Community Care

I’ve written a couple of versions of this post, about a subject that’s quite personal for me at the moment. Let’s just say that it concerns social care and the cost of it. In summary, if you’re unlucky enough to be affected by dementia or Alzheimer’s, have amassed some savings in your lifetime and haven’t acted to “protect” them from the State, then the State is going to come after you to pay for your care. They will demand to see bank statements, investments, divestments, savings and anything else that they see fit to request. If they feel that you have knowingly tried to move money in order to avoid paying for a relative’s care, you could end up in jail. It’s serious stuff.

I know from reading forums that plenty of people feel that this is fair enough – if, in your dotage, you have the cash to fund a plush care home, what better way to spend it? Especially if you don’t have kids, or likeable relatives, or a favourite charity, to leave a financial legacy for. Choose somewhere you’d like to live and pay for it.

The costs are quite breathtaking when you face the reality of them. For a standard, council care home, you’ll be looking at finding between £700 and £800 a week to stay there, of which the State will pitch in around £200 for as long as you have financial assets to cover the difference. If this is the case, then the remainder of the bills will be funded by you, until you’re down to your last £16,000, when the State will step in to pick up the charge. From your pension, investments, savings, sale of your house, whatever, you’ll be finding and funding around £500 a week.  And you’ve pretty much no idea how long that is going to go on for. One year, five years, ten years, more? The way medicine is going, they’re able to keep YOU going, whether you want to or not, for a long time.

If you want to scare yourself witless about a potential future, take a stroll around the nearest dementia ward local to you and ask yourself how, in God’s name, the country is going to be able to afford to look after the legions of poor souls who’ll require round the clock care in the near future? Yes, the big idea is to keep people at home for as long as possible while pumping in community care teams to “look after” their needs. It wouldn’t surprise me, however, if this is even more expensive than caring for someone in a home. The cost of it all is mind-boggling.

When you consider the amount of people who have no pension other than that which the State will provide; when you consider the average amount of savings people have in the bank; when you consider – if you can – the cost of looking after a person twenty four hours a day, seven days a week, plus their medicine, plus their emergency call-outs, their wheelchairs, zimmers, adapted homes for living, the medical teams required for support, the falls team, the social workers, the ambulance service, the heating bills, the solicitors, the GP’s, the administration….look down your street. How many people in their houses are going to need care at the end of their lives, One, two, ten? Then multiply your street up to imagine your village, town, city and country. 

I don’t know about you, but I’d be prepared to pitch in a couple of pence more on income tax if it would guarantee secure care for our elderly. As a community this is surely the right thing to do. My only reservation is that the money would soon be squandered and wasted hand over fist, but what’s the alternative? We’ve got to do something.

Of course, maybe because of my recent personal experience I’m worrying about a potential future of my own that I don’t particularly want to fund out of my own savings if I can help it. And maybe there’s a truth to that, and maybe I feel a bit guilty about it because I was brought up to not break the financial rules, nor even bend them. You paid your way, fairly and squarely, that was how a caring community was built. Everyone contributed what they could, or at least that was the ideal.

The way the health service is going, it’s obvious that the money it will require is way more than a small number of individuals can shoulder. We’re all going to have to contribute more, as a massive public insurance against an uncertain future. There may be a myriad of ways to approach this, politically, economically and socially, but fund it we must as we venture – a lot more slowly – toward the dying of the light.

 

Dumb and Dumber

“You don’t bank percentages”. This used to be a stock rejoinder in a previous workplace when (usually) some marketeer was talking about their brand’s year-on-year ten percent growth. I mused over this workplace cliche as I tried to come to terms with the hit my various investments took over last week, and decided that I actually did “bank percentages”- as it was much easier to think my funds had dropped by 6% as opposed to the actual cash that had vanished from the accounts.

The use of some other clichés also helped mollify the impact of the carnage, such as “I’m in it for the long term”, and “Our favourite holding period on stocks is “Forever””, thanking Warren Buffet for the latter one, if he actually said it. (Like a Shakespeare of the financial world, every pithy quote ever made about money seems to be attributed to the “Sage of Omaha”.)

