The look on my friend’s face was one you might deploy if you were presented with a bill for service at McDonalds. Total incredulity.
“So let me get this straight – you’re putting a money value on your memories?”
“Well I wouldn’t state it so precisely,” I said. “But basically… yes.”
“Wow! That’s so sad! Experiences are worth more than money.”
“I agree,” I admitted. That puzzled look again. “But you’re experiencing something every moment of the day anyway. The question is whether the extra enhanced experience is worth the extra cost. Also – remember that when you spent all that money for those particular memories, you also bought a certain kind of experience you’ll have to live in the future, too.”
“Huh? I don’t get it.”
I topped up her wine.
“Look, neither of us are gazillionaires with infinite money. In particular, you don’t even have a job anymore, depending on whether they’ll take you back – and besides we spent the first half of this evening talking about how the reason you went away for three months was because you hated your work so much.”
“Right…”
“Okay, so you told me you spent half your savings on those three months of traveling. Which now the holiday is over exist only in your head – in as much as you can remember them. Which seems to be to a limited extent, possibly because so much of your holiday took place in various bars.”
“Alright, get on with it…”
“So that’s where we can start. Half your savings bought those memories. I’m not knocking that spending decision specifically – perhaps for you it was worthwhile. My point is you spent the money to buy them. Money that you can’t spend twice. So they certainly have a monetary value.”
“But there’s more,” I added in my winning way that makes me so popular at parties. “You’re in your early 30s – it’s possible you could have quadrupled that same money by age 65 if you’d invested it instead. So we know 65-year old you is going to have massively less money to spend because of those memories you bought and are already forgetting that you don’t think we should think about financially–”
“Yeah bu–”
“–you’re right! Let’s get back to experiences. You usually earn – what – £40,000 a year? After tax and National Insurance that’s going to be something like £30,000 in take home pay. Let’s divide that by 240 working days for easy maths, and say you take home £125 for every day of your life you sacrifice to work. Except since you have to go into the office, you spend more – we’ll call it £6 a day for travel, then add a let’s be honest low-ball £5 for lunch and coffees, and say £4 a day to cover the fact that you buy a certain amount of tidier clothes for work.”
“…”
“Knock that spending off the £125 and we’re at £110 a day or so take home. Really I’d like to take it down to £100 a day to cover stuff like ibuprofen, your inability to take off-peak mini-breaks, and all those late-night Ubers you order to have a mid-week social life while working. But we won’t. Let’s just say you spent £5,000 on your three month travels, which seems about right from what you’ve said.”
“I don’t know – something like that?”
“Well, that’s about 45 days of your take home pay – equal to nine additional weeks of your life where you’re going to have to go into the job you hate to sit in an office you hate because you went on your three-month holiday.”
“Yeah, okay – it does sound worse when you put it like that. But then again I got three months away from the office for another three month’s or nine weeks or whatever spent at it. Seems a fair trade?”
“Um, well sadly I was being gentle on you. The reality is you’re not going to save anything like all your take home pay. You know how much it costs to live in London. You’ve also got to eat, go out now and then. Buy bottles of wine to bring to my house for these thrilling heart-to-hearts.”
“Yeah, I’m really glad about that decision…”
“Hah! Anyway, I’d guess you save about 10% of your take home pay, which means it could take you two years more at the office to get back the money you spent on your three months away from it. But let’s say you manage to save to save 20%. Still going to take the best part of a year more work to pay for it.”
“Okay, okay – at least I have the memories.”
“Good, because you’re going to need them while you’re sitting at work! That’s my point – you’re alive either way and still having experiences. When I said earlier [Editor’s note: I did, different discussion!] that I’m more and more trying to find regular moments of happiness in small things, this is what I meant – that I’m trying to focus on sustainable mild contentment rather than the sort of high-cost roller-coaster you’re on. Honestly, I’m not saying you did the wrong thing – not at all, your trip sounds amazing – but I am saying I personally would totally put a cost on those memories, both in terms of the financial outlay and/or the price to be paid in terms of extra work by your future self.”
