Economics, Libraries, plus another PB win


I don’t remember finding the subject of Economics very interesting at school, or particularly after school, if I’m honest. However, I did enjoy the type of ‘economics’ as found in the Freakonomics books, and one of the ‘you might also like’ suggestions in Amazon came up with The Undercover Economist by Tim Harford. This became the final non-fiction book I read in 2017 to achieve one of my goals.

The book occasionally got a bit too much like a school text book but all in all, mostly held my attention.

It was very much educational but in an engaging way; things I learned included the ‘scarcity power’ of retailers pushing up prices,  how and why ‘externality pricing’ works’ (eg congestion charges) and ‘auction theory’, where the example used was the UK’s 2000 telecoms/spectrum auction which became the biggest auction ever (at the time), plus an insight as to why sweatshops might not always be the worst thing for employees.

For those who love their takeaway coffee, there’s a chapter called ‘Who pays for your coffee?’ with interesting examples of how coffees/drinks are priced.

I was interested in the history of how China started its latest revolution to conquer the world, although as the edition of the book I was reading was written in 2006, it doesn’t include China’s explosion in the last 10 years.  However, even 11 years ago, China’s growth was spiralling upwards like a rocket.

Having never heard of Harford previously, I now see him everywhere doing a couple of podcasts (interesting one here about fake news or ‘facts’ which mislead), plus there was even an article by him in the British Airways magazine I was reading on the plane during my recent trip to London! I’ve probably just never noticed him or his work before, but I’ll be paying more attention now.

An interesting read in any case and I would definitely read some of his other books.

Libraries

I’ve been using my local library since the mid-1990s, when I moved back home to Manchester from uni.  Around 12 years ago, my library was at risk of closure due to council cuts – fortunately, it was saved and I started to use it more often, with a ‘use it or lose it’ view. Borrowing books also helped me reduce my spending as I no longer felt the need to buy new books.

I was extremely relieved to hear that the library once again escaped the ‘chop’ and that it was not to be one of ten libraries (yes 10!) which were closed by the council earlier this month. Very sad times and those communities will be all the more poorer for not having local library facilities.

Although my library has been saved, the hours of opening have been severely reduced and I can only feel for the staff who have worked there for many years and the people who regularly rely on using library facilities.

I wonder if Tim Harford has a theory on how libraries can be saved or run more efficiently?

Another Win

And finally, a good start to the year with my first Premium Bond win of 2018 – just the £25 but it all adds up! I hope to get many more wins over the year.

O.O.O plus another PB win

Out Of Office

Blogging’s going on hold for a bit as I’m off on hols to Hong Kong (for around three weeks). My holidays are all budgeted for, although this particular one is going to blow my budget… we’ll see anyway!

I’m really looking forward to the break as I’ve not had a single day off since I returned to work in May and as we all know, weekends just aren’t enough so my brain is a little fried!

As usual, I’m stressing a little (I always do before I go away) but once I’m on that plane, I’ll be fine! Can’t wait to catch up with the family and also to soak up some rays and warm weather, hopefully get rid of some of these winter blues!

November’s savings and numbers update will likely not appear until the second week of December, assuming I get myself semi-organised upon my return!

I’ll catch up on my reading and comments when I get back.

Another Win

Anyway, I’ll end this brief update with the news that I got another Premium Bond win – yay! Just a £25 prize but better than nowt!

My Premium Bonds represent the small (10%) cash element of my portfolio, not likely to earn much in the long run (although I live in hope!) but safe and stable (strong and stable??) compared to the rest of my portfolio, which is pretty much all in equities.  Here’s to more wins!

Anyway, catch you all when I get back! 🙂

Retire at 40?

I’m way past 40 so it won’t be me! But who watched Channel 4’s 30-minute programme, shown on Monday night, ambitiously titled ‘How to Retire at 40‘?

