Getting Minted One Year On

Source: Pixabay

I’m a financially independent, 50-something, UK based, man who wants to share what I have learned. It’s one year on since I started this blog. I’ve been a bit quiet lately because of some distractions in the rest of my life, but I’m hoping to write more soon.

I’m pleased that I have kept it going for a year and have been able to express my point of view on certain topics. I’ve written 26 posts and garnered over 3,000 views. I’d like to think my writing has been of interest and has maybe been helpful to some readers.

On the theme of getting minted I’ve suggested vision, and commitment , and have discussed millionaires (twice ).

On personal finances I’ve discussed being minted , being a family, giving up work, owning a car , paying for utilities, and buying my first property.

On investing I’ve covered generating investment income, investing a lump sum, index tracking, the safe withdrawal rule (twice), stock market falls, manager risk , and where to invest.

I’ve reviewed my own investments at the end of June , August and December .

I’ve discussed my changing investment approach to Brexit, to the UK, to going global, and coming back to the UK.

I’ve struggled to write as much as I feel I should say, and as much as I feel I have to say. I feel I have been on the path to financial independence and beyond for over 35 years now so I have formed many views on these topics which I will try to put into words in future posts.

Financial review at 31 December 2019

Twelve months Summary

This is an update on my previous reviews of four and six months ago.

A total return for the year of 20.24% growth, slightly above the FTSE All Share total return index growth of 19.17%, results after draw down expenditure in a capital uplift of 15.87%.

Source: Pixabay

Six years of drawdown results

As I am not earning any income from employment any more, I am in draw down in that I am drawing down some of my financial assets each month to cover our spending. I have been in draw down since December 2013 so the six years since then will be the main time period under review. My five key performance indicators in this review are capital, income, expenditure, total return, and income growth. My key comparisons are with an inflation index, an equity index, and the “safe withdrawal rate” (SWR).

Inflation (RPI)

My chosen inflation index is the retail price index. I have chosen this one because it has the longest history, it is perhaps more inclusive than other rival indices, it tends to be higher than these rivals, and is favoured less by politicians.  In 6 years the RPI index has increased by 15.23% (I have estimated the figure for December).

Equities (FTSE UK All Share)

My chosen equity index is the FTSE All Share total return index. I have chosen this one because I live in the UK and the majority of my portfolio is invested in UK equities. This index also has a history that extends back to when I started investing in 1986. In 6 years the FTSE UK All Share total return index has increased by 45.53%. If I chose to invest in funds that attempt to passively replicate and track the index these would return less than the index because of fees and tracking errors. A typical unit trust tracker (M&G Index Tracker Fund Sterling A Acc) had a total return of 41.56%.

“Safe Withdrawal Rate” (SWR)

This approach suggests taking an income, or drawing down, only 4% of your available capital in year one and then increasing that amount by inflation each year.


My capital has increased by 22.69%. This compares to an increase in RPI inflation of 15.23% (I have estimated the RPI figure for December).

Year endCapitalGrowthRPIGrowth
as % of 2013 assets


My income has increased from 3.53% to 5.38% of my original capital. This compares to the income according to the “safe withdrawal rate” which has increased from 4.00% to 4.61%, based on inflation from December 2013 to December 2019.

Year end4% RuleIncome
as % of 2013 assets


My expenditure has increased by 32.87%. This is more than double the inflation increase and reflects some choices made in 2015/2016. I would be prepared to undo some of those choices in the future if that were needed. In the meantime I take comfort from the fact that income growth has exceeded this expenditure growth.

This year my spending as a percentage of my income is 78.10%. Expenditure is running at an annual rate of 3.67% of the average asset value during the 2019 year.

Year endIncomeExpenditureGrowthRPISpend %Expenditure
as % of 2013 expenditureas % of year average assets

Total return

The portfolio total return has been 51.17%. This compares to 45.53% from the FTSE All Share total return index and 41.56% from the M&G Index Tracker Fund Sterling A Acc, a typical index tracker fund. I can’t compete with the total return of global and US equity indices because of my preference for UK and Asian equities.