“Okay, fine, I spent the money. But that’s what money is for, right, to spend and have a good time? What’s the point of just sitting on a big pile of money like a bloody nerd-dragon, counting it in your cave? Even you bought this flat… eventually.”
“Ha ha, nerd-dragon, I’m stealing that! Yeah, I agree. Remember I think and write about this stuff a lot – I’ll probably even turn our conversation into a blog post! So I know this might all sound a weird way of looking at things to someone who doesn’t. But what I think it comes down to is how much do you value your future over your present – or in the case of memories, your past – and how do you strike a balance.”
“Go on…”
“So personally, I’ve always found it very easy to value the future. I saved some paper round money 30 years ago that went into the deposit on this flat! I’d always rather have most of my money invested, and to know I’ll have more options ahead of me because of that. Whereas we both know you live for the present – you’re a great party girl, and you’ve never thought much about tomorrow. That’s obvious. As for the Past You, I guess that’s where the monetary value on memories come in? Also possibly feelings of life satisfaction, and not having regrets, which is what I have to guard for with my approach. Although thinking about it, I suppose that’s really your Present You trying to anticipate and stop your Future You regretting what your Past You didn’t do and–”
“– stop stop I get it. But I still don’t really see how this doesn’t mean money is there to be spent? Whether you spend it now, or when you’re 90 or whenever?”
“Absolutely, ultimately that’s what money is for. But I think it’s helpful not to always think of it as money but sometimes as something else.”
“Something else like what?”
“Well sometimes I like to think of money as stored power. You build up your power by working and saving, and hopefully your investments charge it up further, too. But sometimes you have to run the battery down – that’s when you spend it. You can spend it on something now, but that means you’re going to have to work more in the future to charge it back up. Or you can try to get to the point where you have enough power stored away that it sort of auto-re-charges. And then you have maximum flexibility to spend it how you like indefinitely.”
“…”
“Did that make sense?”
“Err, sort of. You know this is why you’re single again, don’t you?”
“…”
What caught my eye this week.
Hey Millennials! Top tip time! One of the best ways to improve your chances of owning your own home is to make sure you’re born into a family where your parents do, too.
Take a look at this graph charting new data from the Resolution Foundation:
As reported in the FT [Search result]:
Those with the richest parents are the most likely to own a house by the age of 30. Roughly a third of people in this category were homeowners themselves by the time their 20s were over.
They are followed not far after by those in the second two quartiles who both had about a 28 per cent chance of owning a house in their 30s.
Then, much further behind [are] those whose parents did not have any property wealth at all, who had just a 13 per cent chance of becoming a homeowner.
So there you have it – be lucky babe!
I mean it’s sweet that you’re skipping your avocado toast and all.
But as any old Barry Blimp will tell you, he too once ate an avocado in 1977, but that didn’t stop him buying a terraced house in London in the early 1980s. 1
Of course he didn’t have to pay for an iPhone or any similar nonsense.
But he would happily have gone without such frippery and stayed in counting his bedrooms for fun instead if he’d had to.
Because that’s just how tough we were back then.
- For barely four times his salary, compared to over 10-times today.[↩]
Update: 5 March 2019 – Unfortunately the interactive tool from Broker Compare – that’s discussed below – is no longer supported by that company, and thus is no longer available on Monevator. The good news is our comparison table is still there to guide you through the broker maze!
Working out the best online broker or platform 1 to use in your investing can be frustrating.
Just when you have got your head around shares versus funds, corporate bonds versus James Bond, and you’re finally ready to start investing, you discover dozens of different brokers to choose from.
All have their own similar-but-different fee structures.
We have long kept track of the different broker platforms and what they charge via our fee comparison table.
But comparing the charges levied by say Hargreaves Lansdown with those of Interactive Investor can be fiddly work.
