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End of tax year ‘to do’ list

/ Gracie Sunderland / Leave a comment

The clocks changed last night: this is how British people refer to daylight savings. I realised it is not universal, but since this is a post focusing on the UK tax year we can just start there.

So, the clocks changed, the snowdrops are out, and its raining rather than snowing. That can only mean one thing: the end of the tax year. I’ve been talking about this – like all of it, the flowers, the weather and the financial planning – over on my IG page. Do come and join me, a lot of this is more fun with pictures.

Since 1753, for various nefarious reasons, the UK tax year runs from 6th April-5th April the next year. That means there is a week until the 5th April deadline for the 2022-23 year ends, and since the 6-10th April are also public holidays (quaintly referred to as Bank Holidays, honestly I didn’t appreciate how idiomatic British English is until I moved away) there are just eight working days to put in play any transactions relating to this tax year.

There are a couple of big things to be aware of in terms of the tax year:

  • If you self assess for tax, you will need to get ready for the end of the year and for doing your tax return;
  • There may be changes announced which will impact you from 6th April which you should be aware of; and
  • Each tax year you get tax-free allowances which mean you get to keep more of your money through savings, pensions and other approaches. It’s all very simple but if you don’t use the allowances you lose them.

Of these, I will come back to planning your tax return (clue – I *love* doing mine). As more of a global blog I won’t go into the details on the second point but key things to look into are a raise in minimum wages for 21-22 year olds, but also a raise in national insurance in order to pay for social care. For this post I want to talk through some of the allowances, just in time for you to put them into play.

  1. You can max out tax free savings vehicles. The main one for most people is an Individual Savings Account, or ISA. There are multiple different types in the UK, but your money grows tax free. You can invest up to £20,000 per year. There are tons of benefits here – you don’t pay tax on any of the growth, ever, and since you can place it in a stocks and shares ISA you have a decent chance of it growing a lot. There are other options including Lifetime ISAs (though these are open only to people below 40, and are closing out). ISAs need to be opened or rolled over each year and money needs to be paid in before 5th April. If you don’t reach the £20,000 contribution allowance you just get it again next year – and it’s totally worth setting one up however much or little you can put in.
  2. This is also true for savings vehicles for your children. Junior ISAs (JISA) have an allowance of £9,000 per child per year and with stocks and shares JISAs and the power of compound interest, this can make a huge difference in financial planning for your children.
  3. Also thinking of savings for kids, there is the option to open a Self Invested Pension Plan (SIPP) just as there is for adults. The allowance is £3,600 per child per year and whilst the account moves into their name at 18, they cannot access the money until age 57. Again, the power here is from compound interest so even a tiny amount can be worth it with the tax benefits thrown in as well.
  4. For adults, the SIPP allowance is also worth investigating, especially if there are limits to your workplace pension or other options. This year you can pay in up to 100% of your gross annual earnings up to a maximum of £40,000 which will increase in 2023-24 to £60,000.
  5. If you are married then there are tax free allowances you can take advantage of. It’s possible to ‘share’ a tax allowance with a spouse depending on your different earning levels. Doesn’t apply to me so have not looked into it deeply, but it’s worth noting.
  6. Finally, check your tax code. It is your responsibility to do this – whilst there is a tax free allowance for income tax each year, the wrong tax code can mean that you’re paying too little or too much, and that can come back around when you least need an extra bill.

I hope that has been useful! Remeber – with the time left, you could open a new account and max out the allowances before the end of the year.

Reminder on the disclaimer: I am not a qualified financial planner or advisor and none of this blog or post constitutes ‘advice’. Treat is as seriously as if you were chatting to someone super interested in a subject at a bar. So you might find out something intersesting but you definitely wouldn’t act on it until you took other advice. Cool? Cool.

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What a week (in finance)

/ Gracie Sunderland

Blimey. This week has been far from relaxing if you are in any way interested in finance – or indeed interested in having any money!

The world shaking news about the collapse of Silicon Valley Bank (SVB) was quickly followed by the potentially much more impactful possible collapse and subsequent bail out of Credit Suisse. Those of us who remember 2008 perhaps quaked a little in our boots, since fallout from failure in the banking sector has wide ranging consequences on ordinary people. Indeed, the failure of SVB is the biggest bank failure of a US Bank since that financial crisis.

