Budget Check In: March

Spring is springing (it’s Denmark so it seems to happen pretty late). The weather has been beautiful, the evenings getting longer, and there’s a delicious smell in the air. Budget-wise March has two close family birthdays, mothering Sunday, Easter, and school holidays. I did calculate how much I had spent half way through the month, then once again had a massive splurge in the last week. I thought about it and realised it’s because I get paid on the 23rd of the month but budget per calendar month. For some reason I can’t cope with the thought of managing the month differently so for now I am going to try and be aware of my final-week-free-for-all and see if that works.

A quarter of the way through the year already! Photo by Glen Carrie on Unsplash
Item Monthly BudgetSpend March % of monthly budget
Childcare costs £           1,100.00 £         1,000.6291
Car (insurance, tax, petrol) £              125.00 0
Charity £                 66.67 £              28.3843
Eating out £              120.00 £              90.1675
Entertainment – subscription £                 50.00 £            118.15236
Entertainment £              100.00 £              50.8051
Kids – extra curricular £              250.000
Family £                 50.000
Groceries £              400.00 £            714.38179
Holidays  £              300.00 £            329.89 
Insurance £              200.00 £            169.3585
Personal care £                 30.00 £            248.94830
Shopping – general £                 25.00 £              14.8960
Shopping – gifts incl birthdays £                 58.33 £            251.85432
Shopping – clothes £                 29.17 0
Rent and Bills £           1,500.00 £         1,771.00118
Transport £                 41.67 £            159.18382
Utilities £              200.00 £            186.1593
TOTALS £       4,645.83 £         5,133.74111

So how did it go? Better than February, worse than January. I spent £5,133, or 11% over budget. It could have been better, but could have been worse.

  • I absolutely beasted my grocery budget AGAIN which is infuriating. I managed to spend 180% of the monthly budget which is ridiculous. I realised I have one particular trap which is the fancy supermarket delivery service (only one place does this in Denmark and it’s way more expensive than my usual Lidl) – that added £200 with no real added value.
  • I spent a lot on personal care which I had hardly budgeted for. Thanks to working from home, both my son and I have developed back and neck issues and have to go to physiotherapy. He, lucky chap, gets to go to an osteopath: I get a scary Norwegian man who shouts at me whilst I do horrendous exercises. So I spent a lot more than planned but I do get back 80% from our health insurance company which means that the £250 I spent should actually be in budget when I get refunded.
  • My entertainment subscription budget doubled but it included an annual £50 subscription for the Guardian newspaper. Technically I don’t get anything from this other than a sense of supporting Proper News since it’s free to read anyway – maybe I’m prepared to pay before it hides behind a paywall. Anyway, I could stop this cost but I am prepared to keep it for now, at least in solidarity.
Spring time sunshine and sakura. Photo by Arno Smit on Unsplash
 Monthly saving planMarch% of plan
Mortgage (UK house)  £                500 £              500100
Mortgage Overpayment  £                500 £              500100
Emergency Fund  £                  100 £               100100
ISA £               1,250 £               50040
Kids savings £                   248 £               248100
SIPP £                   300 £               300100
  £   2,898.00 £ 2,348.0087

And what happened with the savings? I reduced my budget on this because I was saving for the house costs – the deposit is all there but the costs like the lawyer, removal men and so on don’t come cheap and I need to be ready. So an additional £2,000 went to that making a total savings of £4,348.

Overall I spent 54% and saved 45% which I am very happy with, even though some of the spending lines took a bit of a kicking.

How has your March been? I’d love to hear from you!

Back to Basics Part 3: Know your numbers

So, you’ve got a good idea of what FIRE is, and what your FIRE number is; and worked out how quickly you want to get there and how soon it might be. This is the last post on going Back to Basics and explores what your journey might look like.

As with all ‘simple steps’ the pathway to FIRE depends on where you start. All the steps fall into three main categories: spend less, save and invest, and earn more. This blog will focus on working out your real income and expenses at this point in time, since this is the best place from which to build out plans to increase income, reduce spend, and work out what fabulous things you are going to do with the rest on your path to FIRE.

Simple steps to FIRE. Sometimes the view is great too. Photo by Khara Woods on Unsplash

The first and most important step is to know your numbers.

You will have looked a little at your projected costs when planning your retirement number, but the first step is to really understand what you have coming in and out.

What income do you have? For most people this is from one job, but if it isn’t this will take a bit longer to work out. Do you have other bits of money coming in – child benefit, working family tax credits, maintenance from your ex? Then what comes out pre-tax – pension, health insurance, student loan repayment, childcare vouchers?

If you are self-employed then try and work out the average of your income from previous months. You’ll need to take into account if your business is seasonal, or if you had significant up front costs in setting up your business for example, and it’s harder to project your profits / income in terms of growth. You should look to calculate your mandatory tax and national insurance if this isn’t done for you, and use your post-tax figure.

For now all you need is money you are sure of coming in, and anything that comes out pre-tax. Being clear on this means you know exactly what money you have to play with and what you might have already paid out for before it hits your account.

What do you usually spend? This needs to be a really honest view of what you spend, rather than an aspirational view where you think ‘well I keep meaning to stop smoking/buying lattes/my habit of buying clothes when doing the supermarket shop so I just won’t add that cost in and it will spur me on’. Be honest. Not only will it help you more in the long term but it also gives you spaces to win – if you do cut out a habit, you can celebrate it rather than setting yourself up to fail.

There are lots of ways to work out your spend but this is mine. For each of these costs, I have a spreadsheet which shows whether they are paid monthly/annually, by what method, and if by direct debit, when and from which account. Not everyone loves geeking out with spreadsheets – there is a simple budget planners available but whatever the approach you will need to spend some time getting your numbers together. When I was doing this I made a date night (with myself, if you are reading this and not single then do it with your partner so you are on the same page). I got some fancy tea and homemade cookies, put some music on and got down to business. (I realise that sounds dodgy. Ahem.)

