When I looked at my plan for 2020 little did I realise that it would utterly be turned on its head. That said, sure things turned out different, but there have also been some items and their impact that rather make me reflect on my decision making. As a result, I now have a better and more forward looking plan. (I say ‘better’ .. we shall see !).
Essentially, a ‘Budget’ is a list of bags – bag of cash. It is what we notionally itemise to allow us to both organise and change spend profiles. I have my own list of bags – everyone will be different – just whatever works for you, but I do like to think in terms of 3 big bags: Primary, Discretionary and Other. These are the must haves, the desirables and then everything else. Just helps the thought processes I feel.
2020 Budget Plan
At the beginning of last year I summarised it working out a spend profile of £47.6K. I can summarise what was spend and recorded and we can see there are variances – mostly small (noise), but some quite big.
A bit lower than ‘noise’. When I looked I really had not updated my tracker properly, so was budgeting for more Utility costs than we now pay and also I had inadvertently left a line item of something expired on (around £250 of the underspend)
Shopping & Going Out
Clearly more of one and less of the other. However, really, the shopping is higher partly because we did not do lots of holidays (so we were home more). Although we have been a bit smarter about shopping so not throwing out as much ‘over’ fresh food.
I have to admit a tad of hoarding. It was clear in April that people went a bit mental assuming (of all things) toilet rolls would run out. Never a problem except in the minds of many. However, I took the decision to build a bit more of a larder long term. So when, for example, I bought 4 cans of chopped tomatoes (a normal thing every 2 or 3 weeks), instead I got 5. Same with pulses, soups, Rogan Josh jars etc etc. I over-made some easily freezable meals and just put them in the freezer.
Essentially, we have storage in the garage that holds at least a month forward. So that increased the shopping bill. Also (gulp) a decent supply of different beer bottles !… well … had to be done ! I have discovered some amazing brews 🙂 so not all bad and her ladyship discovered some gins she really liked especially in the warm summer.
So on balance, looking at growing a bit more forward store and less holiday away time, the balance of ‘Going out and shopping’ seems about right: no need to adjust the budget for 2021 in any great way.
A big £1.8k more than I expected. A couple of biggies: first 4 new tyres needed, then another one as I had a blowout so had to be replaced again. Also, the EU brought TPMS legislation in a few years back so every tyre now has to have a digital monitor. Utterly useless really, but the dissimilar metals mean corrosion and at 7 years old, was clearly at the dangerous level, so had to have a complete change of that. Car a bit older so one of the shocks broke with the garage saying ‘yes, they do that on this model at this age’ and a couple of other things, along with a couple of new brake discs I did not think I needed.
I have reflected before that the cost of my car should be considered a part of the FIRE strategy , but there does come a point when change is needed. I started to trust my car less and less. I really just wanted a change.
Her ladyship was thinking about changing hers (although she does very low mileage) and when I took her to see and test-drive the model I was thinking about, she turned round, looked at a cute little thing and said ‘that’s nice’ … one test drive later and she wants it.
In the end we traded in and used part of an inheritance to just buy two brand new cars (the £40.7k exceptional). Sounds a lot and is, but we will have no maintenance costs for at least 2 years, full warranty on anything, and I did get a 35% discount for her and 17% for mine.
This said, I will be keeping mine for 3-4 years as a minimum and her ladyships very low mileage means she will likely keep 7 years (at which point we may well go down to one car).
Holiday & Piping
Well that speaks for itself. We had a week in a big static caravan in North Wales (a cheap booking from a friend who had just bought it) and a week in the delightful Westward Ho with my brother and his wife…. so really a big underspend.
We did see some lovely open spaces and great views and walks, to a point that her ladyship wants to holiday at least as much in the UK as abroad in future.
Obviously did not spend the money I planned on visits to Scotland for the main Piping championships as they were all cancelled
This should not be a surprise really with a big reduction. In the UK the contactless limit was raised to £45 (and I rather think that will rise) and for almost all purchases that was enough. Cash clearly carries a possibility of Cv19 transmission, so the number of places now only taking card has massively increased.
I wonder whether cash is on the way out over the next decade !
Now the Overspends:
We had no budget line before, but spent some money on the garden, some storage units, Cooking gadgets and a large issue with our central heating
An overspend of £4k – this is entirely the trial setup flight and pre-booking of a full NPPL course.
I decided I was going to re-do my old expired gyro licence and convert to fixed wing with a long term aim of buying or building a plane. Had 12 out of 15 lessons cancelled through either bad weather of CV19 lockdown rules. So whilst I thought I could complete by November, it is more likely to be April/May now. Just have to go with the flow and see.
