FIRE Girls Pension Diary - Aim High & Dream Big

michaels

hugheskevi said:

Firegirl said:

So my plan is when paid I’ll transfer a monthly amount to the account I will use. All spending will go through this account so it means in a few years I will have a really good idea of my spending without having to spend time doing a detailed budget.  I know the best idea is a detailed budget but I just can’t face doing it so this is a way round it. 

I can't be bothered tracking every individual spend either. Fortunately, there is a much simpler way that should give you the information you need if you keep moderately detailed financial records.

Once a year, in the first week of April, I save a copy of my financial spreadsheets. This is a record of exactly what I have at that time - all my assets and all of my liabilities.

I keep a careful record of my income, along with how much I contribute to pensions and ISAs over the following year and compare my spreadsheets the following April to the one I saved a year earlier. Then I know exactly how much I spent on general living costs by simply calculating:

Living costs=Gross salary + dividends + saving interest - pension saving - ISA saving - income tax - National Insurance - mortgage - change in net minor debts and saving

The dividends came from a very small company I set up and operated for a while. I keep a detailed log of my salary and deductions each month, so it is simple to sum them up at the end of the year. My mortgage payments were usually 12 payments of the same amount in most years. Interest was the hardest to track, but I need to do that anyway to avoid HMRC limits, so got into the habit of once a month logging interest from all our accounts. The categories I subtract from income are all the big things which are not to do with everyday living - either taxes, paying debt or saving in one form or another.

So this is a fairly simple inputs and outputs record, and as long as you are confident you can accurately record income and major savings, then whatever remains as the difference is what you spent on everything else, ie living. Other folk might have slightly different categories depending on their source(s) of income and major expenses, but that gives the general idea. 

I've found it a very good discipline, and like the charts it enables me to build over time - the chart below is the main one I keep up-to-date (unfortunately I couldn't update for 2022/23 and 2023/24 as I've been away traveling so there is a complete discontinuity in the series in every category, but 2024/25 will be back to normal).

I would at the very least split spending into some sort of essential, optional and 'capital' as there is a lot that is lumpy - a big holiday or a new boiler or car (although having said that in my spending breakdown I accrue for the big spends so most years I spend less than my notional spend)

hugheskevi

michaels said:

hugheskevi said:

Firegirl said:

So my plan is when paid I’ll transfer a monthly amount to the account I will use. All spending will go through this account so it means in a few years I will have a really good idea of my spending without having to spend time doing a detailed budget.  I know the best idea is a detailed budget but I just can’t face doing it so this is a way round it. 

I can't be bothered tracking every individual spend either. Fortunately, there is a much simpler way that should give you the information you need if you keep moderately detailed financial records.

Once a year, in the first week of April, I save a copy of my financial spreadsheets. This is a record of exactly what I have at that time - all my assets and all of my liabilities.

I keep a careful record of my income, along with how much I contribute to pensions and ISAs over the following year and compare my spreadsheets the following April to the one I saved a year earlier. Then I know exactly how much I spent on general living costs by simply calculating:

Living costs=Gross salary + dividends + saving interest - pension saving - ISA saving - income tax - National Insurance - mortgage - change in net minor debts and saving

The dividends came from a very small company I set up and operated for a while. I keep a detailed log of my salary and deductions each month, so it is simple to sum them up at the end of the year. My mortgage payments were usually 12 payments of the same amount in most years. Interest was the hardest to track, but I need to do that anyway to avoid HMRC limits, so got into the habit of once a month logging interest from all our accounts. The categories I subtract from income are all the big things which are not to do with everyday living - either taxes, paying debt or saving in one form or another.

So this is a fairly simple inputs and outputs record, and as long as you are confident you can accurately record income and major savings, then whatever remains as the difference is what you spent on everything else, ie living. Other folk might have slightly different categories depending on their source(s) of income and major expenses, but that gives the general idea. 

I've found it a very good discipline, and like the charts it enables me to build over time - the chart below is the main one I keep up-to-date (unfortunately I couldn't update for 2022/23 and 2023/24 as I've been away traveling so there is a complete discontinuity in the series in every category, but 2024/25 will be back to normal).

I would at the very least split spending into some sort of essential, optional and 'capital' as there is a lot that is lumpy - a big holiday or a new boiler or car (although having said that in my spending breakdown I accrue for the big spends so most years I spend less than my notional spend)

To deal with this I also keep a table of inflation-adjusted and earnings-adjusted figures as well as their historic cash values. Then when I want to look at things like typical expenditure I just average the adjusted series. Even after just 5 years many larger one-off spends will be included, and after 10 years of data most things will have been replaced once or twice. In practice, the biggest impacts have been paying for travel when the payment for a holiday in the next financial year was made in the prior year (eg a holiday in June paid for in March). I mused about whether such transactions should be shifted, but concluded it was easiest to do everything on a transactional basis at the relevant date and average series instead.

chile_paul2

hugheskevi said:

Firegirl said:

So my plan is when paid I’ll transfer a monthly amount to the account I will use. All spending will go through this account so it means in a few years I will have a really good idea of my spending without having to spend time doing a detailed budget.  I know the best idea is a detailed budget but I just can’t face doing it so this is a way round it. 