Wherever you live, and however you get to and from work/life, you need to budget for both. Think of the house insurance premiums in Venice tho… Photo by Marijana Vasic on Unsplash
  1. Work out your fixed costs: This includes all the basics, which I find useful to put into categories:
    • Home: Rent/mortgage, gas, electric, water, council tax (or whatever the equivalent is where you are) and house or contents insurance. There might be more that comes in here which are fixed for you but not standard – I have boiler cover for example, others have ‘white goods’ insurance which covers washing machines and whatnot. This also might be different if you rent. The key is to make sure you capture things you pay for annually as well as monthly.
    • Transport: car tax and insurance; bus pass; bike insurance. This will depend on you but this is fixed costs so things like petrol or new tyres don’t come in here, however regular they are.
    • Debt repayments: if you have debt repayments, then the first focus will be on repaying this so you are free to throw all your income at building your FIRE stash. But for now if you do have them then they are fixed and need to be included here. Gezuntheit.
  2. Work out your essential but flexible costs: This is all the stuff which is essential but changeable.
    • Childcare: I include childcare in here partly because it changes as kids get older or you choose different kinds of provision. When you plan out your options, childcare is also something to play with since, certainly in my life, I feel an element of working to pay childcare so that my kids can be looked after whilst I work. So it’s essential but moveable in lots of different ways.
    • Health: depending on who and where you are, there might also be fixed costs here. In the UK I do wonder if we are ready for changes in healthcare costs which might be coming our way, but that’s for a different post. This could include glasses, dentist check ups, vitamins or prescriptions. Try and separate out the essentials and those things which might be optional.
    • Groceries: we all need to eat, but do we all need to eat organic chocolate almonds on a weekly basis? I suggest that here you are absolutely honest, and go back through your bank statements to see how much you actually spend. For lots of people this is a real shocker, but it’s also a place you can work saving magic.
    • Clothes: This is another one where looking at bank statements should help to work out what you spent over a year, for yourself and your family. I suggest separating these out since I have been guilty of overspending on kids’ clothes whilst telling myself I was doing no such thing because I was slopping about in 10 year old jeans. Check for a whole year so that you capture summer, school uniform, Christmas party frocks or whatever other seasonal changes you deal with.
    • Cosmetics: yes we all need some (well, probably) but this is another area which can be a few quid a month or a way of getting into debt. I did a cosmetics challenge and even though I rarely wear make up and think of myself as being pretty much a soap-and-water girl, this was an unexpected area I could make savings.
  3. Non-essentials: well, something of a mixed bag – and there are lots of things which can be mixed between essential and non-essential (even on one supermarket receipt), so be honest:
    • Gifts: again how much and how often you spend is very individual, but being clear on birthdays/Christmas or Hannukah or whatever/wedding presents and how much you usually spend in a year will help you make a plan and put any necessary boundaries in place.
    • Eating out: coffees, lunches, dinners, going down the pub. With COVID this seems like a sweetly reminiscent nod to idyllic days, but all those take away pizzas still count.
    • Holidays: holiday childcare might also go in here, depending on how optional it is. But this is all your holiday spends, from your tent to that business class upgrade.
    • Everything else. I was pretty surprised by just how much there was in here – and it’s why bank statements are your friend.
Do the hard work then get inspired – remember what it’s all for. Photo by Sergey Pesterev on Unsplash

So there you have it – you have worked out how much you spend in an average month, and on what. If you are anything like me, you might need a stiff drink (or sugar hit) at this point. But then come back and:

Get inspired for your next steps

So that’s it! You know your numbers. For me though I found that I was really comfortable having done the nerdy bit, and struggled to get onto making a budget and finding ways to cut costs. Before we go there, spend some time getting excited about what’s coming. I motivate myself by hearing from the FIRE community, and looking at photos of Kenya (ok, sometimes doing fantasy house searches) since it’s part of my ‘why‘.

I love to fall down the grocery shopping rabbit hole so beloved to FIRE. Check out Tread Lightly, Retire Early’s post on reducing the budget whilst eating better; or the FrugalWoods many posts on grocery shopping (though whilst I totally admire their choices, I don’t get the impression food is a particularly important or interesting part of their lives). I’ve previously shared Mrs Smart Money’s challenge to split a family food budget by 50%. You could also check out accounts from reducing spend over a whole year – I got Michelle McGagh’s No Spend Year and Cait Flanders’ Year of Less out of the library when such things were open but there’s lots on line. Go get your motivation on.

So, what does your spend look like, and how did it make you feel? Would love to hear from you!

Back to Basics part 2: What are the kinds of FIRE?

Last week I wrote an introduction to FIRE and working out your FIRE number. The approach and calculations in that post also apply to basic retirement planning, since the task was to fully understand what you will need when you stop working. If you want a more step by step guide to approaching your pensions (and you’re in the UK) then check out this Meaningful Money podcast which does exactly that.

If you want to retire at 65, or at 30, you need to know your requirements. Only around 40% of Americans have tried to calculate their retirement needs (can’t find the number for British people but I suspect it might be even less). If you don’t know what your goal is or why it matters, the chances of you making it are slim.

Find your goal and align your behaviours to reach it. Photo by Ahmed Zayan on Unsplash

So once you have worked out what you need per year to live on, then the fun starts.

Or maybe it doesn’t. If you do your calculation and feel like it’s a million miles (or million pounds) away, it can feel disheartening. If your net worth is zero, it can feel even more impossible. But there are two things to bear in mind:

  1. That there are different kinds of FIRE to aim for, and not all of them mean waiting until you have it all in the bank before you are independent enough to make different choices;
  2. And that the basic tenets of spending less and making more income are available to (almost) everyone.

I want to take a moment to recognise that I am coming to this from a place of privilege. Poverty is alive and growing in the UK at what should be inexcusable rates. According to the Child Poverty Action Group more than 4.2 million children – or 30% – are growing up in poverty. 44% of children in lone parent households are growing up in poverty. Children from black and minority ethnic groups are more likely to be affected: 46% are now in poverty, compared with 26% of children in white British families. More than 70% of children living in poverty live in a working household – so the simplistic notion that we can all just work our way to a new life isn’t true either.

