The Life and Loves of a Spendthrift

I’m tight. I always have been. On my wedding day, my brother stood up as best man and kept the guests entertained for ten solid minutes by cracking jokes about how tight I was. “Jim was up a ladder the other day cleaning a gutter when he felt 50p fall out his pocket. He caught it before it hit the ground”. Yes, yes, yes, how they laughed, while I wondered why I couldn’t remember it. After all, it sounded like something I’d do. And what had I spent that fifty pence on?

As I’ve probably mentioned before on this blog, I actually receive a bigger thrill from not spending money and from making little incremental savings than I do from making ridiculously big purchases. I do have one or two exceptions to this rule – I really don’t mind spending serious money on holidays and I’m a bit of an Apple fanboy, despite how shallow and pathetic I feel the latter admission to be. Still, they’re the exceptions to my rules.

Resultantly, I was a bit shocked the other day to sit down and calculate out how much our household seemed to be spending on “unbudgeted” items over the last year.

For someone who is proudly aware that every penny is a prisoner, I seem to have been allowing quite a few of them “escape” recently. I’ve been vaguely aware that I’ve been letting some of my standards slip – for example, these days when we head out for a Saturday night dinner with friends, I take the bill out of our “savings”, whereas for years this would have come out of our own personal monthly spend budgets. I don’t know why I made that change, but I do know that it has made a difference. When you can spend £150 a month socialising and allow yourself effectively not to “notice”, well, that’s just not good enough!

We also seem to have been buying “frivolous” stuff for the house, like new wooden flooring in a couple of rooms when, in my view, we had perfectly good and serviceable carpets. My car has cost quite a bit this year too, perhaps because it is five years old with over six figures on the odometer. Repairs, services and anything else has to come out the savings too, because for thirty years I was given “company cars” and never had to budget for them. That’s a habit I’ll probably have to break now to get back in control. (I won’t bore you with the fretting I’ve done over the past few weeks about whether or not I should trade my car in for a newer version. Suffice to say I’ve decided not to. For the moment.)

Looking at my “unplanned spend” caused me to think about our “planned”, or budgeted spend too. Our Virgin Media bill is frankly ridiculous as we’re paying the top package. I really have to do something about that. Then there’s those charities I’m giving to merely to salve my guilty middle class conscience. What have they done for me lately? And then there’s other “stupid’ stuff, like insurance – life insurance when my mortgage is all but cleared, annual holiday insurance. mobile ‘phone insurance, multi-car insurance, dental treatment insurance – I feel I’m single handedly keeping that damn industry afloat.

On the plus side, I’m still doing the weekly shop at Lidl, I’ve slashed personal spending on the Kindle due to rediscovering the local library and I’ve managed to cut the cat down to two pouches of food a day from three. These things add up, and tell me that I haven’t quite reached Kardashian levels of needless consumer consumption yet. On the other hand, reviewing my credit card spend for the year has underlined the fact that my “emergency fund” needs to be watched more closely going forward. When you stick to the rule of having an equivalent of three month’s salary available to you in cash to cover life’s unexpected spend, it’s all too easy to class that second bottle of wine in Pizza Express as a genuine “emergency” purchase. And my monthly budget needs a good talking to while I’m at it. These days, I might not be as agile as I once was when it comes to descending ladders at speed, but there’s no harm in keeping the training up.

Vertigo

Is anyone else feeling a bit dizzy as the markets seem to continue to climb ever upwards? For someone like myself, passively investing for years, 100% in equities across my pensions and ISA’s and forever looking forwards to a five or even ten year horizon, these should be heady times. I should be enjoying the ride, but at my back sits dark anxiety. Why? Because I’m nearing the finishing line.

In a few days I will turn 54 and the final year countdown begins toward cashing in the first slug of one of my DC pensions. This is so that I can take my 25% tax free cash from the pot before the government raids this perk as, I feel, they inevitably will at some point. This pension has, frankly, rocketed in the past 18 months. It’s not totally passive, as I have one or two managed funds within it, but I watch it growing well beyond the goal I’d set for it to achieve about three years ago, and increasingly fret about the markets undergoing a massive reversal.

I’ve lived through such things before – I invested over the dotcom boom and the 2008 crisis – stifling a yawn as the markets collapsed. For me, at that point, this was great news. My regular monthly contributions just gained me more units in the funds I was buying, and I never thought twice about converting to cash, buying gold or looking for value in property. “What goes up must come down”’ I told myself, and stuck to my “pound cost averaging” and my long term view.

I’m not so blase now, I can tell you, and hardly a day goes by without me telling myself that the sensible thing to do right now would be to convert all those equity funds into cash or something more stable than shares. Or at least some of it. Then I could set my 25% lump sum in stone. Okay, I might lose out on some growth, but at least I won’t lose out versus my projected lump sum. After I’ve collected, I can switch the remainder of the pension back into equities while I live off the sum that I’ve cashed – which will last me five years, I reckon, so I’m back to a “safe” investing horizon on the remaining funds.

As I write, I ask myself what’s stopping me doing so? I think a lot of it is that I’m frightened of change – I’ve not really altered the way I invest for over twenty years, and it’s served me very well so far. It ain’t broke, so why fix it? And I don’t really “need” that lump sum either. If the markets do collapse in the next 12 months, well, I can ride it out again. As a passive investor at heart, I’ve set my allocations, I’m following a strategy and therefore the best advice I can give myself is to “do nothing”. Stop worrying and go and do something more useful instead.

But this only gives rise to the next question: “If not now, when?” At what point am I going to relax and cash in some of my chips? I set a goal to cash that pension at 55 and I almost feel obliged to achieve it. If nothing else it might force me to look at other aspects of life that involve a bit more spending than saving because time is finite. Reaching pensionable age is a milestone that’s hard to ignore, much as you might want to tell yourself you’ve years and years left to gather the rosebuds. You haven’t.

Please forgive this “Woe is me” navel gazing. I know I’m lucky to have such problems. I can only justify submitting a post like this because I never knew that choosing to sell would be a hundred times harder than choosing to buy. It’s like in the same way that I found choosing to retire to be a lot harder (for me) than choosing to go back to work. And that was why i started to write this blog in the first place.