Financial Goals for 2020

Flames

It’s been just over a year since I discovered the FIRE movement and fell down the rabbit-hole of endless blogs and podcasts all talking about financial independence. I watched the documentary ‘Playing with FIRE’ last night and found it so inspirational. It was thanks to an email from Monethalia, letting me know that it is free here (with the password FIRE) until 11th December. The documentary follows Scott Rieckens and his wife and daughter as they make enormous changes in order to pursue financial independence. On the way they talk to the great and the good of the FIRE world.

If like me you’re not quite brave enough to give up your job, sell your home and move half way across the country to live with your parents for four months, as the Rieckens family did, then a good place to start instead is with an annual review of your finances and a plan for what you want to do over the next 12 months.  

Reduce the mortgage by £12,000

My main aim for 2020 is to reduce our mortgage by a further £12,000. This year I have made payments totalling nearly £14,000 against our mortgage and by the end of the year we will owe about £72,000.

As we overpay by more than £500 per month the building society recalculates our monthly payment each time and decreases it. The plan is that each month Mr Simple increases the overpayment which he makes manually, therefore the total amount we pay each month remains the same. The thinking behind allowing the standard monthly payment to decrease each time is that at some point in the future, if we decide to stop overpaying and just let it run its course, the amount coming out of our account will be fairly small. At the moment the standard payment is decreasing by about £4.00 every month.

Well, that’s enough about the mortgage, let’s have a look at the other bills I expect to be paying in 2020:

Item Monthly Annual
Water £40.50 £486.00
Gas and electricity £89.78 £1077.36
Phone and broadband £18.99 £277.88
Woodland Trust £6.00 £72.00
TV Licence £11.50 £138
Council Tax £258.00 £2580.00 (ten months)
watering can
Watering the garden costs money, but we enjoy growing our own vegetables

Reduce the water bill to £31.00 per month

Our water bill went up after we had a new lawn laid and spent the very hot summer of 2018 watering it using a sprinkler. Prior to that the bill was £31.00 per month. We have a large garden, two greenhouses and a vegetable patch, so our water consumption is going to be higher than someone who lives in a flat, but I am hoping that when it’s reviewed at the end of the financial year it will go back down to the previous rate. Mr Simple has installed two water butts and we have adopted the habit of not flushing the toilet every time we spend a penny. Sorry if this sounds a bit disgusting, but it’s only me and Mr Simple and it really doesn’t bother us. According to the Money Advice Service about 30% of water used at home is due to flushing the toilet.

Gas and electricity have recently gone down thanks to Octopus and we are moving our phone line and broadband to Plusnet, so I am happy with those totals. All of the other items are fixed so there’s absolutely nothing I can do about them.

Increase my holiday spending

This year has been a fairly frugal 12 months in terms of holidays. Mr Simple hasn’t been abroad at all, but I did go to Italy with my mum in celebration of my 50th birthday. Having only gone away in the UK with Mr Simple, which meant missing our usual two weeks in France, I realise that holidays are one thing that I am happy to spend money on. My mum wants to go to Croatia next year and whilst I could stick to my frugal guns and decline, she’ll be 75 in April and so I want to take the opportunity to enjoy time with her whilst I can. It’s not that I think she going to pop her clogs any time soon, but you never know what might be around the corner. I have therefore increased my holiday budget and am going to put my annual car user’s allowance from my employer towards my holidays.

Next there’s my own bills – for some reason the house insurance comes out of this instead of the joint account, but it makes no difference as I would be paying the total amount whatever.

orange beetle car
It has 105000 on the clock, but I need to keep it going

Keep the car going

As my car is getting older it is likely to cost me more and so I have calculated increased spending in that area. It’s only a matter of time before I have to buy a new one, but fingers crossed that won’t be in 2020.

Item Monthly Annually
Car service £42.00 £500.00
Car tax £2.50 £30.00
MOT £3.75 £45.00
Recovery £5.08 £61.00
Car insurance £20.00 £230.00
House insurance £24.00 £290.00
Travel insurance £7.50 £90.00
Hair cuts £8.00 £96.00
Opticians £13.50 £162.00
Dentist £28.00 £2.30
Holidays £166.00 £2000.00 (plus £800 from travel allowance)
Physio £38.00 £455.00
WI £3.50 £42.00
Presents £25.00 £300.00
WWT membership £3.45 £41.50
Total £364.21 £4370.50

I am due to have my eyesight checked in January 2020 and may have to buy a new pair of glasses. I therefore save every month towards this eventuality. If I don’t need a new pair then the money can go into savings.

