Why it was tough?
December was a tough month. Not only were the markets unkind to me (I have feelings too!), but it’s the most expensive month of the year. This was compounded by my decision to go skiing in the French Alps (cost over £1200) and buy very nice presents for the first Christmas with my girlfriend. I think for most people it won’t be news, I just so happened to also treat myself at the same time. I won’t make that mistake again.
There is always a temptation to splash out when you are in a new relationship. My girlfriend isn’t someone who is impressed by money, but we enjoy using our money on experiences that we will remember for the rest of our lives (hopefully together!). We’ve started to communicate much more clarity about our financial needs and burdens and it’s been great. In January so far we have drastically reduced our spending to pretty much only necessities. It turns out that when it’s too cold to leave the house we just cook with whatever we can find in the fridge. This has worked in our favour.
Talking About Money in a Relationship?
The real catalyst for us to discuss our finances in much more detail was my girlfriend saying yes when I asked her to move in. We’ve been talking about it for a while and we are very aligned on how we use our money, and how much she should contribute to the house. I don’t want to make a profit from her, but I also want her to feel like it is as much her home as mine.
We’ve agreed she will own no equity in the house, but I’ve agreed to a very modest monthly contribution from her that will leave her
a.) the ability to save (less than her current outgoings (rent +bills))
b.) give her a sense of safety, as if anything goes wrong she will be in the best financial position she’s ever been in
c.) we have a levelled our disposable income (just about) so we can plan holidays, investments and the like in a similar vein (this is after accounting for her increased savings and my having to pay the majority of the bills /mortgage (money I will get back when we sell)
The number we landed on was £400 incl bills. I pay around £1400 w/ bills a month so this brings my costs down to a more modest £1000. We have agreed that if the heating goes beyond x amount she will make a 50% contribution to the additional cost (which we both agree is fair).
So far, we have avoided joint accounts. We did try and onboard via starling back, but they rejected my application(?!), which I have to say is a first – especially for an online-only bank. We plan to just use split-wise for extra stuff and split everything 50/50. This is easy and simple, we can just settle things each month.
Once she joins me and all goes well, we will start planning our next move. With our joint income of around £80k, we could afford to move to something bigger, but that may not be the best use of our income. I haven’t mentioned the blog to her, not the exact FIRE topic. However, I have been clear in my life, professional, and financial goals (just not specifically mentioning what age I want to FIRE at).
This Months Numbers:
As of now, my current net worth is £124,565. This is made up of several different components:
- House equity: £111,300
- Credit card debt and other loans (Christmas and cashback): -£8,000
- Investments (including pensions and a Lifetime ISA): £20,265
- Cash and savings: £1,000
It’s important to note that my house equity, which is the current market value of my home minus any outstanding mortgages or other liens, makes up the largest portion of my net worth at 89% of the total. This is followed by my investments, which make up 16% of my net worth.
While it’s great to have a high net worth, it’s also important to keep an eye on your liabilities and make sure they are not becoming a burden. In my case, my credit card debt and other loans make up -6.4% of my net worth.
It’s also important to have some savings and cash on hand for unexpected expenses or emergencies. In my case, I have £1,000 in cash and savings, which makes up 0.8% of my net worth.
Overall, my net worth is a positive number, which is a good indicator of my overall financial health. However, it’s important to remember that net worth is just one measure of your financial well-being and it’s important to consider other factors such as your income, expenses, and overall financial goals when assessing your financial situation.
You can see the effect of starting to put more into my pension, my cash is low and needs attention, but I do have ways of raising money if I did hit an emergency. However, I will be replenishing my cash balance by reducing so of my pension payments and the extra £400 I will gain tax-free from my lodger, I mean girlfriend!
I’d like to get a minimum of 3month basic expenses, which I would put at £6k. I have a lot of work to do next year to get there. My loan is only 1.5% interest so not worth paying off in this current climate, I’ve got it going to work for me, although so currently a little underwater on it. I can take the risk as I am young and have assets to back me up if things get murky.
The reason I track all my money including mentions is that if I can get enough money in my pension (or project out what I will have aged 55) then I can work on my other investments. I would only need to survive 20 years from 35-55 if the pension was sufficient. However, given I’ve only been working 5 years and have not been perfect with how I have looked after my money, I consider myself to be on the right path.
If you’d like to see what I was doing this time last year, you can read here: https://growingmoneytrees.org/2021/12/29/december-2021-net-worth-update-100543-the-first-100k-is-the-hardest
In short, my net worth has increased to around £24k in a horrid investment environment. Mainly, this is due to house price appreciation, mentioned contributions and, as ever, a bit of luck!
I hope you enjoyed reading this, please do share the blog around and ask me any questions. All I seem to get is spam on here, it makes my heart hurt!