I’m not saying this to use a personal finance blog to smack about some politics – I’m saying it because not recognizing the institutional and personal privilege I do have would be not just disingenuous but would be a contribution to the kind of poverty-shaming narrative that we cannot afford if we are to care for the whole of our society. I am a single parent, and I was raised by one: we lived on benefits for a while when I was a child, and I did again as an adult with my first child. I am very fortunate to be in this position now, and I pay specific attention in my life as to how to support and build up others in that position. Ok, with that said…

Being privileged and ambitious doesn’t mean losing your humanity: being more independent gives you freedom to choose new ways to play your role in this life. Photo by Matt Collamer on Unsplash

So then shouty lady, what are the different kinds of FIRE?

This has been something of a key discussion in the FIRE community in recent years, partly because there are so many different lives that people are interested in living. Broadly though the categories are:

  1. Barista FIRE: This is the first step for many people. It involves having enough assets or passive income to cover your most basic bills, but you need to work to make up the difference. The trick here is the ability to potentially give up a stressful and high pressure job – or one you hate – for something which brings in basic income and gives you a way to socialise. Barista FIRE is a good way to split a FIRE journey half way, and takes off some of the pressure to to save, especially if you hate your job. This allows you to top it up or to pay for luxuries. Some people also like the idea of having work to do and other ways of socialising during retirement. At the moment, this is what I am aiming for.
  2. Lean FIRE: This is about covering the basics. It’s hard to find UK – or even European – calculations, though there is, naturally, a rich discussion on Reddit. but in the US the estimate is that you will be looking for an income in retirement of about $40,000 or £29,000. Interestingly, this is around the number that WHICH thinks is needed for a ‘comfortable’ retirement in the UK. It’s also the median income in the UK. As such, this should be enough for a comfortable life style, without too much scrimping but also without expecting regular long haul luxury holidays. Assuming you were starting from scratch, you would need a pot of £725,000 to be able to comfortably draw this down. Regardless of the number, Lean FIRE is about being able to comfortably pay all your costs, including replacing things if they break, without dipping into savings or heading back to the office.
  3. Regular FIRE: this is seen as a middle ground, and was the traditional calculation of what you think you will need. It’s worth doing (as discussed in my last post) so you get a better idea of your goals and what would work for you.
  4. Fat FIRE: this is the purview of those who really do want the regular long haul luxury, or something else, anyway. Fat FIRE is retiring on a significant budget – in the US of around $100,000 per year. At £70,000 per annum, this would put you in the top 5% of all earners in the UK – you would need a pot of £1.75m. For me this is the fantasy-land stuff which is great if that’s your schtik but it’s not for me.
FIRE means being the one serving the fancy coffee, not the one buying a latte every day. Still smells amazing though! Photo by Nathan Dumlao on Unsplash

For me, I am aiming for Lean FIRE but with the intention that I will work to cover additional costs. These might include helping my kids with their university costs or other expenses, or travel. I also love a lot about my work and have put a lot into building a career, so I would like to be able to take on some self employed pieces – but only if I can pick and choose, including choosing not to work.

So what’s your FIRE number? And how does that make you feel – excited that it’s closer than you thought, or terrified? I’d love to hear about it! And if you feel terrified then do come back next week when I look at simple steps toward FIRE.

Back to Basics part 1: what is FIRE?

Following a chat with a friend this weekend, I realised that I don’t have a single post on here which actually talks about the basics of FIRE. To be fair I’m quite like this in real life as well – just starting sentences wherever I had reached in my own head and assuming everyone else was there with me. As my mum once said, “it’s like your train of thought is half way out of the station and off down the track before I realised you were speaking to me”. But as with saving (see what I did there?!) it’s never too late to start a new habit, so in these next two posts I am going to outline some of the basics.

So, what is FIRE?

There is a whole movement out there, so I start with the caveat that this is my personal take. Financial Independence, Retire Early (or FIRE) is all about becoming financially free from the need to do things you don’t want to. This includes spending money on things you don’t really want or need; and for most people, means being free to give up paid employment. There are different kinds of FIRE to aim for, which relate to the extent of your freedom and whether you need an income at all, and a few main steps.

FIRE!!! And/or the kind of delightful beach-side evening you could enjoy if you didn’t have to go to work tomorrow. Photo by Nathan Lindahl on Unsplash

Where do I sign up?!

The brilliant thing about FIRE is you can start from wherever you are. All the steps are simple to work out (or there are simple versions at least).

Step One: Start with your ‘why’. This is so important, but it could be anything. You hate your job; you want to spend more time with your kids; you have an amazing idea for a world changing small business but you can’t get started with the debts and commitments you have; your dad died before he could retire and you don’t want that to be you. FIRE is simple but it’s not always easy – having a ‘why’ to come back to really matters. And it might change which is totally fine. My why is about being able to live my dream life, with my kids, and a balance of the work, environment, community and service that means to me.

Step Two: Focus first on financial stability. I don’t talk much about this here because it’s not where I am at on my journey, but getting out of debt, and making the lifestyle changes needed to ensure that you are self-funding, is the first building block. Dave Ramsey is a good place to start, with a plan designed around simple steps.

Step Three: Work out what you need. There are some basic tips on how to do this which centre around two rules: the 25% rule for calculating how much you will need, and the 4% rule for calculating how much you can take out in retirement. You only need to do one sum, though the first part takes a bit of work. You need to work out how much you will need to live off in retirement (whether that’s at 65 or ASAP). This will be different for everyone, with two big factors being whether you have children or family members to support: and your accommodation costs.

Do a rough calculation of your monthly fixed essentials – utilities, transport, accommodation and so on, remembering to factor in giving up work so whilst your commuting costs might go down, your energy bill might go up. To be fair, you could probably use your in-COVID costs for this.

Estimate what are essential but not fixed, so groceries, charitable giving, entertainment. People have these in different categories, but I work to a ‘basics’ budget which includes e.g. good internet and some money for books, movies and whatnot but not much.