Continue paying into my ISA, but at a reduced rate

With the increasing cost of my car and the holiday expenses I can only guarantee paying £363 per month into my ISA. What doesn’t factor in my spending is the payments that I get towards the miles I drive for work. This is on top of the annual travel allowance. Although I budget spending £120 on petrol, sometimes that is covered by my travel expenses. How much I receive varies each month, but whatever I get will go into my ISA. Some months it is over £100 so would take my savings up to nearly £500. We’ll just have to see how it goes.

After deducting the above payments I have will have £450.00 to spend as follows

Item Monthly Annual
Food £140.00 £1680.00
Petrol £120.00 £1440.00
Toiletries £30.00 £360.00
Professional membership £24.10 £289.20
Phone £9.99 £119.88
Pilates £34.00 £408.00
Social £50.00 £600.00
Miscellaneous £40.00 £480.00
Total £448.09 £5377.08

Reduce the food budget

I have worked hard in 2019 to reduce our food spending, but I hope to make further progress next year. £140 also covers cleaning items and some toiletries so I don’t think it’s that bad, but I feel that I could do better. So how does this compare to your budget? Finding it hard to make savings? Why not subscribe and get my ‘Frugal Tips’ sheet as a thank you.

Ideas to Save Time and Money at Christmas

Stuffed toy reindeer sitting on a sofa

Christmas is fast approaching – that time of year when it is expected that you spend money you haven’t got to buy gifts that other people don’t need or want. I can hear the booing and calls of ‘Baa Humbug!’, but I honestly believe that this is true. I am not a religious person, but I feel that we have moved a long way from the real meaning of this time of year. There is so much pressure on us to go mad, spend lots of money and eat until we pop. But I truly believe that Christmas is optional or at least all of this excess is.

If I ruled the world I would make Christmas like the Olympics – just once every four years. I am not against the time that we are given off over the festive period, as this enables families to spend time together, but often the weather isn’t good and we all just eat too much and then slump in front of the TV for hours. I would rather have the time off when the weather is better, but as I don’t make the rules here are some ideas for moderating the excess that is shortly to come…

Just buy for the children

This is what we have done in my family for years. Once we all got jobs my mum suggested that we stopped giving presents to each other as we could all buy something for ourselves whenever we wanted to do so. I first met Mr Simple, fifteen years ago and he and his parents were still buying presents for each other. When his mother learnt that we no longer did that in my family she agreed that it was a good idea and so now they are ‘present-less’ at Christmas as well.

Keep the cost of each present to under £5 or £10

If you can’t survive the festive season without having several beautifully wrapped packages to open then keep the budget low by limiting spending on each present. There are Secret Santa schemes for several groups that I belong to and there is always a limit to cost of the gift.

Pick one adult, like Secret Santa, and buy for them

My physiotherapist mentioned this to me recently. He is part of a large sibling group, so instead of everyone buying for everyone else, they just buy a present for one of their brothers or sisters and obviously only receive one present. In this way it could be that although you get one present, it may be of more value and therefore something nicer than the several pairs of socks or smellies.

Give the money you would have spent to a charity

If you decide not to do presents, but still want to give something to someone, then give some money to your chosen charity. Find something close to your heart or maybe linked to Christmas, such as one that provides food or shelter to homeless people during this time.

Invest the money

As you won’t be spending as much money as you usually do, put the savings into a high interest savings account or even better, your ISA, in true financial independence style.

Prepare for Christmas 2020

Once the madness is over go shopping and buy cards, wrapping paper, etc. for next year as it will all be on sale at discount prices.

Share the cooking

Instead of one person taking all the responsibility for cooking, share it around and get someone to bring the starter, someone else the dessert, others mince pies, cakes, etc. Just let the host cook the main course, which will be the hardest meal to transport. There may be people who aren’t so good at cooking, but give them something simple to make, or maybe they can just bring the treats such as chocolates, crisps, nuts, etc.

So there we are, a few ways to save time and money at Christmas and hopefully make it all a bit less stressful and a bit less expensive. Whatever you’re planning to do over the festive season I hope have a lovely break.

Financial Independence – Lessons Learnt Over the Past Year

two blue chairs on the beach
You might be able to sit here every day if you achieve financial independence

It has been over a year since I discovered the financial independence/retire early movement. I have listened to so many podcasts and read hundreds of blog posts in that time. It has helped me to become familiar with many of the principles of FI/RE and for those of you new to this concept I want to introduce you to the basic tenets. This is also an opportunity for me to look back at what I have learnt over the past year and how far I have come in my FI/RE journey.