Most of the Sunday papers offered solace too, with “Don’t panic Mr Mainwaring!” being the favoured tone of most commentators, although I did feel that there was an underlying, if not blatant, message of “Nobody knows anything”, when it came to trying to explain what had happened. I’m not sure if this was comforting or not, because surely professional analysts, economists and finance geeks should have a better idea than most of us as to what was going on? After all, when I visit the doctor with a well explained summary of a condition that ails me, almost the last thing I want to hear from him is “You know, I haven’t a bloody clue what’s going on. Have you got any ideas?” I might appreciate the honesty, but it’s not really going to help me.

There seemed to be a lot of discussion and dissection of the VIX index, but at that point my eyes began to glaze over. I realised I wasn’t going to be enlightened on the situation if one of the main tools used to try and explain it was just something else that I didn’t understand. Hopefully someone else did understand it, but is that really how the modern world works these days? When you think of some of the key pieces of engineering that we all rely on every day, how many of us can repair our car, never mind an iphone? When the central heating or boiler goes on the blink, do you reach for your toolbox? (The last two issues I’ve had with my boiler have been down to a faulty circuit board, something a spanner and screwdriver couldn’t really repair.) Even my cooker mocks me over my inability to use the functions it has at its disposal and let’s not even think about how we’d live without the main cultural, social, educational and emotional crutch of our lives, the Smart Telly. You can’t even walk over to it and give it a good wallop on the top of the cabinet when it malfunctions, because it doesn’t have a cabinet.

When I start to think like this, I can feel a bit of panic rising. It seems to me that in the “old days”, when there was a problem you called on a professional you trusted to fix it. A doctor, a mechanic, a joiner. And, when you called them in, you’d generally thought through the problem and maybe had a go at fixing it yourself before bringing in the hired help. These days, before the help’s even over the door, we’re standing there with Google and Youtube in our hand, ready with all of the questions and none of the answers.

I have a book on my reading list by Tom Nichols, “The Death of Expertise”, which laments this trend in society and worries over what it all means. I found out about that book through listening to the Sam Harris podcast, but increasingly listening to the Sam Harris podcast worries me. This guy is extremely smart, and interviews all sorts of other smart people, but often his live debates with fellow eggheads leave me feeling that they too are lost in the complexity of life today. Was there ever such a thing as an uncontested “fact”? You’d hardly think it, listening as yet another debate wanders off into the philosophical long grass of whether “a fact” is actually only an informed opinion built on certain rules and constructions, or vice versa. (The only “fact” that Harris seems to feel is truly incontestable is that Trump is an arse.)

Then, just as I was about to abandon all hope and embrace the “fact” that ignorance actually is bliss, along comes Monevator’s “Weekend Reading” with a fantastic summary of the many factors that might be behind last week’s market volatility. In plain English, and with no sense of panic whatsoever, cooling oils are poured over the fevered brow. And the Vix Index isn’t mentioned once.

Taking the Plunge

And the markets come down, as inevitably as they once went up. Most of us, disciples of Motivator and (mostly) passive investing, take a deep breath and take this in our stride. “We’re in it for the long term”, we tell ourselves, finger hovering over the “Sell” button. Many of us have been here before, the dot com crash and Lehman Brothers in 2008 being our two watershed examples. But, in my days of yore, thoughts of selling out, or de-risking my portfolio into bonds and other less volatile instruments were just not a consideration. I had years – years I tell you – to watch the market recover, so I kept up the monthly payment plan while chanting the mantra “Pound Cost Averaging, Pound Cost Averaging”.

So, today finds me trying to reframe time. I turn 55 this year which, I now tell myself, will be the start of my serious investing life. It won’t be time to cash in any big slugs of my investments because that would be silly. This, of course, is the complete reverse of what I was telling myself two weeks ago when I was hoping the Trump Bump would last at least another year, just long enough for me to maximise my tax free lump sum out of my DC pension pot. Then, with the Dow Jones possibly slowing as it approached 30,000, pulling all markets in its glorious wake, I would “take profits”.