Credit Suisse is one of the most important global wealth managers, and is in the top 30 financial institutions who are considered ‘systemically important’ and whose collapse would impact across the financial ecosystem world-wide. Unfortunately with that in mind, Credit Suisse shares have lost more than 75% of their value over the past twelve months and their bail out by the Swiss Central Bank might not even be enough to shore them up in the medium to long term.

So, what does it mean? Clearly as someone who doesn’t work in finance I have only the vaguest idea. In general though, commentators seem to agree that whilst the impact will be felt, the regulations put in place after 2008 mean that they will be felt as ripples rather than a tsunami. However, if SVB was impacted for example by rising interest rates and inflation, then there might be a lot more to come.

The knock on effect has of course been a downturn in the stock market, with share prices reducing and the banking sector in particular – unsurprisingly – hard hit. As we get to the end of the financial year in the UK and I am preparing to max out my stocks and shares ISA I am trying to view this as buying shares on sale, rather than freaking out and hiding my money under the mattress.

The final thing was the UK budget, as announced by Jeremy Hunt. Aside from the cost of living crisis in the UK (and I could say more but I’m trying not to be overly political here…) he is focused on ‘prosperity with purpose’ without seeming to make any meaningful movements to support people’s ability to live whilst the supposed magic happens. Hunt committed to keep the energy cap as well as increasing support to get people into work. What jobs there might be is a different question.

The main news seems to have been the reform around childcare, also based on ensuring people can work more hours, meaning parents of children aged nine months to three will be offered 30 hours a week of free childcare in term time – as long as both parents are working at least 16 hours a week. Let’s see if the issue of childcare places and the under payment of many places under the free hours scheme will get resolved.

How will the budget – or the issues with the Bank – impact you? I’d love to hear from you!

Showing up

/ Gracie Sunderland

In my last post, I was focused on making changes you can be grateful for as you grow older. But as Valentine’s Day came around, I have also been thinking about the expectations we have about others and what generosity looks like as a mindset. Last year around this time I wrote about financial inequalities for single parents so perhaps this represents personal growth? Or maybe February is just the kind of month for reflection.

On thinking and writing about this, I realised that making and keeping commitments to myself are an act of radical self care. Removing the anxiety around whether I will or won’t do something, and removing the restlessness that comes from leaving all possible options open: this is a pathway to peace.

What this also means is that when others don’t fulfill their commitments to me, I take it badly. In previous posts about this it was important to recognise that I am not always reliable – far from it – but if I have committed to do something, whether a basic act like call you, through to something more existential like ‘have your back’, I am all in.

I don’t even quite know what I want to say here. But there is something nagging in my mind about the kind of behaviours we accept, and what that does to our self esteem. If I expect high standards from myself and feel like making commitments and sticking to them show respect and value, then I try to live that in how I treat people. If I don’t get that back, does it mean that people are treating me poorly or does it mean that I am not open enough to have people show up authentically?

Likewise, if gift giving is part of my ‘love language’ (hate that phrase but not enough to not use it as shorthand) and someone isn’t willing to bend to those needs is this someone who will always disappoint me? Or a situation where I am pushing someone to be too different from who they are?

And if I am able and willing to create so much space for other people’s authenticity why wouldn’t I expect the same willingness, and a compromise and sense of joint value where we navigate this so it works for us all. So everyone is in the same boat instead of just one person being prepared to compromise their needs.

This isn’t about romantic relationships though Valentine’s Day would have us think that is all there is in this world, it’s about how I show up and what I need from others. And clearly I don’t entirely know. But I hope to work it out.

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Changes future you will be grateful for

/ Gracie Sunderland

I was inspired this week by a Twitter post by Dan Go on ‘things I’m doing at 43 to avoid regret when I am 73‘. I am 43: I don’t like regrets. The guy writing is a fairly traditional motivational coach of the kind where I doubt we would have much in common, so I thought I would come up with my own.

And whilst this account isn’t on Twitter we are definitely on Insta: come and join us, the water’s lovely!