The four percent rule

Financial independence is achieved when you have saved 25x your annual spending. For example, if you could live on £10,000 a year you only need £250,000 saved. If you prefer a less frugal ‘retirement’, say on £30,000 a year, then you will need £750,000. This is based on the premise that when you stop working for money you will be able to withdraw 4% of your savings every year to live on. Despite the regular withdrawals, at a rate of only 4%, if invested wisely, your nest egg should last until you die.

Although financial independence is amazing, I arrived late to the party, so my chances of being able to save 25x my spending are about zero. Nevertheless, the principles of FI/RE have enabled me to begin to spend my money more thoughtfully and helped me learn what is important in my life.

a takeaway coffee
Not buying one of these every day can add up

Small savings can add up

This is the easy part and something that everyone can do. Unless you’re completely new to the FI/RE movement, then you will already be familiar with the usual list of things to cut out of your life e.g. cable/satellite television, gym membership, daily lattes/lunches expensive mobile phones, bottled water.

I have stopped buying so many coffees and lunches, but also cancelled some magazine subscriptions. I have also not bought any clothes in a year, having realised that I have plenty to keep me going for a while yet.

The three big wins are making savings on housing, transportation and food

These are the three areas where we all spend the majority of our money. Over the past year I have mostly been tackling our food budget. We used to do our weekly shop in Waitrose, which is one of the most expensive supermarkets in the UK. I have to admit that the quality of some of their food is better than what I now get in Tesco, but currently the savings are worth it.

woman buying bread in a market
I have worked hard on making this stress-free

Food

As well as changing where we shop I have also devoted time to meal planning and now do that once a month, along with ordering a monthly food delivery. This is one of the areas where I realised that time is more precious than money. At the beginning of 2019 I was going to two separate supermarkets each week to maximize our savings, but after a long day at work I was exhausted and found this a challenge. I was also disappointed in the quality of the fruit and veg from Lidl and we ended up wasting food as it just went straight into the compost.

Now I choose to shop only at Tesco, which is via our delivery and then weekly top ups, mainly of perishables. The delivery also means that I am not lugging heavy bags of shopping in and out of the car e.g. beer, tins, bottles of cleaning products. I feel that I have completely taken the stress out of shopping. The delivery does come with a charge of approximately £1.50, but for me it is so worth it.

white house with blue shutters
Our house is really too big for just a couple, but we don’t want to sell it

Housing

Housing is a much more difficult area as prior to discovering financial independence we spent £435,000 on a house, albeit the mortgage was only £130,000. It now stands at £73,810.70.

I don’t want to sell the house and so the only other option is to maximise our asset. This could be through AirBnB or renting out a room. The first would be my preference, but I have realise that this may be difficult when we are hosting trainee guide dogs. We love having the dogs and wouldn’t want to give this up, but I’m not sure how the organisation would feel about this. Theoretically the strangers staying in your house could steal the dog, who is worth a lot of money due to all the training hours that has been put into him/her. This eventuality seems unlikely, but it would make me anxious. I am not sure how we are going to address this and probably need to have a chat with someone from the agency.

We are then left with the option of renting out a room on a long-term basis.  At the moment I am not sure about that. Mr Simple has talked about trying to find full-time employment, which may mean staying away from home Monday to Friday. If that does happen I may consider having lodger, ideally one who is just here through the week and returns home at the weekend.

red car in a field
We need one of these, but manage with old ones

Transportation

Ideally a financially independent life is a car-free one, but if you live in a rural area as I do this is not realistic. As I’ve mentioned before I get an allowance from my employer towards the upkeep of my car as it is essential for my job. If you do need a car, then buying second hand is the way to go, which my car was when I bought it. At nine years old it is getting on a bit and costing me more money in upkeep, but it is less than buying a new car, so I am trying to keep it going.

One possibility for us is having one car. Mr Simple wasn’t enthusiastic when I mentioned this recently, but as he is home most of the time and his car sits on the drive way, I do question whether it is really necessary. He says that he needs it when he goes away to work as travelling on public transport would limit where he is able to stay overnight. I think that it’s something we need to consider. I may look at how feasible it is for me to arrange my appointments on the days that he is usually here and to be at home when he is away so that he could take my car.

hands typing on a computer
Sell clothes on Ebay or start a blog

If you can, increase your income through side hustles

There is only so much you can do to reduce your spending unless you want to live like a monk and eat rice and beans every day. Those aggressively pursuing financial independence look to earn extra money in their spare time. You could get a second job, do surveys on line or start a blog. There are lots of ideas here on the Humble Penny website. So far I haven’t made any progress in this area.

logo for Vanguard investment platform
This is where to put your money

Put all your savings in index funds with Vanguard

All that money you save from cutting back and earn from side hustles needs to be put straight into an index fund with Vanguard. The company set up by John Bogle in 1975 seems to be the favourite of the financial independence movement, as a result of its low fees. There’s no picking individual stocks, just own a part of the total stock market, invest regularly and wait. It will go up and down, but over time will gradually increase in value until you’ve got that nest egg from which you can draw your 4%.

