Owning your home

I mentioned in Introduction To.. Wealth that money is an extremely emotive subject. So it stands to reason that if you stick absolutely truckloads of money into the place that you and your family live, then we’re on seriously dodgy ground! Strap in.

 

There’s plenty of people out there that will tell you that:

“owning your home is a terrible idea”

and there are people that will tell you that:

“owning your home is a great idea”

 

So, first up, my personal viewpoint; I don’t think there’s anything inherently wrong with owning your own home (and yes, in the interests of complete transparency, I’m biased because I currently do own my own home!). But it does depend on the circumstances; everybody’s situation is slightly different.

 

Run some numbers; it might be evident that it’s not the right thing for you to do, not at this point in your life anyway.

 

Alternatively, after running the numbers, and depending on what’s happening in your life, then owning your home might turn out to be a great idea.
Looking back, it was right for me to buy, it’s served me well. Paying off the mortgage last year felt amazing, and now we sleep at night safe in the knowledge that no landlord or bank heavy can come-a-knocking and tell us to “get orf their land”  (yes, yes, my house is freehold). And of course, we also have a much higher savings rate than before as we’re not currently paying rent or mortgage.

 

But here’s the thing – for people looking to become financially independent as soon as possible, you may be able to use your house as a way to reach FI earlier than you had previously thought possible.

 

Imagine that you’re planning to move towns, areas, or even better – countries. Or maybe you weren’t actually planning to move, but you are able to move, and you would consider it if that brings your FI date closer. Now then, if your current house (the one you own, or part own) is worth more than houses where you are going, then that could obviously work in your favour. (If you currently own a house in London, then I guess this applies to you if you’ll consider moving just about anywhere else!)

 

And things could be even better if the rent-houseprice ratio where you’re going is low too.

 

Here’s an example, and it’s a real life one; it’s our situation.

 

Our house is a 3-bed semi on the outskirts of town, with a current value of about £160,000.
Where we’re planning to move to, a similar sized house could be bought for €100,000 (or possibly even less, at the moment). At the time of writing that is about £80,000.

 

OR, here’s another idea – we could rent a house there for about €5,000/year (currently about £4,000).

 

So our £160,000 house sale would give us about €200,000, which is 40yrs rent money to stuff under the mattress. (Yes, that’s in “today’s money”.. obviously rising rentals would bring that number down.. although if the €200k was wisely invested then we’d hope to at least beat that nasty inflation).

 

OR, another idea – instead of selling our current house, we could rent it out for £600/mth (€750/mth) and bingo, it now pays our euros-rent, plus currently gives an extra “left-over” income of €330/mth. So that’s the food bill and the ‘leccy paid for. And assuming that rents rise fairly evenly in both countries, our rent (plus hopefully that extra bit for food and lights) would be covered for life.*

 

I would say it’s worth thinking about! Like I said – everyone’s situation is different, but there’s always more than one option, and I think that the process of thinking through these options – and thinking of new options you hadn’t previously considered – will stand you in good stead for this financial independence lark.

 

JAL

 

 

 

 

 

* Hopefully we’re talking about a period of at least 40 years here, and obviously the currencies could do all sorts of wacky things over that period! But again, if you’re willing to look at options, be flexible, “think outside the box”… then I think you’ll always find a way to make things work

 

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Oh Lord, won’t you buy me.. some shares in Mercedez Benz?

What’s up world? How’s it going?

 

This afternoon I sat through a 2 hour on/off conversation between some guys in the office I’m working in today. I didn’t participate, for two reasons:

 

  1. I would have probably upset a few people (which is something I don’t generally like to do)
  2. I was making notes on the conversation because as soon as it started I could smell a nice, freshly roasted blog post ready for carving!

 

Basically, these chaps – all very nice, decent lads I should point out, nothing personal whatsoever here – were discussing cars, as work colleagues often do. To be more precise, they were discussing new cars.

– Which new car should employee (a) now purchase to celebrate his recent bonus (even though the bonus comes nowhere near paying for any of the cars in question)?

– How much has employee (b) been recently offered for his 3 years old motor by his friendly local dealer, in part-exchange for a new one? (62% of the price he paid for it just three years ago, by the way.)

 

Now, one of these fellas has only recently started work at this place. He used to work for a similar company that have offices literally right over the road from the office we were sat in. He and his (ex-)colleagues all became casualites of the ever-popular trend of outsourcing. Sympathy not really required though, it matters not to them – they all quickly got new jobs, and they all got not-at-all-insignificant redundancy payouts – miniumum £30,000 by all accounts. Tidy.

 

So anyway, this guy made it known that he’d just seen his old colleagues as they’d all been back to their old office for a lunchtime farewell. Three of his old colleagues, he told us, had just bought new Mercedes cars with their redundancy money. The group of guys involved in the conversation all then toddled off together for a look – and sure enough they came back 10 minutes later with a photo of the three new Mercs parked next to each other, shining and resplendant in the midday sun.

Now..(brace! brace!)..

I’m not criticsing these three people at all – it’s quite obviously their money to do what they want with. But…

By golly, if I had that sort of lump sum paid to me.. Well, I reckon I would be quite a bit further down the line to financial independance, whichever way you look at it. That £30,000 (the lowest sum received, remember!) would fill two people’s nISA for the year. Or maybe it could become a decent deposit on a buy to let property.

