Wealth update – 31/03/2020

The markets are now closed and I have updated all of my portfolios (see my Wealth page for details). Unsurprisingly, March has been a negative month.

The only things which increased were my cash holdings and my pension. This is because I topped up my cash from my salary and sacrificed my bonus into my pension. All of my investments have lost money across the board – however, I kept my EIS valuations the same as last month as these are illiquid and it’s not possible to get a market value.

Not only did I get a bonus, but also a tiny 1.8% increase to my base salary – this, I presume, is to keep my salary in line with inflation (CPI is 1.7% right now based on Bank of England’s website). Better than nothing I presume and it’s always nice to see an increase in my earnings. My net salary will increase a tiny bit from next month as well as HMRC announced an increase in the national insurance bands. So, this has been a modest improvement.

However, my rent has increased by 4% and council tax has increased by 3.5%. These two largely negate the increases in my earnings.

I also switched my mobile service provider as I found an even better SIM-only deal than I previously had. Now, I’m saving a fantastic £1.05 p.m. on my mobile phone bill – I only pay £4.95 p.m. and get 2 Gb of data plus calls and texts, which have some limits but I hardly ever call anyone – and when I do I use WhatsApp. #Millennial The saving is small but still worth doing.

Next week, on 6th April, the new tax year will start. I plan to top-up my LISA with £4,000 from my current cash and invest it. Once the £1,000 LISA bonus is paid in (this will probably take 6-8 weeks), I’ll invest that as well. I’m going to hang on to my GIA monies for a bit as the market is very volatile and I don’t want to move it to my ISA just yet (as that would require a sale in the GIA and then buying it back in the ISA and maybe a few days of being out of the market). I will fund the ISA with my GIA later in the year when things have calmed down a bit.

I also started an application for critical illness insurance. However, the insurer needs to get a medical examination and a GP report, which are difficult to obtain during times of a pandemic. This is delaying things, probably for a couple of months. I estimate this to cost about £45 p.m. once it’s set up (I’m applying for a £100,000 critical illness sum assured with £100,000 of life cover to age 70, where the sum assured increases with inflation).

Why am I getting critical illness cover? Well, to cash in if I get cancer or some other horrible illness. For example, 1 in 2 UK people will be diagnosed with cancer in their lifetime – so if this happens before my age 70, I will get the sum assured and treat myself. The £100,000 figure is sort of random as I didn’t really know how much I need – on the plus side, I’m able to increase it during certain life events e.g. buying a home, having a child – without any need to do any further medical checks (but I will have to pay more each month to reflect the larger sum assured). So I’ve got some flexibility.

I find paying £45 p.m. quite expensive for £100,000 of cover, but the fact is that I’m not getting any younger. The later I leave it the more expensive this will become.

My girlfriend (24 y.o.) got the same insurance policy (but with a 40-year term as it’s more than 40 years for her to reach age 70 and the maximum term was 40 years). She was accepted without the need to provide any medical tests or GP reports and got the policy on the same day as we applied for it. I think it cost about £28 p.m. for her, I’m not sure. Oh… to be young…

And that was the month of March 2020.

Pandemic benefits

I had a think about whether there was anything positive about this pandemic and I actually came up with a few things. These don’t have a lot to do with finances though.

Pollution. There’s a lot less of it. There are hardly any cars in Central London and I think the air quality here is the best it’s been since I moved here. This is true for most areas in the world now.

Peace and quiet. I live above a pub… or to be more precise the pub is on the ground floor in the building, which is diagonal to where I live. This pub gets crowded and there’s almost always an overflow to the little square outside of it. The chaps at the pub tend to get loud, especially when they’re watching football or something. There were plenty of Covid-19 parties down there until they closed the pubs in the London lockdown. Now it’s super quiet and peaceful at home. I really like it.

More quality time with my girlfriend. I get to spend all day with my lovely girlfriend as both of us are working from home. It’s very nice! Yes, there’s the usual bickering where both of us are in a phone conference and someone is too loud and other stuff… but overall it’s a positive experience.

Saving money (and investing). We’re not going out, no restaurants, no brunches, no nothing. This pandemic thing is a great opportunity to save money… but as everybody is doing that the economy will suffer. Markets have corrected quite a lot and seem to present a good opportunity to add more to my portfolio at low prices.

It’s not all bad. See ya!

Covid-19 pandemic handouts

The UK government is taking unprecedented measures to tackle the economic impact of this pandemic. This includes both corporate and individual welfare.

