FIREside Chats

Tartan_Mum

gallygirl said:

Tartan_Mum said:

I have a confession to make 😳 

Sometimes I do buy grated cheese especially mozzarella for home made pizzas. 

Do I need to turn in my MFW wings? 😱

Yes. Stand in the corner wearing (home knitted) sackcloth and ashes

That was just an example plucked from the air, and I know some people who buy grated cheese because of arthritis/energy issues. It really about mindful spending - if it costs an extra pound a week is it worth 52 a year, 520 (plus interest) over 10 years etc.? There comes a point where we say 'yes, actually, it bloody well is!!!!!' ....... but the 4 pound daily coffee habit isn't. FWIW I don't think I've ever bought grated cheese but it's only recently I've soaked dried beans!

🤣🤣🤣🤣

Not sure I can face the sackcloth today. It is baltic here! 

I hope everyone realised my comment was totally tongue in cheek. Appreciating all the great chat and ideas here. It’s very thought provoking! 

edinburgher

I'm not sure where @gallygirl is buying her coffee, £4 is brutal! I wouldn't say I have a shop bought coffee habit, but in the year prior to lockdown I probably bought 1-2 @ week, every week at a cost of perhaps £3.75 (we'll average it out). 

I justified it to myself as helping a business that offered jobs to those who might find it difficult to get a job elsewhere, including people with disabilities and those unable to work for more than a few hours due to health/MH issues. I also used the "well deserved treat" line (I worked 35 hours over 4 days, with a 30 min break each day). 

I don't think those thoughts were inherently "wrong", but thinking back, it seems out of tune with my longer term plans. Even £3.75 a week is £195 a year, which might become £400 after 20. I love coffee, good coffee, but we also have a bean to cup coffee machine at home, nice travel mugs and plenty of coffee.

Perhaps when I go back I'll make it a once a month treat...

ajmoney

edinburgher said:

As I'd mentioned on your own thread @ajmoney, the differences are largely around the accessibility of money and when tax is paid.

With a pension, you get tax relief on the way in (20%, you have to claim back the Rest on a tax return if you're a higher rate tax payer I believe). You're taxed on the way out at your marginal rate (but you can take 25% of the whole pot or of each withdrawal tax free). Personal pensions can typically be accessed at normal retirement age minus 10 (so I'm expecting 58).

ISAs get no tax relief on the way in (although there is an uplift for a lifetime ISA (LISA, which sits somewhere in the middle and is relatively unpopular). You can access ISAs whenever you want, LISAs at 60.

A pension gives you jam today, but tax tomorrow. I quite like pensions as I have a long timeline and like the tax relief as it gives my investments a better chance of growth.

You can invest in the same funds in both should you wish to do do, they are both just wrappers to hold investments that behave slightly differently

Thank you, I have read it a few times and think I understand.  I am too old for a LISA so that option is out but I am reading up on pensions and will come to some decision.

edinburgher

@ajmoney - my most helpful message would be keep it simple. Do some basic sums around your needs, consider an attitudes to risk test (whether free, or paid if you're really swithering) and pick a low cost passive fund of funds that meets your tolerance (like Vanguard LifeStrategy). Alternatively, simplify things further with a Target Retirement fund that meets your needs

ajmoney

edinburgher said:

@ajmoney - my most helpful message would be keep it simple. Do some basic sums around your needs, consider an attitudes to risk test (whether free, or paid if you're really swithering) and pick a low cost passive fund of funds that meets your tolerance (like Vanguard LifeStrategy). Alternatively, simplify things further with a Target Retirement fund that meets your needs

If you hadn't guessed, I love simple.  I know my attitude to risk through my S&S ISA which helps.  It is tempting to use the extra money to help clear my mortgage quicker but I am going to weigh up all the options.  Thank you for your help.

OhIJustLostMyShoe

ajmoney said:

edinburgher said:

@ajmoney - my most helpful message would be keep it simple. Do some basic sums around your needs, consider an attitudes to risk test (whether free, or paid if you're really swithering) and pick a low cost passive fund of funds that meets your tolerance (like Vanguard LifeStrategy). Alternatively, simplify things further with a Target Retirement fund that meets your needs

If you hadn't guessed, I love simple.  I know my attitude to risk through my S&S ISA which helps.  It is tempting to use the extra money to help clear my mortgage quicker but I am going to weigh up all the options.  Thank you for your help.