Well, it seems it was a nice idea, despite the fact that when November arrived, and if the Dow was closing in at 30,000, I know I’d be thinking, “32,000 is a better number to cash in at”. This psychology is a great way to drive yourself nuts and, I feel, is directly connected to my inability, or severe reluctance, to spend money. I’ve been regularly investing for almost twenty five years with, on a monthly basis, at least 10% of my net income being salted away into Index Trackers. Sometimes it was a lot more than that percentage. After the bills were paid, I “squirreled away” any excess cash as, for me, this was the singular most satisfying thing I could do with the money.

Recently, however, the day came when I could no longer find that incremental income, unless I started to cut my costs.  I was, and am, reluctant to do this, comfortable as I am with the way I live today. Therefore, when the markets plunge downward, I’d be lying if I said I wasn’t twitching, wondering where it could end and whether or not it will recover. I’ve seen it before, I say, but are we not in new territory here, what with all that QE about to disappear and only the hangover to live with? Didn’t Japan stagnate for twenty years following their own bout of irrational exuberance? Will the Remoaners have their day in the sun, dancing in the ruins of the British economy while tweeting “Told you so!”?

Maybe. But 55 is young. I can work for another 20 years if someone will have me. And if they won’t, I can consider doing without for a time, take pleasure and satisfaction from the things in life that you’re supposed to, the things that don’t rely on money to power them. In the end, the markets will come back, I’m pretty sure of that. It may take ten days, ten months or ten years, but eventually the ship will right itself (probably!) In a way, this “correction” is a timely reminder that there’s more to life than fretting or celebrating over the Dow Jones or the FTSE or Emerging Markets, and that it’s a useful signal to focus on things outside of them for a while.   

 

Taxing Issues

I was reading an article on the dreaded Brexit the other day – it’s still hard to read anything that doesn’t refer to it – about the hotly disputed claims over the amount of weekly money going to Brussels that could go the NHS. Cutting through the chaff and spin, the main point was that those Big Bad Brexiteers quoted a gross figure, not net.

Well, the last time you quoted your salary, or an employer quoted one to you, what figure was used? Gross or Net? Daft question, isn’t it? On salaries, everyone quotes gross. In this way, a gross number has some sort of legitimacy and credibility, even if it has a long distance relationship with the “bottom line”.

When I stop working I won’t have a salary of course, but I will have a pension, including one from the State which is probably going to be around £8,000 a year. But – is that gross or net? That depends on (a) what other pensions and income I’m taking and (b) how I choose to look at it.  Worst case scenario, the government will give me £8,000 with one hand and then take 40% of it back with the other. In a real horror scenario, they might take 55% of it back (as I understand it) although that could be quite a nice problem to have as your pension pot will then be north of a million quid.

The subject of pensions and taxation is one that lingers on the periphery of many dialogues I have with myself on retirement income. It’s on the periphery because I often just don’t allow it in to the inner circle of my calculations on the basis that it’s an uninvited guest who I may, or may not, ask to join the party. However, if I cannot totally exclude the taxman from the party, I assume I will be doing everything to minimise his presence. It’s just that I’ve not yet really dug into the detail of how I do that.

I once constructed a spreadsheet that did factor in the knowledge I thought I had about the tax situation in retirement for both my wife and myself. It soon became an unwieldy, over-formatted monster that included so many “ifs and buts” it threatened to crash my computer. Needless to say, I haven’t opened it since I thought I’d finished it. Instead, exhausted by scenario planning, I told myself, “Keep it simple”. Stick to the big things you do know and, if you have those correct, you’ll not make any massive mistakes.

What do I think I know about tax and pensions? Firstly, the big tax free bonus that applies to me is that I can currently take 25% of any pension pot tax free when I hit 55. For my Direct Contribution pension that’s a simple calculation. Secondly, when it comes to income tax, both myself and my wife can withdraw up to £11,850 a year tax free which, when you tell yourself that’s a net number, is quite a substantial amount. What gross salary would you have to earn to take home, after tax and NI, an income of £23,700 a year? I can’t be bothered doing that calculation (because I’m frightened I will get it wrong) but it must be close to thirty grand, which is above the national average wage. Anything you add on top of that is cream on the cake, taxed or not.

