Category Archives: money

A new beginning?

As I’ve recently got married, thoughts have unsurprisingly turned to ensuring our life together stays as comfortable and stable as possible. I’d like to think we work hard on the emotional side of our relationship, but there are other pitfalls that can occur, with money being a common one. Given my lack of confidence in the UK Government’s ability to look after anyone financially apart from itself, it occurred to me that it might be worthwhile trying to sort us out with some kind of safety net for the future.

In my younger days, I would hear older people bang on about pensions and other boring stuff like that, and I felt totally removed from the situation. That was something old boring people spoke about, after all! It never occurred to me that a pension was anything other than the State Pension. My parents went on about getting one, so when I joined my current employer at the age of 24 and the option was offered, I thought “Why not?”. BEST. DECISION. EVER. Turns out now I look into it, I’ve been paying into an employer-matched final salary pension for the last ten years. I was exceptionally pleased. Further research gave the depressing figure that I needed to spend another 30 years working for them to get half my final salary as a pension.

Now I don’t know about you, but no way am I intending to do that. I realise I may well end up doing so through not being motivated to go somewhere else, but then that still leaves me with the horror of turning up 9-to-5 somewhere for at least another 7500 days. OK, so how do I manage to slip out of this? Two options immediately spring to mind:

  • Bum off the State. This looks attractive on account of seemingly being able to choose this straight away, but there’s only so far you can go with this. You are still relying on someone else to provide for you, and as mentioned above, I’m not massively confident that this is viable long-term. Being a belt-and-braces kinda guy, that sounds too much like all my eggs being in one basket.
  • Work part-time, and live on less. This leave the former as a fallback option, whilst still decreasing the amount of effort put into supporting myself. Downsides appear to be a lower quality of life as I’m used to living on my current wage, and still having to turn up somewhere at least once a week and play by someone else’s rules voluntarily.

Don’t get me wrong, I do enjoy my current job, but don’t be under the misapprehension that I would turn up if they didn’t pay me. Ideally, I would like to be able to afford not to turn up. Looking around the web, there seem to be an increasing number of websites about Financial Independence. The general principle is to live on a lot less than you earn for a few years and build a chunk of savings to eke out for the rest of your days. This, quite frankly, sounds like the worst of both worlds. You work full time AND don’t see the benefit of it now? The upside of not working for those remaining days does seem attractive though…

So, for a laugh, I thought I’d start making some vague attempts at changing my attitude towards life in that general direction.

A lot of these sites seem to be biased towards investing in the stock market. I’d never considered this before as my impression was it was the preserve of a certain undesirable type with red braces, and those who already have money to burn. I was definitely not the latter, and I hoped I was not the former but as I already owned some red braces I thought it might be worth looking into further. Long-term returns looked promising, and through using a selection of index funds (like shares in the whole stock market), risk of making newbie mistakes seemed minimal. So as of the 11th of November 2014, I was a stock market investor.

Considering that we had been saving hard for the wedding and being a Dave had not changed much at all, it made me wonder how much more I could save. I’d been putting nearly 20% of my take home pay into savings each month with no detriment to my lifestyle, and this process prompted me to look at my monthly outgoings. I was shocked, in truth. Having covered living expenses (housing, food, vehicle costs, weekly poker game), I had a quarter of my net wages left. There were two ways to look at it, yet again:

  • “That’s not much!”
  • “What am I spending this much on?”

Notice a subtle difference? It’s either not much or quite a lot each month.

So I’ve set up a spreadsheet, and am itemising each thing I spend out of that cash and it’s been quite a surprise. As an example I appear to be buying a can of Coke most days. Now that might not sound like it would add up to much, but that’s nearly £250 a year. If I didn’t spend that for one year, and put it in a savings account at 5% until I retire, not drinking Coke (just in work) that would equal over 1100 quid. What if someone said they’d give me a grand to not buy Coke in work for a year? Being me, I’d probably buy something else, but it made me think. More sums suggested not buying Coke at work EVER AGAIN (saving £18 a month) would be worth £15k. That’s quite a lot of cash. Another thought: if I bought supermarket own-brand at half the price, I would STILL be getting my fizzy sugar fix and the difference would be worth £7.5k! How many other tiny differences could I make that would not impact my quality of life AT ALL and make such a significant difference later on?

I know this sounds like a chronic nuisance but I truly believe this could be the difference between living like I live now in old age, and living in fear of a big bill arriving. Which is not the way I want to live.