Details matter. Some brokers charge lower fees for trading but sting you with high withdrawals fees. Others offer cheap trading, but make additional annual charges for each different kind of account you open with them – once for an ISA and again for a SIPP. There may be entry and exit fees, too.
You also need to compare fixed annual platform fees – for instance £15 a quarter – with the alternative method of levying a percentage fee – say 0.25% year – on your investment pot. Which is more cost effective for you?
What’s more, the winner of this equation will probably change as your nest egg grows! You’ll need to run the numbers every few years to keep your costs as low as possible.
Get tooled up to compare investing platforms
If you find all this fun then you’re in the right place. We’re investing nutters around here.
But most people frankly do not.
Out in the wider world, people use interactive tools to compare things like insurance products and energy bills.
Well, that is now possible with investing platforms, too.
We’re hosting an interactive comparison tool created by our partners at Broker Compare. We hope it will help casual investors get their money onto a suitable investment platform with a lot less hassle.
In fact anyone who wants to hone in fast on the best potential brokers will find it a quick way to generate a shortlist of candidates.
True, if you want to work out precisely what you’ll pay – in your specific situation – you’ll always need to do the sums for yourself.
There are just so many quirks out there, and any tool needs to make a few assumptions. Only you know exactly how you plan to invest and why.
But for many people, getting a good idea of the best platform to use quickly is the most important thing.
They’d rather know approximately what they’re going to be charged than laboriously figure out the exact costs from a dozen or more competitors.
Compare the brokers and save hundreds of pounds
Monevator regulars love to debate the minutia of different platforms with all the passionate enthusiasm of trainspotters arguing about the best non-standard railway gauges found in the wilder mountainous regions of Europe.
And long may that continue. (You’re among friends here.)
But the average person has little idea of their broker’s fees – or how what they’re paying compares to the competition.
For these people, five minutes with a comparison tool could be a quick way to save hundreds or thousands of pounds.
So what are you waiting for?
- Try out the interactive broker comparison tool. [No longer available]
- Prefer to DIY? Check out the broker comparison table.
Note that just as with the price comparison websites we all use to compare energy bills or mortgages, Monevator may receive a payment from a broker that you visit or sign-up with via the table or tool. This does not affect the fees you pay – it’s made by the company to us for introducing you to their business.
Happy hunting – and let’s save some money!
- We tend to use the words ‘broker’ and ‘platform’ interchangeably. A broker is a stock broker – a person or company who trades and holds investments on your behalf. The platform is their website that lets you see and adjust your investments.[↩]
Much is written about how to save: “You there, you reckless spendthrift, come here and read my secret formula that will turn you into a prudent accumulator of wealth.”
Far less time is devoted to the difficulties of staying the course.
What are the techniques that will enable you to stick to your savings goals through the long days ahead? The times when your entire being just screams out for a foam-plumed latte with an extra fancy shot? Or those new shoes? Or that shiny, new car? How do you deal with the urge to splurge?
You need a defense-mechanism, my friend (and I’m looking in the mirror here).
Two tactics make the difference for me:
- The long-term goal
- My monthly savings target
The long-term goal
Knowing where I’m going helps keep my eyes fixed on the distant horizon. When I can imagine how wonderful journey’s end will be, I don’t resent every heavy plod that carries me one step closer.
My initial goal was an emergency fund. Then it became paying off the mortgage double-quick.
Other popular goals include:
- A comfortable retirement
- Income supplement
- Property purchase
- The kids’ education
Without my goal I’d have nothing to fight for. No ultimate dream that makes today’s sacrifice worthwhile.
But it’s important that dream is defined. That it’s a concrete number I can hit. Vague notions of ‘financial security’ are too woolly and abstract to sustain a long-term commitment. If the goal isn’t defined then you can’t draw psychic sustenance from beating your numbers.
Many are the days that I go into work and steel myself with the thought that the trials ahead will bring me a step closer to my endgame, provided I stick to my saving goals.