I can't be bothered tracking every individual spend either. Fortunately, there is a much simpler way that should give you the information you need if you keep moderately detailed financial records.

Once a year, in the first week of April, I save a copy of my financial spreadsheets. This is a record of exactly what I have at that time - all my assets and all of my liabilities.

I keep a careful record of my income, along with how much I contribute to pensions and ISAs over the following year and compare my spreadsheets the following April to the one I saved a year earlier. Then I know exactly how much I spent on general living costs by simply calculating:

Living costs=Gross salary + dividends + saving interest - pension saving - ISA saving - income tax - National Insurance - mortgage - change in net minor debts and saving

The only issue with this approach is that I'd get to the end of year and end up thinking 'How on earth have I managed to spend that much' and would want the underlying detail.

 The approach I take is to have a spreadsheet that breaks down expenditure across approx 15 different categories (Gas, Water, Council Tax, Groceries, Entertainment etc) and on a monthly basis update the spend in each area. For most of the categories it's a matter of plugging in a standing order amount which is normally unchanged from month to month. For the more complicated categories I download the transaction details from my credit card provider (all spend goes on my credit card) and put a pivot table on by merchant and then link each merchant to a category. It's not 100% accurate but it's close enough.

As a result instead of asking 'How on eartch have we managed to spend that much' I can instead be heard walking round the house muttering 'How on earth have we managed to spend that much on groceries'...........  

Smudgeismydog

Excellent thread firegirl, I am 50, have achieved financial independence, and have just given notice to retire at the end of June. I recently started my own thread and plan to document how my assets hold up through retirement, please feel free to pop over, you will be most welcome!

You sound so focused, and this is entirely achievable for you.
Good luck 

Watty1

Followed you over. Great to see the thread.

Firegirl

@chile_paul2 I’m with you on the groceries!!!

@Smudgeismydog (love the name) How exciting to retire in June. I’d love to follow your journey.

@Watty1 Massive welcome!!!! So lovely to see a familiar name and thanks for following my journey.

Some good news thismorning. I got recent valuation on my 50k pension is actually 55k.  I won’t adjust my figures…..I’m just gonna take this as a head start!

Have a good week everyone

GrubbyGirl_2

Sorry I haven't read the whole thread so this may have already been mentioned but what you have put as your savings target is all based on an ideal world.  Over those 11 years the interest rate is unlikely to be 5%, I think 2% is more realistic and even that might be too much considering that interest rates were under 1% for over 10 years in recent times.  Also you're assuming you won't have an emergency spend in those 11 years - new car, new boiler, house repairs etc.  Maybe have 2 pots one of which is 10% of your your monthly saving (£2,700 and £300 a month).  Still £3k a month but don't rely on your contingency pot always being there in full, though great if it is

Firegirl

GrubbyGirl_2 said:

Sorry I haven't read the whole thread so this may have already been mentioned but what you have put as your savings target is all based on an ideal world.  Over those 11 years the interest rate is unlikely to be 5%, I think 2% is more realistic and even that might be too much considering that interest rates were under 1% for over 10 years in recent times.  Also you're assuming you won't have an emergency spend in those 11 years - new car, new boiler, house repairs etc.  Maybe have 2 pots one of which is 10% of your your monthly saving (£2,700 and £300 a month).  Still £3k a month but don't rely on your contingency pot always being there in full, though great if it is

You are right!  If I put a lower percentage though I won’t get to my target.  

There’s a lot of factors to take into account for sure and I might fall flat on my face but gotta give it a go. Market fluctuation and emergency spends.  I will likely save more than 3k a month though and have savings in off set mortgage too.  The obvious one is if my contract finishes…..plan will drop off a cliff edge then but you know l look forward to seeing what and reading back at these early days.

jimi_man

Well done on all the progress so far. However, unless I’ve missed it which is eminently possible - you don’t seem to say how much you need or want to live on. I.e what your Number is. Having a £million for retirement is a great achievement but if your outgoings are £100k a year then it’s not going to last you long. Equally if you are as frugal as Seashell then you may have worked too long! 

Tbh a good starting point is what you spend now, after removing monthly savings, loans (mortgage). 

enthusiasticsaver

jimi_man said:

Well done on all the progress so far. However, unless I’ve missed it which is eminently possible - you don’t seem to say how much you need or want to live on. I.e what your Number is. Having a £million for retirement is a great achievement but if your outgoings are £100k a year then it’s not going to last you long. Equally if you are as frugal as Seashell then you may have worked too long! 

Tbh a good starting point is what you spend now, after removing monthly savings, loans (mortgage). 

I think @Firegirl said on page 1 of the thread that she still needs to work out her "Number".  Good point though as a £1million retirement fund could last for completely different number of years depending on lifestyle. We worked out when to retire based on affordability and when projected income in retirement hit normal expenditure plus a bit of a buffer. That plus getting to the point we did not enjoy work anymore.