I’m trying to think back over what happened in my life in October, and to be honest it was a bit of a non-month. Nothing of note really happened. Don’t get me wrong, I had fun, I had some people round mine a couple of times, went out for meals and drinks and pub quizzes, went round friend’s houses, did my Park Run each week, went bowling, but you know, nothing particularly out of the ordinary. That’s the reality of working for the man I guess, the weeks melt into each other, you fit what social life you can around work and exercise and try and keep on top of life admin. I haven’t had a holiday from work since July and it’s taking its toll, I don’t know how they do it in the US with their meagre 10 vacation days a year.
I continue to be exasperated by politics. I mean how do so many idiotic people become MPs? Who votes for them and can I try and slap some sense into them? This month we had the Tory plonker Chris Heaton-Harris thinking it’s okay to ask all the universities what they’re teaching the students about Brexit – what’s he going to do, force them to stop teaching facts and start teaching about unicorns? Then there’s the Labour moron Jared O’Mara who it turns out said some pretty bigoted and sexist things several years back. Then of course you have all this sexual harassment stuff that’s coming out. And that’s not to mention Brexit – it seems like Brexit has brought all the most loony politicians out of the closet – the Rees Moggs, the Leadsoms, the Goves and so on (to be fair Gove’s been doing and saying dumb things for years). Theresa May has become an object of sympathy in the UK and abroad – she must hate that but what can she do? Part of me wishes Cameron and Osborne would come back – I didn’t like them and I don’t agree with all this austerity politics but at least they seemed reasonably intelligent. At least they appeared to have some level of control over what is going on (mind you it’s Cameron’s fault we had the EU referendum in the first place so there you go).
And then you have this interest rate increase from the Bank of England. Now, I studied economics back in university, and I realise ‘the people’ don’t like listening to economists, but my understanding is that when the BofE decides it needs to increase the interest rate that is a BAD THING. You wouldn’t know that if you read the Torygraph. An interest rate increase means inflation is too high and needs reigning in. Sometimes that’s because the economy is doing very well and there is a threat of demand-pull inflation, but that is not the case this time round – the UK’s economic growth is the lowest in the EU/G7 and it doesn’t look like it’s gonna turn around any time soon. We will necessarily get a worse deal with the EU than we currently have and these promised trade deals with other countries won’t come in for years yet. Inflation this time round has been directly caused by Brexit and the fall in value of sterling. The hope is that it’s a one off spike and inflation will return to normal. Alternatively we might have the stagflation of the seventies (won’t that be lovely).
Here’s the Governor of the BofE Mark Carney talking about the interest rate increase:
From my perspective the interest rate rise wont make any immediate difference to my finances – both my mortgages are fixed until the middle of next year. And a 0.25% increase is hardly going to break the bank. Actually mortgages are cheaper now than when I got the 5-year fix for my first house back in 2013 so I’ll probably see my mortgage payments go down next year. It’s interesting, in the past most people would have had a variable mortgage so would have been immediately affected by a interest rate change – these days on the other hand most people have a fixed rate mortgage so it means the BofE’s decisions have a much more delayed effect on inflation (and it was already a delayed effect anyway).
The interest rate increase means business loans will be more expensive which means less business investment and a further slow down in growth. So we might see unemployment start increasing (though I don’t know how much you can read into the unemployment figures anyway). We’ve already seen productivity flat line for the last decade – that’s not gonna change anytime soon. But the main group that will be affected by the rate increase are those people living on the bread line – the ones with big credit card bills and loans and rent to pay and so on. I work in a credit card company and nearly all of our credit cards are linked to the BofE base rate now – indeed someone in my team actually spent most of yesterday afternoon working on applying the interest rate increase. Probably most customers aren’t even aware of the rate change, but they’ll notice it when their minimum payments increase. A lot of landlords will see the inflation figures and their mortgage rate increases and decide they need to increase rents also.
Anyway, perhaps I’m just a pessimist. Perhaps there is a land of gold and honey and unicorns just around the corner. I’m sure once the UK government has hired the 8,000 extra lawyers/civil servants and the 5,000 extra border staff they need there will be lots of money left over to spend on hiring all those extra nurses that will need replacing.