Year endTotal ReturnGrowthIndexGrowthTrackerGrowth

Income growth

Income has grown by 56.94%. The portfolio income yield has increased from an annual rate of 3.82% in 2013 to 4.70% in 2019. This is calculated on the average asset value during the year.

Year endIncomeGrowthRPIGrowthIncome Yield
as % of 2013 incomeas % of year average assets


My current main objective continues to be income growth rather than total return. Compound income growth is running at about 8% per annum. This is derived from increases in the dividends paid per share, from re-investing any unspent income, from re-positioning the portfolio towards higher yielding investments, e.g. high yield bonds and commercial property, and from remaining focused on the higher yielding stock markets in the United Kingdom and Asia. I have had to steer clear of lower yielding markets such as the USA.

Markets seem buoyant since the election but some concerns are ongoing and volatility in capital values is always a possibility. If that were to happen then I will aim to stay invested on the basis that any volatility would be short lived and the investment trusts I hold should be able to maintain or even increase their dividends.

Income growth has stalled a little in the last two months as I took the precaution of going global and also increased my cash holdings. I currently want to further raise my portfolio income but I expect to move towards more of a total return objective in the years ahead.

Back in the UK

Source: Pixabay

Last month I wrote about beginning to go global as I increased my non-UK exposure in response to the unstable political and economic situation. The impending general election could have resulted in a change of government to one much less supportive of business and of investors. In early November therefore I reduced my UK exposure from 58% to 52% as a precaution and I had plans ready to reduce this further depending on the outcome. In early December I sold a little more of my UK holdings in order to hold more cash.

As we now know such fears of a Labour government or hung parliament have proved to be unfounded and the Conservative government has won a landslide victory. In my view such a decisive outcome means that both the Brexit stalemate and the Labour threat are removed. Some Brexit uncertainty remains as to the shape of a future trade deal, but overall the UK is now a better place to be invested. Having reduced my UK exposure, I am now cautiously increasing it.

One week after the polls closed the FTSE All Share total return index is up by 4.2%. My portfolio has risen by 3.6%. This is acceptable to me given that I have some exposure to bonds and property and to international equities and that my UK exposure had been reduced to 52%.

Even after this “Boris bounce” following the general election UK equities are still relatively cheap compared to global and US equities. As at 19 December 2019, I calculate that buying £1 of income is 31% cheaper in the UK than it is globally, and 34% cheaper in the UK than in the US. The same calculation also shows the UK to be only 5% cheaper than Europe and only 9% more expansive than the Asia Pacific region. This is based on the dividend yield of selected income investment trusts. These show an average yield of 4.80% for Asia Pacific trusts (HFEL, AAS, SOI), 4.40% for UK trusts (EDIN, CTY), 4.20% for a European trust (JETI), 3.03% for global trusts (HINT, STS, SCAM), and 2.90% for a US trust (NAIT). I am still persuaded that UK equities offer good value but now I do want a few more of my eggs in that basket.

The latest information on these investment trusts can be found at the AIC website under find and compare investment companies. You can then filter on a particular AIC sector or else search a trust name or TIDM code (e.g. CTY).

After my changes last month my portfolio looked like this:

Investment Trust SectorPortfolio %UK %Non-UK %NDY %
UK Equity Income38.7833.095.693.67
Asia Pacific Income21.900.3221.584.98
Global Equity Income21.091.6819.414.11
Property - UK Commercial9.
Debt - Loans & Bonds8.427.391.037.65

Note: Data is from my portfolio and from the AIC website as at 7 November 2019.

