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Checksies ✅

Money things to read, money things to do.

Hello

Hi, this is Checksies. It’s about how to do money. It’s not about vouchers. It’s written by @annagoss and @rod, who are not financial advisors. This is issue 3. Sorry about the wait since issue 2 - we went on holidays (because money is for life as well as for your pension fund). Feedback welcome.

One thing to do

 

Review your savings strategy

We save money to be able to pay for something, or to build up a “rainy day” fund. This kind of saving gives you safety, flexibility and options to insulate you from something bad, or to do something good. Options to deal with the unexpected.

We also save for the long-term - for our later life - usually in the form of a pension. You pay into it for years, it grows a bit, and then when you retire it starts to pay out to you, hopefully for years.

In both cases, instead of spending money today, we’re tucking it away it so we can use it for something else in future. The more you save, the more ownership you have over your choices... To change jobs, to go on a holiday, or to buy some shoes. Or to decide you don’t need more shoes and would prefer to have the option to buy shoes or anything else in future. Savings = options.

Rough guides

Split your income like this: a third on housing/rent. A third on all the other essentials: food, bills etc. The last third will be a mix of some fun money for you to live your life now, and some emergency fund saving and retirement fund saving.

That’s just a rule of thumb, and there are always variables: living in an expensive city might make the housing cost higher, for example. Anyway, here are some other rules of thumb that might be helpful:

  • Emergency fund of 3-6 months of expenses, saved in cash: save 3 months of expenses if you’re employed, 6 months if you’re self-employed. Or if you’re more cautious, make that 3 or 6 months of income rather than just expenses. You keep it in cash in an easy access account because you might need to access it at short notice.
  • Pension contribution of half-your-age % of salary: if you’re 40, get 20% of your salary into your pension. Your employer’s contribution counts here, so you don’t need to cover it all yourself.
  • The “Rule of 300” might tell you what retirement target you’re heading for: if your pension reaches 300 x your monthly spend you can retire! But until you get there...
  • Try not to spend more than 33% of your take-home income on rent/housing. No more than 50% of your take-home income on essentials - housing, food, bills.
  • If you have debts, it’s still a good idea to build up your emergency fund. But once you have enough cash to cope in an emergency, if the interest on your debt is higher than the interest paying on your savings, pay down more debt rather than save more money. High interest is good on savings accounts. Bad on debts.
  • (Some people say you should instead pay as much debt as possible and not bother with the emergency fund, but we think that having cash savings is worth it because it gives you emotional security too.)
OK, that was a bunch of rules of thumb, and not all of them agree with each other. The point is: there isn’t one rule that fits every situation - you have to find a way that works for you. But we’re confident that this is true: it’s good to save for your long-term retirement, and it’s good to save for a rainy day. 

Saving gives you safety, flexibility and options.

Three things to read

  1. Let Me Convince You To Save Money - “Savings is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.” 
  2. Age your money - slow down the rate at which you spend your money - less spending this pay check, more spending the last one.
  3. What happens to your financial plan when you get a chronic illness or cancer? - ignore the detail because it’s about US investments and insurance. Consider the principles here: if your plan relies on you working for many years without any unexpected bad things ever happening, it might be a good idea to add some safety margin into your plan by building up a larger emergency fund or adding some insurance. (More on insurance in a future Checksies.)
Choose your own adventure: what would you like us to cover next?

Should I invest in Bitcoin? I hear it’s hot right now.
How do mortgages work?
 

Thanks for reading.

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Small print

We’re not independent financial advisors, so this isn’t financial or investment advice. Before spending money on financial products, you should talk to an Independent Financial Advisor. The ones you want are qualified as “Chartered Financial Planners”, and you can find one here. We’re in the UK, which means we don’t understand anything about advice, money or tax in other countries. We have biases. We hold shares in whatever Vanguard thinks is appropriate. We may also hold shares in individual companies, for instance our employers. We’re trying to work out what’s best to do, just like you are.







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Checksies · Hillcrest · London, SE24 · United Kingdom

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