I won’t go into the programme details myself except to mention that I didn’t think much of it, but there are some interesting discussions here and here, from bloggers who were actually featured (briefly) on the programme and one who missed the cut (unlucky, Huw!).

Watching the programme and seeing the young folk featured on it, I was reminded of how when I blundered into embarked on my own career in my early 20s, the very very last thing on my mind was retirement (although following my older sister’s advice, I joined the company pension scheme as soon as I was able to).

Traditional

I’m from the traditional/common way of thinking – go to school, go to university, graft for 40 years, retire in my mid-60s.

Nothing wrong with that way of thinking – it’s what many people do. I have been fortunate in that my 20+ years career (so far) has been largely fulfilling and enjoyable, and I have made close and life-long friends through work.

Despite spending most waking hours at work, I’ve been able to enjoy my life, including go on holidays every year, have enough time for family and friends, have hobbies etc. I have always been able to maintain a good work/life balance.

I will admit however that much of my life was fuelled by debt but that was me being stupid with credit cards until I came to my senses and paid them all off.

Throughout my career, I have never minded working for The Man/The Woman, although I guess I’ve been fortunate with my bosses in that they’ve all been pretty reasonable people (most of the time) and people who I respected. I may not be so fortunate in the future.

Be my own boss? No real desire to do that, sounds like too much hard work!

Anyway, what got me thinking about early retirement a few years back was stumbling across MMM and then wondering what I would do if I suddenly started to hate work and be fed up with the 9-5? Wouldn’t it be great to be able to just walk away?

Options

Well, without sorting out my personal finances, my only option would be to keep plugging away another 20 or so years until normal retirement age (67 for me). Ok if you like/love your job; not ok if you have health issues or dread going into the office every day, although of course, you can always switch jobs if this is the case.

I’m hoping that saving and investing hard now will build up a big enough pot which will allow me to choose to stop working full-time at age 55-56 (my stretch target) if I’m fed up with work by then. Some may not think this is early retirement but I consider anything <60 as early!

In the event that I’m not mentally ready to give up work then (like Jim from SHMD) or if I’m just content doing what I’m doing, I might choose to just carry on working and continue to save and invest. That’s the thing – I’ll get to choose.

I don’t think there’s such a thing as ‘too much’ in retirement funds (I won’t be anywhere near the lifetime limit!) but ‘too little’ would be a miserable scenario!

I’m barely two months into my new job and things are looking good so far but I must keep one eye on the future. I’ll be eligible to join the company pension next month so a few more £££s in the pot there.

Another win!

Anyway, ending on a good note: another month and another Premium Bond win for me (any wins for you, FiL?).

I won £50 so I’ll be lumping this in with other cash to be used to buy investments.

In it to win it, like the lottery only you get your money back (subject to inflation!)

Have a great weekend, all!

Investment Strategy – updated

It’s been over a year since I made a ‘tweak‘ to my investment strategy so I guess it’s about time I did a bit of an update and rehash of the post.

Party Politics?

This post follows hot on the heels of the UK snap election. I have to say that my investment strategy was going to be the same regardless of what happened and I’ll not be doing anything different now that we have a ‘not very strong and stable‘ government for another five years and there are the extremely rough seas of Brexit to navigate through yet.

Original Plan

My original plan had been to build up a large enough pot of investments (funds) and to sell off funds gradually, until I was able to draw down on my company pension at 65 and then state pension at 67.

My money was pretty much all in tracker funds, which followed my Portfolio for All Seasons plan, a plan which I set into motion in 2014.

When my company pension got frozen in 2015, I realised that I needed to review my whole investment plan, as I would need some extra income to make up for the unplanned pension shortfall.

Income

It’s still my plan to try to get dividend income of at least £3000 per year. Obviously, more will be better, but this is the minimum that I’m aiming for, and I think I’m on track for my goal of £1500 this year.

I know it seems like it would be easy to just double it but I’m still adding to the tracker funds too so my monies are spread out.

