2016 was a mixture of joy and sadness for us. Mrs. CC’s brother passed away out of the blue and at a very young age. It was also the year when we got married and finding out Mrs. CC was pregnant.
We spent quite a bit eating out and also on miscellaneous things which includes holidays. We had our wedding (done on a budget) and was preparing for our first child (many trips to the charity shop, but there were things we had to buy new, such as a baby car seat). This meant that our expenses were higher than normal. I will write about these topics in separate posts.
In terms of our property portfolio, Property 1 is the one with lodgers instead of being completely rented out. As a result, we bear the cost of utilities. Another thing that stands out is the refurbishment cost to Property 2. The property had some damp problems which needed to be resolved. Finally, Property 3 was purchased towards the end of the tax year so did not contribute as much towards the rental income. We had a tax refund of £480 from our property income. I will also write about my experience investing in property in due course.
In terms of our investments, we did not pay as much into our SIPP and ISA accounts because all our money was used to purchase the two properties. Our employers contribute quite a significant amount towards our pension. This is one of the benefits of many public sector pensions. Although they are not as generous as they used to be, they are still considered amongst the best available. This is why for the tax year 2017-2018 onwards, we are both making additional contributions to top it up even more. This is because the benefits are defined and inflation proof. The main downside is if we pull the trigger and leave once we reach FI, the pension would be deferred until the state pension age which is much older than the normal pension scheme retirement age. It will continue to increase in value in line with inflation, but it means we need to ensure that we have sufficient passive income to cover us until then. If we decide to go part-time and still be active members of the pension scheme, then we will still qualify to claim our pensions earlier. This is something we would consider, especially if we continue to enjoy what we do, but it’s nice to know that we won’t have to rely on the pension income.
Goals for 2017-2018
Our passive income after costs and taxes came to 25% of our main living expenses. The main aim for tax year 2017/2018 is to:
- Reduce our eating out expenses.
- Reduce our miscellaneous expenses.
- Ensure that Property 2 and Property 3 start cashflowing.
- Increase our Passive Income Expense (PIE) Cover.
At the time of writing this post, we are approaching the end of another tax year. The numbers have not been finalised yet, but our return from our properties is looking much healthier this year.
Note: the savings rate I calculate excludes our employer pension contributions.