So these are the ten things that came to me, most of which are not a surprise. All of them have simple things that can be done today, or this month, and all of them will help you not just in 30 years time but right now in terms of living in your peace.

Work out what matters to you. Everything else comes from this. You are old enough now to know what matters to you, and to go out and live it. Where there are perceived tensions, this can be awkward, but really they are rarely so dire as to make things impossible. And think about it in terms of your top three since as Brené Brown says, more than three priorities is the same as admitting that we can’t actually choose. For me the three priorities are my kids, my community, and social justice. But it can be anything: your faith, your family in a larger sense, or something granular like running or gardening which gives you the kind of mental and physical strength and peace to deal with everything else. It really doesn’t matter. But it means you have a kind of north star to come back to if you are feeling off-course.

Make commitments. Look, you get to decide what you want and what you don’t (and if you are a guy, I might have just lost you with this one). But the older I get, the less respect I have for the emotionally immature reluctance to commit. It’s not just about intimate relationships, but with everything. Being half-assed means getting half-assed results. That will be true whether it means you are hoping a relationship with a partner will grow positively whilst you also try and enjoy keeping your options open: or whether fear is making you self sabotage with how you do your work. Instead of seeing commitment as a threat to your freedom, see it as a way to aim for depth instead of breadth. You might be amazed.

    Learn to deal with hard things. In Dan’s post he talked about learning to deal with grief, which is a critical on especially at this time in our lives. But we all have our stumbling blocks. Knowing yourself better is a great first step: understanding that you struggle with conflict, or shame, or whatever means you can look it in the eye and try to learn new mechanisms. It’s not enough to stop there though, and just get into an anxiety spiral when hard things are coming up. Work through them, knowing that crappy things will just be crappy, but they will no longer be impossible.

    Get financially secure. So my whole blog is pretty much about this, but to me it’s not a priority because it’s a mechanism which allows me to focus on the critical issues. But paying off debt, organising your finances and mindfully allocating your money toward your priorities really does set you free to focus on other things. If you don’t know where to start, check out my three introductory posts: getting started, auditing your fixed costs, and paying yourself first.

    Take time with people who might not be around for long. This might well be your parents – and with the total uncertainty of life and how hard this year has already been – it could be anyone that matters to you. Spend time to really understand them, ask the questions you might want answers to in the future, and make your peace with any lingering anger or resentment.

    Take care of your body. At 43 I can see that the careless disregard I have always had for my body – I mean it’s just there, it looks ok, what’s the issue? – will in years that might be coming very soon, result in challenges. There is endless advice out there about how to exercise, what to eat, staying healthy blah blah and none of it turns me on at all. So this one is a simplified version: to treat my body like a precious and rare commodity, since that is what it is. That means making those regular appointments at the dentist or GP; taking some basic care over what I eat, how much and when; and getting some exercise in. Some of that is easier than others, but none of this requires me becoming a world class weightlifter, just having one less slice of cake. And recognising that life is guaranteed to nobody (see point above…) might help focus on this.

    Make a plan, and go for it. So thirty years seems like a long time. I mean, I was 13 thirty years ago: and now I have a 13 year old. But being clear where you want to go matters, and more at this age maybe than any other. I don’t want to work for another 25 years (which is what the UK State pension age qould require) but that means really working toward an alternative. I don’t want to be a burden on my kids in terms of my money or my health – I mean I will totally rely on them but that’s part of our cultural norms, I don’t want to have to – so making sure that I work on these now is critical.

    Protect your energy. This might mean cutting off toxic people, or it might mean dealing with a sticky issue which has been nagging away at you. For me it means trying to be less negative and speaking out rather than resenting things. But it also means saying no to certain situations where I feel obliged to be spending time with people that I don’t really get any value from. Being able to prioritise protecting my energy over fulfilling social obligations feels like a gift.

    Do what you love. OK so you might not be able to do this instead of your day job (or not yet) but doing what you love really does matter. Doing activities you love is part of dementia prevention: hobbies help us keep mentally stimulated without pressure, generates a sense of achievement and goal setting, relieves stress and builds confidence. So whether it relates to exercise and keeping healthy, or you do jigsaw puzzles, write a blog, paint in your attic, or whatever, do it because you love it. Note: partying doesn’t count: dancing totally does.