£3000 a year currently covers the following expenses for me – electricity, gas, internet/broadband, mobile phone, water, boiler cover, TV licence and dental/optical cover. That’s a lot of bills to not have to worry about!

Of course, these costs are likely to go up with inflation but hopefully, if I’ve invested wisely, my dividends will also continue to grow and kind of keep in line with inflation.

Share and IT portfolio can be found here.

Last year, I switched some of my tracker funds into ETF equivalents which added to the monthly income received, whilst at the same time reducing some management fees (the fees on my investing platforms are capped for ETFs but not for funds).

Living off dividend income is very appealing but to only live off income and not sell off any capital would be pretty much beyond my financial capacity.

I don’t earn a mega salary, there’s only one income coming in (gotta get dating again) and I don’t have the luxury of saving/investing for >20 years to build a massive pot, not if I want to retire early.

I could probably save and invest more but who wants to live like a frugal nun? Not that I have anything against frugal nuns but I choose not to go down the extreme path.

This past year or so, I’ve been steadily throwing cash at a basket of investment trusts to grow my dividend income. The shares I already own also contribute to this income. I practice a buy and hold strategy, apart from the little experimental portfolio I have, whereby I will sell in accordance to the ‘Dogs of the FTSE’ strategy – well, I’ve not sold anything yet but plan to do so early next year!

P2P and Property Crowdfunding

As well as the trackers/ETFs and the shares/ITs, I’ve also got a small amount in peer-to-peer (P2P) loans and some in property crowdfunding (via Property Moose).

I’ve been invested in P2P for 3 years and my portfolio has grown by over 15%. However, I have now started to divert some of the P2P funds (interest and repayments) into my other investments.

This is for no reason other than to start simplifying my portfolio, although if it was possible to convert my existing P2P accounts into one of those new innovative finance ISAs (it’s not), I would probably just leave them as they are.

I won’t be cancelling or cashing in any P2P loans early, just withdrawing the repayments and interest, so this exercise could take up to 4 years before the loans are fully cashed out, since I took on some long term loans early on when the interest rates were really high (some of my Funding Circle loans were at 17%).

I’m likely to keep the property crowdfunding ticking over for a while longer – I want to see how it does since it has been purely funded by matched betting profits.

SIPP or ISA?

Aside from the bit of money tied up in P2P and property crowdfunding, the rest of my savings/investments are ‘tax efficient’, ie either in my SIPPs or my ISAs.

I’m continuing to invest in both, although I plan to build up more in my ISAs as I feel they offer more flexibility and (hopefully) will continue not to be subject to tax. I currently have more in my SIPPs but hopefully that will be addressed over the years.

Cash

As someone who may consider stopping working full-time within the next ten years, I don’t have a huge amount in cash in my overall portfolio.

The latest Monevator post reminds us that we’re not getting any younger and that your investments should reflect your age.

The classic principle governing age and asset allocation is:

Hold 100 minus your age as a percentage in equities
Hold the remainder in bonds (or cash?)

Equities currently make up around 85% of my portfolio which is pretty high risk for my age. I’m ok with that.

The majority of the 15% cash element is sitting in premium bonds. Yes, I know, crap returns and all that, but I don’t care – I just love that every month, I get the chance to win something. In fact, I won again this month, the second time this year, although it was just a £25 prize!

It’s possible that I might not leave so much in cash/premium bonds – I might feel the urge to pick up some bargains when the stock markets take a dive. Or not. Probably not. Who knows if I’ll be feeling ‘brave’ when the news and noise is full of doom and gloom!

Anyway, as mentioned in my May update, my emergency fund isn’t looking too shabby now, with the equivalent of about 4 months’ living expenses, courtesy of some of my redundancy payout.

So that’s my investment/savings plan for the next couple of years or so.

It’s not set in stone and is subject to change depending on what obstacles life (or government legislation) throws at me and will be reviewed as required.

How are you investing for your future?

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