Perhaps, if I left things at that, then I’d have a much more relaxed and stress free life. Unfortunately that’s not the way I’m made and, I think, I didn’t get where I am today by letting my money take care of itself. You have to work on your cash to ensure it’s working for you. Plus there’s the whole question of getting value for money when you spend it – after all, isn’t that why we work to earn it? At some point you have to choose to spend and, when I do, I want to ensure I gain maximum value at the point of withdrawal to give maximum value at the point of purchase. (I also give myself a hard time about mulling over “First World Problems” like these, but that doesn’t change anything except my mood and level of guilt).

I’ve already become lost in various forum threads that try to answer the question of how best to withdraw retirement funds in a tax efficient way. There are a lot of strategies because just about everyone has a different set of circumstances that apply to them. In a way, it reminds me of those examples newspapers always run post-Budget that take a variety of households and calculate “Here’s how the budget will affect you”. In all the years of reading them, I’ve yet to find one that actually applies, a hundred percent, to me.

As ever, when it comes to personal finance, a good outcome will probably be related to the amount of work put in. I could pay a professional to give me some pointers but, with those fees running into potentially thousands of pounds, I doubt I’m ever going to do that.

It would be easier, and possibly saner, to just plan to live on £23,000 a year net, with any excess sitting there as an “Emergency” or “Fun Fund” to be called on as necessary. In a lot of ways, I really like this idea. It’s really simple. I just can’t shake the feeling that it’s also really dumb, as I worked hard to save the money that I’ve accumulated, telling myself that one day I’d be able to enjoy it. I just don’t think it’s a sensible option now to sit and watch the pile grow. For what?

So, in lieu of any other great ideas, it’s back to the financial grindstone of the forums and blogs, and the never-ending debate about what to do for the best.

Calculated Risk

One of the most infuriating arithmetical questions that has bugged my life off and on for decades is this: “If your salary was increased by ten percent to raise it to fifty thousand pounds a year, what salary were you previously on?” My gut response is always to say that you were on forty five thousand, because 10% of fifty is five and……wrong, wrong, wrong! (again)

I pondered this as I smugly reviewed my investments on Fidelity recently, mentally warming my hands against the financial glow from the growth, and a somewhat disquieting thought disturbed me – how do I know they’ve got their arithmetic right? All those dividend payments, currency fluctuations and compound returns, minus their management charges across a variety of accounts – I mean, who’s checking the sums on my portfolio are correct? Because I, unable to calculate a simple percentage sum, sure as Hell can’t do it.

I then began to remember the legions of financial controllers and directors I’ve worked with over the years and the errors they (often cheerfully) made in their own numbers. Too many numbers and variables, you see, to ensure that everything was a hundred percent checked. But even the most complex business I’ve worked in, I imagine, would be simplicity itself versus running Fidelity?

Later in the week, I heard on the radio that the government’s state pension forecast tool, which estimates what your state pension will be, was in hot water for giving erroneous projections. Okay, we expect the government to cock up any and every computer system it invests in, but still, it underlined my suspicion that it’s relatively easy for anyone to get their numbers wrong. 

The thing is, they could err either way. My investments and pensions could be over or under stated (I can’t actually decide which would be worse). If they wrote and informed me of this, what would my recourse be? Ask for the data so that I could check the numbers?

Ever since Primary Six at school, when I think I first encountered tackling fractions in maths lessons, I’ve struggled with percentages, ratios and functions. Perhaps if that had been a more positive experience maybe I’d have gone on to be an accountant, but I was intimidated by the numbers (and by the teacher). I’m sure many people are entranced by the prospect of puzzling out answers that stack up when they face a difficult calculation, but me, I’m just ever so slightly terrified.

It’s also been my experience at work that if “You don’t know your numbers” then that can be a powerful criticism. There’s little to match the horror in a business presentation than when someone points out that you’ve made a basic error in a spreadsheet calculation. You feel your credibility in just about everything else has just been completely blown out the water (yes, I have been there and got the T-shirt. In fact, a small collection of them). For some reason this can happen to finance people too, but they seem to be able to generally laugh it off. Which I can only put down to confidence in their own ability in this area. When I made such an error I felt like an utter clown and would be genuinely mortified, but if I saw other people do similar I felt it made them a bit more human. (That’s probably two reasons right there why I never made it to “the top”!)