Get real about what you want out of your retirement. If you want to spend it all on cruises around the Caribbean, your costs will be very different to someone who wants to potter about at home and spend some time each year visiting family in the same country. There are also lots of different kinds of FIRE, some of which aim to cover all the basic costs but assume some additional income stream to cover luxuries – for now though, just start somewhere.

An easy way to just get going is to take an estimate. WHICH did some great research into what people in the UK actually spend in retirement, and found it was less then most people imagined. They have calculations for a basic, comfortable and luxury retirement, finding that a luxurious retirement for individuals (not couples who are calculated differently) costs £30,000 per year, but this is dependent on having a paid-for house.

There are lots of different ways you could go: you get to choose. Photo by Javier Allegue Barros on Unsplash

Once you have these total costs, multiply them by 25. I worked out that I will need £30,000 – so I should need £750,000 invested.

Step Four: calculate your net worth. Whilst it can be disheartening to feel like you need to save an unfeasibly large amount of money, hopefully, you won’t be starting from zero. Working out your net worth can take a little while the first time you do it, but recalculating it annually is easy peasy. You essentially need to work out your assets: capital on your home, cash in the bank, money invested in pensions or non-retirement funds, premium bonds, money down the back of the sofa – all of it. This might take some digging, but make those calls to find out where your old pension fund went, it’s your money after all! Then work out your debts (mortgage, student loans, other debt) and minus this from your assets. Voila! Net worth. I share my net worth annually.

Once you know your net worth you can also revisit the figure that you are aiming for since there might be other things to take into account. For example, since I have two small defined benefit pensions which will are already projected to bring in £9,000 per year in retirement that means I actually need £21,000 more, or £525,000 saved and invested. If I add in the state pension (which frankly feels like magical thinking the way things are going, so I don’t count it – if I was closer to retirement then I would do) then I would have an additional £8,970 per year and only need to save £300,000. My calculations are also based on owning a home outright though, which is a massive additional aspect in terms of either saving enough to pay it off between now and retirement, or needing a lot more invested to cover your costs.

So simple you can have a little happy jump. Photo by Austin Schmid on Unsplash

And that’s steps one through four! Realistically if you are in a lot of debt, then these steps will take a while. But if you are an average person with a reasonable income, puttering along and thinking about how to get more out of life, you might have just moved into a whole new frame of mind. A quick moment to recognise that these are really hard times, and with the average British person being more in debt since COVID than ever before, this might all feel impossible. But I really believe that the tenets of the FIRE movement, some of the thinking and the simple actions to make a difference, are valuable wherever you are in your journey. More on all of these, and steps five through seven next week.

PS: If you want to find out about FIRE and get all fired up yourself, Mr Money Moustache’s ‘start here’ post is a great one. MMM is the hipster uncle of the movement (which also has grandparents, coming to that another day) and is all kinds of inspiring, though one of the reasons I started this blog was that, whilst I love his writing, he doesn’t resonate with me much.

FIRE habits: a simple week’s routine

We’ve all heard the phrase ‘a journey begins with a single step’, and it’s a helpful reminder that even the most ambitious of ventures starts with just taking action. The more I engage in the FIRE journey (which continues to be much less about FIRE and much more about conscious living), the more important it is to remember that the single steps are actually the whole journey, and the journey *is* the destination.

Before I mix too many metaphors, perhaps it’s simpler to say that these days I focus more on the steps than the goals. Through peer coaching over the last year or two it became clear to me that my goals are sharp and focused: and my One Next Thing is also clear. What I was lacking though, was the idea of the messy middle section, or, what my life needed to be and become to get from here to there. So this post is about the small habits I’ve crafted and a look at how they worked this week.

Take time to smell (or plant, or photograph) the roses. Photo by Randy Tarampi on Unsplash
  1. Make time for gratitude: I’ve written before about my morning routine, which has been crafted to include mindfulness practice, gratitude journaling, and goal setting, all in about 30 minutes. Whilst I have to admit that I now do this probably three times a week instead of every day, I try and integrate gratitude practice throughout the day. This might sound very modern, but it’s also akin to what my granny would have called ‘prayer‘. Saying thank you before food, when receiving something, and before sleeping or travelling used to be much more ingrained into our daily lives than it is now, but it’s a habit that really makes a difference. If you really want to say thank you, be a British person asking for something in a shop – my son counted and the shopkeeper and I said ‘thanks’ three times each. Apart from generally making the world a nicer place, there is evidence that gratitude and appreciation contributes to our sense of optimism, and is one of the practices that can make you even more optimistic: something I can definitely appreciate in these challenging times.
  2. Meal plan, and stick to it: this is one of the major tools in my (seemingly never-ending) battle with my spend on groceries. I’ve always quite enjoyed the meal planning bit, but as with my early budgets, treated it as evidence that I was Doing The Right Things and promptly ignored it. So now I take a bit of time one weekend morning over coffee to look through the special offer flyers – these come through the door once a week in Denmark, and list all the different supermarket offers – and have a poke through the fridge, freezer and cupboards to see what we have. Then I talk to the kids and let them nominate two meals each (small salad-refusing daughter invariably says pizza and pasta, but we live in hope), and we sketch out the evening meals. I try to make it so they are logical: a roast chicken on a Sunday, then leftover chicken in a risotto on a Tuesday for example, or making sure that we don’t OD on over-regular infusions of tomato sauce and mozzarella. Then I check against the commitments for the week so that the things which take more time are planned for the evenings when I, well, have more time. The proof of the meal planning is in the eating, though, so the focused work is then sticking to the plan and not heading off to the supermarket.
  3. Check my finances: I tend to so this daily but I am also trying to trust the budget and wean myself off it. But checking in weekly means I can make sure I know what’s coming up; see if there are any sneaky tricks I have pulled on myself; and, hopefully, have a mental pat on the back for everything being in order. It has definitely taken a while to get here though, so if you are starting out then do check your bank daily (not your investments though, that way madness lies). Keeping a real eye on your spending is easily done through looking at your account regularly: whilst the odd £5 or even £15 here and there might not feel like a lot, seeing how it adds up will help keep you focused.  
  4. Do one big chore: well, they might not be that big, but it’s the kind of things where if they build up, they make me feel crazy. Recently I’ve been focusing on de-cluttering, going through the various bits of the house where crap piles up, and trying to feel like I only have things in the house which are beautiful or useful. I’ve also this week started with the Minimalists podcast which has lots of inspiration. We started the 30 day minimalism challenge as well this month – more on this soon. Other chores in this list include mowing the lawn, descaling the taps (thanks hard water in Denmark) or other thrills. But knowing I do one thing a week keeps me from waking up with randomized anxiety about the tasks undone.
  5. Get some fresh air: maybe not as obvious as the others, but I try and work out my exercise and fresh air intake over the week. Because we’re so busy with the usual minutiae, this often means a big walk at the weekend. I am always shocked by how much better I feel after a blowy walk. There is evidence (and not only just from talking to my mum for whom the answer to all problems is either a) a walk in the fresh air or b) a hot bath) that getting outside really does make you healthier, even compared to doing the same exercises inside.
It’s beautiful out there…

