Simple Pound

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The first month of 2008 is over and we’re 1/12 through a year which may not enjoy as much economic growth as we’ve seen since the beginning of the decade. No, I don’t want to call it a recession. Just because we’ve seen some increase volatility on the stock market does not necessarily mean we’re heading towards a Japan-style recession. Unfortunately, the more “so called” experts are discussing the likelihood of exactly this happening, the more probable a real recession becomes.

In any case, I’m losing myself in a rather dull rant that I don’t want to subject you to (well, at least not beyond this short introduction to make sure everyone knows what I think of pessimists… ). Let’s get started on the actual purpose of this post - my monthly review. The good news is that I’ve had a sizeable increase in my net worth of 11.30% in comparison to last month’s figure. This was mainly brought about by an increase in my assets of 11% and a total elimination of all my outstanding debts. The bad news is I’m unlikely to be able to repeat this whopping increase because much of it was related to my January bonus or “discretionary incentive award” (depending on whether you like to call things by their name or not… ).

Sticking to a budget was strange and needless to say I didn’t always manage. Especially as we had dinner at Hakkasan, one of my favourite yet slightly more upmarket London restaurants - that totally ruined the concept of having a budget for dining out. To even it out I spend less on taxis, clothes and cosmetics than I could have and didn’t get that monthly pampering session (manicure, facial, hair cut - you know the girly ways of relaxing!) either. Moreover, I did not spend a single penny of my bonus but put it all into a 6-month high-interest bond (Icesave!) with a rate of 6.76% AER that I probably won’t be able to get for much longer (assuming the Bank of England will cut interest rates again fairly soon).

All in all, it was a good month but I’m still determined to spend less next month. Especially on things like coffee and lunch as I should simply overcome my laziness and prepare some sandwiches to take to work. It shouldn’t be that difficult, should it?

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December has been a busy month and I have not found the time to post much as a result. I also accumulated a massive amount of receipts that I needed to enter into my spreadsheet in order to track my spending and not abandon my good efforts this close to the end of the year.

After all the paperwork was done, I am pleased to see that my net worth increased by 4.46% from November to December which translates into 33.8% of my next goal. The increase in net worth can be fully attributed to my decision to throw all my available funds at the credit card and hence pay down the entire balance in one go. All that remains now is the last interest payment of £41 which was only debited this morning.

Now that a full year is over, it’s also time to draw some conclusions which will go hand in hand with new goals for 2008. I started keeping track of my net worth in May 2007 when I first came across the NetWorthIQ website. Based on that, I would like to see my assets grow at a steady rate of 0.5% a month at least, ideally closer to 1% a month. Liabilities should ideally be reduced to zero, unless they are subject to 0.00% APR - I am thinking of taking out a 9-month interest-free loan in order to purchase a digital piano, but I consider this good debt as long as it remains interest-free.

After tracking my expenses for a full year now, it’s time to draw up a (hopefully realistic) budget. In doing so I have mainly focused on the expenses I incurred over the last four months (since moving to London, starting my job…) as I believe they best represent my new lifestyle and hence actual spending. I have slightly underestimated my income as I don’t know what January’s bonus round will bring yet. Moreover, since I can live off my current salary quite comfortably I’m hoping to put any extra money that might come my way straight into a savings account in the hope of ever being able to purchase my first London home

As a result of now “being on a budget” I have made a few changes to my original spreadsheet so that I can monitor whether I’m sticking to it or not. I will review the budget in 3 months’ time to see whether my estimates are still feasible. After all, for me the whole point of having a budget is to get a good picture of my living expenses while also ensuring I don’t spend more than I have…

Finally, there will be a slight shift in focus with regards to my savings goals (see Progress page): I have decided to abandon my pursuit of a car as well as the eye laser surgery in favour of aggressively saving towards a deposit on a flat or house in London. While everyone is afraid of a housing crash and recession (dare I say the word…), I’m absolutely optimistic as this means that both property prices and mortgage interest rates will hopefully become a little more affordable than they are at the moment.

