What caught my eye this week.

The New Year is the day we all start behaving better – whether it be quitting smoking, eating more vegetables, jogging, or simply resolving to stop putting your dog’s waste in a plastic bag and then flinging it up into a nearby tree to hang like a toxic fruit bat. (Okay, perhaps nobody resolves to stop doing that. They should!)

Do we keep behaving better? Rarely.

I sometimes make New Year’s Resolutions and they seldom work. I’ve been resolving to read more books for as long as I remember. But whatever method I try, the instant delights of the Internet have soon sucked me back under and I’m lucky if I’ve finished a novel by February.

I read a book a day in university!

In another universe, I’m incredibly well-read now. In this one, well, at least you guys benefit via this weekly link list.

Ready, steady, gain

Perhaps one reason I do badly with New Year’s Resolutions is because I invariably start the year off on a naughty foot.

No, I don’t smoke cigars whilst quaffing champagne from the bottle. That’s all out my system by Boxing Day.

However I do lovingly re-set various aspects of my active portfolio tracking spreadsheet back to zero. By doing this, I start the year with a clean slate and a fresh chance to beat the market by December 31st.

This is only half bad. As part of my ongoing active investing experiments, I track my returns precisely. My portfolio is unitized – there’s none of this “I assume dividends cover expenses, and I guess I should count that bonus money I put into an ISA in April but it’s a faff” that you see in some online portfolio reviews.

No, I count every penny in and out like some miserly Noah. I track all my gains, losses, and costs, and I compare myself to four real-world benchmarks, over the short and long-term.

So far so reasonable.

Precisely tracking your returns can be a bad idea if you’re a passive investor. In fact I think most investors would be better off following a sensible passive strategy and not tracking their returns at all if the alternative is getting too obsessed and fiddling with their portfolios. It’ll probably only harm their results.

However if you’re an active investor, tracking is vital. Many private investors delude themselves about their performance, because they don’t know it. They see some winning shares in their broker accounts and think they’re not half-bad at picking stocks. They never work out where they’d be if they had just lobbed the lot into a global tracker fund.

Even if you’re actively investing for fun as much as profit, you need to know your returns. A dartboard without any numbers to score by is just a wall you throw darts at.

With that said, there’s very little to justify overly-focusing on returns over any particular single year. And there’s even less reason to do so from January to December. (At least for American investors that matches their tax year! April to April would make a little more sense in Britain.)

Of course you do need to know annual returns if you want to compare yourself to active funds; something that was very important to me for a while.

But even then it would be better to calculate the appropriate figures once a year, rather than watching as I do my performance versus my benchmarks with every passing day. Now a little ahead, now a little behind, now back in the lead again – it’s like one of those plastic horse racing games you used to find at seaside arcades.

Nevertheless I’ve resigned myself to this procedure for as long as I’m active investing. It’s part of my process now, however irrational. It may even be marginally beneficial that I reset the annual return column on each of my holdings (obviously I track the long-term loss/gain on purchase in another column) as a way to avoid any anchoring biases.

Human error

I know I shouldn’t watching things too closely; the knowledge is strong, but the flesh is weak.

As a result I’ve tried a lot of different ways to obfuscate my portfolio performance in the short-term, or on a quick view. I’ve experimented with everything from hiding the real pound values of holdings in my master spreadsheet to hiding the gains and losses, to creating ‘layers’ that blend the moving parts of the portfolio to try to stop me focusing on short-term winners or losers.

I’d write about all this, but I don’t want to encourage anyone. Perhaps when my passively pure co-blogger The Accumulator is back full-time I can indulge this side of things again.

For now: It’s a new year, and the game is afoot! Exciting. Yes I should change my habits… but then again I should probably read more books, too.

Happy new year and good luck with all your resolutions – except for that silly one to read fewer investing blog posts.

Pfft! A little of what you fancy does you good.

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This is a guest post by David Sawyer, author of the UK-focused financial freedom book: RESET: How to Restart Your Life and Get F.U. Money. (You can also read his previous posts on Monevator!)

Although RESET stresses that hard work and good habits are the key to success in life, I’m all for cutting a few corners.

The road to financial independence is not an easy one. Anything that saves me time and makes my life easier, I embrace.

This short post profiles nine under-rated tools/shortcuts – all featured in my book – that’ll smooth your path to FIRE1 and give you more time to do what matters to you.

#1 How rich are you? / Salary calculator

Let’s start with two tools to help you put things in context and work out how much tax you’re paying.

Discovering where your salary places you compared to the rest of the world is humbling. Finding out your precise take-home pay is useful for personal financial planning (and also good to know if you’re going for a new job).

#2 How much do you need when you retire?