What do you do each week and how is it helping your journey? I’d love to hear from you!

Budget Check In: February

My second proper budget check in (having been blogging for 14 months. Small victories). And a lovely short month to focus on, after January which seemed to last 3100 days instead of 31. However, it did contain the February half term holiday; and an even-more-enormous-than-usual heating bill after I did the meter readings and it turned out we used a whole heap more than anticipated in 2020. This was also the month that we had to pull the house deposit together. But here we are: a check in of spending and saving for this month.

Month 2! Photo by Glen Carrie on Unsplash

I carried on the habit of tallying up the budget weekly, which I found really helpful. What I also noticed was that I do well throughout the month then have a sudden splurgy freakout in the last week and get takeaways etc and generally let loose. I had never really understood that I did this, and it’s so helpful to identify habits like this and be able to work on them.

So, how did we do?

  • I spent £6,164, or 133% of my monthly budget. This clearly sucks. There were three issues this month: £700 on winter tyres (I didn’t need them last year, but with temperatures of -9 and weeks of snow and slush, this year I really did). We also went on holiday for the February break, which cost £978, sharing a holiday home with another family just a 90 minute drive away. This felt expensive but it was totally worth it to spend time with others, somewhere with a heated pool and a hot tub. Money well spent having not spent a night away from home since June. Finally, we had a monster heating bill of £1,000 which will be the same every quarter this year. Blimey. We got all the old jumpers, socks and blankets out the day I got that bill, so fingers crossed that we won’t have another such bill next year.
  • There were some smaller over-spends against the monthly budget but these should work their way through. I spent £100 on a birthday gift for a colleague where others will pay me back; and another £100 on a series of exercise classes prescribed by the doctor, where my health insurance should cover the cost. Starting that exercise class is hopefully a step on the road to a healthier me, but oh my gosh it’s total hell.
  • But there were also lots of areas where I was well under the budget, and I spent 104% of the grocery budget which is the closest I have come to sticking to this one and which I am proud of! So, some gains in spite of the overall overspend.
Winter tyres. Surprise huge payment! Photo by Sid Ramirez on Unsplash
February
Item Monthly BudgetSpent Feb% of monthly budget
Childcare costs £         1,100.00 £          730.0066
Car (insurance, tax, petrol) £             125.00 £          731.82584
Charity £                66.67 £             25.8339
Eating out £             120.00 £             92.7177
Entertainment – subscription £                50.00 £             37.2474
Entertainment £             100.00 £             16.0216
Kids – extra curricular £             250.00 £                     –  0
Family £                50.00 £                     –  0
Groceries £             400.00 £          417.87104
Holidays  £             300.00 £          978.41326
Insurance £             200.00 £                     –  0
Personal care £                30.00 £             73.45245
Shopping – general £                25.00 £          134.12536
Shopping – gifts incl birthdays £                58.33 £             86.00147
Shopping – clothes £                29.17 £                     –  0
Rent and Bills £         1,500.00 £      1,500.00100
Transport £                41.67 £          101.16243
Utilities £             200.00 £      1,240.24620
TOTALS £   4,645.83 £      6,164.87133%
Savings though – am I sitting on a pile of cash yet? Photo by Mathieu Stern on Unsplash
 Monthly BudgetFebruary% of plan
Mortgage Capital  £                    865 £                 865100
Mortgage Overpayment  (actually deposit this month) £                1,250 £                100080
 Emergency Fund  £                    100 £                100100
ISA £                1,250 £                50040
Kids savings £                    248 £                248100
SIPP £                    300 £                300100
  £   3,148.00 £ 3,013.0087

Whilst the savings rate doesn’t look as good, I didn’t count up everything extra that I paid to my deposit for our house in Denmark, which all had to be in the account by the end of this month and which is in place! That’s £90,000 as a down payment ready in the bank, waiting for a big decision next month. I struggled to get the last little bit in place, so even though it looks as though I saved less than planned I am pretty confident that any additional money trickled into the deposit account and will count as capital at some point!

Overall I saved 34% of my income, and spent 66% which is a little worse than planned.

Hopefully this is because of money spent – such as on the car – where it will balance out over the course of the year. And I am proud of some of the areas where I have been able to really control my spending and starting to see changes, such as grocery spending.

How was your February? I’d love to hear how its going!

Risk and the single girl / parent

Risk is such a huge part of life. Every decision we make has an inherent risk attached to it, but most decisions are not something we give that much thought to. Maybe we should: the arguments around tiny habits and the difference they can make is certainly compelling, but at least for me I rarely think of these small things in terms of risk.

When it comes to finance, though, risk can start to feel like something that we have never dealt with before. And it is something of a different game. In finance, risk is predominantly thought of as the other side of the coin to returns. You make a decision about what to do with your money, invest it (including in real estate) and the chance of not getting the outcome you hope for or anticipate, is the risk.