Thus, in a nutshell my (financial) goals for 2008:

1. Increase assets by at least 0.5% a month

2. Stay on budget

3. Deposit, deposit, deposit

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My goal for November was to save up as much money as possible to throw it all at my credit card bill in order to bring it down to 0 before the end of the year. I’m quite pleased with the fact that I saved around 25% of my salary last month and this number would have been a lot higher (~ 40%) if I didn’t have to buy a return flight to Germany for Christmas.

Unfortunately I haven’t had a chance to actually transfer all the “spare” money to my credit card account yet, so it’s only down by 16% this month. My assets increased by 6% last month, largely due to the fact that I now officially have a defined-contributions pension through my employer as well as a stable performance of the funds that reside within my life assurance policy (you wouldn’t believe it!). Combining these two numbers results in a total increase of my net worth of 7.45%

If you have paid close attention to my progress page over the last few months, you will notice that my car fund has suddenly dropped by 10%. There is a simple reason for this - I decided to take much of the money I had put aside for a car and use it to reduce the outstanding balance on my credit card. The reason for this is simple and pretty straight-forward. As much as I like watching my money grow, I currently pay more interest for the credit card than I earn in my savings account - hence, the money is put to better use in the credit card account. Yes, I know, sometimes it hurts to be sensible…

On an equally positive note, Adam has managed to pay down his entire outstanding balance and take a first step towards saving for a downpayment on his first property. Congratulations!

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Every new month starts with looking back at the month prior to not only track my net worth goal but also understand my finances better in order to avoid surprises… Whenever I try to avoid writing this post I know that something didn’t quite go as well as it should have.

October wasn’t a particular great month as I had plenty of expenses that couldn’t be put off (think telephone bill including connection fee) or simply had to be taken care of (think credit card bill for our TV). I also had to travel to Cambridge quite a bit, and even though it was for a business reason (recruiting next year’s graduates!) I haven’t been reimbursed (yet). Plus a trip to Germany to visit my family and a stunning invoice for books I need to study for my FSA approval.

My credit card bill is still sitting there waiting to be paid off, but I haven’t really had much spare change to do that. In the light of things I will probably have to cancel my trip to New York as I should work on reducing the bill not increasing it - and who am I kidding: if I go to New York I will spend.

In a nutshell: Net worth down 3.80% this month.

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A lot has changed this month and I suddenly had to keep track of both my personal finances as well as the expenses associated with the new flat I’ve just moved in with my boyfriend. I also returned from New York earlier this month and unfortunately couldn’t take the advantages of the weak dollar home with me.

If it wasn’t for a generous gift I received from my grandparents for my 21st birthday last month, my net worth would have been down again. With this gift however, I have actually reached my first net worth goal and the 31% progress you see on the right-hand side now refers to the next-higher goal of £50,000.

My emergency fund is steadily increasing by £50 a month. I realise this is a fairly small sum if I ever want to reach my 3 months worth of living expenses. However, I believe that my job at the moment is fairly secure and pretty much all of our appliances in the flat are brand new which reduces the likelihood of them breaking down and hence resulting in a larger one-off payment. Furthermore, since I haven’t bought a car yet, no repairs could force me to touch my savings in order to replace a gear box or the like. Therefore I think that small but steady payments are sufficient to build up the emergency fund.

I’ve reached about half of the sum that I owe my parents even though they don’t seem terribly concerned about ever getting it back. I have asked my Mum repeatedly (for months!) to tell me the exact sum I owe them without ever getting anything more than a ballpark figure. In any case, I do intend to pay them back in full (whatever I owe) so knowing that I have already accumulated about half of it within the last few months is a very good feeling.

Above and beyond my regular saving goals, I aggressively put money aside for a car last month and managed to double the savings intended for this purchase. In total I put away roughly 25% of my income despite all the expenses we were facing to fully furnish the new flat.