    Work out what needs to be in place if you pass away. Yes make a will, but also prepare your executors. If you have kids, work out the details of guardianship for them and if they are old enough, prepare them for what would happen if you passed. Organising your money into a Trust, along with simplifying and preparing a guide to all the paperwork will make things so much easier for everyone at a time when they will already be devestated by losing you. Which, God willing, will be much after you turn 73!

    So I sold my rental: Part 2

    / Gracie Sunderland

    Don’t forget to come and join me for daily inspiration on financial independence, budgeting, wealth, and all manner of other nonsense over on Instagram!

    Last week I wrote about selling my rental. I wanted to reflect a little on the financial side of how that went.

    I bought my property in my home town in early 2016, intending to live in it. It was a tricky time with the market, and we moved further out that our previous home. Since I was on a budget, I looked at 42 properties and eventually chose the one we had nicknamed ‘the ugly house’.

    A friend gave me some great advice at the time. He reminded me that I wasn’t looking for my forever home: that I needed something that would work for at least five years until my son reached secondary school age when maybe we would have different needs. It needed to be cloe to public transport, have some outdoor space, and some flexible living space for when my parents visit etc. And it had to have rental potential based on how my job works and how things might pan out in future years.

    And it turned out that rental potential was needed much before imagined. I was offered a job almost straight away, and moved six months after buying the house. So naturally I rented it out.

    All in all, it was rented for six years. There were about six months of ‘void’ (without tenants) and I had three different sets of tenants in that time.

    During that period, the house went up in value by £96,000. So even if I hadn’t rented it out or made any improvements, I would have made a profit.

    So how did the financing work out?

    Below I set out a) the costs which are due to buying a house. These include sale and purchase costs, the mortgage, and insurances. Whilst the types of insurance are different, it probably works out about the same. Then b) costs unique to having a rental. Whilst some of these are maintenance costs, having to contract these out (or indeed do them when I would happily live with e.g. not redecorating for a while) I add them all in here as relating to the rental.

    Purchase fees (solicitor, survey, stamp duty etc) £         8,544
    Sale fees (solicitor, survey, stamp duty etc) £         9,360
    Mortgage insurance £         1,440
    Other insurance (landlord, boiler etc) £         4,200
    Mortgage £      64,440
    Total costs regardless of tenanting £      87,984
    Letting agent fees £      11,448
    Maintenance, decoration etc £      12,000
     Costs specific to renting the property  £      23,448
    Tenant income £      93,600
      
    Total costs £    111,432
    Total costs in spite of tenant income £      17,832

    So overall, I didn’t break even. Since this was bought as a family home and perhaps wasn’t the best in terms of rental options, I can live with this. But it is nothing like the predominantly American mantra of real estate as a way to make millions. Since it was rented out, I also had to pay capital gains tax on the increased value, which cost an additional £23,000, taking the total rental specific costs to £46,448.

    On the flip side, having tenants essentially paid my mortgage which is a huge deal. So that was £64,400 which I didn’t need to make as income.

    So it worked out pretty well in the end. I made the decision to overpay my mortgage, so was able to sell the rental and come out with a decent chunk of money clear, a lot of which is profit from the shifting market. And now I get to decide what to do with it!

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    So I sold my rental: part 1

    / Gracie Sunderland / 1 Comment

    Welcome to this blog post – if you’re new, do have a poke about the other posts, and if you’re an old friend, thanks for sticking with me. Also do come join us over on Instagram for frugal food and adventure ideas, reflections from the Barbies (those girls don’t play), and some inspiration.

    So, I was banging on mysteriously in my financial review of 2022 about some major changes in my portfolio, and the biggest one is that I have sold my rental property in the UK. This was something under consideration for a long time – indeed, it’s a year ago that I made the first call to an estate agent to get a valuation. During my portfolio valuation in March 2022, I realised that 60% of my net worth is in property. Since around 30% was in pensions, it meant that there was very little liquidity.

    Whilst I don’t need a ton of liquid cash, I am at a point where I need more flexibility. That might mean having more accessible money for investing in a side hustle, or a smaller property in Kenya as I plan my transition there. So it doesn’t mean putting it all under the bed in a cardboard box but it also doesn’t mean hosting so much of my net worth in one property.