In daily life, we all take risks all the time based on previous experiences and on trends that we know from others. It’s rarely possible to eliminate risks, rather, you can aim to mitigate them. Risk is also about balance. I cycle home from work (well, I did in those halcyon days when we left the house) even though I know cyclists are 15 times more likely to die on their journey than car drivers. Side note: cyclists are so well looked after in Denmark that the stats might be different here but I couldn’t find them. But I take into account the health benefits of regular exercise in the fresh air, and I mitigate other risks by wearing a helmet, having lights, and only cycling in bike lanes.

I am too risk averse to cycle in a short skirt, but this is a great route: Photo by Febiyan on Unsplash

Before investing, it’s good to understand your attitude to risk. Financial advisors have a nifty little questionnaire they use to assess your risk appetite, but you can do a lot of that analysis yourself by using the following questions:

  1. What can you afford to lose? If the answer is ‘none of it’ then you are going to be looking at some very conservative approaches. This is a good question to help work out a sliding approach to investments, where you safeguard what you absolutely cannot lose in cash or bonds, then portion out other percentages in increasingly high risk investments. There are funds that will do this for you as well: Vanguard’s LifeStrategy funds for example are staggered so as to offer a simple option for people in different phases depending on how close they are to retirement. I also ask myself this question every time I invest, especially in non-traditional areas. When I invested in cryptocurrencies for example, I only put in what I could afford to completely lose. My tolerance is more around ‘potentially losing my ability to go on holiday that year’ rather than ‘potentially losing my house’. Naturally the answer overall will also depend on where you are in life, and relates to question two:
  2. What are your goals and timings? If you are about to retire and need a guaranteed income, aggressive risk taking is unlikely to be for you. However, I invest my personal pension for example in relatively high risk investments because I can’t take it for another 20 years. If you are likely to need you money at a specific time, such as if you are saving for a house, then you’re less able to accept the risk of a volatile stockmarket. What this means basically is if you have to pull your money out at a particular time, there is a chance that particular time might coincide with a period of poor performance and you would make a loss. If you can wait for your money, you are much more able to tolerate risk.
  3. What is your own personal risk appetite? I think I’m quite a risk taker. I’ve lived all over the world, sometimes leaving at short notice, with small children in tow. But I definitely find that as a single parent with, as mentioned, no Plan B, I can be somewhat risk averse when it comes to money. So don’t be surprised if you find that you lit-party-girl sense of self isn’t the one holding the purse strings – and let’s be fair, this might not be a bad thing.
Sometimes it’s the risk which makes it fun. Photo by Valentín Betancur on Unsplash

But when the markets went into freefall in 2020, what I thought I discovered was that my risk tolerance on paper was much greater than in real life. I’ve reflected on this a lot since then, as I tweak my FIRE plan, and I am not sure that was accurate. Rather, my risk tolerance during my first financial shitstorm, was pretty low. But having lived through it, and seen that what feels irreversible very rarely is, has built another layer of confidence that I don’t think I would have got without the experience. In other words, you gotta be in it to win it.

But its easy to only consider the risk of taking action, rather than the risks of inactivity. As Tim Ferriss says, “Risk is the potential for an irreversible negative outcome”. And that is what can paralyse us in terms of decision making: the idea that the negative outcome is permanent. I remember being about 13 and choosing my GCSE subjects, and feeling for the first time that I was making an irreversible decision which would set the trajectory for A Levels, university, job – basically my whole life until death. I’ve made many, many switches since then, but that feeling of taking a giant pair of scissors and shearing off possible futures, is something which I still get when making big decisions. And since my decisions now impact on my kids, sometimes making decisions can feel impossible.

And sometimes, we can get caught up in fear spirals, and chalk them up as ‘balancing risk’. Tim Ferriss also has a great series of pieces on fear-setting as risk management: taking time to walk through your concerns and really understand ‘what is the worst that can happen’ can give you new insights onto what is holding you back. Every decision has to be a mix of not just financial, but mitigating the risks of living a half life – not FOMO, but really missing out on showing up as your full, amazing self with all the passions and gifts you come with – are real.

I kind of hate the phrase ‘living my best life’ mostly because it sounds so InstaSmug, but I think that’s what risk management really boils down to. Look at all the aspects first, not just the finances, and trust your judgement.

Love Life, Love Oprah: Photo Credit

Buying a house is a great example of this. I am in the process of buying a house based on a relatively simple set of calculations about rent vs mortgage+costs. But I am sunk into a total spiral of worry about all the things which could go wrong and, frankly, just what an enormous amount of money it seems. I keep coming back to two things: one is the calculations I made on affordability, stability of my contract etc; the other is the risk of spending another £120,000 on rent which I feel would be better somehow in my portfolio. And again, risk balancing isn’t just the financial – I want to have somewhere I can paint, and plant trees, and feel at home. If the flipside of the risk is that I am responsible for the whole thing then hopefully my research, pre-purchase survey, and emergency fund, will get me through it. Fingers crossed, anyway!

What is your attitude to risk? And how does it impact on your decisions? Look forward to hearing from you!

Valentine’s Day Massacre: The financial inequality of single parenting

In my last post I promised to come back and reflect specifically on financial inequalities that face single parents. Being a jolly sort of soul (and, obviously, single), Valentine’s Day seemed like the perfect time. I considered doing a post on self-care and self-love and how this relates to FIRE, but whilst it’s great to work on being positive and hold yourself to account, sometimes it’s necessary to look at structural inequalities and burn. it. all. down.

This isn’t a post about how hard it is to do all of this on one income, though that’s true. There are more single people in the world than ever, around 45% of the adult population in the global North, and there is evidence that they are happier than married counterparts. I am not an evangelist for the single state – indeed I would be happier in a commune than living alone – but I do sometimes imagine what I could achieve if I was part of a couple with the added energy, income, time and other resources and it makes me dizzy.

There’s a lot of love out there, even if you’re single. Duh. Photo by Paweł Czerwiński on Unsplash

So no, it’s not just jealousy or the basic ‘2 incomes is better than 1’ point. In the UK and many other countries, ‘couple privilege‘ is a real thing: outside of the obvious difference in having two incomes, there are tax privileges to having a spouse for example. There are a myriad of hidden costs to being single, from holidays to supermarket norms, not to mention the cost of housing and how single people are viewed as a greater risk in terms of accessing a mortgage.

