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What I learnt about money in 2023

/ Gracie Sunderland / Leave a comment

Ah, here we are again! The most wonderful time of the year, or a bit of a damp squib where we are all too knackered to really enjoy the festivities and starting to panic for the new year. In our house it’s somewhere in the middle, so some brilliant quality family time, nice walks in the woods and suppers by the fire, as well as lots of early nights and the occasional argument. So far, so normal (whatever the advertisements try and make you believe), but I have definitely enjoyed the lack of pressure and a chance to just unwind with the kids.

Firstly, I learnt that I want to make some changes to this blog and how I show up in the personal finance space and beyond, so watch this space for some exciting announcements!

Overall though, this year has been an interesting one financially. Here are some key things I learnt:

I spent big on things which I felt were worth it, without giving it another thought. Whilst I remain relatively frugal (well – ‘fake frugal‘ is more like it, still have issues with the version of how I spend money as it exists in my mind, and how it exists in my bank account), mindful spending doesn’t really concern me. In 2023 this was mostly holidays and travel, including a trip to see the Northern Lights with the kids in January; a major birthday party joint with my best friend in August; and a family holiday with them and my mum by train across four countries in October. I paid for all of these, with the elements not for my children being gifts for birthdays/ Christmas etc, but they were all fabulous.

There are different kinds of privilege and cultural expectations, and that these impact our financial lives. This absolutely isn’t news – even my reflections above noted how much of that holiday money was spent to ensure that the people I love could come with me. I am white, and do not claim experiences like the Black Tax in which the responsibility of taking people with you on an upwardly mobile journey can make that journey much slower. But my own background means that, as a friend told me, I am ‘the success story, the one that got out‘. And that comes with responsibilities to extend a hand, repeatedly, to family and friends who are struggling. 2023 saw a lot more people struggling than before, and it feels like there is more pressure to support people around me, and less opportunity for others to extend that same support to me. I am happy to be here for people, but it’s also getting kind of exhausting.

The emergency fund is real. I had what felt like endless emergencies this year – broken pipes, a flooded basement, a broken school laptop for my son, a missed car MOT and on and on. All of these things mattered, but the head space was taken up by trying to find workmen in Denmark who are available and will actually come through, rather than freaking out about being able to pay for things. Since both my dishwasher and Quooker (boiling water tap thing) both stopped working during Christmas, I don’t expect that there will be fewer outgoings in 2024, but the money is there. And having that peace of mind is what I saved it for!

Being savvy with your money matters – as does understanding just enough about economic policy and trends. A lot of 2023 was watching interest rates and inflation rise. Whilst this sort of felt like more economic blah and uncertainty, the average impact on UK mortgage holders was a rise of about £300 a month, or £3,400 per year, on the same mortgage. If you are struggling financially that is a massive, unexpected increase in your outgoings, and isn’t based on anything you have control over. So whilst this post isn’t about what 2023 looked like globally on finance (TLDR, not great) being aware of what the risks are and keeping a weather eye on what might be coming your way, really does matter.

What did you learn in 2023?

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2023 Inspiration Round Up

/ Gracie Sunderland / Leave a comment

So the FIRE community is real, and for me this is especially online. Keeping going with budgets, big dreams, downturns, frugality and more can be exhausting, and getting energy from the community helps keep me going. So here’s a quick round up of where I found inspiration and great content in 2023. Of course, you can always go to my IG if you need the same!

#1 for 2023

One person who I loved this year is the Budgetnista, Tiffany Aliche who has books out, a blog, and appears on podcast. I love her no-nonsense practical approach to financial wellbeing, and the way she targets the middle section of people (i.e. most of us) who are neither flat broke nor financial genuises. She has a great community on Facebook and elsewhere, and serves up inspiration to be brave and keep going in search of your best life.

Tiffany was also in Get Smart With Money which was a Netflix film about FIRE and financial guidance, along with Paula Pant, Mr Money Mustache and Ro$$ Mac. I rarely watch TV but I loved this – and my kids thought it was hilarious that something I talk so much about *finally* became interesting enough to make it onto Netflix. The different approaches of the financial experts, and the needs and solutions for the different participants, really showed that there are many ways to get this right, but help is out there.

Podcasts

I remained very much a creature of habit this year and will include those here for anyone new to this journey, but there was a definite shift in podcasts for me in 2023. I started to have a sense from a few – Choose FI, Bigger Pockets – that I have missed the boat. I am always cheering on people who have reached FIRE and for sure they don’t want to talk about budgeting forever after they don’t need to think about it any more, but 2023 had a lot of content about ‘how to spend’ and get out of frugal habits (and a whole lot about pickleball) which felt alien to me. So I’ve been skating around more and listening to particular episodes instead of just pressing play. Old faithfuls have been:

Afford Anything: the inimitable Paula Pant continued to bring weekly wisdom this year, talking through the choices that we have to make with our money, focus and energy in order to make a life which suits us and where we really move.

