#8 – The Million Pound Question 2 – Reprise

Yesterday marked my return to blogging after a 2 month hiatus and I posed the question about what would you do with a tax free £1m if you received it right now. Read it here

I woke up this morning at 5 thinking about many things, checking my emails and all the things you really shouldn’t do if you want any chance of going back to sleep.

My mind wandered back to this and I realised my gut feel didn’t take into account a few important factors. Namely these:

  1. We might have a 2nd child – quite an important oversight but this is on the horizon hopefully within the next few years. Whilst i don’t believe they cost as much as everyone says (assuming you don’t private school them and they don’t go to university), they will need to be factored in. This leads me onto…
  2. I had forgotten my son’s Junior ISA. Currently we pay in £100 a month to give him a good start once he’s 18. I would strongly encourage him to not touch that when he’s 18 and strive for financial independence with my guidance and let compound interest work its magic. Anyway, i digress, I would boost this to the maximum £4,260 per annum. Some quick calculations (assuming 9% YoY growth) – I’m using Vanguard LifeStrategy 100% for those interested would mean (inflation adjusted) £120k at the age of 18.  If he didn’t touch that (or add to it) AT ALL, when 50, he would, in theory, by financially independent. Assuming he’s employable and able to save something from 18 onwards, this should only improve drastically. Enter child number 2 hopefully, and this annual outlay is doubled to £8.5k.
  3. My wife would never, ever, let me get away without spending money on the house. We’ve bought something structurally pretty good but it could use £70-80k to get it configured better for us and updated. We think the work would add value but not a huge amount, but justifiable.
  4. The other adjustment i would make to my original plan is to pay off the mortgage entirely. Getting the outgoings down takes far more pressure off and whilst probably not the best way to maximise the money, it represents a spread of risk away from solely investment strategies and any potential headwinds in the near future (ie. Brexit etc)
  5. Now, i need some help, the big outstanding question i have is not what to invest in with the remainder, but when to invest it. Do I do as i said yesterday and add my max ISA allowance each year and drip feed and in theory sacrifice growth over time, but have no tax considerations, or do you invest it all in one go, maxing out the ISA allowances but then investing in general fund and share accounts for the rest. This means clearly if i drawdown and make profits above my allowances i will have to pay tax.

My question this: What is the best strategy? If i took option 2 (invest all at once, not all in a tax wrapper), can i transfer 40k each year into the ISA account? Would this be possible, even?

Then there is my SIPP – should i drip  some into that every year (max £40k) instead to get around the tax? Obviously i then cannot touch it for 17 years until im 57 (at the moment anyway) and then cannot get access to all of it without a tax penalty…

HELP ME!

#6 REVIEW – Aldi

Once again I’m living by the teachings of RESET by David Sawyer in a bid to optimise our savings. Last weekend we took on Aldi and here is my brief summary of what you can expect:

  1. A very poor experience if you take your 1-year-old and no pound coin for the trollies. We had to carry the considerable lump around with us whilst trying to do our big shop using just two baskets, somewhat tainting the whole experience
  2. A very full car park.
  3. It will be very busy on a Saturday lunchtime. Footfall was bonkers and a little annoying in some key areas as it takes a while to get anywhere
  4. Good quality food for less – I can safely say that after eating the wares this week, I have yet to die.
  5. You will probably leave without everything on your list – it was busy, the staff were good at topping up but just cannot keep up with the demand. They will not have the items you would typically find in a superstore of course.
  6. No pitta bread – I mean seriously. See previous posts about the importance of this.
  7. Rapid cashiers – I couldn’t keep up with the pace and with very little space to put the swiped goods so my bagging was not optimal. nb. I squashed the bread much to the annoyance of Mrs M.
  8. It’s better than Lidl. It just seemed more organised in my opinion, but that might be a reflection of our local stores and staff

Once my wife and I recovered from our tense experience (where I took the blame re. the trolley as I should clearly have done my research into this beforehand 🙂 ) and after taking stock, my wife summarised its definitely cheaper and we’ve saved money – annoying we cannot tell by how much since we lost the receipt. She is not sure if the brands are as healthy as the major chains (I suspect they are the same) but is willing to go again.

I think that is a result. Next time, we’ll go earlier… with a pound coin.

#4 Leaner, Meaner Saving Machiner

Would you just look at this gorgeous chart (screenshot from Money Dashboard).

Savings

My wife and I have been trying to address our spending for the last month. Every single self-help book on Financial Freedom covers this as being a major element to work on so we (well….I) took the plunge into dissecting it. I ran a full assessment of all expenditure for every single purchase on both our current accounts and joint account, and was frankly shocked at how much we were spending on completely unnecessary items. In particular, top up shops from supermarkets, but also takeaways because we couldn’t be bothered to cook, or we just hadn’t been organised enough to have any food in the fridge.