My money’s in a Target Retirement Fund. This is part stocks, part bonds the balance of which changes as you get nearer to the year that you have selected for your retirement. Vanguard does it all for you, so the fee it slightly higher than their other funds, but it’s still very reasonable compared to an actively managed fund.

So there we are folks, the basics of the financial independence/retire early movement and my progress so far. How’s your journey going? I would love to know. Are you just starting out or are you already retired?

Why You Really Need a Budget

calculator
If you want to stop being poor you really need to start budgeting

I get fed up of reading blog posts where people say they don’t budget or they don’t need a budget. It makes me mad! You may be one of those people that finds the thought of having a budget rather boring, but it’s essential. If anyone tells you that you don’t need a budget they are lying. Not having a budget means that your bills don’t get paid on time. It also means you may have to get into debt just to be able to pay for the basics in life.

In the world of Financial Independence/Retire Early there is a focus on making it sound fun and exciting. In reality, it can be hard work. Stephen Covey said that effective people are prepared to do things that other, less effective people, aren’t. Believe me, if you want to be effective in the field of early retirement and financial independence you’ve got to put in the work. This means having a budget. To some of you will seem like common sense, but I am always amazed at how many people don’t actually have a grip on their money.

So what does a budget look like?  

How to set up a basic budget

If you want to have any chance of getting control of your finances then you need to start looking at what you are spending your money on. If you don’t know how much is in your account and you are blindly handing over your credit/debit card to buy something that you don’t really need then you are in trouble.

You could start by keeping track of your expenses over the next few months, but really you need to look at a whole year. I’d recommend pulling out your old bank statements and having a look at where your money went.

Light bulb laying on grass
If you want to keep the lights on you need to start budgeting

Predictable Expenses – monthly

Let’s start with the easy part. Look at the regular bills that you are paying each month. For me these are gas, electricity, mortgage, council tax, water, phone and broadband and TV licence. I recommend setting up a separate account to pay these out of. You can automatically transfer a set amount to that account the day after payday. With that done you won’t be at risk of having the gas cut off.

Predictable Expenses – annually

Secondly, there are some bills that you only pay once a year. For me these are:

  • Car service
  • Car tax
  • MOT
  • Vehicle recovery
  • Car insurance
  • House insurance
  • Travel insurance

I also add money for medical expenses such as opticians, dentist, my physio appointments. Finally I add money towards my holiday fund. For some of the annual bills there is the option to pay them monthly by direct debit, but often this increases the annual total.

Make a list of all your one-off annual expenses, plus anything else that you want to save towards each month. Add up how much you spend on these in a year and then divide by 12. If you are going to have a second account for your monthly expenses you can then add this amount to your post-payday transfer every month. That way, when the yearly bill comes around you’ve already got the money saved. It also prevents those expensive months, as you spread the cost over the year.

Savings

If you haven’t yet got a grip on your spending, then finding some money to put away each month may not be at the top of your list. I would hope that as you’ve gone through all of your main expenses you will have discovered where you could make some savings. Hopefully you’ll have been amazed at how much you’ve wasted on things that in retrospect you could have done without. Once you’ve worked out how much you can afford to save it’s just a matter of transferring that amount to a savings account or preferably an ISA each month.

woman doing pilates
A Pilates class – one of my weekly expenses

The remainder

What you have left is yours to spend as you see fit. I have six categories for this money. They are food, petrol, toiletries, Pilates, social and miscellaneous. As I am someone who likes budgeting I allocate a certain amount to each category, but it’s entirely up to you how you spend this. As long as you don’t go overdrawn by the end of the month then you’re doing okay.

So there we are, a simple guide to start to get a grip of your expenses. It may seem like a lot of work to start with, but once it’s in place you won’t have to worry anymore when you get to the end of the month as to whether you’ve got enough money to pay the bills.

Do you have particular problems with your budget that you are trying to tackle? Let me know in the comments section or if you’d rather keep it private send me an email via the contact form and I’ll see if I can help you.

How to Save Time and Money Everyday

In this modern and hectic world everyone seems to be so busy, but there are easy ways to save time, along with making some financial savings as well. This is particularly important if like me you are interested in the financial independence/retire early movement. Making small savings every day can help you to increase your savings and having more time might just help you find a few hours each week to work on a side hustle. Therefore, here are some ideas how you can save time and money every single day.