This is crucial. What type of life do you want to live when you retire and how much money will you need to fund it?

Spare yourself an extremely laborious task that you’ll never get round to and instead read Which?’s 2017-18 member survey of 6,000 retired and semi-retired couples.

Examine the detail and work out – factoring in the tax you’ll be paying in retirement – the before-tax amount you’ll need to draw down as an income in retirement.

#3 Candid Money’s ‘How Long?’ investment calculator

You simply plug six crucial figures into this calculator as follows:

A: Your target stash2 £

B: Your current stash3 £

C: Annual (expected) investment return %

D: Annual (expected) inflation rate %

E: Combined4 annual investment charge %

F: Monthly savings figure £

When you’ve arrived at those figures, use the calculator to find out what age you’ll be when you become financially independent. Play around with F to see how this (the main variable within your control) affects matters. When do you want to reach financial independence and how much can you save each and every month?

#4 Check your state pension

This one’s dead easy. All you need is a phone and your passport to find out how many more years you’ll need to work to qualify for the full state pension. (Not the same as accessing it, of course.)

As I write, the full state pension is £8,546.20 a year, or £17,092.40 for a couple. Who knows what it’ll be in 15 years’ time but probably not a figure to be sniffed at.

Check your state pension online at gov.uk.

If you’re lucky enough to have a final salary pension, you can also request a transfer value from your scheme administrator once a year. (It’s the law and it’s free.)

Anything over £30,000 and you’ll need an IFA5 if you do want to transfer (think carefully before you do!) and also be sure to check if the administrator is applying a percentage reduction to the CETV6 first. Final salary schemes that are in deficit are allowed to do this (again, it’s the law).

#5 MSE’s Budget Planner and Money Dashboard

These two tools work in tandem and are key to budgeting – an important and often time-consuming aspect of achieving financial independence.

MSE’s Budget Planner is a flexible spreadsheet, which breaks your outgoings down into intuitive categories. It helps you to see the effect that planned changes in spending will have, and thus to protect your all-important monthly saving figure.

Money Dashboard is a secure cloud-based open banking website that enables you to replicate and then track all the spending categories you set up in MSE’s Budget Planner. It syncs all members of your family’s current, business and savings accounts in one place. It even lets you set up ‘offline accounts’ to track things like VAT, pocket money, corporation tax – whatever you like. It gives you a real-time one-figure overview of your everyday money.

If I had to track spending manually or by logging in to umpteen accounts, I wouldn’t do it. Money Dashboard is free and I believe it’s a game-changer for UK FIREers.

#6 The LAHs

For the biggest impact visit all three: Lidl, Aldi and Home Bargains. This one’s a no-brainer, albeit you may not want to take it to the extreme of using them all.

Changing your weekly shopping habits from Tesco, Sainsbo’s, and Asda to the delights of the discount food stores could save you 30% – or in my family’s case £300 – on your monthly groceries bill.

#7 Index cards

Financial independence is a philosophy of life. A different way of looking at the world. You’ve always got to be learning, reading, discovering – but you need to do this with intent, to challenge and enhance your worldview.

To achieve this objective, you need to record what you think. Some people use emails, some Evernote, some Google Keep. I use index cards. You know, those little bits of white card with ruled lines on. I carry them everywhere and file them in boxes. They came in really useful when I was writing my book.

Sound a bit old school? Perhaps. However, I’m in good company. Ryan Holiday, Anne Lamott, Robert Greene, Oliver Burkeman, Ronald Reagan, Valdimir Nabokov and Ludwig Wittgenstein (admittedly, he probably is a bit old school) all use(d) the humble index card to catalogue and organise their thoughts.

#8 WordPress and MailChimp

Increased broadband speeds have transformed our lives. None of us would be familiar with people like Mr Money Mustache or movements like FIRE if it weren’t for the Internet. It also means that communication has become democratised. Anyone anywhere can set-up a WordPress blog and sign-up for a free MailChimp account to broadcast their thoughts into the ether.

Why would you want to do that? Well, if you’re into financial independence you’re probably into personal development, and you should definitely be into maximising your career earning potential. Blogging and setting up an email list sparks professional rejuvenation, helps you organise your thoughts, and future-proofs your career.

WordPress powers 30% of all websites and is free. MailChimp is free until you get 2,000 people on your list and it’s easy to use.

#9 Why oh why oh why? (Over to You!)

Why oh why oh why is there not a free Personal Capital-type tool on our side of the Atlantic?

You know, one place where you can synchronise all your bank accounts, where all your investment accounts also sync to – where you can do all your financial planning and have a handle on all your money and your money-based financial independence plans in one place.