    I write about housing and home ownership a lot, especially recognising the tensions where structural inequalities impact people’s ability to own a home and how this affects generational wealth. I also recognise that the UK rental market is an absolute catastrophe, with rising rents and rising uncertainties holding back a huge number of people from fulfilling their potential. It isn’t just about whether people can buy a home of their own: spending huge amounts on rent means that it’s harder to save for a future, and lack of stability in the market is impacting the sense of living in ‘permacrisis‘ which is impacting mental health for so many.

    All of which are critical conversations. But this post is just about the decision to sell my rental property, and how it is working out so far.

    One of the main challenges with having such a heavy lean towards net worth invested in property, is the level of risk. Whilst owning a house to live comes with a certain amount of risk, it is very different to owning property as an investment. If my house that I live in goes down in value, all the other houses locally will likely go down in value too meaning that I haven’t lost out substantively: the market has changed for all. Plus if I want to live in that house, as long as I can pay the mortgage (hello rising inflation), it balances out.

    With the uncertainties in the housing market in the UK, I felt that the risk was too great and that I would be stuck with the house forever. I had bought the house planning to live in it with my kids, but then I got a job overseas and now I really don’t see us moving back any time soon. Whilst it was a good house for us when my children were smaller, I had planned for it to be a ‘five year home’ and we are past that point – even if we wanted to move back, the size and layout of the house, and proximity to a decent secondary school, means it doesn’t work for this season in our lives.

    Whilst the rental income was covering costs, it wasn’t enough to make the locking up of all other assets worth it. In fact, choosing to rent out a house that I had bought as a family home only made sense when I was thinking we might move back to it. Many FIRE podcasts talk about this – basically, what you look for in a rental property and a home for yourself are different. Which is not rocket science, but good to remember.

    Paula Pant has some useful guides to working out whether a rental property is worth it. You can have a read for yourself to get into the complexities of it, but my property fails at the first hurdle. Paula’s ‘one percent rule’ recommends that you only consider a property where the rent equals one percent of the purchase price. So if you have a house like mine where the acquisition price was £360,000 it should rent for £3,600 per month. Whilst the rental markets in the UK and US are totally different, by the time of the sale (noting that the value had increased, and I had frozen rents at the same amount since 2016), rent for my property equaled less than 0.25% of the market value.

    So I decided to sell. I wanted to treat my tenants well, and gave them six months notice that I would not be renewing their tenancy in September. I agreed a price and put the house on the market. Since things are so strange at the moment, I had no offers for some time, then an over asking price offer which I accepted immediately. There was a lot of negotiation trying to get things done as quickly as possible on their side so they could be in for Christmas, and my recognising that just after my dad passed away, I was really not capable of dealing with very much. So, with help from the estate agents, we muddled through and completed on the sale 10 days before Christmas.

    And that’s it! It feels like a long post but it was a decision which took so much thought, and one where a lot of the thinking was basically crystal-balling in terms of what would happen with housing market, mortgage rates and so on. And in the end, I had to make a decision based on the information that I had at the time, and what season of life I am in right now. I am finalising the financial assessment of how it went and will share in a future post (including all the joy of Capital Gains Tax woohoo) but for now, I am excited about what’s next for that money, and hoping the new owners had a great Christmas in their new home.

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    2022: Financial year in review

    / Gracie Sunderland / 1 Comment

    I like to start the new year with a stocktake of how my finances are doing and whether my savings and investments went according to plan, then using this as a prelude to setting some plans and goals for the coming year. This isn’t the only focus for the year, so check out future posts to find out more about setting intentions, vision boards and the like. But it is a good way of gathering some baseline data to see where I am starting from.

    To say 2022 was a tricky year financially is a massive understatement. Whilst the economy globally seemed to be strengthening post-COVID at the start of the year, the invasion of Ukraine in February turned a lot of the world’s certainties on their head. Prices started to go up for petrol, food, energy, leading to massive cost increases in the basics for most households.

