The Piano Diary

AgathaSquirrel

Sounds like things are improving and it sounds sensible to focus on savings.

glass_half_full

Dear diary and all,

Its just over one year since I declared mortgage freedom on 28th July last year, so I thought I would take stock of where I am and how things have been since then. I must admit, the feel good factor lasted a long time and I had to pinch myself too to think that it had really arrived. Eventually, it becomes normal although every now and then I remind myself of the fact that it has gone and it is a great feeling. On a practical level, it really means that it is easier to deal with the financial surprises that come along every now and then, which in the past could easily unbalance the finances and sometimes meant going into debt to deal with them.

The numbers.

On 28th July 2021 I reported on the savings and pension at the time which were:

ISA £20K

Liquid savings £30K

AVC Pension £219K

As of 20th August 2022 the numbers are:

ISA £18K

Liquid savings £0K

AVC pension £260K (£37K invested over last 12 months)

Savings

Since last year we have spent quite a lot as follows:

Car for DS £5K

House refurbishment £23K (redecorate and furnish living room and dining room, new upstairs bathroom and downstairs loo)

Helping DS £2K

We need to build the savings back up beginning with the liquid savings back up to £2K emergency fund. Then I would like to build the ISA back up to £20K

Pensions

Reasonably pleased with this since I have saved around £3K per month since last year so a total of £37K. Thus the value would be £256K without accounting for capital growth. The last 12 months has been volatile with big falls but the funds I am invested in seem to be recovering now and even going up in value now. This is in addition to the DB pension I am contributing to.

So on a positive note, still debt and mortgage free. Contributions to the pension (the freedom fund) have gone to plan. Savings have gone down but for things that were important to us and we both discussed and agreed on. In some ways we wanted to relax the purse strings a bit anyway. I think  we do now need to refocus and build the savings back up again.

The focus remains on achieving financial freedom which I think will be some time in the next 4 years.

savingholmes

Thanks for the progress report. Always interesting to see what people do once MF and DF.  Well done on the impressive savings and only being 4 years away from freedom.

glass_half_full

Dear diary and all,

Energy

I have been trying to work out the impact of the latest energy price cap increase on our finances. Before the April rise we were paying £140 per month for both gas and electricity. From April the direct debit rose to £300 and now with the latest increase the direct debit is being suggested at around £550. I have found out the various charges, standing and unit rates for both gas and electricity and based on our useage for the last 12 months I am calculating that the monthly charge would be around £536 so unfortunately I think that the recommended direct debit is about right. I think the new £2500 price cap will mean that this latest increase will probably remain, but my energy supplier should be clarifying within a few days. The Prime Minister’s statement confirmed that the Energy Price Guarantee would be set at £2,500 per year from 1st October 2022 for a typical household (one that uses 12,000 kWh of gas per year, and 2,900 kWh of electricity per year, and paying both by Direct Debit). We use quite a lot more than this. However, even if we used 2x this amount then the cost would be around £5000 or £400 per month so maybe our monthly cost will end up being lower than at present.

I have downloaded the useage over the last 12 months and it totals:

Electricity : 4827 KwH

Gas : 22,411 KwH

This seems high for a 4 bed detached house, especially for gas. Usave.co.uk suggest 4,600KwH of electricity and 17,000 KwH of Gas.

I wanted to understand how energy efficient the house is so I organised an Energy Performance Certificate assessment. Apparently these are now required anyway if you sell your house and as they last 10 years this could be useful for that when we sell. Anyway, the rating is from A to G with an average in the UK of D. Ours has come back as a C. I learned a few things in the process like we do already have cavity wall insulation, apparently it was built in when the house was built. We have a newish and efficient boiler (2019). We have extra loft insulation and double glazing. Overall, the ratings for energy efficiency were quite good. You also get a rating for CO2 emissions. We could install solar thermal or solar panels to reduce emissions. We need to try to reduce our gas consumption so will be looking more closely at when we switch on the heating and the timings and setting of the thermostat. Maybe the message of this is that with just two of us, we don't need to be living in a 4 bed detached house and paying to heat it all.

We have used less energy than last year over the summer and we need to try to keep it lower in the coming months. The problem is, working from home, it will be necessary to have the heating on. And besides, you can’t not have the heating on at all otherwise pipes can freeze etc. The alternative is to go into work, but then there are the commuting costs. This is the graph comparing our energy use this year (orange) with last year (purple). I think we will try to put off switching on the central heating and wear more jumpers indoors. However, we know from experience that in the end it just gets too cold to not have it on.

Windfall

We have received some more money (£12K) from the final winding up of my mum's affairs. This was not expected and so was a really nice surprise. At the moment it is sitting in a liquid savings account. I've always read that you should have 3-6 months expenses on hand as an emergency fund. This has always seemed a bit much to me and besides I have never been able to save this much in the past. However, right now I think I will leave this in the liquid saver so that we have some buffer money in case of problems and also available in case we need to help DS out.

savingholmes

Interesting on the report. 

Nice to have new £ coming in even if it is for a sad reason. A decent EF definitely can help you sleep better.

glass_half_full

Dear diary and all,

I have been pondering a few things and am using this space to capture my thoughts. The various crises seem to keep coming. My stocks and shares ISA is reducing in value in front of my eyes. Cash at least is not reducing, but effectively worth less every day due to inflation. Prices for everyday things when out and about are all increasing. This is making me feel even more that the MSE mindset is the right one to try get through all this.