I like a good tool, but I don’t know a macro from my elbow. I have tried scores of FIRE-blogger spreadsheets and other systems that purport to make it easy for me, but they only seem to work in the US or in their creators’ heads.

The everyday money thing I have sorted – Money Dashboard and Martin Lewis’s Budget Planner spreadsheet. Easy.

But what about my portfolio?

When Google sounded the death-knell to the full functionality of Google Finance Portfolio last year I was aghast. With that I had been able to manually input all my fund purchases and sales and get a lovely real-time-updated coloured chart saying how well (or badly) my investments were doing and what the rate of return was on each fund. (Useful when you’re making multiple fund purchases every month).

I’ve tried replacing it with Yahoo Finance and the Morningstar portfolio manager, and I’ve even attempted to get to grips with the Financial Times Portfolio tool. None is perfect and I find myself increasingly falling back on a combination of my fund providers, Vanguard and Fidelity – a sub-optimal solution.

So I’m wondering, how do you guys do it? What with the open banking reforms, why isn’t there a Personal Capital equivalent this side of the pond? How do you track your investment returns with the least hassle and in the shortest time?

With that said, every cloud has a silver lining… and a consequence of the absence of one tool to rule them all is my finger isn’t drawn to checking my investments on a daily basis.

That’s surely a good thing!

David Sawyer (46) is a United Nations award-winning PR man and author. He lives in Glasgow with his wife, Rachel, young kids (Zak and Jude) and pet – Hamsterdam. His first book  – RESET: How to Restart Your Life and Get F.U. Money – is priced at just £0.99 for the Kindle version until midnight 3rd January. In addition, David has cut the price of the paperback to just £9.99 and Amazon has knocked a further 18% off today, bringing the price down to £8.23. Get it while you’re in the mood for making resolutions!

1. Financial Independence Retire Early [↩]
2. The before-tax annual income figure you discovered above multiplied by 100 divided your safe withdrawal rate (e.g. 3.5 for 3.5% SWR.) [↩]
3. Your net worth minus house equity and final salary pension CETV (cash equivalent transfer value). [↩]
4. Ongoing charges figure (OCF), portfolio transaction costs and admin charge [↩]
5. Independent Financial Advisor [↩]
6. Cash equivalent transfer value [↩]

What caught my eye this week.

And just like that it’s Christmas. Not sure if I should blame Brexit, the flu, the unseasonably warmish weather or the unseasonably bearish market, but it’s sprung up on me this year.

Even the spammers have stopped bombarding the website and sloped away to buy their Christmas turkeys. Time for me to do the same – after one last links post of 2018, of course!

Most years I suggest a few books before I take my annual Yuletide break. With just four sleeps to go until Santa, it’s hard to spin these books as gift ideas this year (although if you hurry Amazon might still manage it).

Oh well, the best presents are the ones you buy for yourself. So knock yourself out with one or two of these 2018 page-turners, to cheer yourself up if it’s socks again from the family on Christmas Day.

Thinking in Bets by Annie Duke

Nothing wildly original in this great read from a former poker star, its charm is that it’s an excellent entry-level introduction to probabilistic thinking and banishing black and white, all or nothing certainty from your investment approach.

Mastering the Market Cycle by Howard Marks

Mark’s The Most Important Thing is one of my favourite investing books, so I was disappointed to learn the other day he’s sold 500,000 copies. There goes another of my delusions of edge. This one isn’t in the same league, but everyone needs to understand that economies and markets are cyclical. Why not get a refresher from a man whose made billions from it?

Keeping At It by Paul Volcker

Must admit I haven’t yet read this! It’s in my ‘Save For Later’ shopping basket though. It seems appropriate to hear from the man who killed off high inflation at a time when its return – or not – has the market running in circles.

Bad Blood by John Carreyrou

It feels like only yesterday I was sending uplifting media stories about the female-led biotech Theranos to friends concerned about the ‘bro-fest’ of Silicon Valley. That – well, relief almost – at finding a good story to share about a young female Steve Jobs type is one reason Theranos got an easy ride. This tense, gasp-inducing expose of a multi-billion dollar scandal picks apart the rest.

Buying books for kids? Be sure to peruse Maria Popova’s selection of The Loveliest Children’s Books of 2018 (h/t Zude).

The publishing event of 2019

While we’re feeling bookish, make sure you also set aside a few pennies ready for our Monevator book. It is definitely coming next year.

Oh yes it is!

We now have a near-complete draft ready for editing. How much longer can it take? (Okay, don’t answer that.)

Once our book is out and you’ve all bought a copy, we can hope to see @TA back on-site every week, too.

What larks pip! Maybe next year will be the year the world starts to emerge from the darkness? Well, maybe.

Until then have a great Christmas and New Year – and thanks as ever for stopping by! 🙂

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