Bear in mind that risk comes in multiple flavours.  We often talk about market risk and volatility, i.e. that if you invest £1,000 in the stock market today, it might be worth £500 next week.  But when you're planning a retirement, there are far more types of risks that matter - particularly shortfall risk, i.e. that if you want to retire at 55 and you need £1m, then only having £800k at 55 means that you've not achieved your retirement plan.

For me, investing rather than paying off my mortgage has so far been incredibly lucrative (investments growing at double-digit interest rates whilst mortgage is <2%).  To be clear, everyone's risk tolerance is different and the most important thing is to be comfortable with your own plan, so I wouldn't recommend anyone take a specific course of action.  And outside of this thread I wouldn't espouse investing with more leverage than necessary, but it's a discussion and thought process well worth going through.

Apologies if any of the above is repeating old conversations or something you're already comfortable with - I haven't read through the last few pages!

Karmacat

edinburgher said:

One of my favourite rules of thumb in personal finance is the rule of 72 (i.e. divide 72 by your expected rate of return and that's how long it will take your money to double).

I decided to combine the rule of 72 with my love of takeaway breakfasts from the lovely eateries that have sprung up everywhere in Glasgow (the joy of living near a major city). I spent £15.50 on breakfast for Mrs E and I. As it's (hopefully) 20 years 'til I retire, I have decided to gift future me (another personal finance concept that makes me smile) a tasty breakfast in 20 years time. I'm happy that I'll achieve 3.6% net over 20 years, so £15.50 / 2 / 1.25 (pension tax relief) = £6.20 paid into the SIPP.

I didn't start this thread because I'm not a personal finance nerd

I know I'm a bit behind, but I had to post - this reminds me of the kids' game, Cats Cradle

killerpeaty

gallygirl said:

Tartan_Mum said:

I have a confession to make 😳 

Sometimes I do buy grated cheese especially mozzarella for home made pizzas. 

Do I need to turn in my MFW wings? 😱

Yes. Stand in the corner wearing (home knitted) sackcloth and ashes

That was just an example plucked from the air, and I know some people who buy grated cheese because of arthritis/energy issues. It really about mindful spending - if it costs an extra pound a week is it worth 52 a year, 520 (plus interest) over 10 years etc.? There comes a point where we say 'yes, actually, it bloody well is!!!!!' ....... but the 4 pound daily coffee habit isn't. FWIW I don't think I've ever bought grated cheese but it's only recently I've soaked dried beans!

I thank everyone who buys grated cheese, it makes it cheaper for my old lady hands.

I think I have outed myself as an investor to too many people IRL. I keep getting people giving me their tips, anyone else get this?

edinburgher

@killerpeaty - I happily share basic investing chat with a couple of interested family members and colleagues and deals etc. With friends and family. If you mean tips as in the next hot thing - I'd avoid that like the plague and proceed to talk about index investing 

rugbymadfamily

Hi All, some really great chats on here. I'm a bit behind a fair few of you and don't have a fully formed plan. We are both early 30s and hoping to start a family next year. We both work fairly demanding jobs and really don't want to be working until our early 70s (i think retirement age is heading that way for my generation....its already 68). We both have DC pensions, recently my husband combined about 6 small ones into one place to make it easier to administer and then he has a public sector one in his current role. I have 2 DC pensions and am HR taxpayer.

Have recently opened S&S ISA as we want to early retire and travel from about 60 for a few years and then potentially work part time for a few years if needed. I thought about a SIPP but my concern really is that the age of accessing it will just keep going up (think its 10 years before retirement? Which would currently be 58 but I think will more likely be 63 by time we get closer) so decided on S&S ISA instead. Am splitting savings between the ISA and mortgage OPs (I know interest rates are low at the moment, but our mortgage is substantial so I would like to keep ploughing it down so when interest rates increase we won't be too badly impacted).

Whole lot of waffle there to basically say, great idea for the thread and I ok forward to reading and learning and hopefully putting firmer plans into place over the next few years!