FI Wannabe

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  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    I picked up an envelope-sized folder, but haven't implemented the receipt system yet. I've been spending all my time at work, and have totally lost control of the finances. I've made some bad decisions (impulse buying drinks and food because I didn't plan ahead) and some good ones (decided to get the Amazon gift cards rather than spend it on silly games!). I'm not sure exactly where I'm going to sit when the month ends, and right now I'm just grateful to catch up on sleep and buy some groceries!

    I've done almost all of my Christmas shopping (primarily online) over the weekend, and got some good Black Friday/Cyber Monday deals. I can't imagine fighting the crowds in person, but if things are less expensive this weekend, then I'll join the hype from the comfort of my PJs :D

    Bills are still coming in for presents, so I don't know how much we've spent there. We've also spent quite a bit on food and the dog. My current total is £1010/1322, though presents are not included in this total. I'm pretty sure that there's about £50 of food unaccounted for. Also, if I buy clothes for myself and wrap and put them under the tree, is that 'clothing' or 'gifts'? :D;) What if I make OH wrap them to give to me?!?
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    I've been re-reading 'Your Money or Your Life', the book that caused a huge LBM for me a few years back. It's so different to read it now that I really enjoy what I do for paid work, though I still love the bits about spreadsheets and frugality.

    Speaking of spreadsheets, I have some final numbers for my November challenge!
    Total spends (excluding gifts) = £1155/£1322!!!!

    We came in way under despite (or because of) me working like a madwoman this month. I ended up buying way too many pre-prepped foods at the store, but we didn't go for a single meal out this month. We spent A LOT on the dog, but the food and restaurant spends made a big difference.
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    Here's the long-form November report:

    Total spends (INCLUDING gifts) = £1663
    Total saved: £1781
    % saved: 52%

    We spent £500 on presents this month and still managed to save 55% - I'm shocked. Income was high this month because I had a substantial amount of work expenses reimbursed. Otherwise, we just.... didn't spend as much, I guess. I don't feel like we changed much this month, though buying Christmas presents does make me feel like a spendypants even when it's in the budget.

    OH managed to haggle our internet bill down, so that's £8/month extra to the FI pot! :T:T:T Also, at £96 less per year, that's £2400 less we'd have to save overall to produce that income at 4%. In the new year, I'm going to re-evaluate the fancy gym membership.

    Sadly, my bicycle bit the dust this month, so I'm walking until I can find a new-to-me one.
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    A whole £11.64 in passive income last month :D:D

    I'm struggling to come up with a goal for December, because we're travelling to spend the holidays with family and I would hate to miss out on experiences due to the cost. I love spoiling them, too, and because we don't see each other often I tend to go a little overboard. I struggle with this a bit, as many of the recipients genuinely don't need anything, but understand love and affection through gift-giving. So even though it's not always rational or efficient, it's good for the relationships that matter to me. I try to resolve this dissonance by gifting something we can DO together, rather than more Stuff.

    With that in mind, I'm not going to set a goal for the next month, and just enjoy the season.
  • SwashSwash Forumite
    209 Posts
    Sixth Anniversary 100 Posts Name Dropper Combo Breaker
    ✭✭
    Just read your diary, I'm so intrigued with FI!
    Good luck x
    "Nothing is permanent in this wicked world, not even our troubles".
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    Hi Swash, thanks for dropping in! It's always fun to connect with other people interested in FI :) How's the house purchase going?

    On the FIW (financial independence wannabe :D) front, another payday has come and gone. I move £1500 to one of our stocks and shares ISAs, just to make sure that amount gets put away every month. I've been doing that since June this year, and it's worked better for us so far than saving whatever is left over.

    Did a whole bunch of baking yesterday, so have lots of tasty things in the house and happy friends and co-workers! Work has calmed down a bunch, and I'm really looking forward to seeing friends and family in a few weeks. Not to mention making 2017 plans!
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    I was reading an article linked by the [email protected] blog about safe withdrawal rates in retirement (fun stuff, right?!?). Basically, a common shortcut in the personal finance world is to use a 4% withdrawal rate as a way to calculate how to turn pot of money into income. The rule of thumb is that you can withdraw 4% of the initial sum per year, adjusted each year for inflation, and you can be confident that you will not run out of money for at least 30 years. The original study that came up with the 4% rule was based on US data and assumes you're at least 50% in stocks.