I now intend to leave my bond and property holdings unchanged but to reduce my global and Asia Pacific exposure and increase my UK exposure. Having added certain trusts in the global and Asia Pacific sectors just last month I intend to keep all of my holdings in these sectors but to trim the size of some of them. My non-ISA holdings are all in UK trusts and will not be changing. My ISA holdings are spread across three platforms and my increase in UK exposure will ensure that each platform has some UK exposure as well as some global and/or Asia Pacific exposure. I have initiated some trades this week and am now awaiting confirmation of them, but they should result in an increase in UK exposure of about 5%. This will bring my UK exposure roughly back to where it was two months ago. Arguably I should have not made any changes before the election, and I would not then need to make any changes now. That, however, is hindsight and I don’t regret my approach to this. This situation actually served as a good prompt to review my portfolio and consider how I would go global with my portfolio if that were needed.

All these portfolio changes and the raising of cash levels will likely curb the income growth from the portfolio in the last two months of this year. Income growth has been more of an objective for me than capital growth over the last six years. In the new year I expect to make further progress on that income growth once these portfolio changes are behind me. I expect UK, Asia Pacific and selected global equities to continue to provide good income and good income growth, so I will continue to invest in them. I may add further to my UK position as further events unfold. Although subject to some Brexit uncertainty continuing as trade talks proceed, I think UK equities will continue to make progress.

Can Bolton Man on 80k get to be a millionaire?

Source: Pixabay

On BBC’s Question Time TV programme, last week in Bolton, a man earning over £80,000 criticised Labour’s higher tax policy. He believed (wrongly) that earning over £80,000 didn’t put him in the top 5% of earners. That incorrect claim was swiftly rebutted. This led to a wider debate in the media.

I was interested to read that according to Torsten Bell, director of the Resolution Foundation: “You may need to earn only £80,000 to join the 5% club for earners, but that’s unlikely to ever be enough for you to join the top 5% club by wealth. To achieve that, you need housing or savings of almost £1m – which you’ll probably have to inherit or marry rather than earn. That’s the result of our stagnant incomes but soaring wealth of recent years.”

I commented elsewhere that I think many in the FIRE community (those seeking, or having achieved, Financial Independence Retire Early) will disagree with that pessimism on wealth building. I think someone earning over £80,000 in income should eventually accumulate over £1 million in wealth from reasonable saving and investing.

A follower of FIRE blogger Mr Money Moustache saving 31% of salary would look to be able to retire after 28 years of work on 70% of salary. This is based on 5% investment returns after inflation. You can run this calculation on the networthify calculator, or in an excel spreadsheet.

I used these annual figures in my calculations:

  • Gross salary £80,000
  • Income tax £19,500
  • NI £5,654 (UK current position at 29/11/2019)
  • Net Salary £54,936
  • Savings £17,030
  • Savings rate 31%
  • Spending £37,906

This gives the following year by year growth in net worth:

YearNet SalarySpentSavedGrowthNet Worth
 Net SalarySpentSavedGrowthNet Worth

So, it may take 28 years and a savings rate of 31% but it is possible for someone who is just inside the top 5% of earners to accumulate over £1 million in wealth or net worth. This is a simple calculation and doesn’t allow for any earlier and lower earnings and savings, nor any later and higher earnings and savings. It ignores any contribution from employer pension contributions, or from house price growth.

The savings rate equates to our £80,000 earner effectively living on the equivalent of £50,638 of gross pay. At a marginal tax and national insurance rate of 42% the £17,030 of net pay saved is equivalent to £29,362 of gross pay. This saving of £17,030 in net salary is asking the top 5% earner to live on the earnings of a top 12% earner. This is based on government statistics from 2017 which showed that you needed £75,300 to be in the top 5% and £49,600 to be in the top 12%.

Moreover, the net worth accumulated would support a 4% “safe withdrawal rate” of £40,779 which is in excess of the annual spending of £37,906. Assuming that this net worth is all or mostly tax sheltered in an ISA or pension or is only subject to the 7.5% dividend tax then tax would be minimal and less than this excess. After the 28 years financial independence would therefore be achieved.