Note: Choosing too many savings goals is as fatal as failing to define any. When the enormity of the task dwarves your resources, then defeatism and failure will surely follow.
Savings targets
Defining your goal means setting a target. My long-term goal – financial independence and early retirement – was initially a large and distant one. A big problem can only be beaten if you break it up into many smaller problems that can be picked off one-by-one.
Creating the opportunity to win a string of handsome victories is critical to building morale, momentum, and ultimate success.
Set yourself:
- A yearly target
- A monthly target
If I can save (and therefore invest) X every month and Y every year then I’ll hit my target in W years.
Targets may have a bad rap in the NHS, but I’d never stay the course without them.
Knowing I have to hit my monthly target electrifies every spending decision I make. Every decision now has a purpose:
- If I don’t splash out then I’ve made progress towards my goal.
- If I do, it’s because I really want or need the thing I’ve bought.
Crucially, the target makes me think things through. I no longer make thoughtless impulse purchases that amount to money down the pan. (Well, not often anyway).
Budget control
One tool that helps me stick to saving goals is my Budget_Control spreadsheet.
It’s very simple. The spreadsheet:
Adds up income, subtracts spending, and shows what’s left.
It also sets predefined monthly limits for spending in cash and on credit cards. Knowing what those limits are – and checking how I’m doing every week using online accounts – enables me to ease off the spending throttle when I’m having a bad month.
I use monthly direct debits to siphon off cash into savings accounts and to a regular investment scheme. The Budget Control sheet enables me to watch with pleasure as that amount grows in the ‘saved’ row.
As is often noted, you soon learn to live within your new means when cash is hived off automatically. Human inertia can work in your favour!
How to use the Budget Control spreadsheet: You can download the spreadsheet via the link above. The numbers already in the sheet refer to the spending targets set for credit cards and cash. Choose your own. The cash category covers ATM withdrawals, BACS transfers or debit card payments. Most of my spending is on cashback credit cards (paid off in full every month), so most outgoings are tracked by knowing these numbers. I’m not one for painstakingly totting up every till receipt. Regular bills are paid on direct debit.
Any spare money (the surplus category in the spreadsheet) also gets saved and ultimately invested. This is a movable feast that depends on how successfully I’ve fought spending on cash and credit cards that month.
The tension between trying to stay within the spending limits and the desire to generate a savings surplus creates the drive to stick to the plan.
Tracking my saving and spending also enables me to set realistic saving goals that are within my means. Progress relies on those handsome victories referred to earlier. Constant defeat would soon stall the project.
Don’t forget too that target-adjustment will probably be required along the way as the rising tide of inflation laps at all our saving sandcastles.
Take it steady,
The Accumulator
What caught my eye this week.
I would have had this post to you much earlier on Friday, but for consumerism. You see I got totally distracted trying to get the best out of my new Sage Barista Express:
Having done a barista training course a few years ago, I improbably fancied myself as pretty hot stuff with a coffee grinder.
I’ve enjoyed flat whites knocked out by a friend on this well-reviewed model many times, too.
But it turns out I didn’t know my friend as well as I thought I did!
I’ve discovered he’s great at making coffee – but perhaps more shockingly that he’s modest about it. (What other talents does he boast, I now wonder? Or rather does he not boast?)
Seriously, I know it takes a while to get the hang of DIY espressos on new kit, so I’m not too perturbed. It’s only eaten a couple of hours so far, and that includes washing the bits and bobs, figuring out how it fitted together, and collecting beans I spilled on the floor.
No, the other reason why I fell behind was because as soon this new toy finally arrived from Amazon, I went out for a three-hour hike around West London.
Did you sign for it, sir?
You see I’ve been in all week waiting for deliveries – and it drives me crazy.
I’m on edge all-day, until the deliveries do (or don’t) arrive.
A laid-back friend who doesn’t understand my hair-trigger control freak personality asked me what the big deal was.
“Imagine waiting all day to be slapped in the face,” I said. “You don’t know when it’s coming, but you will be slapped in the face. That’s me waiting for the door buzzer.”