    This trend has continued throughout the year, with supply chain issues as well as scarcity in some areas leading to a crisis with the soaring cost of living. I feel like I’ve been writing about this all year: 92% of adults in the UK have reported an increase in the cost of living, with 60% saying they are ‘very concerned’ about their ability to cope with additional rises. Food banks in the UK had to distribute more than 1.3 million food parcels in 2022, an increase of 50% since pre-COVID figures. I recognise that whilst financial freedom remains a critical goal in my life, so many people are getting closer to the financial precipice that they really need to get support, and get it now.

    Inflation also grew at a significant and rapid rate, hitting almost 11% in the UK by the end of December. For many people, including me, this had an immediate impact on mortgage interest rates, biting even deeper into the daily costs of getting by. Whilst the expectation is that inflation has now hit its highest point and will start to reduce in 2023, the impact (and uncertainty) of these shifts are real.

    It has also been a shaky year for the markets. Again an understatement, with the Financial Times headline for the end of the year reading Stock and bond markets shed more than $30tn in ‘brutal’ 2022. Markets in the US had their worst year since 2008 (and we all remember what a brilliant year that was). Whilst I love FIRE and the focus on both balancing for risks, and keeping your head in the event of a downturn – and I have definitely moved on from panic selling in 2020 – it has felt like another rollercoaster ride which just hasn’t been that fun.

    This has also been the worst year in terms of growth for my own portfolio. I made some major changes this year (more about this in future posts) to rebalance away from being over-invested in property, but continued to invest throughout the year in mutual funds and my pensions. I added in kids’ savings here which I don’t normally do, but as they are starting to get older I need to come back to my financial planning for them, and make sure I am adjusting as needed depending on their age and stage.

    My investments this year came to almost £80,000, though some of this came from my property sale meaning that my investment from salary alone came to £50,000. I am extremely proud of this figure and what it represents in terms of prioritisation and tenacity. Since I have been working on myself over the last few years, I can feel that pride at the same time as recognising that my salary and privileges mean that I am in a very unusual and blessed position.

    2022 Contributions
    Personal pension (SIPP) £                   8,600
    Savings (stocks and shares ISA, emergency savings) £                 31,000
    Work Pension (pre-tax) £                 18,444
    Mortgage capital overpaid £                   5,000
    Kids’ savings (JISA, J-SIPP) £                 16,000
    Contributions £                 79,044

    Next steps for me are to do a review of my net worth (and realistically to not compare it to a US$ amount as I traditionally have – with the recent forex issues, this is a pathway to sadness) and set out some plans and goals for 2023. Whilst I do that, I will just continue to save and invest as usual, and get ready for what is hopefully an easier year for us all.

    Look forward to hearing about your 2022 and how able you were to follow your financial plans given that major challenges during the year.

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    2022 FIRE Podcast Roundup

    / Gracie Sunderland

    Firstly thank you for being here with me in 2022, and for joining me over on Instagram. In spite of a very challenging year, it’s been a privilege and a blast!

    I’m so happy to be back with you after a much needed break, and writing this gentle post with some recommendations has been a nice way to return. But I am looking forward to much more on family, mindfulnesss, FIRE and much more in 2023.

    I’ve been consuming a lot of content recently, and since it’s such a hit and miss process, thought it was time to share some links and ideas as to where to find more FIRE and mindful money advice. And with the end of 2022 just round the corner, it might also be the time when people look for something to get them in the zone for making New Year’s Resolutions.

    FIRE is about so many things to so many people that it can take a while to find something that speaks to you – prioritising what matters in your life, living mindfully, rejecting bullshit corporate culture, or just being really, really rich – that you might need to dig to find what you need.

    FIRE has definitely become part of more regular conversation over the past few years, but 2022 didn’t feel like there were many new contenders in terms of content creation.

    I will focus on podcasts here, all of which work for people who are FIRE-curious, newly on this path, or much further along. Most of the books I read this year have been about mindset (and start ups – more of which soon) so I won’t include them in this post. I have stayed true to my three favourite podcasts which I listen to regularly, and whilst I have tried a range of new things, none have really compared.

    Journey to Launch

    Hosted by the fabulous Jamila Souffrant, Journey to Launch remains a staple for me.

