The Piano Diary

ElmoR

Wonderful to hear your news and your now being mortgage free

AgathaSquirrel

I’m so glad you are continuing your diary. I always enjoy reading it.

glass_half_full

Thanks @ElmoR and @AgathaSquirrel!

glass_half_full

Dear diary and all,

Back at work this week, although it has been quiet since there is no teaching and several people are away on vacation.

I am now thinking and planning for the next phase of this journey.

Freedom fund / ethical investing

My focus now is on building up a fund for retirement. At the same time, it matters to me how these funds are invested and I think pension funds are potentially a big force for good in ethical investment. I realise that this can be a bit of a minefield and we can’t be sure that these funds are themselves squeaky clean. But for me the important thing is that I am doing what I can rather than everything is perfect. So to that end, for some time now I have focused my two main investments into ethical funds.

So the first fund is worth £163k from an accumulative AVC investment of £50K over 10 years ago. This fund is called an Ecology fund and has as its objective:

To provide capital growth with the prospect of income, over the long term (at least five years) by investing in companies whose core products and services address global sustainability challenges.

The second fund is my main workplace pension AVCs which is currently in the Ethical Equity fund. At the moment this is worth £32K and will be where I will be putting the extra investment over the next 3-4 years.

The remaining fund is quite small £24K and is invested in equities.

So the total in DC funds at the moment is £219K.

Other savings include £20K in ISAs and £30K in a short terms savings account. Of this, I am considering £10K as potentially a fund for home improvement, helping DS etc. So the total savings toward retirement is:

£259K.

Keeping score, the numbers

The maximum I can save tax free is £40k per annum so this means increasing the % of salary going to pension to 70% of gross salary of which 60% will go to AVCs. So in effect I would be saving 70% of my salary. I know this is feasible. This would take our monthly income down to £3450, but I know our outgoings are around £2000 so still ok. I have now pressed the button on this. This is often the difficult part of these plans ie when you have to take the positive step to make it happen. I know from the MFW stage that its best to set up your finances accordingly so you can get used to a certain level of income. This then takes away the temptation to spend the money via lifestyle inflation.

With a £400K target, the goal is £141K. This is the amount I have calculated I need in addition to my DB pension. With monthly savings of approx. £2,800 it should take 50 months, so call it 4 years. Of course, this doesn’t take account of growth or windfall, payrises or other things that may happen along the way. If the funds grow faster then the freedom day will come sooner. So this will now be my new goal, to save this £141k as fast as possible whilst having a life!

savingholmes

Well done @Caeler @SouthCoast
Great plans Glass half full - sounds like a great income and great money management too

Sunshine_girl2

Hi glass half full, I followed your DF journey under a different name but often come to see how you were doing on the MFW board. 

I am so pleased for you that you made it MF now , your retirement plans look good , here's to early retirement for you. 

misslolu

I've just read your full diary @glass_half_full congrats on paying off your mortgage, you must be so relieved. Please let me know if i'm being nosy, but I just noticed that your outgoings are £2000 even though you've paid off your mortgage. How come?

glass_half_full

Hi @misslolu, thanks for your question, no you are not being nosy at all! I appreciate the interest. 

Once we achieved debt freedom without the mortgage I loosened the budget somewhat. We had been living under quite a tight budget for some time and I felt like I wanted us to feel a bit more relaxed about money whilst still paying down the mortgage. Below is a typical month for us now, two adults with adult DS who we are supporting for now a bit whilst he gets on his feet. Where I have put an x are items which would have been lower before, and could be lower now if required. This is a level of spending I am ok with to be honest. I realise its not as frugal as it could be!

Charities	£12.00
Church	£50.00	x
Political party	£10.00
Microsoft	£7.99
Playstation	£8.99	x
Netflix	£8.99
Spotify	£14.99	Family
Groceries	£600.00	x
OH cash	£50.00
Me cash	£50.00
Petrol	£80.00
Hair me	£20.00
Hair OH	£40.00
Auto maintenance	£50.00
OH beauty	£30.00	x
OH clothing	£100.00	x
Me clothing	£50.00	x
Societies / Unions	£55.00
Supporting DS	£100.00	x
Life insurance	£16.00
Electricity and Gas	£145.00
Dental	£55.00
TV	£12.83
Council tax	£267.00
Mobiles	£40.00
Water	£30.00
Broadband / phone	£35.00
TV subs	£33.00	x
Dining Out	£80.00	x
	£2,051.79

savingholmes

Thanks for sharing. Always interesting to read others budgets

glass_half_full

Dear Diary and all,

Its now just over 3 months since we achieved mortgage freedom so time for an update. It still is a great feeling when I remember that we no longer have a mortgage! We have spent a bit since then on various things. DS passed his test in September, so we contributed a few thousand to help him buy a second hand car. It meant he could afford something a bit newer and hopefully more reliable. Then, after some deliberation, we have decided to stay in our current home. So we decided to redecorate and refurbish the downstairs of the house. We have got decorators in and bought some new furniture and curtains etc and spent around £4500. I think we will probably spend another £1500 by the time we are finished. Its nice as it is refreshing the house and helping to pick us up a bit to be honest.

The budget has settled down since mortgage freedom and the holiday season and we can now see what it will be like going forward money wise. Without the mortgage, we can live pretty much on OH’s salary which is about £2300 per month take home. Thus I have been able to start the last stage of my strategy which is to max out my pension contributions. I am now saving around 70% of my gross salary into the pension which will work out at around £40K per annum which is the maximum allowed without paying tax. I won’ t deny that I have been tempted by other ways to spend the money such as moving house or buying a new car. But it hasn’t been too hard to resist the temptation to be honest. In terms of my financial freedom strategy, this is when I need to stay focused on the goal. I have approx. £240K saved in my DC pension which is mainly made up of AVCs I have been making all my life, since my twenties. I need to build this up to a point where I can step down from work to either part time or fully retired. The target number in my mind is somewhere around £350 to £400K. Its quite complicated because I also have a DB pension, but I have a spreadsheet with various projections in it. So if I save £40k per year then it will be somewhere around 3-4 years to achieve this target. I think I see 4 years as a back stop and probably I will go for a more flexible work / life balance in 3 years time maximum. This goal helps me stay focused and not get sucked into spending more than I need to.

On the work front, I have a new role. In around September, I was given a new coach at work. She has been great, challenging me a bit, but in a positive way. I realised I was getting stuck in a rut and that I needed a change. When a new role was advertised, I put my name forward, and after a couple of conversations and an interview I found out that I had got the role. Its probably a sideways/diagonal move rather than an upwards promotion, but it is new and will involve working with new people. Its also a bit more externally focused which I was looking for. This has really helped because I now feel much more excited and motivated by my job which means I can see myself doing it for a couple more years. I do think it becomes very difficult if you are wishing the time away to early retirement.

So all in all things are ok, fingers crossed etc etc and taking nothing for granted.