 

Having scribbled down some notes and drafted out the blog post thus far, I went for a quick walk. And I thought “I wonder what would have happened if, instead of purchasing one of the rapidly-depreciating and completely-unnecessary-to-them products of the company, they had instead invested in shares in the company ?”

 

Well, let’s see.. Here are Daimler’s share prices:

 

14th March 2014 (when these guys got their big cheques and P45s):

64.41

 

25th June 2014 (today):

69.28

 

So.. wait.. If they’d have bought shares in Daimler instead of the car itself, they’d each now be looking at a minimum…

– £2,268 increase on their initial capital?!

– Almost 7.6%!!

– In THREE MONTHS?

 

Hands up anyone who would like to see that sort of return on their money?

Wow.

However, back in the real world… Instead of looking at that 7.6% INCREASE on their money, they now have a car. A car which, if they took it today to a dealer to “trade in” or just “get rid” then I reckon the dealer would be offering them.. what?.. at the absolute top-end.. 80% of what they paid for it? A 20% LOSS.
Now, ok – this is all a tad contrived, because back in March I almost definitely wouldn’t have said to them “buy shares in Daimler!”. Also, of course, they could have invested that money and lost 7.6%, or even more. But then, I wouldn’t have recommended they sell an investment after 3 months anyway (except, perhaps, if they had seen a 7.6% return on it in that time..!). No, had they asked me, I probably would have just recommended they bought “some sort of investment” with it, and then left it there for a minimum of 5 years. Keep the current, perfectly serviceable motor vehicle, take up your next job, and seriously get to think about winding things down a bit in 5 years time, aged 45.

 

So, as I said, I almost definitely wouldn’t have recommended buying shares (regardless of the company – I just don’t do “shares”) – I just had that thought on my walk and thought it would make for an interesting point (and I think it did!). But how’s about if they’d have invested in something which I might well have recommended? What if they had just stuck that money in one or more passive investment vehicles, index trackers?

Well, let’s look at an example:Vanguard LifeStrategy 80. It’s currently up 3.2% in those 3 short months. Not quite the awesomeness of 9%, but what would you choose :

3% increase, or

20% decrease

?

Again, I must point out that the tracker could have quite easily lost value in this time too, but that’s not the point because I wouldn’t be recommending they sell for quite a while anyway. The JAL investing plan isn’t based around buying one day and selling the next. We buy an investment with a view to keeping it for at least 5-10 years.

 

Also, we haven’t mentioned dividends either. Those guys would have been getting a little bit of that too, a nice bit of extra income as well as the capital gain. That income, compared with the outgoings of motor vehicle ownership..

 

Hey ho, enough already. I hope those dudes enjoy driving those cars, ‘cos I reckon they’ll be driving them (if not even costlier replacements for them) for another 20-30 years. Driving them to some office or other. Rather them than me!

 

JAL

Use it or lose it!

Hi there!

 

Due to various reasons, it’s been a long time since I managed to post anything. My most humblest apologies, but – if you know me at all by now, you’ll know that there will be no excuses! Time to get back to it, there’s so much still to say.

 

As has been the case for the last couple of months (but this time largely down to something more trivial) I don’t have an awful lot of time right now, so this will be brief. Nothing wrong with that – brevity being the soul of wit, and all that – and that’s what we’re about here at thejustaboutlifeblog; distilling things down to a few simple, easy to remember points that get us ahead and keep us there.

 

Anyway, I digress..

 

To set the scene – I’ve started doing quite a lot of work for one client, and most of my time with them is currently being spent at one site. I always try to take a lunch break, to reap the many benefits of a little exercise and fresh air, and occasionally I walk past the village library. Now, I had always assumed that you had to live in a certain area to join the local library of that area, and as we don’t live in the same area as the library in question, I never even stuck my head in the door. Until yesterday lunchtime, that is, when I finally plucked up the courage to go in there for a nose around. And guess what? I found out that I can indeed join – they don’t care where in the UK I live. So I did, I joined that there library, and took 3 books out immediately.

 

I still consider myself incredibly fortunate to live in an age and society where we have these oases of resource-filled calm within stumbling distance of most Wetherspoons. The library in question is not a huge one, but it’s still got plenty of decent-looking reading material to keep me busy, internet access, wifi, it’s air conditioned, and did I mention – it’s FREE? Over the last few years I’ve probably been guilty of buying too many books – I bet you know the drill; you buy far more books than you could possibly ever read in the time before you go again and buy some more! I could have saved myself a bit of dough had I just used the library, and I wouldn’t have had the storage headaches at home either.

NOTE: I very,very rarely buy new books, I’m a charity shop book-buyer. It’s one of my simple pleasures in life. Browsing through their endless shelves of as-new books, and looking for the hidden gems amongst the mountains of “I’m A Celeb (Except I’m Not.. Or Am I.. Who Cares?)” autobiographies.

 

Once I’m done with chastising myself for not having re-discovered the wonders of the local library sooner, I’ll be posting again. Until then, enjoy the football and, if you’re Spanish or Australian, maybe pop down your local library at half-time and get yourself a self-help book on “Coping With Loss”.. and return them again soon before us English need them 😉

 

JAL

 

 

 

 

 

PS – This post is deidcated to Mrs JAL, who quietly (what other way is there?) joined our local library a couple of months ago and brought home some books to help us:

a) grow a higher quality, and a bigger quantity of crops in the JAL trial vegetable patch
b) prepare interesting and healthy foods for a 1-year old who’s allergic to almost everything :/

– Mrs JAL (and junior JAL) – you are my inspiration!