    She talks to her own experience of working toward FIRE goals as a mum, bringing on guests to talk about money, making consicous choices, building generational wealth especially in Black communities, and a whole lot more.

    Journey to Launch is also active on Instagram (and she even replied to me once #fangirlscream) with real advice as well as motivational thinking.

    Afford Anything

    Paula Pant is such an OG in the FIRE space that she was one of the advisors on this year’s Netflix hit Get Smart With Money.

    I love her mantra ‘you can afford anything, but not everything‘. Coming from a determined and mindful standpoint with your money and your life is more importnat to me in FIRE thinking than the end goals. Paula and her guests talk about this a lot, providing guidance and inspiration on mindset, decision making and prioritisation, and optimising what you have.

    She is a property guru and whilst a lot of the advice there is for listeners in the US, the overall thought process is still inspiring. You can also find her over on Instagram.

    Choose FI

    The third go-to is Choose FI. This year, one of the two hosts left to focus on other priorities so it’s now fronted by Brad Barrett (who is always doing ‘quite well’ – an in joke you will need to listen out for from earlier episodes) along with guests.

    Choose FI started as a community, aiming to provide crowd-sourced advice, and the community feeling is evident. I love the personal journey stories, especially when people come back on after months or years to update the audience on how things are going. The bumpy ride and unexpected turns that people go through are inspiring and comforting when your own journey takes some new twists. Find them on Instagram as well.

    I hope you enoy them! What have you enjoyed or been inspired by this year? What am I missing? I love sharing ideas and content recommendations with the community so do flag whatever has been part of your 2022 journey.

    Enjoy your New Year’s Day and I hope you are feeling inspired for the new year!

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    My father’s gift

    / Gracie Sunderland / 3 Comments

    Having written just a month ago about grief, I am devestated to say that my father passed away this week.

    He has been ill for many months so it wasn’t a surprise. He went quietly as he would have wanted to: fell asleep holding my mum’s hand and slipped silently from this world during the night. We had a lot of time during his illness to share our love and our feelings with him, so he went having ensured that we weren’t left with ‘things unsaid’ – those things which can become toxic after someone’s passing.

    A rainbow, picture taken by my daughter the day my father passed away. “Look,” she said “a little gift from pa.”

    But it is still unimaginable to me that this world continnues to exist without him in it. I believe that he is with God, and that his spirit will live on – those that we have loved never truly leave us. So I thought I would use this post to celebrate that spirit and his life, and share some of the lessons he has given me over the years which I will take with me and keep sharing with my children.

    • There are some areas where you shouldn’t try to save money. Namely: books, wine, cheese. Books are something I try not to keep buying, partly so my home doesn’t end up with teetering stacks of books in every corner and partly so I can give up on a book I’m not enjoying rather than feeling the need to see it through ‘since I paid for it’. But I am prepared to rethink this one to pay respects to my dad.
    • Making people feel loved means seeing who they are and what they need. He came into my life at 14, becoming my step-dad. I call him my dad out of love and respect – and because that is who he really was for me. From the day we first met, he was someone who created a feeling of love and respect with such a simple grace, largely by really trying to understand who I was, how I felt and what I needed. And that effort and level of care was always the bedrock of our relationship, and meant that I could talk to him and rely on him for anything.
    • Then you show them that love. As a man born in 1939, my dad was maybe not an obvious candidate for showing emotions. But my kids and I have always felt supported on a kind of cloud of love and affection. When we were living overseas he sent a weekly package of cuttings from the newspaper (often with speech bubbles or other commentary so it was clear where he stood), letters, and little notes he had taken about things we’d be interested in. I find little cuttings, notes and letters, throughout my house: tucked into recipe books, or mixed in with the kids’ stuff. And I love to see them.
    • Poetry is not a luxury. He really loved poetry and is one person who consistently gave me books of poetry as gifts. It’s not something I do for myself, but every few weeks I pick up one of these books, let it fall open, and just enjoy the small, beautifully written treat within. I added this activity – poetry i-Ching if you will – into a list of ‘5 minute treats’ recently and I love it.
    • Love hard. It’s worth it. My parents got married after messy divorces on both sides. They learned to trust each other, and built a successful life and family. That’s a lesson worth learning.
    • Unconditional love is rarer than you think. My dad was the only person who cried with joy when I finished my PhD (apart from me but I cried with relief) and I gave them a bound version which referenced them in the acknowledgements. For my mum, it was too tied up in needing to compare my achievements with my siblings. But for my dad, it was much more simple: “You did a great thing. And I couldn’t be prouder.”
    • Cycling drunkenly into a hedge is a family thing. Don’t sweat it. (Just gonna leave that one there without an explanation!)