Apparently £3.7k, but really this is exceptional. Her ladyship upgraded her sewing/embroidery machine and this was mostly the difference to trade in – yes it really is an all singing, dancing piece of kit !
Not really an un-budgeted item, just never had a column specific before just recording as Miscellaneous Spend. The Misc spend line does not reduce as much mostly as during lockdown there is the endless nik-naks from the local shop. We have had a cleaner for many years now. Even being at home a lot, we hate hoovering and the general dusting/cleaning, so while we have the money, we will get a cleaner – call it a life-luxury.
In Summary for 2020
If I removed the Aviation, Sewing and Home Improvement (as unplanned exceptional) the an a parry-parry basis out actual spend was circa £40k, around £8k less than budget, which is pretty much the unused holiday and piping travel planned.
This is very good news. Why ? Because it means overall, I have my budget items in balance and fairly well planned out. Yes some are a bit more or a bit less, but that is just the general nuance of flows. I can confidently look to the future 1, 2 3+ years and with good accuracy map out our likely spend profile.
This has been no mean feat. Just think back to when a budget gets started. We make a lot of assumptions, finger’s in the air and best guesses. Then a year later we get a better idea, then another year a lot clearer.
Future budget panning is not a single afternoon exercise, but a process of coming to terms with what is importance, necessary or just plain desirable to us
So what of 2021 ?
Well strangely fairly similar. A few items adjusted. For example, car costs should reduce as they are both new and need nothing that would not be covered by warranty. Bills are a bit lower as detailed above. Holiday a bit lower to reflect that we will not be going abroad until at least the autumn when we have had vaccinations. Although I would love to go visit my mates in New Zealand and take in the Women’s Rugby World Cup in October. I would like to go to South Africa for the Lions tour, but really can’t plan anything until I know the UK vaccine plan. I considered the likelihood of either this year low so just have not budgeted for them… but we will see.
I think people will rather forget medical insurance will almost certainly carry CV19 exclusions unless proof of vaccination has happened.
We plan to spend some big money on the house. Her ladyship wants a completely new patio and some lawn re-modelling, and we have rather put off some much needed refresher-decorating in part of the house along with a new hall, stairs and landing carpet. Looking to do those at some point and we are certainly not planning to move any time soon.
That said we did see a fantastic place online a few weeks ago … really did make us think as since her ladyship’s father died in November ‘Ma’ has been with us 3-4 nights a week. Long term, if this continues, we really need to look for a new house.
So the condensed plan ….
The Exceptional items I consider separate and the money is there to use if/when we do it.
As before, always worth considering what could be chopped or reduced. Then easy to make an adjustment going forward if circumstances change. In our case this year that is unlikely. I got a nice inheritance from my mum and essentially we are covered in spend with the guaranteed income her ladyship has for the next 3 years really if we want to with very little adjustment (and far longer if we chopped a few things) – an absolutely great place to be with the world economic turmoil. We are very fortunate !
If I look at reductions there are 3 possibilities: a major spend reduction (or a variation on it), and/or paying off our remaining mortgage as we do have the direct funds to do that if we choose too. I did look a while back at the relative merits of investing rather than paying off the mortgage as it is such a low rate – essentially now it just comes down to relative outgoings. I do think we will most likely pay it over entirely over the next 12 -15 months.
What this basically shows is that whether clearing our mortgage, or reducing spend by a proportion, we could easily get to an income required of around £30K. This amounts to low withdrawal rate and as we have a large safe level of essentially cash investments, a negligible risk – Especially comforting in a world economic crisis. We really are very fortunate.
And what of the future ?
One of the main points of detailed budget planning to to map out income streams and expenditures out into the future to allow that critical component ‘time’ to be used, not least to understand what we need as an investment pot and likely risk profiles we need to adopt: an essential long term FIRE principle !
In the past 2 years, I have not been quite as confident on the budget with some variable a bit high, but actually I do feel pretty good now. But I think I will write about the future another day. It is easy to look 3 years, even 5 years ahead with good confidence, but one of the things is the rate of change of spending varies as we get older.
As we head towards 70, various spend profiles reduce for all sorts of reasons. So simply taking a budget and adding (say) inflation each year will not be as accurate as a more considered view of how we as humans change over time. I mentioned above there will be a time we reduce to one car for example – this would essentially half the car items. Not massive, but non the less, a real break-point.
it is an interesting topic … and I have mapped out over 30 years ahead. But I know I am not there yet in terms of assumptions and modelling: close, but no cigar yet.
I do, however, now know with a high degree of confidence the total amount we need from our funds over the next 30 years (assuming we live that long). And that, is gold – it allows a change in risk profile for us and again, I feel, is an essential point to get to in FIRE planning.
….But for another time