Don’t Panic!

TL:DR – don’t panic! Whilst I’m not the Hitchhiker’s Guide to the Galaxy, those two little words do have to give particular comfort. Especially without the exclamation mark, which suggests that panic of some kind is right around the corner. But it’s Sunday morning, and I am three coffees in and heading to a kids’ birthday party once I’ve written this, so perhaps I need the drama. But whatever you do, don’t let your panic define your actions.

This week I have been thinking a lot about doom and gloom. More than usual, in any case. I wouldn’t say that I have Eeyore tendancies but the world is a busy, scary and sometime relentless old place these days, so a bit of doom is on the agenda. From the endless heartbreaking news from Ukraine, to the real debates about what the exceptionalism shown in that situation means for the reckoning coming for the colonialist staus quo, to the ridiculous news that the UK has a monkeypox outbreak (I mean – really?): it can feel like the only time I hear the word ‘positive’ is when a friend does a COVID test.

Really don’t, even if you can’t hitchhike your way off the planet

But what is going on in the world of FIRE, of savings and investments? There have been a few things that struck me recently and I try to keep coming back to these:

This is even more true in the world of finances i.e. literally everybody’s day to day world. The soaring cost of living, shortages of fuel, eggs, potatoes or whatever is real. Every time I go to the supermarket there are empty shelves, and shelves full of things at a price that I am not willing to pay. In the UK, the price of cheese (CHEESE!) has gone up by almost one-quarter. Once the costs of Marmite and tea start to spiral out of control we will all be shafted, frankly. (Denmark is powered by licorice and pork products, neither of which we eat so I focus all my crazy-hoarder-lady issues elsewhere).

Beautiful! But can you afford any of it?? Photo by ja ma on Unsplash
  1. Plan for the worst, then remember this is what you did. My Crypto portfolio has totally crashed. In the last two weeks, more than $300 billion has been wiped off the value of Crypto overall, so this is not really a surprise. There was real panic that Coinbase was going to go bust – and take people’s money with it. Whilst that didn’t happen, Luna, a popular Crypto token, did, taking $40bn with it. My reaction has been to do absolutely nothing. I refuse to look at my portfolio other than on the twice-monthly date I always look at it. And then I refuse to act or worry about it. This is based on the fact that when I invested in Crypto, recognising that it is high risk, I did so only with what I consider to be beach money. This is money where if I lose it, it means not taking the kids to the beach in the summer, rather than meaning I can’t pay the rent. So when I freak out about losing it all in Crypto, I try and thank my previous financial planning self, and then just not worry about it.
  2. Remeber you are not a mystic. Don’t make decisions based on crystal ball gazing. The thing weighing much more on my mind is house prices and whether they will crash. And this is also one where my attachment to my net worth is at odds with a moral sense that rapid house price increases really are shafting those less well off in a way which will impact on generational wealth for a long time to come. The reason I put this one under the heading of trying to predict the future, is because a) we really don’t know and b) none of the ‘experts’ can agree. Whilst there is a general sense that the market cannot keep rising, particularly in light of inflation and changes to mortgage interest rates, there is no evidence at this point that the housing market is actually slowing down. I’ve been thinking about selling my house in the UK to diversify my assets but I need to make this decision on a range of factors – none of which is whether I can guess the future.
  3. Use this time to deep dive into your risk tolerance and decision making, rather than wanting to act. In March 2020, I panicked, and sold out a significant chunk of my investments. This was based literally on being inexperienced, and freaking out. I wrote a lot about it at the time, both the why and the results. This has definitely impacted on my holdings now but I have to chalk it up to an experience that I needed to get better at investing. It also gave me space to think about what my risk tolerance really really looks like, and how I can build that in to my investing (and my life).
Beautiful! But can you afford any of it? 😉 Photo by Travel-Cents on Unsplash

More next week on overall approaches to investing, but I wanted to start with some thinking – and reassurance – that however doom laden the picture is, panicking is definitely not the answer. Trust yourself, your knowledge, and your planning. You’ll survive the storm.

Don’t forget if you want more cakes/sunrises/Barbies and less doom, come and join me on Insta.

House buying and the single parent

I wrote in November that I was thinking about buying a house here in Denmark. My contract is, all things being equal, at least for another 3.5 years, which means an awful lot more horribly expensive rent. Plus since my landlord is coming back and we have to move anyway, incurring both the costs of spending an awful lot of time looking for somewhere and organising and paying for movers.

So we have bought a house!

I’ve been looking since September, and it has been absolutely brutal. As with many places, already high house prices have continued to rise during COVID and family properties (as we are looking for) have increased even more as people look to move out of apartments. In Denmark, the supply is also quite low, meaning that there just aren’t enough properties to go around. I almost wish we had bought the first thing we saw in September, since that will have gone up in price by about 8% since we saw it.

The ideal Copenhagen home (clue: our new house does not look like this). Photo Credit, Architectural Digest

It is even worse in the UK where house prices are soaring. People moving out of cities, or flats; a lack of housing stock; the temporary suspension of Stamp Duty; and realising what an incredible amount of house you can buy pretty much anywhere in the country if you sell a London home means that the average house price in the UK is now £256,000 – up a whopping £100,000 since 2012.

In the UK, you can usually borrow four-and-a-half times your income meaning you need to earn £56,888 in order to qualify for a mortgage. With the average income being just over £31,400 (and that already the median, so it will be skewed by very high and very low earners) this means that the majority of people – and any single person who is not a majorly high-earner – is priced out of the UK housing market. Since one-third of single parents were living in poverty before the pandemic, and have been one of the groups hardest hit in terms of income partly due to an inability to work and manage kids at home alone, buying a house can seem a million miles away from many single parents who are already working their hardest to create a secure future for their kids.

Denmark, like many countries, has other alternative options including Andelsbolig which is co-operative housing offering both affordable rental and houses to purchase. The conditions of being part of the co-op mean that it’s not possible to take advantage of the system and the apartments (not usually houses) stay in the relevant pricing market and can benefit others in the future should someone move on.

This is Iffley Lock in Oxford, near Iffley, where I would buy a house if I magically became a millionaire. Photo by Lia Tzanidaki on Unsplash

This month, the Australian government took the incredible step of recognising this issue for their citizens and actually doing something about it. The New Home Guarantee scheme will allow single parents to buy with just a 2% deposit, with the federal authorities guaranteeing the other 18%. It is only available to 10,000 women (about 10% of Australia’s 1 million single mums) and whilst that might be a drop in the ocean it has to be celebrated as an approach which both recognises that we have assets and incomes but struggle to get over specific hoops in many financial processes.

I wonder if the UK Government would back a similar scheme? Though with the income needed to buy a house, there will still be struggles for the majority of the almost 3 million single parents in the UK. Sometimes I think the best solution is housing co-ops where we can live with multiple families and share some of the burden.

Together for all! Photo Credit: Radical Routes (and check them out if you are interested in housing co-ops)

But until we get to radical social change, creating support structures so that all families can leverage their income-generating power to build assets and have somewhere secure for their children to grow, should be an area for policy makers to think about. Generational wealth has a significant impact on society, and single parenthood – and the intuitional fabric which keeps people in poverty stuck in that cycle – prevents people from building wealth to hand on. There is a direct relationship with this and continued income inequality which has wide-ranging social implications. And, if you are living it, absolutely sucks you dry.

What’s your story been with housing? I would love to hear from you!