    Grief is hard. Loss is hard. Relationships with our parents and family can be hard. Parenting and trying to get it right can be hard. But it’s not all hard, or not always. It’s a beautiful, tight hug from someone who really knows and loves you, whatever your flaws. A hug that you can still feel long after they have gone.

    Thanks for being here with me at this difficult time. This blog is about all the things that make up a life, and grief and love are part of that. Now go and give someone a hug, or a call, and tell them you love them.

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    Pension planning

    / Gracie Sunderland / Leave a comment

    So I think a lot about pensions. Pensions are by far the biggest topic when I talk to women in the same sector as I am. Or single parents. Or anyone who has moved between jobs, or between traditional jobs and entrepreneurship. So, everyone really.

    There are a few different schools of thought. Many younger people I speak to have such little faith in the pensions industry that they are not convinced of the need to invest in retirement vehicles. In fact one-third of savers don’t have faith in the industry – and this survey was done with savers, so imagine the additional people who don’t have faith to the point where they just don’t save. Almost 60% of people believe they will not have enough to retire on, with women being significantly less confident about their ability to retire at all, or comfortably.

    Not totally relevant but much more interesting than pictures of currency notes and clocks. Photo by Ricardo Gomez Angel on Unsplash

    I’ve written a couple of times about calculating what you need to retire on, and on working out across your own financial journeys, especially if you want to retire early, where you might have gaps in your income prior to being able to access pension funds.

    One tricky area to work through is the difference between defined benefit and defined contribution pensions. Sometimes I imagine myself on the Dave Ramsey show explaining at length why I don’t have $1million in retirement, and why that doesn’t matter because I am largely in defined benefit pensions. I realise that we have now plumbed the depths of my boring internal monologue, but putting that aside, let’s continue.

    The first point is that defined benefit pensions are largely in the public sector, and they are increasingly rare. The second is that you will very rarely be able to choose which one you get. You may, if you are joining public service, be offered this option. And – whislt I don’t normally give unequivocal advice – you should always choose defined benefits for the reasons outlined below:

    Some of the differences across pension type

    Defined benefit pensions are usually linked to the length of service in the company, so it can feel pretty small or silly, but it all adds up. The greatest benefit to defined contribution is that a) you can choose where to invest the funds yourself and b) you can usually roll pension contributions into a single fund as you move jobs.

    I have three defined benefit pensions, and one SIPP which I invest into regardless of how good my company pension looks. The figures below assume I stay in my current job for another two years: many defined benefit pensions require a minimum stay with the organisation. So how do my pensions look?

      Transfer valueAnnual guaranteed
    income retirement
    Defined benefit pension 1 £          62,304 £            6,250
    Defined benefit pension 2 £          39,462 £            1,400
    Defined benefit pension 3 £        104,864 £          15,266
      £        206,630 £          22,916
    Self Invested Personal Pension (SIPP) £          44,075 £               400
    TOTAL ACROSS ALL £        250,705 £          23,316

    Even a quick glance suggests that the benefit from the defined pension is better than the defined contribution on the SIPP. However – and it’s a significant caveat – the SIPP will grow with the market. Or hopefully grow, in these days, who knows.

    This is where it gets interesting. Using the more traditional FIRE rule of 4% withdrawal, to achieve the  £30,000 per year in retirement I would need to save £750,000 overall. Side bar – Mustachian Calcs are great calculators for working this sort of thing out. As you can see, I am not far off from that £30,000, and indeed would reach it if I could add in the UK State Pension (caveats galore!) but my portfolio ‘value’ is only around one-third of that net worth calculation.

    Definitely more on this in blogs to come. It’s both a tangled old web, and a cornerstone of what we’re trying to do here. So do come back and join me on Instagram for more.