July 2020 – FIRE v London

What has lockdown done to my finances?

2020-07-202020-07-23 FIRE v London12 Comments

Rainy Sunday mornings are perfect times to do household admin. In my case household admin centres on my personal finances. This gave me an opportunity to examine what has happened to my income and expenditure during lockdown.

Lockdown in England began on March 23rd, just at the end of Q1. Normality, by which I mean pubs/restaurants, resumed to a large extent on July 4th – just at the start of Q3. This makes Q2 a good period to examine what happened as a result of lockdown.

Income: down 32%

This simplified analysis just looks at cashflows entering/exiting my accounts. This is net of taxes (unlike my annual review which considers gross income and treats taxes as an expense).

Inflows, net of tax, Q2 last year vs Q2 under lockdown

The graph above shows what’s happened to my inflows. Dividends fell by ‘only’ 15%. Rent halved. And my earnt income dropped by 30%.

However, to interpret the graph we need some context. In Q2 last year, I moved my Previous Home from ‘rental property’ (with tenants) into ‘for sale’ (empty). So it gave me some rent in the quarter, but not a full amount. I finally sold it in February this year, and moved the proceeds almost immediately into the stock market (at the market’s record highs, sigh). This makes rent and dividends somewhat interchangable across these time periods.

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How much should you save?

2020-07-122020-07-12 FIRE v London5 Comments

A common question, especially for ‘normal’ people in their rare moments where they ever think about saving, pensions, or their financial planning, is ‘how much should I save’? It is a key question. Unfortunately, a lot of the typical answers you’ll hear/read are misguided or even wrong. Instead, I think anybody asking this question must be told three things.

For example, I was riled recently by something that the (normally sensible) Wealth Dad posted on Twitter:

I don't know who needs to hear this…

Investing only 5-10% of your income isn't going to provide you the retirement you keep telling yourself it will
— The Wealth Dad (@thewealthdad) June 14, 2020

Wrong-headed advice for many people

I don’t mean to pick on the Wealth Dad because he is far from alone. A quick Google search of ‘how much should I save rules of thumb’ yields the following:

Bankrate’s rule of thumb: save at least 10% of your income towards your retirement

It’s not surprising that investment firms like Fidelity advocate fairly chunky savings rates. But it isn’t just them.

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June 2020: Disadvantage month

2020-07-04 FIRE v London3 Comments

Well, it’s nice having some new news. I would struggle to mention any big stories over the last six months except Brexit and Covid-19. But June has been ‘disadvantaged minorities’ month.

The month began with the awful George Floyd story ricocheting around the world.

Thousands around the world protest against George Floyd's death in ... — Protests over George Floyd’s death spread to Europe (Source: CNN)

My first reaction was to think of this as a very American thing; my conclusion from reading Robert Caro’s masterful biography of LBJ was that America not having apartheid to the present day was a close run thing. And the American policing system is in a western world of its own, helped by those archaic constitutional clauses about the rights to form militia / bear arms / etc. Closer to home, I didn’t approve of the ‘anti statue’ brigade, siding with those who see it as rewriting history.

Edward Colston statue pulled down in Bristol, England during ...

A month later, and my thinking has changed significantly. I’ve woken up to some of the ongoing issues that are easy to ignore in the daily grind. I’m slightly more aware of the UK’s own role in the shameful American legacy (whose colonies were they, after all, when slavery was legalised in 1640?). I now concede that statues are as much style/decoration as they are historical record, and that a town square’s/Oxford college quad’s choice of statue can be seen as a contemporary aethestic choice. I don’t want to see statues destroyed, but I do accept that some might be better moved to a museum rather than left in pride of place.