The trick, in your career, is to latch on to someone who really does know the numbers and is willing to check yours. Perhaps that would be a good idea in investments too? Unfortunately they’d probably charge a small fortune to do it and, of course, I’d continually be asking “How do I know you’re right?”

So there you go. I’ve no option but to take my investment performance “on trust”. It’s a lot to ask when I consider that this is my life savings I’m talking about, but I don’t really see much option. Then again, the whole monetary system is built upon trust and very little else. It only exists because we all choose to believe that it does.

As an investor I like to tell myself that I’d never invest in something I don’t understand – and then I read over what I’ve just written, and realise that I don’t actually understand anything.

Well, at least I understand that.

Are You Experienced?


It can be good to talk about retirement with friends, but it can be a bit of an awkward discussion. How much are your pensions worth? What age can you go? What about your other half? What will your income be? You’d like to give your thoughts, and receive some back, but without some basic information, this can be hard to do.

I was thinking about this at the weekend as I chatted to a mate in the pub who’s considering retirement as soon as possible from a job he hates. He’s passed the landmark 55 birthday, so knows what lump sum he can take today. I’ve no idea what kind of sums we’re talking about, but he mused, “You know, I’m thinking about buying a decent motorbike, and building an extension to the garage for it.”

“How much will that set you back?” I wondered.

“Well, maybe ten grand for the bike and six or seven for the garage”.

I tried to disguise the spluttering into my beer. “Yeah, well, if that’s what you’re comfortable spending that amount of money on”, I said, eyeing the sleet hitting the pub window and imagining tinkering with the bike as your hands turn blue.

“It’d give me a hobby, a project, something to do”, he said, and I could certainly see the point of that. After all, I’m looking for retirement projects too.

“”Quite a lot of cash to spend on a hobby”, I ventured, trying to calculate how many months earlier he could retire if he didn’t blow the money on that project.

“Some folk would spend that on holidays in a year and all they’ll have is memories”, he mused. “The bike will last me the rest of my lifetime, if I look after it.”

So there’s the funny thing. I think I would consider spending seventeen grand on holidays if I had the money to spare. That would be up near the top of my things to do with that kind of spare cash.  In fact, with a bit of budgeting, seventeen thousand pounds could take you on holiday for a year – and think of all the experiences you’d have, the places you’d see, the people you’d meet, the stories to tell. That would be a worthy spend, in my book, so I told him as much.

He looked at me aghast. “Are you mental?”, he asked. “No way would I squander that kind of money on a bloody holiday, even if it did last a year.”

Different strokes for different folks, of course but, while we’re talking in cliches, no man is an island. My mate had a motorbike before, but gave it up after a few scares and resultant pressure from his family. I’d happily traipse off around the world for a year, I dream, but the reality is I’d be going myself if I did it. So would I consider doing so? “No”, is the simple answer. My family and friends are more important to me than far flung places at this time of life.

This is where I start to think that money in retirement isn’t maybe as important as I sometimes think it is. True, it can give you options, but how realistic are they, all things – including loves ones – considered? In fact, especially when considering loved ones. Or at least I’ve come to believe that this is a truth for me. I feel happy and content when my family are happy and content and, if I live my life doing only what only appeals to me, then I’d consider it selfish. Which I like to think I’m not.

There can be compromises in all of this and I’d have to admit that money probably facilitates those, given that “it can give you options”. Sometimes just knowing that you could do something, or buy something, takes the pressure off the need to have it. Plus, like me and Oscar Wilde, you might suspect that the worst thing in the world is not getting what you want, and the second worst thing is getting it. With such I thoughts I give myself mental succour, shoulder the sky, and drink my ale.

 

In 2018, I Will…..

