The Piano Diary

glass_half_full

Dear Diary and all,

Thanks @savingholmes and @South_coast !

DS and his GF came over for Boxing Day. We have had a great time with them catching up and exchanging presents. We went for a meal out in the evening and then played board games. They stayed over. It was really great to see them. We are going to see them again at the weekend for another meal out.

So as we approach the end of 2023 its time for a review. It helps to stand back and see how things have gone over the last year. I find it useful to put my thoughts down in this diary so I can think things through.

When I look at YNAB from January to December 2023 I can see that the total household spend was £64,000 across the year, so an average spend of £5300 per month. This included all the day to day costs but also the holidays which this year were quite expensive. It also included some car repairs and some home improvements and helping out DS. Not all these costs were covered by income, as I increased saving to pension significantly with a saving rate of 75%. Our monthly household income was around £4000 so a shortfall of £1000 per month across the year As a result of this savings were depleted from £26K down to £5K.

Total pension savings in the DC have increased from £264K to £323K which is an increase of £59K which I am really pleased with since this was my target to save as much of my salary as possible this year. However, looking at the big picture, I think this saving rate is perhaps still a little overambitious. I think we will probably rein our holidays in a bit next year, but I think realistically, an annual spend of around £55,000 would be realistic. There are a couple of home improvement projects I want to do, getting some fencing in the back garden replaced, and finally fixing the leaking roof for good. I would also like to build savings back up to say £10k. So this would need a total income of £60,000 or monthly of £5,000. There are a couple of minor increases to income which will help. The pension costs are due to come down by £100 per month, and I am due a small pay rise of around £100. So in order to have an income of £5000 per month, I would need to reduce the pension contributions in order to boost my take home back up by £800. There is a useful website https://www.thesalarycalculator.co.uk/ that allows you to work out your take home pay based on your tax code, pension contributions etc. According to this site I would need to reduce pension contributions to 58%. Across the year with a 75% contribution rate the amount is £48K and with 58% it would be £38K so around £10K less. In terms of achieving the target of £400K this would take the time to save this to two years. So that would be December 2025 which is 8 months later than my current target of April 2025. In December 2025 I would be 59. I am ok with this since with the new role I can see myself being interested in my work for the next year or so. I’m not going to make this change straight away, but let these thoughts settle for a few days. Probably make a decision by the end of the month.

I have talked this all through with OH and we are on the same page. Its difficult to get the balance right between living for today versus living for tomorrow. This year has been interesting challenging myself to see just how high I could drive the pension savings. But I think it is time to rein it back a bit. This is my current thinking but as ever will be subject to ongoing review.

 

 

 

 

savingholmes

Hi

You've achieved a phenomenal amount this last year - huge congratulations. I suppose my question would be - could you have reduced any of your wider spending to have reduced your £64K a year spend so that you didn't erode savings? And how could you adjust next year's spends to retain your original retirement target date depending on whether or not that's your priority? It sounds like it may not be. I've lost track of whether your mortgage is gone and how much your DH is able to contribute to your income needs both now and after retirement.

My goal after I move house is to try and live on now the income I am due to have in retirement - and put the rest into pension - that way I'm building my nest egg and then when I finally retire it's not a shock and I've not had 'lifestyle creep'. I've found your diary a huge inspiration and next year hope to create a fully funded EF by downsizing and then throw a big for me as a single person proportion of my income into creating a tax free lump sum. Even if I only sustain it for a relatively short period it will have a huge impact - as yours has done for you - although you have sustained it over a pretty long period from what I recall.

glass_half_full

Hi @savingholmes,

Thanks for this. These are great questions. Regarding the spend, yes, I think we could have been controlled that better. There were a couple of big spends last year where we consciously spent on holiday related and home improvement things. Also, a big area remains supporting DS in getting established. He needs to become more independent so we can stop supporting him with regular payments. You are right that the focus is shifting a bit for me away from an immediate need to retire. I’ve just got a new role at work and if that goes ok I will probably continue for a couple of years. Yes, we did pay off the mortgage a few years ago now, and yes, my OH is a big help and in effect we have been living mostly on her income.

I think your idea of reducing lifestyle creep is a good one and in effect living on less as you say and saving the difference into the pension. The challenge is getting the balance right. I think I have been a bit too ambitious and will probably reduce the amount I am saving for reasons I will go into in the next post on here. I think I think you are doing fantastically by the way with everything you are doing with the house move etc.

savingholmes

Thanks @glass_half_full

Your aspirations were very ambitious - and there's no point having a heap of gold in retirement if you forgot to enjoy the journey along the way. I'm glad the new role looks set to be more satisfying and if as you say that means you can have more fun along the way without sacrificing your longer term goals - all power to you

glass_half_full

Dear diary and all,

The new year is now well underway. It has been quite a busy start, but that is good in a way as has got me passed the back to work lethargy.