Journey to Launch: I listened to this more in 2023 as she is many steps ahead of me but is still in the ‘courageous decision making’ rather than the ‘done and dusted’ phase. Getting into thinking about side hustles, passive income streams and the ‘what next’ of a financial independence journey is where I’m at, and her passion, personal story and diverse range of speakers is really inspiring.

Choose FI: this was another staple during 2023, though a lot of it starts to feel like conversations we’ve had before and as noted, has definitely moved into the ‘how to do life when you are FIRE’ territory which is to be expected from such a long term project. It remains a really good basic resource and a great community for when you need dusting off and putting back on the path.

Books

I read a lot this year, making the most of the local library which has an excellent selection of books in English. We went pretty much every two weeks, and got a cookbook out each time so there are lots of new recipes in the household menu bank.

I’m not going to list all the books here – and I put them up on my IG – but I read a lot of non-fiction about finance to get more into the nuts and bolts of how the financial systems work. And I read a lot of 1920s detective fiction, because honestly how else do you get to sleep?

#1 2023: Raynor Winn: The Salt Path, The Wild Silence, Landlines

I read all of Ray Winn’s books this year after a friend recommended the Salt Path. These are all written as memoirs, charting the moment Ray and her husband become homeless when their house and land are reposessed as the result of being scammed by a friend. They take to walking, going hundreds of miles across the UK and learning a lot about what matters, money, nature and society as they go.

So I hope there is something in there for you, whether you are getting started, having a think about your finances at the end of the year, or need to get back into our community ready for 2024. Enjoy!

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So I bought a new rental part 1

/ Gracie Sunderland / 2 Comments

Happy end of July! It is almost the end of the summer holidays here in Denmark so I am working on de-cluttering the house, planning for the second half of the year, and sneaking in an more relax time I can get before it’s full steam ahead. Do keep up with the small things over on this blog’s Insta – other people’s Barbie obsessions are louder than mine these days but we still hang out!

One of the things which has been finalised over the summer is the purchase of my new rental.

I wrote in January about having sold my rental – both the decision making and process, and my own history of house ownership. I’m not working on a real estate empire. I am not even sure that it’s possible to do this in the UK for small investors, or if it is the challenges around accessible credit, robust tax measures and the general insanity of housing prices mean it certainly isn’t the walk in the park it seems to be in the US.

There are other difficulties for those like me who don’t live in the UK but plan to return. Once my fixed mortgage term ended, I couldn’t remortgage my UK home which was rented out, and I couldn’t get a mortgage for a rental home without owning a primary residence. And all this in a time of rising if hyper uncertain house prices and massive rises in interest rates and hence mortgage payments.

If landlording was my aim perhaps I would have really worked through these issues – with tenacity everything is possible. But since I also have ethical cautions around owning property for profit in a time when renters’ struggles are being ignored (and noting that this is a nuanced conversation and one I will come back to), I have continued with my previous plan.

From a FIRE perspective, and based on my own risk profile, my plan is:

    1. To own one rental in the UK, partly to maintain connection to the country.
    2. To have it near family/friends who could support me if I couldn’t work and was forced to go back to the UK. Since I am a single parent, not being able to earn money or adequately look after the kids would be an utter disaster, so having a plan B matters. This recognises the need to give tenants six months notice, but it still needs to be an option.
    3. To own it outright: see point 2 about risk mitigation.
    4. To own it for approx. ten years which would give tenants a good stretch of stability, and would bring in additional income for me whilst my kids are finishing up their education.

    With all that in mind, I looked for a property near my brother up around Manchester. This part of the decision making took really a long time, tipping back into the decision to sell my last rental. Who, realistically, could support me in the way I would need if the sh*t hits the fan? Where should I buy a property then? Since I can’t get a mortgage, how much of my nest egg do I want to invest in a property? Was I mad to sell from a high cost of living area where the property might have just carried on making money?

    And I am still not settled on some of the answers, but the housing market waits for no vascillating woman! I started looking for a property in December as I was heading to complete on my own house sale, though I needed to wait on capital gains tax and other fun deductions to work out exactly what I had to play with. My brother and his wife were amazing. I would look at properties online (which is both easy and fun, let’s be honest) and they would then talk me through the location, and go to view if it seemed like a serious option. Paula Pant, a FIRE fairy Godmother, talks a lot about out of state rentals and how to organise such a portfolio. Maybe I don’t put enough time into my rentals, or I’m too limited in my thinking, but without family around I would have found it impossible to sort this out unless I had travelled a couple of times to be hands on.

    So I completed on a house last weekend, and it goes onto the market for rent next week once all the paperwork is sorted out. It’s not my dream house but it will make a lovely easy-to-maintain rental for a family, hopefully long term, and would work for us if it had to.