Being a long term fan, and implementer, of personal goals, I tend to look on New Year’s Eve in the same way as heavy drinkers do: it’s “amateur night”. Resultantly, I like the reminder, but I tend not to sit down and right out objectives for the year ahead, so I’ve pretty much none to review from January 2017.

This year, however, knowing the power of the discipline, and turning 55 in November, there’s a dangerous goal that I could write at the start of this year, namely, “This year, in November, 2018, I will retire from work for good”. That’s because I can access my pensions in that month and that income can replace the current wage I receive from employment.

Eek! Should I do it? Should I commit? As some of you may know, I went this route before and ended up kicking off this blog by writing a post about the Top Ten Downsides of Early Retirement as I realised retirement wasn’t quite working out what I expected it to be. Since then I’ve reflected that maybe it was because I didn’t mentally commit to the idea and couldn’t quite believe it myself. Never work again? That wasn’t me, was it? I’d worked for almost thirty years and enjoyed most of them. What would I do now?

Despite philosophical kickings from Ermine about getting my head into the right place, I couldn’t do it – I felt I wanted to work, even if I didn’t need to (something I was always questioning anyway when it came to the financial side of the equation) and, eventually, back to work I went.

I haven’t regretted the decision, although I have regretted that I realised a goal only to discover that I hadn’t really prepared for it. Not that this seems realisation seems to have changed my behaviour to date – no new “hobbies” started, no new social structures created, the garden lies untouched, I will never stand in on lead guitar for Kirk Hammett in Metallica, no book written, no classic motorbike repaired and rebuilt, no marathons run, no flying lessons taken. I’m almost proud of all the things I haven’t achieved.

One of the truest things I think I read about retirement stated that if you weren’t doing something before retirement, then you won’t be doing it afterward either. Clearly that applied to me, so the idea was, and is, to start doing some new things today, while still at work, and then I can find out what I might like to do with my time when I have plenty more of it.

New Year Resolutions provide the ideal time to start this stuff, but I can’t answer the major question I ask myself over making them: Why? I’m happy right now with my life as it is. What’s missing that I can’t actually take steps to resolve if I really want to? I mean, I could go and build a train set like Rod Stewart to occupy my quiet hours, but I don’t have many quiet hours. Perhaps this is because I’m still working, but then I could reframe that to state that one of my major hobbies is my work – after all, I’m choosing to do it. What’s a hobby if it’s not something that interests you, entertains you, keeps you occupied, keeps you socially connected, teaches you new skills and pleasantly fills boring Tuesday afternoons when otherwise you really would be bored?

And I get paid for it. (Let’s hear it for working, maybe that’s my New Year Resolution!)

I probably will make some pledges to myself that I will follow through on, but I suspect they will pertain to things that I already am doing. I’ll tweak some of the things I’m already working on. Some of them might be connected to my work too, because I know how useful it can be to set yourself goals in this area. I know I’ll continue to ask myself that retirement question too, however, and I hope that the irritation I feel in asking it will help me to decide what to do.

 

Unlucky Alf

You have to laugh. At least, as an investor, you have to. A full year of Brexit and Trump which, in the minds of many economists and intelligentsia, should have trashed the Western economy, and what do the markets do? They thrive like never before. We have the UK FTSE 250 up by 14% and the US by 20%. I wonder what would have happened if we’d voted for Hillary and Remain?

Still, the dogs will have their day at some point, and it’s all bound to come tumbling down in a market “correction”. Reading the papers this week, most City commentators – no doubt sipping their second Bolly of the morning – don’t see this as happening in 2018. All systems are go, the world is looking good, Big Tech has more growth in there yet and China, well, who really cares? They weren’t great in 2017 and look what we did!

All this makes me scratch my head in frustration. I like to think that at least I know that I know nothing when it comes to investing, so I’ll stick to my largely passive, Index based strategy. But which Index? Should I stay in the UK? (I’m actually out of the US, because I sold up in anticipation of Trumpian havoc, underlining the fact that I know nothing.) Should I rebalance into Emerging Markets? China? The Pacific Rim? Latin America? Am I too late for Japan?