In addition to this, for single parents there are punitive financial measures specifically designed to impact on us. Don’t forget that our current Prime Minister called the children of single mothers “ill-raised, ignorant, aggressive and illegitimate” (ironic given his contribution to the creation of single mothers). And don’t his policies show this belief. Changes and restrictions in benefits (most of which are not actually spent on ‘dole scroungers’) including family benefits are pushing single parent families even further into poverty. The British charity the Child Poverty Action Group have talked about the ‘war on lone parents’ and cited evidence that current policy really does try and make it harder for single parent families, presumably as a deterrent for the terrible mess we make of society.

Research in the UK shows that this approach has been so successful that it is not possible for a single parent on median earnings to reach a decent minimum living standard. Indeed, the gap between earnings and costs are getting worse thanks for austerity and benefit cuts, and price rises. For lone parents working full time on median earnings, the shortfall has risen from 6% to 16% in the past ten years.

In 2019, the overall cost of a child up to age 18 years (including rent and childcare) was£185,000 for lone parents (up 19% since 2012) and 151,000 for couples (up 5.5% since 2012). A greater cost, on half the possible income. It feels hard because it IS hard.

Maybe we should be angry instead of ashamed. Photo by Miguel Bruna on Unsplash

In a previous job where I was posted overseas for a British company there were significant benefits available for a spouse that I was unable to tap into for either of my children’s secondary parents – their father, or their grandmother. These benefits included the cost of flights to spend time with us, or if one of them had wanted to live with me, pension contributions. I lost out on around £20,000 per year because those benefits could only go to someone with whom I had a very particular intimate relationship. I felt totally judged by 1950s hetero normative rules: you can have the money if you still go to bed with the person with whom you had children, but if not, forget it.

The attitudes here, both in the treatment of those on benefits and low wages, and those of us in a much higher tax bracket, are unite by the same message. You have failed, and you should be ashamed.

And we are ashamed. Parents who have to bring up their children on the bread line already feel like they are failing without being told. A New York Times article talks about how normal this all is. Whilst being frugal, getting a side hustle and so on are the building blocks of FIRE they are also par for the course when making ends meet. It’s the same shame that stops people asking for help; stops them checking to see if they have the benefits they are entitled to, or asking for adjustments to working hours. It’s the same shame that in my own petty way, stopped me from questioning why I was paying 50% of a bill where I was clearly not benefitting from 50% of the purchase.

I am blessed to be able to bring up my children without stinting – on luxuries as well as the basics, where we are frugal it’s out of choice – but I am also constantly anxious about what happens if I can’t work. We don’t have a second income to lean back on. We don’t have a plan B.

Lessening that anxiety is one of the reasons that financial independence is worth so much as a single parent. There are loads of brilliant exes out there who co-parent and equally share the financial burden but I can honestly say that I don’t know any of them myself. When you have sufficient issues with someone that you made the enormous decision to break up your family, relying on them financially can be challenging however easy it is. Sometimes the plan B just isn’t possible.

But sometimes, we also need to think about how society – and communities like FIRE – can help us create new plans. Love is so much more than just romantic: for our kids, for our community, our planet and each other. Happy valentine’s day to us all.

Love one another, wherever you are at. Photo by Priscilla Du Preez on Unsplash

The inequality of single parenting

It won’t surprise you to know that this isn’t the life I had planned; not the life I expected. I was raised by a single mother, and I thought I had done everything I could not to become one. Not because I didn’t love my childhood, but because I could see how hard everything was for her.

And I know how lucky I am. I write a lot in this blog about gratitude, and I really mean it. There are so many people out there who can’t have children for whatever reason and the impact this can have on their mental health and sense of self. There are so many people without the blessings I have had which result in me having a great career, good health, family and friends, the ability to provide for my children and watch them grow, and so, so much more. I am thankful every day.

But I am also exhausted. And frustrated. And sometimes I just want to scream into the dark night and I can’t even go for a beer or a run or have a chat without organising childcare and dealing with my children’s emotional needs first. During these months of home-schooling and juggling working fulltime from home, along with the usual home-and-child-admin and without the occasional respite of my mum coming to stay, I am just getting worse and worse at parenting – worse and worse at holding it all together. I’m not alone: research from the University of Oxford – and indeed common sense and even a cursory glance at social media – shows parents’ mental health has been massively impacted by this challenging period.

Sometimes I feel *this* sad and there isn’t even someone to take a photo of my back. Boo. Photo by Volkan Olmez on Unsplash

What-ifs have always been a mainstay of those 3am thought spirals. What if I had had children with someone else, and stayed together? What if I never meet anyone else? Might I meet someone if I were thinner/ prettier/ younger/ less career-motivated / didn’t move around so much? What will happen to me when my kids move out? Will we all make it until then?

I started this blog because I so rarely come across people like me in the FIRE movement. Sometimes I think it’s because we’re all just coping, all just knackered. There have been challenges to the lack of diversity in the FIRE movement and some brilliant female role models out there, and there are absolutely some single mums and single women. But the majority feels to me like couples: acres of material about getting your spouse on board; hours of podcasts of people who live off one income and save the rest, or have one parent stay home. Being a single parent sometimes feels like having fewer choices: like having the box you’re in get smaller and smaller.

We are not going to be near a beach like this on holiday but it made me feel calmer just looking at it. Beautiful but tenuous. Photo by frank mckenna on Unsplash

Today’s gripe though, is more pedestrian. It’s about how single parent family status isn’t taken into account, and how shitty it is to either make a fuss to make it fair, or swallow it down and just make yourself angry whilst everyone else gets to feel ok.

