mindful money

Featured

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.

Advertisement

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.

Featured

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!

    Featured

    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.

    Featured

    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!

    Featured

    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.

    Featured

    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.

    Featured

    The Fear

    / Gracie Sunderland / Leave a comment

    Things seem pretty scary at the moment. Climate disasters, war in Ukraine, Ebola in Uganda, right wing shifts in Italy, significant remilitarisation in Europe, a soaring cost of living – I could go on. Having always been a political animal I now refuse to have the news on in the morning because it makes me want to go back to bed and just stay there.

    Writing a blog about personal finance (and I mean that in the loosest sense) means that recognising the impact political and socio-economic changes have on people’s lives and opportunities is critical. There is a big difference between painting a falsely aspirational picture versus giving people hope and courage to try a different path and see how they can succeed in their context.

    So I just wanted to take today to talk about The Fear and why it’s not unfounded.

    100% faith over fear. But it takes a lot to say faithful in an unstable world when you keep getting kicked down. Photo by Sincerely Media on Unsplash

    Personal finance is largely built on evidence-based faith. We look at the options open to us; historical shifts, values and movements; and our own future plans and needs. Then use all that information to triangulate the best options. I mean – this is what happens ideally. Sometimes we get hopeful, or greedy, and it’s more like a game of pin-the-tail-on-the-donkey. Sometimes we freak out, and it’s more like flipping over a table full of delicious food in order to hide underneath it. But in essence, making decisions means assessing what we think will happen, in our lives and in the markets, and trying to match them up with available options.

    Take deciding to invest in the stock market. This is traditionally somewhere where it’s easy to be fearful, and decide not to get involved (caveat – there are other excellent political reasons not to do so, but that’s for another time). It is also a place where people are likely not to realise that not investing creates other risks around having their savings eroded by inflation. But intentional action always feels more scary than unintentional inaction, even where the impact might be the same.

    Over a long period of time, the stock market has consistently gone up. As the financial planners say, it is time in the market, not timing the market that delivers results. Taking the graph below which models the sorry history of a fictional investor who puts money in just at the worst possible time, we see that he still benefits from compound interest and ended up with a 7.98% annualised return.

    In other words, however disastrous certain moments were, the net result of investing in the stock market has been positive.

    Modelling of a single, ill-timed (and imaginary) investor. Credit

    The massive caveat here is that if the market crashes at a point where you need your money, you are screwed. And that’s where The Fear comes in. In the example above, if that investor had lost their job and been forced to pull out their savings to live off, or reached pensionable age and had to cash out an invested pension, they would not have won.

    This is all aside from people freaking out and pulling their own money at the wrong time, like I did in 2020. If you are in a position where you must – either for reasons of perception or fact – have to take money out of the market at a time when it is down, you will lose.

    This week I have been reading Nomadland (also a film). This amazing book charts what has happened to the “invisible casualties of the Great Recession”, largely older people who unexpectedly found that, in spite of investing in it for years, the American Dream would be forever out of their reach. There is more I want to reflect on about the changing nature of work – most of the people featured in the book will never be able to retire but are forced to work seasonal, temporary jobs – but that’s for another time.

    Having a global financial shitstorm happen at a time in your own life where for whatever reason – divorce, illness, getting to an age where you are considered disposable – on top of all the other institutionalised inequalities that impact on people’s ability to make ends meet, can push you permantly to the bottom of the heap. Whils the stock market recovered from the 2008 mega crash, and people who were able to stay in the market have done very well indeed, 10 million Americans lost their homes. For those who lost their homes but were upside down on the mortgage or on other debt, they could spend many years paying for something they no longer own. Having to make money to service a debt for a dream they suddenly couldn’t afford.

    So The Fear is real. It’s not to stop any of us from dreaming, or investing, or anything else. I still wanted to recognise how quickly things can go left: there are long term impacts that we can still see, and blithely ignoring the possibilities is just foolishness. I want to leave with these two photos from Detroit of a residential street 9 years apart, in 2009 and 2018. Detroit was one of the hardest hit areas during the recession, meaning there are a lot of streets like this.

    It’s ok to be afraid and still look for ways to keep moving in faith: in fact, that’s maybe all we have. But remember that there are people and places which have been erased by these historical financial moments. And they won’t be coming back.

    From a community to an overgrown pathway in less than ten years. Read the full story and see other examples here.

    Featured

    Grief, and strength

    / Gracie Sunderland / 1 Comment

    Damn it’s been a bit of a year. After ‘the COVID years’ it seemed things might get easier, but that doesn’t seem to be the case.

    I’ve been offline for a week as I had to go back to the UK to support a family member whose wife passed away suddenly at 46, leaving him with two children. Suffice to say, it’s been a brutal week and I only hope I can support him during the long dark night of grieving and dealing with the practical and emotional challenges of becoming a widowed dad.

    There are lots of relevant things I could write about (and might come back to): estate planning; making a will; or accessing benefits when your circumstances change. 1 in 20 children in the UK have experienced the loss of a parent before the age of 16 so whilst this is something none of us as parents want to think about, it’s common enough that we should be preparing for it, just in case. But all this stuff will have to wait whilst I ride out the sadness and be there for the family.

    In addition to the loss of the individual, and the sadness around the loss her children in particular have suffered and what it means for their lives, I have a real sense of losing a shared history. Of course it’s not the most important thing, but when there are people whose lives have intertwined with yours since childhood, losing them is like a mini ending of an era. And for whatever reason, it feels like we have lost a lot of people so there is a sense of standing on a glacier which is slowly melting into the sea (awkward climate change image).

    All our dreams and plans have foundations in where we come from and which families and communities we are part of. What I have learnt, as someone who moves and travels (phsyically and emotionally) a lot is that this is true whether we realise it or not. The comfort of being with people with whom you have not just a shared history but a shorthand or venacular is immense, and it matters so much to be able to just rest in that. No wonder losing it is hard.