At the moment, I’m spread across many of these markets, but not in a big way. These days, almost the majority of my investments sit in dividend paying international funds such as the Fidelity Global Dividend and the L&G International Index. My intention is to stick with them and not tinker around, but is that a wise move?

One of the things that surprised me when I reviewed my allocations was that 15% of my portfolio is in an Investec Global Gold fund, which I started back in mid 2015. I must have been twitchy as an investor at that time too, hedging my shares against the lure of the precious metal. Let’s face it though, as an investor I’m ALWAYS twitchy, always thinking that every silver lining has a cloud. At the end of a year where my investing and pension portfolios are both returning more than 15% growth, my overall thought seems to be “We’re doomed!” The party has to end at some point and how should I best guard against a crushing hangover?  

Another irritation from the year is the investing equivalent of penis envy. Is my growth as big as the next bloke’s? Of the financial commentators I do read, I like the straightforward and easy to understand style of Ian Cowie in The Sunday Times. He has a portfolio of single shares that he calls his “Forever Fund” and, seemingly, it’s up 24% this year. That knocks my performance – restricted by conservative pitches into gold and bloody bonds – into a cocked hat. While I know I’m not comparing apples with apples, it doesn’t seem to help. He’s done better than me and, if my portfolio had grown by 24% I’d have made…..oh, I can’t even bare to calculate it.

So, as I say, in the face of this imminent financial catastrophe that, in my head, is coming, I have to laugh. Sometimes I feel I should be a lot more irrational, convert everything into cash and stuff it under a digital mattress. Unfortunately the suspicion that one day I will be uncovered as Unlucky Alf would then mean that inflation would take off to 10% and I’d be ruined that way. There doesn’t seem to be much alternative than to keep reading the tea leaves as best I can, taking an interest in the financial pages (and blogs of course) and tell myself that, whatever happens, “I’m in it for the long term”. I know, “in the long term” that we’re all dead, but I think I’m happy with that because, coincidentally, that will be the day it seems I will stop worrying about my financial performance.

Rolling with the Punches

I read in the weekend papers about the “Santa Rally”. No, this was nothing about Jeremy Clarkson on “The Grand Tour” (which I will always call “Top Gear”) but financial journalists commenting on the fact that December is generally a good month for share prices, although none were sure why that might be. But who knows anything about the markets? I sold out my American Index funds in the belief that the markets would wobble badly if Trump got in and, because I’d had a good run up until that point. I felt I should “take some profits”. Of course Trump did get in, and what did the Dow Jones do? It has only jumped subsequently by 36%.

I console myself with the fact that I sold the US Index and bought Global Dividend funds with the proceeds which, when I look at their portfolio mix, are over 50% weighted in American companies. So I’ll probably have benefited there, but I won’t give myself any credit over it. I know I’ve no real idea which markets and funds are likely to prosper and I only checked the Global Index portfolio spread after I’d bought it.

“Santa Rallies”, “Sell in May and go away” – I’m sure there is some backing to these mantras in the same way that “A stopped clock is right twice a day”. True, but at what time will the clock stop?

I’m not buying anything in December, but I probably will have a look at how my investments have progressed this year. This is because it’s probably looking not too bad – the “Trump Bump” has pulled most things along with it, including the UK market. Seriously though, if you’d have a crystal ball that told you with certainty that both Trump and Brexit would happen in 2017, would your first response have been, “Fantastic, the stock markets will take off after that!”? Somehow I doubt it. I now guffaw when I hear commentators recite that old cliche, “The markets hate uncertainty”. No they bloody well don’t, they absolutely thrive on it from what I’ve seen this year.

What will happen in 2018 then? Well, what goes up must come down, but even if there is a correction, it has seemingly only ever taken the markets 69 days to recover losses from such adverse events in the past. That’s even happened after the dot com collapse and the financial meltdown of 2008. I’m going to make a real effort to remember this adage in case 2018 sees a downturn, and maybe I’ll refer back to my dairy of 2007 and 2008 when queues formed at Northern Rock and Lehman Brothers imploded. I’ve read through my entries from those months before and was I panicking? Was I even slightly bothered? If I was then I wasn’t writing it down. Like everyone else, I rode it out and I’d probably do the same next time ’round. 