    This newspaper article was talking about a new study which showed that, using historical returns of BRITISH stocks and bonds, a withdrawal rate of 3% linked to inflation would fail 40% of the time :eek::eek::eek:

    How could the numbers be so different?!? The newspaper didn't link to the study, so I did a G00gle search and found it here:
    http://media.morningstar.com/uk%5CMEDIA%5CResearch_paper%5CUK_Safe_Withdrawal_Rates_ForRetirees.pdf

    In the paper, they suggest that a 2.5% withdrawal rate is safe for UK investors. If you wanted a retirement income of £10,000, you would need a £400,000 pot (whereas using a 4% withdrawal rate you would only need £250,000). Why such a massive difference? I read through to the bottom of page 3 and found out why: the authors of this study assume an annual portfolio fee of 1.0% of assets

    To me, this says that you can safely withdraw 3.5% (2.5 for yourself, and 1% for fees). It also says to me that you will be paying 29% of your income in fees! :eek::rotfl:

    I know this is turning into a long-winded post, but it makes FI and retirement seem nearly impossible when you have to save 40x your annual expenses. However, reading the article showed that you can definitely use a higher withdrawal rate as long as you apply MSE principles to your investing fees. If you are interested in funds, there are platforms with fees of 0.25%, and you can then buy any number of passive funds that have fees of well under 0.25% again. The total of 0.5% in fees means you've saved 50% from what the study suggests, and if you have a pension pot of £100,000 it means an extra £500 a year in your pocket. You can get fees even lower, too.

    I felt relieved when I figured out that the reason the safe withdrawal rate was so low due to fees, and I'm still going to optimistically stick to my 4% rule for now :cool: It's also motivated me to go back and take a look at my investment fees - no way are they going to be even close to 1%!
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    Good morning diary! I've got the decorations up and am getting all excited about the holidays and 2017! This has been a really tough year for my family, so I'm looking forward to a fbetter one ahead.

    I'm just about to head out for a run on this cloudy, foggy day, and then having a day of laundry, hoovering and scrubbing. I don't mind so much when there's Christmas music :rudolf:

    I've been mulling over strategies for saving next year. I need to look further into the Lifetime ISA, regular savers, and SIPPs. I do some P2P investing with 'fun money' (I know how to live it up, don't I?) but there are a few more platforms I'm interested in. I need to look at my asset allocation and read up a bit further on that. On the income side, I'm interested in matched betting. I was also looking at switching my bank account for a bonus, but since OH and I have a joint account it'll be a multi-step process. Lots of MSE stuff on the list!

    Back later to talk to myself! :D
  • jodles16jodles16 Forumite
    1.5K Posts
    Car Insurance Carver!
    ✭✭✭
    Hi Kahra, it sounds like you are doing amazingly! I am thinking about P2P, I dont have a lot of spare moolah but have some sat in the account which could be used for this, is it easy to do?

    Best of luck with your travel plans!

    Jodles :D
    MFW2020 #115 250/3000 J-250
    1% challenge- /1525
    Save 1k in 2020- /3000

    Joining in UberFrugalMonthChallenge set up by the Frugalwoods!
  • KahraKahra Forumite
    88 Posts
    Sixth Anniversary
    Hiya jodles! I've used [email protected]@m and [email protected], and both were very easy to set up and fund. Buying loans was pretty easy in both cases with a bit of FAQ reading. There are a lot of P2P providers these days though, and they all have different levels of risk, invest in different things, ease of getting your money out, etc. Choosing which platform to go with was the most difficult part, tbh! Some have funds to cover defaults, so you're less likely to lose ££, but the returns are lower too (some regular savers even have better rates with WAY less risk!). Some have crazy high returns, but you want to have a lot of different loans for diversity, so that WHEN one defaults you don't wipe out your profit (or principle!). Sorry to ramble - I have a lot of fun with my P2P, and investments in general! Any particular platform you're looking at?
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