I apologise, my cynical side has gone a little overboard today. I’ll stop ranting about the state of the country. Here’s something I did have some control over – my financial figures for October:
- Mobile phone – £19.40
- Rent – £550 – I own my house (with a mortgage) but I pay myself rent. I don’t actually move any money around, but for the purposes of my spreadsheet and my savings rate I treat my house as though it were a rental property and I am a tenant in it.
- Food, drinks, toiletries – £170.27
- Eating/drinking out, takeaways – £138.09
- Petrol/travel – £76.44
- Car expenses (insurance, repairs etc) – £0
- Gym/Sports – £30
- Music/gigs/cinema – £18.80
- Cash Withdrawals – £111.50
- Miscellaneous – £253.54 – This category is up quite a bit this month – I had some dental work done (man that local anaesthetic is weird), I bought a new board game (Catan is fun!), and I’m still making repayments on a couple of mattresses I bought a few months back.
- Bank charge – Negative £9.01 (ie they paid me).
I split out my income into active and passive – passive is basically my rental income, active is everything else.
- Salary (after pension/sharesave removed) – £2176.54
- Pension payment – £877.50 – I put in 6%, my employer puts in 20%
- Sharesave – £250
- Matched betting – £0
- Rental Income (after bills, expenses, council tax and mortgage interest removed) – £1248.86 – one of my tenants moved out this month so I only got half a month’s rent from them. I already have another tenant moving in at the start of December but it does mean my passive income for November will be a little lower.
Total Active Income = £3304.04
Total Passive Income = £1248.86
My Savings Rate
This is where my approach differs to other bloggers. Most bloggers don’t appear to consider their investment income (my passive income above) the way I do. They usually just reinvest it, or they might add it to their total income.
So for most bloggers looking at my stats above they might see an income of £3304.04 and spending of £1359.03 and say, aha, your savings rate is 1-spending/income which equals 0.59, or 59%.
Other bloggers might add the active and passive income together for a total income of £4552.90 and use the same calculation above to get a savings rate of 70%.
Other bloggers might consider the mortgage repayments as an expense also (I’ve only considered the mortage interest above) but that’s a different topic altogether.
My method is to use passive income as an expense reducer. That is, my spending is £1359.03 minus £1248.86 which equals £110.17. As my active income is £3304.04 and my spending is £110.17 then my savings rate is 97%.
Yeah I know, 97% savings rate, sounds too good to be true. See my earlier post here if you want a bit more explanation on this. Basically while it sounds great, this month didn’t include many annual expenses or major life expenses, and I don’t have kids (yet), so it doesn’t really tell the whole story. But I do think it is an accurate way of measuring the savings rate (until someone tells me otherwise).
My Net Worth Tracker
My net worth increased in September from £178,168.41 to £188,238.33, a £10,069.92 increase. This is based on the estimated values of my properties minus my debts (mortgage/loans etc), plus my savings, plus my investment accounts (including pension) and the total of my bank balances.
The increase this month seems like quite a lot, but it’s partly because I work out my house values using Zoopla which is quite volatile. One of my houses apparently increased by £6k this month according to Zoopla, though it decreased by £4k last month, so really it’s just a £1k month on month increase. I’ve said it before – I realise Zoopla isn’t the most accurate way of measuring a property’s value but based on my rental yield I don’t think it’s too far off – actually I’m probably being quite conservative in my valuations.
Since this time last year I estimate my net worth has increased by £55,518.18. Here’s a lovely graph to show how my net worth has increased since September 2012:
As mentioned before it’s the green line that’s the most important one. It’s weird to think that a £10k increase only shows up a slight movement on the graph, when 5 years ago £10k was about all I owned in the world (and I thought that was a lot at the time). It shows how your perspective changes as you move closer to FIRE. I’m so very close to that £200k line – I’m still hoping to get there by the end of the year.
There are so many external factors swirling around at the moment – house price movements, inflation, interest rates and so on – and if Brexit goes ahead I fully expect to see a drop in the values of my houses. All I can do is plough on, keep expanding my investments and reducing my debts.
Next month is going to be a bad month financially – I’m in the midst of sorting out flights to Thailand, a skiing holiday in France, and flights and hotels in Germany. One other thing… I submitted my tax return for 2016-17 and I owe the tax man around £3k which I need to pay in the next month or two… Just thought I’d slip that little bombshell in there!
As always thanks for reading,