So, when I think back over 2017 I reflect that it’s been a pretty major historical year that’ll be recalled as a watershed on a lot of fronts. Uncertainty abounded, but the markets strode on regardless. Keeping an open mind and remaining flexible when it comes to finances seems to me to be the best advice I can give myself in the light of what has gone on. Anytime I try to be smart, such as making the call on Trump being elected and believing that Britain may well Vote Leave, I failed to foresee the consequences that would have helped my investments. I guessed the right results and then guessed the wrong market response.

Hindsight is 20/20 vision, of course, and it’s that historical data that pushes information on December “Santa Rallies” and “69 days” of recovery. They’re interesting statistics, but they still tell you nothing about what will happen either in January or Day 70, except that those days will come too. Just like Trump and Brexit, what choice do we have but to live through them and roll with the punches if, it transpires, that’s actually what they turn out to be?

Loadsa Loadsa Loadsa

It seems that an American journalist has caused a bit of a Twitter storm for publicising the following advice:

According to Jean Chatzky, a financial journalist, by the time you are 30 you should have at least the equivalent of your annual income saved for retirement. By 40 it should be three times your annual income; by 50, six times; by 60, eight times and by retirement 10 times. How do you do that? You save 15% of your income every year (most of it into the stock market) from the age of 25 onwards.

I can’t say I saw anything out of the ordinary in what was stated, but then I do read stuff about FIRE so perhaps I need to admit that I’m not part of the mainstream when it comes to finances.

Circulating stuff on Twitter is one sure fire way of hitting a young audience. Or, perhaps more accurately, I should state that by doing so you’ll miss an older demographic who are still slavishly watching the BBC or Sky News and reading the papers. So, as the tweet picked up steam on line, the youth reacted in utter horror at the seeming impossibility of saving a penny, never mind 15% of their income.

I have to admit that I don’t remember saving much in my teenage years or my twenties when it seemed there was so much stuff to buy and so little cash to buy it with: hifi separates on which to play my budding album collection, driving lessons in the hope that I could borrow my dad’s car (an old Fiat 126, the only car in the family), beer, Chinese takeaways, clothes from Burton’s menswear and so on. There weren’t iphones and laptops and ridiculously priced coffees, but we had our temptations.

What there was though, in the Eighties, was a growing sense of the importance of money and the desire to get some and make it work for you. Other people seemed to be doing it, which was why they were driving around London in Porches while sporting blue striped shirts with red braces. It also seemed that certain tradesmen were beginning to do quite well for themselves and that we needed to Tell Sid about the British Gas shares that were coming to market. In the Thatcher years I do think we became much more money orientated, but it was with a sense that there was a positive edge to it. You could get some and you could use it to get some more.

I turned 30 in 1993 and had just married, and that’s when I remember thinking about trying to save and invest for the future. I doubt I was thinking about retirement at the that point but, having pretty much spent everything I earnt up until then, I wanted some sort of financial cushion to support my family going forward. I’d realised how pernicious debt could be with credit cards that just never were cleared and I resolved to pay them down – once I did, the money I’d been spending to do that would be “put to work” in buying investments and shares.

Sometimes, however, I do wish I had had access to the information in the 1990’s that I have now. What if I’d been reading Early Retirement Extreme and Mr Money Moustache when I turned 30 instead of 50? What if I’d had access to the information about UK investing that I’ve found on Monevator and been applying it for twenty years? What if I’d had the forums on Money Saving Expert at my fingertips to give me further advice on tax, pensions, ISA’s, ETF’s and the rest as I required it?

So, on the one hand, I sympathise with the youth of today looking at the financial mountain they have to climb, but I also kind of think that  it was always thus. The young will never have any money, they never do. But, what they do have on a scale way beyond anything I had, is access to information and knowledge that will help them when they decide the time is right. “When the student is ready, a teacher will appear”, is a saying that’s always appealed to me because it often seems to be true. The teacher appears when you seek them out and, given the internet, the ability to find that guru, or gurus, has increased exponentially since the days when Norman Tebbit told us to get on our bikes.