Do less washing – you won’t be smelly – I promise!

Laundry

Wash items less

Washing clothes is time-consuming, costs money and is bad for the environment. The first way to save time and money on laundry is to hang up your clothes after wearing them once, instead of washing them. Now I don’t mean underwear, just items like trousers, skirts and jumpers. I wear those several times before washing them. I also wear blouses and t-shirts twice. In between the first and second wear I put them on a hanger on the front of the wardrobe door. This stops them from getting creased, allows them to air and reminds me that I have already worn them once.

Use an airer

If you use a tumble dryer the cost of electricity can be astronomical. To dry our clothes we have a washing line outside, which in our lovely British weather is only useful so many months of the year. When it’s too cold or wet outside, in order to save money I use airers to dry our clothes. I don’t think that hanging clothes on radiators is a good idea.

For a start, I think that it restricts the heat coming into the room and I find it’s too hot for many of the clothes and they can go a little crispy. A much better idea is to just hang them on the airer and stand it next to the radiator. It may sound a bit pedantic, but made sure each item is laying flat. I used to have a flatmate that would hang her knickers on the airer whilst they were still crumpled up. This meant that they took longer to dry and again seemed to have a ‘crispy’ feel once they were dry.

Reduce the ironing pile

As well as putting clothes in the washing machine and hanging them up to dry there is also ironing. Fortunately since Mr Simple got made redundant a couple of years ago I have saved hours of my life as I no longer have to iron his work shirts very often. He spends most of his time working from home and just shoves on a t-shirt and jogging bottoms. About once a fortnight he wears a shirt and like me, he will wear it more than once, so now it’s only one shirt a month that I have to iron.

If you do a lot of ironing, in order to save money I would suggest trying to do a large pile in one go. Heating the iron up several times a week to iron a few items will cost you more money than putting it on once and keeping it at that temperature until you’ve finished the whole pile.

Colouring your hair yourself is easier than you think

Personal care

Dye your own hair

Since discovering the financial independence/retire early movement I have significantly cut the amount of services that I purchase and even before that I wasn’t a great consumer of the beauty industry. Through this I am able to save both time and money on trying to fight back the signs of ageing. When you get to the ripe old age of 50 (and for me long before that) grey hair is a fact of life. Some people choose to embrace this and are happy to go grey, but I just think that I would look so much older, so I choose to dye my hair.

This used to involve going to the hairdressers once every six weeks and paying about £60 for a colour, cut and blow dry. I’d never really considered dying it myself, but after reading about Mrs Frugalwoods cutting her own hair I thought that I would give it a go. It is a bit messy, but it saves me so much money. A pack of ‘Nice and Easy’ Dye is just £6. I then just go for a wet cut every few months, i.e. I turn up with wet hair, the hairdresser cuts it, gives it a quick blow with the hairdryer to get out the worst of the moisture and I’m off. That only costs me £20.

Make fewer trips to the salon

So how does this save me time? When I went to the salon to have my hair dyed I would be there for about two hours. By the time they had put the dye on, left it a bit, washed my hair, cut it, dried it and then straightened it, most of the morning would be gone. My hairdresser would often ask me what I was doing later, expecting me to say that I was going out somewhere nice to show off my new haircut. In fact most of the time as soon as I got home my hair went up in a clip and I got on with some household chores or gardening. All that drying and straightening, which I can do perfectly well myself, was a complete waste of time and money. On top of the time and money spent at the salon there was the travel time and if I took the car, the cost of petrol. It’s only a mile away, but it all adds up.

As well as my hair I am now plucking my own eyebrows instead of getting them waxed and using hair removal cream on my other facial hair. Each task only takes a few minutes, saving another trek into town and yet more money.

Cleaning

Be tidy

One of the best ways to save time on cleaning is not to make a mess in the first place. When you’ve finished with something, put it away. When you pick up the junk mail on the way in the door put it straight into the recycling bin rather than leaving it on the side to pile up. Eventually you’ll have to sort through it.

Ban ornaments

I’ve never been a great fan of ornaments, but I think that if you want to save time on cleaning it’s really important to keep your environment simple. I can never understand ‘collectors’ – shelves and shelves of figurines or fancy teapots. To my mind these are just dust collectors which you have to spend hours of your life keeping clean. So, save time and money – by not buying them and therefore not having to dust them. If you really must have something, keep it simple and buy just a couple of things that will be easy to move when you need to dust that shelf.

So there we are, just a few simple ways to make life easier, giving you more time and saving you a few pennies.