Some New Year realisations, rather than resolutions for me. Firstly, is regarding the house and need for renovation. We moved into our house in 2000, the house was built in 1996. In my mind this has always been a ‘new’ house. However, we have now been here for 23 years and so its no longer new and is in fact 27-28 years old. Hence some parts of it are now reaching the end of the design life. We have done some internal refurbishment and redecorating etc, but there are a few other areas that now need attention. Some repairs are needed to the roof and the guttering (I now have the quote for this which is £3250 - this involves some scaffolding requirement). One of the ceilings in an upstairs bedroom needs repairing. The back garden, patio and fence are pretty much unchanged from when we bought the house. The fence needs replacing, the patio widening and the garden needs improving and the drainage improved. I have had a local firm out who can do all of this out and again waiting on a quote from them. So I am anticipating some additional costs this year above normal day to day running costs. I am hoping to cashflow these so once I get the quotes in and understand the costs we are looking at, I am going to redo the budget and have a think. It may require some phasing so as to spread the costs across the year, and also another look at the income versus saving equation.

On the pension fund front, its interesting to see the difference in performance over the last 12 months between the two pots. The one with my employer has grown by 25% over the last 12 months, whereas the one with my private SIPP has delivered precisely 0 % growth over the same period. I can’t really blame the provider since I have chosen all the funds. I have chosen a range of diversified funds and shares across different sectors and geographies, but whereas some have gone up, others have gone down and the net effect is uninspiring. I am going to explore transferring it all to my employers DC fund as the performance seems to have been pretty impressive over the last 3-5 years, not just over the last 12 months. I quite like the idea of it all being in one place which will maybe simplify things when the time comes to draw down. I am going to request a transfer and see what happens.

savingholmes

Good luck with the transfer. The other option would be to mirror your DC funds in your sipp

glass_half_full

Dear diary and all,

The roof is now being repaired, scaffolding is up at the front and rear of the house. Some interesting info from the roofer about how the original builder (supposedly a good one) cut corners with the original build, hence explaining some of the problems we have had ever since. It will cost £4000 in total with VAT included. Worth every penny to know that the roof is watertight.

I have had quotes back from the landscape gardening company. Typing in those words may lead to me being banned from MSE or at least losing badges etc! The fencing quote was very high as involved having the concrete posts replaced. I have since had a fencing guy out who has done good work with my neighbour and his quote came in a lot more reasonable (1/3 of the price) at £1600 so I am going with him. That work will be done mid-February.

Then the landscape company quoted on enlarging and replacing the patio and also implementing a drainage solution for the lawn, which is a quagmire unfortunately. These two quotes together are £23K. I am having a second company who my neighbour have used, and done good work, to quote on the same work. He is coming out on Saturday. I will make the decision between these two companies. I should be able to cashflow this work over the next 12 months, spreadsheets are being built.

On the pension front, I have started the transfer process to put it all in my employer DC fund. The total is now £335k, a rise of £8k entirely down to the employer fund increasing.

savingholmes

If you can cashflow it that sounds fantastic. Sure it will be worth it when it's done 

glass_half_full

Dear diary and all,

Well the roof is repaired. It has rained a lot since and finally we haven’t had any leaks! The fencing has been done as well. I had the second quote for the patio and garden which came in at £15k. This is more reasonable and so I have decided to go with this company, the work will be done in April. Now that the roof is done I can move on to getting the ceiling repaired in the upstairs bedroom which was damaged due to the leaking roof. The radiator in that room also needs a replacement valve. So I have messaged a couple of reliable tradespeople who hopefully will be out to do these jobs. I should be able to cashflow this work.

Work is very busy at the moment. My organisation has announced a voluntary redundancy programme. I have found out from the calculator that I would get around £50k. My current DC pension fund is at around £342k, so if I was to apply for it and be accepted, I would get to around £392k which is very close to my target of £400k. The modeller I am using shows that this would be enough in combination with other pensions. The irony is that I have just started a new role so it feels strange to be contemplating walking away just now. I have a month to think about it but I think that my current feeling is to keep going for year or two as I am quite enjoying the new role.

I have given DS some money to put in his LISA. I want to help him build it up so that he can afford a small place with his GF in the next couple of years, lets see.

savingholmes

I've recently spent a similar amount on the roof plus more on other things. Important but not as pretty as what we'd prefer to spend our money on.

Glad you got a cheaper landscaping quote.

Interesting on the VR. I'd find that so tantalising...