Unfortunately I can’t just report good news. The truth is that my last credit card bill from my trip to New York has just come through and currently still remains unpaid. I am obviously not happy about accumulating outstanding credit card bills but the fact that this particular card still remains with a German bank doesn’t necessarily speed up the process. I have already transferred money to pay for about half the balance - but it’ll easily be another week and a half until it will reach it’s ultimate destination.

Because I have now permanently moved to the UK, I cancelled this credit card and as soon as the outstanding balance is paid I shall not face these problems any more. Hooray!

Finally, we have found our first site sponsor in Finweb.com. In my opinion, Finweb offers sound financial advice on a range of topics and products and was hence the ideal candidate to advertise on SimplePound. I would like to thank them for their support.

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I’m shocked when I look at today’s date and have to realise that the last month just flew by and that I didn’t have the time to post a single thing - despite having an enormous list of things I want to post about. In any case, my time in New York is drawing to a close now and once I’m back at home more regular updates to the site should commence.

Luckily I was still diligent enough to keep tracking my expenses over the last month and thus you will get at least a proper end of the month update. My only stated goal in terms of a budget was to undercut my expenses from July. I knew that trying to set myself an actual budget would simply not work out. This is my first time in NYC and I don’t know when I’ll get the chance to come back, hence there were plenty and plenty of things I wanted to do and see (and spend) before returning to the UK.

So, have I achieved this only goal I set myself? Well… it depends . August brought many one-off expenses that are connected to finally finding a flat in London, paying the deposit and starting to buy certain items of equipment necessary when moving into my first flat.

Instead of the duvets I spent a lot of money on last month, this month’s main expense in terms of “consumer durables” was a desktop PC that set me back £450 - which in itself is only half of the actual cost. But since I’m going to be living with my boyfriend (who is also hosting this site in case you wanted to know ) I fortunately don’t have to pay all of these unavoidable expenses myself. Next month’s big thing is going to be a new TV, so I’m already preparing myself for another reduction in net worth…

The good news is I only spent about half as much money on eating out, cabs/public transport and clothes. Only 10% of last month’s sum was spent on gifts (July pretty much covered it for a while…) and only 25% on cosmetics.

Unfortunately - and a little to my surprise - I spent about £30 more on coffee, snacks and quick lunches. This happened despite me brown-bagging my lunch more often than last month, but looking through the receipts it’s pretty obvious whom I can blame for that increase: Starbucks Old habits…

I nevertheless put away 15% of my salary for savings (check out the progress page…) which was mainly because I finalised the paperwork for my Icesave savings account and had to transfer an initial minimum balance of £250.

The worst news of today’s review is the fact that I am now carrying an outstanding balance of roughly £100 on one of my credit cards. If you are a regular reader, you won’t be surprised to find that this is due to my “slight” overspend in clothes last month. While I could pay off this balance fairly easily, I also need to keep my funds as liquid as possible for my return to the UK in order to be able to make all the necessary purchases that come with a new flat.

My coin jar savings amount to $15.67 this month or £8.04 at the current exchange rate. This sum has been fairly steady compared to July, and is fairly high compared to the UK mainly due to the fact that no one ever seems to use coins to actually pay for stuff in this country…

What does the last month do to my net worth then? Well, it decreased it by 2% . And that is despite the fact that I’ve added a piece of art and some rare books towards my net worth calculations. Contrary to popular belief I haven’t done that to make up for my spending habits, but I wasn’t actually aware of their value beforehand. I got both the art and the books from my family over the years (occasions like my 18th birthday, graduation and my 21st birthday) and hence couldn’t really ask “Sooo… how much is this worth then?”. But since I will need contents insurance for all possessions held in the flat I had a legitimate reason for asking and can now pin down their actual value.

Adam has also updated me on his progress (without me asking for it and with a bit of a snide tone to make me aware of my lack of site updates!) and we can see a steady progress in his debt elimination attempt which resulted in a 10% drop. At least one of us did well this month then

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