Where has the year gone??? It’s almost bloody Christmas and there’s nothing but Christmas tunes in the shops – I’ve not seen the sun in week and it’s getting very very cold!!!
Well, at the end of the month it’s time to set some time aside and go over the Gentleman’s Family Finances and this November has been quite good, and after October it’s a welcome relief!
The most important thing to mention is that I’ve reduced my salary sacrifice pension payments meaning my take-home pay is up, as is my income tax and NI bill! It’s a double edged sword. I wrote about it here but the main thing is that this boost in take home pay has meant that for the first time in a while, the family take-home pay is higher than our monthly outgoings as seen from the graph. The red line is our average outgoings and the green line our average take home pay, the blue line is average income after tax but ignoring deductions like pensions, childcare vouchers… For the last year or so, we’ve been spending more than we are taking home in pay and that’s meant that a lot of money is being funneled into pensions but non-pension assets are having to make up for the shortfall in free cash flow. So as you can see, our outgoings have peaked (I hope) and are coming down now. The major part of our spending is on the Nanny which allows me to work the job I do and it’s a great investment in helping to raise my son, the Little Gentleman. Our spending has really come down in the last few months due to no booze, no gratuitious travel and sensible purchasing of baby related things (which if bought new can cost a lot). We have also been helped by a good run of ebay sales and also cashback. We are also receiving child benefit for the Little Lady!!! A massive £13.70 per week will be paid into our bank account until she is 18 which adds up to £12823.20 – a sum not to be sniffed at. Receiving child benefit also counts toward NI contributions.
But boy is the Nanny expensive! We’ve managed to reduce hours since my wife (the Lady) is on Maternity leave, but have you every been left alone with two kids? Then you’ll know that you need some help. So Nanny is around 3 days a week and is doing a great job.
Anyway, on to the results:
Spending totaled around £2400 and about £900 of childcare and £1500 was our spending. That’s a great improvement and I’m quite happy with that – although we can do better but let’s get Christmas over and done with first.
RIT Savings rate was just over 65% which I am very happy with. The markets might do what they want and our investments will go up and down – but saving 65% of our income is powerful and over time pushes us towards FI.
Our net assets grew 0.3% month on month to from 86.6% of our target to 86.9%. Net worth less pensions was static – which is disappointing.
Annual increase in networth was 15%.
Annual increase in networth less income was 2.1% (-4% would be a SWR of 4% – so I’m in positive territory)
Annual increase in networth less income and spending was 8.3% (essentially my investment return)
Dividends from non-pension assets were around £1650 this month – which would imply that our dividends covered our outgoings – so a little indication of FI right there!
In terms of investments made this month. I maxed out my ISAs with the recent downturn in the markets. I’m glad to have been able to buy at such good prices.
I also sold one of my VCTs that I had held for 5 years. I made a net return of about 45% (IRR 8%) but with the 30% tax rebate, that is a return of around 100% (IRR 15.5%). I can’t say that I am disappointed. I’ll be offsetting most of our Income tax with VCTs for this tax year. I currently about about 13% of the Family’s assets in VCTs and they earn us around £10,000 a year in tax-free interest.
Going back to SWR – our Outgoings as a % of Net Worth (or personal withdrawal rate – PWR) was 3.3% over the month – meaning by some measures that we have achieved FIRE!!! The downside is that half of our Net Assets are in Pension funds and we’ve about 12.5% tied up in the house. In terms of our pre-pension fund PWR was 7.8%.
As the old saying goes, the trend is your friend. I’ll keep trying to reduce spending, increase earnings, invest wisely and have my PWRs dropping down.