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    How to save for your kids

    / Gracie Sunderland

    Last week I was writing about how to pay for kids’ college, and the realisation that a) I am off track compared to my previous budget and investment planning and that b) there are a lot of ways to financially plan for your children’s future. As ever, this is complicated if you are a single parent and trying to balance the prorities around just keeping it together versus building foundations for the future you want for your family. And it’s complicated if you aren’t living/working/planning for college in one country.

    But I wanted to come back and talk a bit more about saving for kids and some of the options and thought processes.

    Before all of these processes, ensure that your kids are financially literate. Having them engage with the household spend and planning, understand that paying for one things rather than another is a choice, and managing their own pocket money, really builds them into adults who can make good decisions. Ideally we also raise them to be kind, smart, caring individuals who don’t get sucked into corporate BS and are mindfully contributing to the world, but I’ll have to let you know how I get on with that one.

    Another post on this coming soon.

    1. Just start saving something, as soon as you can

    Even a piggy bank works. Getting into the habit of saving small means that the reflex grows as your child gets older. There are better ways to invest the money, but an early focus on the saving part will help as you work out additional options.

    2. Think about whether there are others who might save for your children

    For me, my parents paid £10 per month into a savings account for each of my children between birth and five years old. It’s not a lot, but it’s what they can afford and it still represents £600 per child. They are also of the generation / mindset that doesn’t believe in generational wealth in the way that meant they would look at their grandchildren and focus on this kind of thing, but lots of people feel differently. So it might be worth exploring, especially if you have family who are in the habit of giving generous birthday or holiday gifts which might be better split into savings.

    My kids have never been gifted money, so whilst there is lots of advice about putting this into savings, it really depends if it’s coming your way in the first place.

    3. Think about risk, and decide whose name you are going to save in

    This step comes before investing. There are great children’s accounts which can act as investment vehicles but your child will be able to access these usually at 18. So you need to work out what the risk is of them getting that money at a time in life when – let’s face it – lots of people will make poor decisions. Taking the example of saving for college: if I put the savings element into an account which reverts to them at 18 and they choose to spend that money on a sound system / gap year / bitcoin or whatever, and take huge student loans, I can’t stop them. I can refuse to put in place additional support (and can sit around with my head in my hands wondering what I did wrong as a parent) but I can’t solve for it.

    In the USA, saving into a 529 account fixes this problem by offering savings specifically in a child’s name, but which can only be spent on college. American FIRE folk have a lot more to say on these, but as far as I know they only exist in the States.

    The flip side of risk is if you save in your own name, but either you make poor decisions (listen, at 43 I am totally aware of my own fallabilities) or you have the kind of emergency situation that means you use the money. Ideally you can mitigate against such risks with other elements of your portfolio, but the point of risk-based thinking is to look at all the possibilities before they happen.

    3. Harness the power of compound interest by investing

    So the great thing about investing for children is the long time frame means that compound interest is real. If you put £25 a month into a savings account paying 2.45% from a child’s birth until they turned 18, they would have £6,775 by the time they could access the account. However, investing that same amount in an index fund and it grew at 4% per year they would have £8,000 when they reached adulthood after charges. And it’s possible to be more hopeful – with the 20-year average of the S&P500 coming in at 9%, the possibility could be a lot more. And comparing to the atrocious 1% savings rates we’ve seen in the past few years (recognising this is changing) investment seems to be the best option.

    4. Be tax efficient, and don’t get caught up with high fees

    Almost all countries have a way of saving for children which has tax breaks. In the UK, Junior ISAs (Indivdial Savings Accounts) are the best option, since you can choose savings or stocks and shares accounts both of which have a tax wrapper which protects any gains. You can also split the annual maximum contribution to a JISA of £20,000 across the two types if you want to split your risk, and any adult can contribute.

    There are different fees and options for investments which change, so it’s worth shopping aorund for the best. In the UK, moneysavingexpert has an up to date list with easy to understand comparisons.

    5. Think about long term futures

    I’ve written about my own pension issues many, many times, and with this in mind I also opened pensions for my children. In the UK there is a Junior version of the Self Invested Pension Plan (SIPP) in order to give them some minimal comfort so they don’t end up making career choices out of paranoia that they’ll be broke old people.

    There are incredible benefits of compound interest for a J-SIPP, given that the money basically has 65 years to compound, and remains tax free regardless of growth depending on how you withdraw it. You can only pay in £3,600 per year, which attracts 20% tax relief. For me, I only started doing this when I have the other bases covered adequately and it remains a tiny portion of savings and spend in our household.

    But paying in £25 per month from birth through til 18 means you contribute £5,400 in total but with 5% growth, this will be worth about £30,000. So it’s not All The Money In The World, but it makes me feel more confident in how I can support their whole lives. At 18, the SIPP rolls over to them as an adult, and they can continue to contribute, but not withdraw money until retirement.

    So I sold my rental: Part 2

    / Gracie Sunderland / 1 Comment

    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!