For the first time pretty much ever, I’ve found myself in the position of being loaded before payday. It’s a nice feeling but an unusual one.
Following the unwinding of some of my side hustle investment our bank account is flush with cash and since we’ve filled our ISAs already this year (LISAs too) and have no outstanding debts (barring the mortgage), we’re in a funny position that when it came to my pay day, that we didn’t need to immediately draw down on that income or even repay expense that had built up.
How it usually works
I’ve always kept a close eye on our investments, cash flow from work or side hustles and our current account has quite a churn. I’m a bit of a wheeler dealer (but you’d never know it). I don’t really believe in keeping £5,000 in the bank gathering dust and being eaten by inflation just so that I can say that I’ve got a contingency.
My contingency was that my money was working for me or I was working for my money. I get paid mid-month and the Lady gets paid at the end. We get sporadic dividends on various investments like VCTs and our community renewable energy projects and we have investments which can be liquidated to release the funds if required.
I know roughly how much our end of month bills will be and have the funds in place to cover them – but outwith that, the money is put to use and put to use hard!
I suspect that keeping the tank empty as o to speak made me think twice before as spending and I saved money that way – similar to how if you (in the old days) had a £20 note you’d not spend it, but as soon as it’s broken you blow the lot. Short arms and deep pockets is another way to see it.
Just How Much?
We have about £30,000 in cash, just burning a hole in my various digital pockets. It’s a sizeable amount of money and it’s nice to think that it came from hard hustle work. It is however only a small part of our family fortune – we just happen to have a lot of cash right now instead.
Hard Earned Hustle
The side hustle that I have got a bit frantic whilst in August and September and I had to borrow money for it (~£25,000) which lead to a profit of about £5,500 directly from that money being invested. Borrowing so much was a bit of a mental stressor (I had to take one loan at 2.9% for £10,000 and then another at 8.9% for £15,000 which was a bit humiliating) but all the money has been repaid and after costs (~£250) I’m £5,000 the richer. The credit industry is a bit funny – of al the questions that they asked on income etc… there was hardly anything on assets. But, they had the money and I needed it (fast), so I didn’t have much choice but accept their usurious offer.
Marginal Utility of Money
I have a bit of a theory that says that the best investments that you can make are with the marginal bits of money that you have lying around and it’s the richer people who can take advantage of that money.
In the same way that if you are a spender, a sudden windfall results in terrible purchases that are a waste of money.
Remember back at the Royal Mail float? I chatted to friends who were in the same sort of income bracket as me (or probably higher) and most didn’t have the money to throw at the giveaway. I ended up netting about £1,000 in profit I think from the flotation (could have been more). Where was everyone else’s money? I don’t know but I suspect that house deposits were on their minds.
When we put down £60,000 to buy our house and since then, it’s maybe gone up to £90,000 – a 50% rise in 5 1/2 years and that’s with the power of margin on its side (7.5% annualised and ignoring the sunk costs of home maintenance). Money I’ve invested elsewhere has beaten that handsomely.
So, my question to you and myself now is; where best put my money now that I have some?
Options so far include:
- Open up Children’s ISAs for the kids and invest there.
- Invest in something for ourselves – GIA stuff or VCTs.
- Pay-off mortgage (not an ideal use of money I admit).
- Improve the house (new skylight, bathroom, furnishings, windows, carpet…
- Loosen the purse strings (e.g. get a cleaner).
- Down payment on a holiday home.
The Lady thinks that option 4 is a priority and I would happily pay for them (now that I have the money) but I don’t like the whole Grand Designs process and dealing with tradesmen.
I’ll have to think about what’s best, it’ll probably not involve spending on ourselves but instead spending on the house – I have a monthly theoretical expense for the home which goes into a theoretical fund (it makes one-off costs easier to swallow) and that is quite full at the moment, so I should probably make our home a bit nicer.
But, this is a nice problem to have. I’ve always felt that those who live paycheck to paycheck are putting themselves in a vulnerable position – but I too was making my life more complicated than it needed to be – sometimes not have enough money to pay cash in our favourite café and to occasionally use the overdraft. It’s much better to have this idle money, lying around, so maybe I’ll just sit on it for the time being and keep a contingency funds not so that I can withstand 2 years of zero income but rather to take the stress out of cashflow tightrope walk.