Since this discovery, we are planning our meals well in advance of the “big shop” at Morrisons every Sunday morning. We are noting down all items that are running low so we don’t forget. We plan meals around what we have in the cupboards, but also how easy recipes are to cook and with as little cooking utensils as possible. This may sound over the top, but remember, we are horrifically lazy and busy with a 1-year-old, so this works for us. Hot tip: One pot and slow cooking recipes are now king in our household!

Groceries is covered under the “Home” umbrella and you can see the difference this has made already from July to August. Bearing in mind we haven’t even attempted Lidl/Aldi as per David Sawyers advice from his RESET book, so we think we can do even better.

You’ll see a bigger change in Enjoyment, and the cynics among you will probably say that August wasn’t as much fun. I honestly didn’t notice if it was. The change here came about because my wife and I trialed giving ourselves an individual “fun” allowance of 300 quid (broadly 10% of our combined income) and piled all excess cash (after regular outgoings) into savings (rainy day fund/items for our new house), and investments in my Shares and Stocks ISA with Hargreaves Lansdown.

In fairness, I probably did go out less, but just having this in your mind when spending your allowance makes you assess what you really want vs what you need. I was sceptical my wife could do this since she is not a natural with money. Her coffee/fruit shakes spend was obscene, but even she was amazed at the difference it made. She even told me she was proud of me for making so much effort on all this, which I don’t think has ever been said in the last 10 years.

Have any of you undertaken this challenge? How much have you saved? I’m intrigued…

PS. the eagle-eyed amongst you are probably thinking what on earth did you do with your family in August. Answer: sod all, we moved our nursery direct debit forward on request from the nursery so it double counted, so there!

 

 

#3 Book Review: RESET – How to Restart Your Life and Get F.U. Money by David Sawyer

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The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy  Kindle Edition. £2.95.  Buy on Amazon

David’s ZudePR blog

Reading is my new thing. I chanced upon Ann Wilson – The Wealth Chef and whilst I couldn’t get on with her writing style AT ALL (there are only so many references to food one can take), I do credit her with the initial inspiration for my newfound obsession with my financial future.

I’ve started many books on many different but related subjects since, but the first I’ve truly finished (without skipping boring bits) was this one. It’s very new (it was published 29th August 2018) which had instant appeal to me, but also its UK focussed. The world is awash with US authors/bloggers on this subject but its refreshing that he ignores this and talks to me and not the mass market. Not only is his writing style engaging but I was more surprised that this is not just a book about money and growing it to be financially free, but a guidebook to life.

OK, that sounds dramatic, but it really struck a chord with me. Whilst we do not share the same career, his story is remarkably similar.

I don’t actually just want money, I want to be happy, I want to find meaning in life, I want to stop being so lazy, I want to not have to worry about my job, I want more in a nutshell.

Sections on Happiness, Purpose, Finding Your Why are not new in this genre, but I hadn’t seen anyone touch on Future-Proofing your career by learning about digital (applies to any career) or De-cluttering (your mind….and house obviously). I particularly liked that he has walked the walk and fed back on the benefits of each of these on his and his family’s life outside of the obvious benefits. It was inspiring.

Perhaps the measure of any of these sorts of books is what have I actually done as a result of reading it. So here is my list:

  1. Signed up to Money Dashboard and linked my and my wife cash accounts – I can now see exactly what we have in one place. Its revolutionary for me. HIGHLY RECOMMEND
  2. Ordered Marie Kondo – The Life-Changing Magic of Tidying (my next book)
  3. Planning to go shopping in Lidl and Aldi rather than Morrisons to shave £100’s from monthly grocery shop – If they can do wholemeal pitta bread on par with Morrisons, I’m converted.
  4. In the process of consolidating my old pensions into a SIPP – I had previously tried to optimise the investment selections but realised they are not diversified correctly and I want to control the 3 of them under one plan.
  5. Sold my entire fund portfolio – OH YEAH, quite a big one. I had previously tried to emulate suggestions from Andrew Craig’s How to Own the World, but I got sidetracked by Trustnet’s fund recommendations and didn’t split them globally correctly. I figured lets just start again and stick to a tried and tested plan suggested in this book
  6. Sold all my sons shares in his Junior ISA so to reinvest properly – as per 5

The Investing section is clearly the big one and his practical advice on exactly what funds to invest in and in what exact proportion is precisely what I’ve not seen anywhere else. I just want to copy someone and not let my amateurism get in my way.

I trust him because he reads a helluva lot. The references throughout are vast and varied. From financial heavyweights to blogging heavyweights and I can see a healthy mix of independent thought on each topic. It just feels like he takes the best bits.

I really hope I do not read any other books that contradict all this as I cannot be bothered to keep selling my funds and restarting every week, and I really don’t think I will read anything on this subject for a while now because I feel I have a guidebook I will refer back to time and time again. Better to focus on other things like Affiliate Marketing for this blog, investing in business, Marie Kondo’s book. I mean seriously, if I read that, my wife will think I’ve gone insane. I hope she likes the new me.