I already ranted about corporate welfare in my last post. Now it’s time to hate on the government some more.

I’m not exactly in favour of handouts. Full stop. It doesn’t matter whether these are to a business or to individuals who have made poor decisions. Both people and businesses should take responsibility for their actions or lack thereof.

In my opinion, giving out handouts increases reliance on the government and reduces a society’s capacity to look after itself. Big business has learned that they can continue to take big risks because the government will be there if the shit hits the fan. Same for the little guy, who feels he will always be taken care of by Mr Government – from cradle to grave. Nobody needs to work on improving themselves, inventing new services/goods etc – what’s the point? You will be OK. Right?

It’s a slippery slope. Many handout programs also make it difficult to get off handouts as your income would then reduce, rather than go up. Why go to work for £1,000 p.m. net if you get to lazy around at home and collect £600 without any travel or work expenses? (full disclosure I don’t know what the actual numbers for benefits are, but the point remains valid)

Having said that, I feel that bailing out the little guy seems more palatable to me. Companies with big pockets should be able to plan for contingencies, but the average Joe is clearly more vulnerable and may not have the resources or capacity to even consider this. This is a societal failure. This is a government failure.

We should all be taught to save for a rainy day, invest wisely – not just in the stock market, but in yourself – your education and your skills. Basic financial education needs to be a core part of the curriculum.

Almost 10 million UK households had no savings whatsoever in 2017. Wow! What a sad state of affairs! Even the smallest emergency would cause massive hardship for these guys. It’s so easy to end up in debt and before you know it you’re bankrupt. As a wealthy nation, the UK should do better.

The government is now paying salaries for people who can’t work due to Covid-19. This is 80% of salaries up to £2,500 per month with loads of terms and conditions, which are complicated to understand. This is another failure of the government – they look like the good guy trying to help out their people. But they make it difficult to navigate the benefits system (probably on purpose) so that fewer people apply for it. It’s quite genius when you think about it – politicians and bureaucrats will later say they helped everybody get back on their feet when trying to get re-elected. Never mind they made it difficult to access these benefits.

It is what it is. I hope things improve and that people learn from this crisis. Stay safe!

Private profits and socialised losses

The global stock markets look pretty bad with Covid-19 doing its thing. My portfolio has taken a massive hit and I must admit it feels very uncomfortable to have losses greater than my annual before-tax income.

There’s loads of news about industries begging for bailouts from their governments. It’s outrageous that for-profit companies could get bailed out by the taxpayer. These crappy companies should all go bust and make room for people who can manage their business in a more prudent way.

I was against the bank bailouts in the financial crisis in 2008 and am against it again. Let them fall. Let them falter away. Every business knows that it can go bust if it doesn’t manage itself properly. We should encourage the failure of crappy companies to build an overall stronger economy. This is how things should be. The bad apples should get tossed into the rubbish where they belong.

There was an article which said that the majority of airlines will go bust within months if they don’t get bailed out. Let them!

Instead of saving for a rainy day many companies opted to buy back their own shares on the stock market. Actions have consequences. Let them fail!

Why should some bureaucrat get to decide which company or industry gets to survive whilst everybody else suffers? The entire bailouts thing reeks of corruption. Industry officials bribe lobby some politician and voila, free money from the taxpayer granted. It’s disgusting. Let them fall.

But the economy will turn to shit if you don’t bail them out“, you might say. Bollocks! The economy will always find a way to recover. New businesses and industries will emerge as they always have and things will improve. They will restructure, learn from their mistakes and build better businesses. Have a bit of faith in humanity.

Dead cat bounce

You may have heard of something called the dead cat bounce. This is used in the markets where you see a big decline first, followed by a bit of a recovery and then a further decline in the price. This is where the world markets might be around this time.

For some reason, I was thinking about this yesterday on my way home from work. Someone said that this expression is used because even when you throw a dead cat from high enough and with enough speed, it will bounce. Hence the name “dead cat bounce”. However, I think this is incorrect because the cat would simply end up on the floor after the bounce as it’s dead. In the real world, you tend to see a big recovery after sharp corrections, not a flat sideways market. So, the market doesn’t simply roll over and die, instead, it tends to start climbing again.

A more apt description would be a cat falling from a tree. It crashes down, lands on its paws, might hurt itself a bit in the process but then recovers and continues climbing trees happily ever after. Until it, all repeats again.

I realise this might be one of the silliest posts so far, but I felt like sharing. I promise there will be less of this kind of stuff in the future.

PS: Don’t take yourself too seriously!