If you are able to earn at that 5% level but spend at that 12% level then based on these assumptions you can accumulate the net worth to become financially independent and to continue to live at that 12% level.

This also works for lower earners who can save that same percentage of their net salary. Someone earning £40,000 in gross pay would need to save so as to live on the equivalent of a £25,983 in gross pay. Spending would be only £21,208 but saving £9,528 each year should grow and accumulate to £570,381. This would then support a “safe withdrawal rate” of £22,815.

At all levels of earning you would need to be able to spend significantly less than you earn, as in these examples, in order to achieve financial independence and be able to retire much earlier than is the norm. That should be easier to do the more you earn but it requires the commitment to do it. Maybe that was what Torsten Bell thought would be unlikely. What do you think? How likely is it that someone can follow this path to the destination?

Sleepless night

Source: Pixabay

I had moved to London to start my first proper job in my early 20’s. At first, I moved into a hostel and shared a room and ate in a communal dining room and watched TV in a communal lounge. It was a more downmarket version of my student hall of residence from an earlier year.

Nevertheless, I had started a job and was earning money, serious money it seemed, so I could start planning. Even before coming to London to work I had looked at property articles and adverts in the newspaper and was starting to form an idea of what was possible. The estate agent’s windows near my hostel showed properties that were out of reach, but there were magazines that promoted new build flats not too far away that seemed a possibility. A new studio flat could be bought for about 3 ½ times my salary in some areas. I had some savings, no debts, and felt able to ask my parents to help a little in the guise of tax planning. My bank would lend me just under three times my salary and with parental help I had a 20% deposit which meant I didn’t have to pay a fee for having a high level of mortgage debt.

As a first-time homebuyer the idea of a new build with some built in furniture and appliances appealed to me. At that time the cheapest new build flats in the London area were on reclaimed marshland but I found that this was an area of completely new property quite some distance from amenities, shops and the train station. There was one other development elsewhere on a former industrial site in an established area with shops, amenities and a train station within a ten-minute walk. This was the one I chose. I remember my parents being supportive but quite concerned as I put down a stakeholder deposit of £100 to reserve my flat just six weeks after moving to London to start my first proper job. Later on, writing my deposit cheque, the first four figure cheque I had written, I had a rather sleepless night as I considered how much I was spending and committing.

Source: Pixabay

With hindsight, I later realised that this was in some ways a reckless move that could have quickly gone wrong if my first real job had not worked out or if living in the capital had not suited me. On the other hand, it was in some ways a bold move that committed me to my job, my location, and to home ownership. I was on the property ladder. In the next few years it seemed to be a good move as property prices rose rapidly in the mid to late 1980’s. In some years my small flat made more money than I did in my job. As I progressed in my job and my earnings grew, I was able to move up to a bigger two bedroom flat. The capital gains from the first flat meant that I had over 40% equity in the second flat. The mortgage was now for less than 60% of the value of the property and represented three times my salary.

For a time, property prices continued to rise in the late 1980’s and peaked as changes were made to tax relief on mortgage interest. Then as interest rates rose up to 15% property prices fell significantly in the early 1990’s. My second flat developed a building problem that involved protracted monitoring and remedial works that meant we couldn’t move on from it until these were resolved. I remember noticing that ten years after buying my first flat the price for flats in that same development, which had doubled, had now fallen by half, back to the price I paid. Shortly thereafter we were able to move on from the second flat but I had to sell it at a loss. Most of my 40% equity was lost and I had just about broken even on my first decade in property having experienced boom then bust. I could have probably rented for that time and emerged in about the same financial position. Others we knew at the time were less fortunate. They had only experienced the downturn which had given them negative equity where their property was worth less than their mortgage debt. They had to save up to make up the difference if they wanted to move. More than ten years after my sleepless night I had experienced and survived a property market cycle.