This week we booked a holiday for the February half term (free to some extent since I got a refund from a holiday booked outside of Denmark so the cost already shows up in my 2020 budget!) in a summer house not too far from here. We booked with a family we like a lot: kids are good friends, we sometimes hang out all together for dinner and board games, and the mum is someone I go for occasional mum-drinks with others from school. All sounds great. But we are three (in two bedrooms) they are four (in three bedrooms). We agreed to do a grocery shop and share costs, but my daughter basically doesn’t eat (a story for another time) whereas one of their boys and the husband really wolf food down. She sent me the bill for my share today, which is a straight 50% of the total cost of both the rental and the food. Of course I paid it without a qualm and now sit up working on my stomach ulcer.

Sigh.

Call her! you think. Make a point, she’s not a mind reader! my mother would say. But you know – we have this all. the. time. And not just with money. Last time we went on holiday with two families there was an agreement where one set of parents would relax whilst the other set would look after the kids (usually split into mums and dads, taking it in turns). But when I went to relax there were mutterings that I wasn’t doing my share of the childcare: that I was taking advantage. So I ended up on child duty for the entire time, and relaxed even less than I would have if I was at home.

So we end up not holidaying with other families, and having it be more expensive. Or indeed just swallowing the cost rather than make a fuss and having it cost the same as it does for a two-income-family-of-four.

Next week I will write a more evidence based blog about the financial inequality of single parenting (and indeed being single). But for now, thanks for being a safe space for when things get hard.

Budget Check-In: January

In the spirit of trying to be more self-accountable, here are the monthly figures. I have to say I feel quite proud of having actually engaged with the budget during the month – I do realise that’s the point, but as noted I have tended to treat my spending tallies more as a summary of mistakes rather than something I can use to tweak behaviours and get back on track.

About to end! Photo by Glen Carrie on Unsplash

I have been tallying up my budgets weekly and found it really helpful. It also takes such a short time, and removes The Fear of having to suddenly spend four hours pulling it together at the end of the month.

So, how did I do? Not badly in some ways but not great in others:

  • I spent 95% of my monthly planned budget, or £4,414 out of a planned £4,645. In some ways this is great since it’s under budget – but looking across the lines it’s clear I should have spent even less. Some annual costs (such as kids’ extra curricular activities) are budgeted for monthly but I didn’t spend anything this month, meaning in theory that at some point I will overspend if I don’t pull it back from elsewhere. I spent quite a bit on gifts but January is birthday heavy for us so this one should work out.
  • I still spent 150% of my grocery budget. This is SO ANNOYING – I was at almost exactly £400 on 30th January but we had a birthday dinner to host today so I went crazy in (the most expensive) supermarket. I knew as I was doing it that I was already regretting it. Something to continue working on, clearly.
  • We hadn’t planned for the impact of Brexit. I feel like, in the words of Lily Tomlin, it’s going to get a whole lot worse before it gets worse, but the immediate impact was that we couldn’t watch the telly. I might appreciate that this is small beans compared to, well, so many other things, but – the telly! We normally watch Prime, through my UK account, and pay additionally for some channels. 1st January – nada. I spent a frustrating amount of time trying things out (turns out you can’t get Brit Box in Europe, since apparently it’s only available in Anglophone countries) and did the single mum thing I hate – asked One Of The Dads to help since technology is a Boy Thing. Shakes fist at self. So I ended up buying an Apple TV box, cancelling my Prime subscription and trying HBO Nordic. We don’t have terrestrial or cable TV so I don’t mind paying for *something* but this was not budgeted for. It turns out my mum also won’t be able to send over gifts for the kids (or me) in the same way, so watch this space for the reign of terror which begins when I run out of marmite.
  • The kids’ schools are closed since Christmas and after a few weeks my son started to get neck pains. So whilst we had laptops from last time, my shopping-general budget took a hit to buy mice/keyboards/ whatnot to set him up, and a webcam for us both so we can use a proper monitor. I managed to find an old monitor and some bits and pieces, and we asked first on the local freebie marketplace, but still had to fork out.
  • There are still some things I haven’t budgeted for. Almost the entire ‘family’ spend this month was on helping out a very old friend. I can afford to do it, and he has done the same for me in the past, but it wasn’t anywhere on the list.
Item Monthly BudgetSpent Jan% of monthly budget
Childcare costs £         1,100.00 £             790.5472
Car (insurance, tax, petrol) £             125.00 £                99.5080
Charity £                66.67 £                25.6338
Eating out £             120.00 £             104.2287
Entertainment – subscription £                50.00 £                72.77146
Entertainment £             100.00 £             340.09340
Kids – extra curricular £             250.00 £                        –  0
Family £                50.00 £             170.39341
Groceries £             400.00 £             597.15149
Holidays  £             300.00 £                        –   
Insurance £             200.00 £             127.8764
Personal care £                30.00 £                47.02157
Shopping – general £                25.00 £             165.37661
Shopping – gifts incl birthdays £                58.33 £             167.97288
Shopping – clothes £                29.17 £                        –  0
Rent and Bills £         1,700.00 £         1,638.5796
Transport £                41.67 £                67.46162
TOTALS £   4,645.83 £   4,414.5595%
Enjoy the little things – like British TV? Photo by Brigitte Tohm on Unsplash

With that done, what did I save?

 Monthly PlanJanuary% of plan
Mortgage Capital  £                    865 £                    865100
Mortgage Overpayment  £                1,250 0
 Emergency Fund  £                    10015001500
ISA £                1,25050040
Kids savings £                    248248100
SIPP £                    300300100
  £   3,148.00 £   3,413.00108%

This went pretty much to plan. In January I had to move my house deposit over to Denmark and I lost some money in transaction and exchange rate costs. I also need to now boost my emergency fund as I’ve taken it down to £4,000 (or one month’s expenses). It’s definitely not enough in these uncertain times, so rather than focusing on my usual goals I need to spend a few months getting that back up to at least three months’ worth.

Overall I saved 44% of my income, and spent 56% which is a little better than planned.

Given the overspend in some areas, February should be a month of clawing back – though it does include half term holidays… Watch this space!

How did your January budget go? Feeling in good shape for the start of 2021? I’d love to hear from you!

PS – if you like British TV and don’t feel like your life has enough dystopian fear in then I highly recommend Years and Years (I am not paid for this – it’s just the best thing I’ve seen in a while. Terrifying).