Month: May 2015

Minimum salary required in London: £500k?

FIRE v London37 Comments

I have not one, not two, but at least three good friends (couples) who would broadly agree with the statement that you (/one / they) need £500k of salary to live in London.  Can this be right?  You need at least 20x the official statistical median wage – really?

First a couple of caveats.  The friends I’m thinking of are all ‘fully fledged families’ – dual income mum+dad, with 2-4 kids.  By dint of being dual income, they need paid-for childcare.  They all live in premium parts of London – all in zone 1. They are not blind to the very affluent and privileged lives that they live, but nor are they totally removed from the real world; they aren’t oligarchs.   They also aren’t wildly excessive compared to a bunch of other friends; I know a lot of Londoners who would be a similar camp to these guys.

Secondly these friends all live very comfortable lives.  Regular ski trips, Michelin-starred restaurants, frequent use of taxis, babysitters used at least once a week – these are all a given.  But they all have budgets, manage their finances pretty carefully, and bitch about the cost of living.

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What’s the worst that can happen?

FIRE v London3 Comments

We investors take risks, right?  But our human aversion to losses is well documented.  In my case, one way it manifests itself is as a paranoia about various ‘disasters’ that could befall my investment portfolio.  As somebody with a sizeable portfolio, one which I am totally dependent on to maintain my standard of living, I want to make sure I consider what can go wrong with it and take any practical steps to reduce the chance of disappointment.

The obvious things to worry about are falls in share prices. But that is not what this post is about.  Stocks are volatile, and I am buying much more than I am selling, so at some level or other price drops are just good news for me for quite a while yet.

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Where to put Euros to protect against Grexit?

FIRE v London2 Comments

My portfolio has a significant allocation to Euro-zone investments*. This includes equities, fixed income, and cash.   But, better late than never, I am wondering what, if anything, to do to protect myself against a likely Greek sovereign default.

My read on the Grexit situation is as follows:

  • Worst case, all hell breaks loose.  Dominos start to fall.  Chaos erupts.  Nothing is safe.  This scenario will have me worrying about much bigger things than the thin sliver of my portfolio that is in Euros.
  • Best case, the Greeks exist the Euro pretty painlessly (for everybody apart from the Greeks and maybe some stranded tourists).  Under this scenario I think it is possible that after a brief hiatus the Euro starts to appreciate, as the weight of worry on its shoulders would have lifted a little. This view is probably unrealistically optimistic because attention is likely to turn to Italy, Spain and France next, and that weight of worry will make the Greeks seem like a feather.
  • Central case, the Greeks exit the Euro and there is some significant market volatility for some time to come.  In particular it is possible that the Euro depreciates out of stress/panic; that consumer spending drops causing GDP to fall in the Euro-zone; that there is an investor flight to safety;  and that probably you’ll see an increase in reform activity in Italy, France etc as the public starts to ‘get it’ about the need to avoid a similar fate befalling them.

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