It’s not even that I can’t do the social interaction bit. It’s worse: I usually talk the delivery person’s ear off. (A common failing among those of us who work from home.)
Rather it’s the waiting and uncertainty that kills me – and the unexpected and unscheduled state change.
Years before the Millennials I kept my mobile on silent always, for the same reason.
A totally unexpected phone call to my mobile feels like being tapped on the shoulder by a suddenly apparating supernatural nosy neighbour. I hate it.
Now at this point you’re either nodding along (a very few of you) or you’re aghast with incomprehension. Which is fine.
(I’ve said before when explaining why I invest actively and nearly everyone reading shouldn’t that I’m wired differently. I didn’t say it was easy!)
Economy class
Anyway, the reason I’m sharing these asides – and the rare from real-life picture above – is to give a quick update on my embrace of consumerism.
The story so far: You’ll remember I bought a flat, I still haven’t written up why, and I set about spending some of my 20-odd years of winnings (well, savings and winnings) to make it fancy.
This got off to a good start. I’ve always loved nice furnishings and so on – from afar. But by the middle of the hot summer I was bored of spending money.
I’d lost enthusiasm, I’d lost my girlfriend (she said she didn’t like my sudden interiors obsession, but perhaps she just didn’t like the sofa I finally selected?), and I’d lost (/spent) more money traded for matter than I’d spent on things in the previous two decades combined.
I didn’t even go crazy! It’s just that living like a graduate student even as your earnings multiply is pretty low-rent.
For most of that long era I used to opine to my more normally spendy friends that buying stuff only produced problems. Which in my experience was almost always true.
Stuff didn’t work, or you had to upgrade something else, or it broke, or you felt guilty, or you had to wait in for days to get it delivered, or you were worried it’d get nicked when finally you did get hold of it – or any one of a dozen other woes that people who buy stuff all the time think is just the way the world is.
Only two things hit the spot for me without fail when I splashed the cash. Black cabs – which I almost never took, and felt so luxurious in those pre-Uber days – and the first beer with two poppadoms and all the sauces and other gubbins.
Obviously I did a gazillion other things over the decades. I didn’t just taxi around London from curry house to curry house! And often it was money well spent.
But never reliably so.
Well, this whole flat buying and furnishing thing has proven my younger self right.
Through the keyhole
Don’t get me wrong. It’s coming along. It looks beautiful, to me if not my ex. I feel lucky to live among all these things I chose in my still-new flat, even while knowing luck is only part of it.
But, oh! I guess I secretly thought the universe would notice The Investor Is Finally Throwing Money At The Problem and the rules would change. But they haven’t.
Stuff comes broken. Trades people don’t show up. Some of them are great, but some are – well – yet to find their true calling. Deliveries don’t arrive. I made a final push to finish my flat before Christmas, and caned the Black Friday offers. But only three of the seven resultant purchases that were scheduled for delivery have actually made it here so far. A new record of rubbishness.
Coffee machines are harder to use than you expected. Analine leather sofas stain if you sneeze near them. Complete automatic watering systems require add-ons to water completely. Your boiler is already up for a service – and that’ll be £100+ with VAT please.
I feel sometimes like Robinson Crusoe, finally back on the mainland after a long sabbatical away catching fresh fish with his hands and brushing his teeth with a fragrant root. I can confirm 2018 has a lot of gorgeous stuff on offer – but as we all know it comes at a price and doesn’t really solve anything.
Still happy I did it, but pleased I’m mostly buying things that will last.
Once I’m done the hedonic treadmill is going back into storage!
Note: Yes, it’s an expensive coffee machine (though one of the cheaper good ones). I’ve always liked a few quality things in life, I’ve just tended to get them cheaply. I saved about half my income for 20 years, so while the Frugal Police are welcome to give me a caution, keep in mind that I wrote the (racier) pages of the book you’re throwing at me. 😉 And beware Buffett’s Folly.
