder but also your retirement wealth number (+DB scheme payout) will become smaller. Some things I've done include a £0 budget. This is where you start at £0 per month/year and need to justify everything that goes in where most budgets look at what your going to take out. Have you done a lowest price grocery shop? Do you really need 2 cars, what about 0 cars?
- Can you increase earnings either in the current job/company or with side hustles etc.
- Earnings - spending = savings. Don't underestimate how much of a contribution savings will make to your wealth journey. For me 64% of my wealth came from savings.
- A diversified portfolio of assets that meet your risk profile. You only show what's in your ISA so maybe you have some property (and I'm not talking BTL, more REIT's) or a small amount of gold elsewhere. I 100% get your VG LS60 choice.
- What are you trying to achieve with your portfolio? For example why are you overweighting biotech and China consumer funds. Do you know something that the sum of the market doesn't. Another example, why are you buying both Acc and Inc funds. I personally just buy the market via index fund investing and target all Inc as I want to live off the dividends in FIRE rather than selling down wealth.
- One area where we differ greatly is investment expenses. After inflation my journey, which included the GFC, has resulted in an annualised real return of circa 4% ex expenses. How much is that Scottish Widows Pension costing you? Could you transfer it to a low cost SIPP. A quick look so I might not have all the costs shows the active funds you show carrying costs between 0.66% and 1.42%. If your portfolio also was to return a real 4% are you happy to give away up to 1/3 of it to a fund manager? Are they really going to be able to outperform a passive index approach for 30 or 40 years. Just one example, your index linked fund carries costs of 0.66% pa. Is it really better than the iShares INXG with 0.25% of Vanguards index linked gilt OEIC with 0.15%.
- You seem to be investing tax efficiently. Just maybe consider the risk of the government changing the rules. For example, what would you do if you couldn't access your private pension at 55 etc etc.

Hope that helps a little.

You're an inspiration RIT!

How do people tend to track their spending?? At the moment, I am just tracking my net savings monthly by calculating my entire cash balance. I didn't want to be too conscious of every little cost I incur over the month and be too restricted by it but I aim to get a decent net saving every month.

BucksLady

Pincher wrote: »

Life is about being really good looking, and have lots of freebies because people want to sleep with you. The moment you think in terms of paying for your own swimming pool, you start paying for everything.

I still haven't got my own swimming pool yet, but if I did, I am not inviting these !!!!!es, who won't sleep with me anyway: not even if I let them use my swimming pool.

Life: A summary
==========

If you have to save for anything, you are just not good looking enough.

Sorry, but that's a really weird post .....:(

System

I used to put £500 of my £1200 a month away when I lived at my old flat and the mortgage was £100 a month

Now I've upsized my mortgage is £250 a month so I'm only saving £400, but £300 a month will go into my sipp and increase my tax credits to make up for that, and £100 a month onto s&s isa for short term needs

GenghisKhan

darkidoe wrote: »

You're an inspiration RIT!

How do people tend to track their spending?? At the moment, I am just tracking my net savings monthly by calculating my entire cash balance. I didn't want to be too conscious of every little cost I incur over the month and be too restricted by it but I aim to get a decent net saving every month.

Each month I set a new tab in an Excel spreadsheet and record every transaction and every pence spent under preset categories. I then pull the monthly sums into another tab to track trends, annual spends etc.

I've gone this way as I want to control big spends as well as many small spends which together can add up to big spends.

Additionally:
- if you know you're going to hold yourself accountable to recording every spend you think a little bit differently about them.
- I also plan to drawdown on my wealth at 2.5%. When I buy a coffee I don't think of it as a £2 spend instead I think about it as requiring £80 of wealth to support that coffee purchase just once a year. Quite often that alone makes me say nah.

enthusiasticsaver

I am 56 and work in the public sector part time. I save 10% of my salary into my LGPS and 50% into a Stocks and Shares ISA (Vanguard LS60). I have at present 4 years salary stashed away in high interest current accounts and regular savers and intend to retire in February 2018 (when I am 58). I have a GMP with Barclays which pays out in 2020 as well as LGPS which I am hoping not to draw on until at least 2020 when I am 60. No debt or mortgage.

OH is in private sector, has a very well funded pension scheme which we will be drawing on from November this year as he retires end of October this year. His pension will give him just under half his gross salary (around £22k per annum) although an IFA is currently looking to see if he can improve on that.

Saving when you are young is a great discipline to get into, both for the long term (ie pension, stocks and shares isas which I wish I had started earlier) and medium term to avoid debt (ie for car, home etc etc). For the first 20 years of our working lives we were focusing on reducing the mortgage and bringing up children although we always paid into a pension. My OH was paying in 10% of his salary from his mid 20s as our aim was always for him to go early due to the amount of travelling, unsocial hours and stress his job involves.

enthusiasticsaver

darkidoe wrote: »

You're an inspiration RIT!

How do people tend to track their spending?? At the moment, I am just tracking my net savings monthly by calculating my entire cash balance. I didn't want to be too conscious of every little cost I incur over the month and be too restricted by it but I aim to get a decent net saving every month.

I do the same. Calculate my net cash assets each month (just after payday), subtract next months credit card bill as I put our monthly expenses mainly on that for cashback and then minus the previous months net cash asset total to get a monthly savings bill. I did use a spending tracker on my phone for a year to see what our expenditure was so I knew roughly what income we need in retirement.

darkidoe

enthusiasticsaver wrote: »

I do the same. Calculate my net cash assets each month (just after payday), subtract next months credit card bill as I put our monthly expenses mainly on that for cashback and then minus the previous months net cash asset total to get a monthly savings bill. I did use a spending tracker on my phone for a year to see what our expenditure was so I knew roughly what income we need in retirement.

I am thinking about upgrading my workflow to track monthly spending for every cost incurred similar to what RIT is doing. I remember reading an article on one of the FI blogs about how if you are a basic tax payer, you are working 5 days to earn enough to spend 4 days worth of wages and if you are higher rate tax payer, you are working 5 days to spend 3 days of wages because of tax. Basically for every £1 you spend, that's the 20% or 40% extra effort u worked for it lost forever. That's the extra cost of every pound u spend. If any of you know which post I am talking about please send me the link. That was one of the posts that gave me a paradigm shift. (Basically I hate working for free)

It's time I look at spending differently rather than just be happy with the overall net savings.

Pincher

BucksLady wrote: »

Sorry, but that's a really weird post .....:(

Hasn't anyone watched Zoolander?

Dird

enthusiasticsaver wrote: »

I save 10% of my salary into my LGPS and 50% into a Stocks and Shares ISA (Vanguard LS60).

Is that all normal contributions or part AVC also? Have you looked into contributing via AVC? I was planning on phoning about it Tomorrow as I haven't had an email reply

bigadaj

Pincher wrote: »

Hasn't anyone watched Zoolander?

Well let us know next time you are going to the petrol station.