Energy

I have the new gas and electricity prices since the new government cap was set. The new direct debit is £380 which is an £80 increase over April but is less than the £560 it was going to be before. I noticed a comment in the e-mail from my energy provider – “Please be aware that from now on, if we’re unable to collect your payment on the date its due, we may apply a £5 administration fee as per our T&Cs”. There are other more supportive messages lower down, but this one is at the top, which kind of indicates the priorities. I have set this amount of £380 in the budget. I have to trim back the savings to allow for this. It has been getting colder outside and without putting the heating the inside temperature is getting cooler. I think once the outside temperature is a lot below room temperature then it will be harder to not put the heating on.

Plan to FI and then maybe RE

FI

We are now properly back to work post the summer break. Although my job is ok, I find myself wondering how much longer I want to do this. I need to make a decision on this and move forward. The goal target for the DC pension is £400k. At the moment, I have around £245K in the DC pension and around £30K savings so a total of £275K. So this leaves a target of £125K. With a saving rate of £3K per month means around 42 months which is around 3 ½ years. So with a bit of capital growth (?!) then perhaps it will be around 3 years. I started to toy with the idea of going part time. I could go down to 4 days per week, but if I did that it would delay achieving the target by 2 years. I am going to commit to at least 3 more years in my head and give 100%. I’ve always felt that I want to do a good job, and the day I can’t do that any more its time to go. I don’t want to be keeping the seat warm as it were. I think I need to adjust to this different mindset with work and it may take a bit of time. I need to be patient with myself.

During this time though, I do intend to step back a bit, give more time to hobbies and interests and mini-breaks, holidays etc. This is assuming that the actions of the government and the financial markets don’t completely destroy my pension!

Meanwhile OH enjoys her job and is happy to continue. That said we will probably plan to finish working around the same time.

RE

My target date of 3 years will be around September 2025 at which point I will be 58. So this isn’t really super early retirement. But at the same time is a lot earlier than the age at which I am eligible for the state pension which is 67.

We have managed to save £1,600 in September, taking the EF to £11,600.

The ISA is worth £17K.

I realise in posting this how privileged we are in the current circumstances. One of the things I am committed to do is to give more to charity. I am currently giving £50 per month but I know I can do more. In addition to this I am helping my son and his GF financially.

 

 

 

savingholmes

Good luck juggling the budget. We all have different degrees of privilege but that doesn't negate how much effort and determination it has required to put yourself in such a good position.

glass_half_full

Dear Diary and all,

A belated Happy New Year to everyone. A January stock take to see where I am. So in October last year the AVC pension was valued at £245K and is now £264K an increase of £19K. I have invested £12K in 4 months (£3K per month) so there has also been a £7K growth. Stockmarket seems to be recovering a little at the moment. Savings were £30K and are now £26K so a drop of £4K. This has been mainly for two reasons. First one a deposit for a summer holiday later this year of £2K and then we have had some additional costs helping out DS and GF for various things. We wanted them to have a holiday and it wasn’t going to happen without our help so we decided to do that. Then a few items for the house etc.

Budgetting

Spending has been quite high in recent months. Christmas period was quite expensive with presents etc. Groceries are increasing month on month. We need to get better at menu planning and reducing food waste etc.

Savings and pension

Nearly blinked recently with the pension contributions as I thought I might need to reduce them due to the cost of everything going up, but in the end held firm and glad that I did.

Work and retirement thoughts

This is a difficult period as I find that I vary in my attitude week to week and day to day. Previously, I think I accepted the stress of the job because in many ways I had no choice, with a mortgage and with other responsibilities eg to provide for my son in various ways. Now that we are debt and mortgage free, and DS has moved out, it is harder to motivate myself to deal with the demands of the job as in the back of my mind I think, well I don’t need to do this. However,  I have always felt that I want to do a really good job and the day I can’t do that (or I’m not prepared to do that) then I need to get out.  Am contemplating a less demanding role and I have actually recently applied for a part time role but not sure if I want to do that just yet. I have started to step back a bit as in not going for promotion or being proactive and putting myself forward for stuff as in the past. We’ll see.

 

savingholmes

Best of luck tailoring a job that helps you be happier.

glass_half_full

Dear diary and all,

Read an interesting article in the Guardian today about lifestyling where pension providers shift funds towards supposedly safer investments as you approach retirement. As this involves more bonds, the recent collapse in bond values has resulted in some pension pots falling by 20%. I want to know and decide where my money is invested. This doesn’t mean I will do any better, but I would rather know.

To that end, I have started to consolidate my AVC pensions into a SIPP. I decided that I want to have the funds in one place and to have more control. I also want to know that when the time comes I have the option to draw down. I have three DC funds, two from old employers, and one with my current employer. I have been asking questions of the two previous funds to see if I could consolidate with one of them. However, the responses have been slow and they weren’t clear whether they could take transfers in or whether I could draw down etc. So I decided to transfer both of them into a SIPP with a new provider. So far one of the funds has transferred in valued £165K. The process has been smooth and painless with that one. The new SIPP is so much easier to manage and is more transparent. The second fund, worth £25K is taking longer to transfer. To be honest, this provider has been slow with all its communication and from time to time I have felt like they have been less than helpful even mildly obstructive. Hopefully that transfer will go through soon. I have been doing some research and have made some fund selections in the new SIPP. I am reasonably comfortable making my own decisions, so the SIPP suits me really well. I’ve tried to think about fundamentals and what is happening in globally and in the economy. I quite enjoy this so I guess it’s a bit of a hobby for me.

Summary of position since last time

Pension AVC total now £278k (was £264K) increase of £14 K (£6K contributions, £8K capital growth).

Savings total now £25K (was £26K). Aiming to build this back up.

I’m treating saving into the SIPP like I did clearing the mortgage with having targets etc. I like the idea of hitting £300K which should be in about 7 months (based on contributions) so by the end of the year.