Are Middle-Earners Getting Screwed By The Taxman? | New Data Reveals All

What goes through your mind when you look at your payslip, and you see big slices of your money taken by the taxman?

Do you think “fair enough, I’m sure I’ll get that back in NHS treatments, state pensions, and pothole repairs” – or are you thinking you’re being asked to pay way over the odds compared to the size of the income that you make? Are you being mugged by the taxman?

Today we’re taking a look at who benefits when you pay your taxes, and whether or not you’re losing out based on your income level. In other words are you getting back more or less than what you put in?

We’ll take a look at whether the tax system is progressive, whether it’s fair, or whether it just punishes aspiration, and we’ll look at the actions you can take to keep the taxman’s hand out of your pocket. Let’s check it out!

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The Effect Of Tax On Your Income – From Poor To Rich

Let’s kick off with what percentage of their take-home pay people actually get to keep, depending on how much they earn.

Fig.1: Tax as a % of income, showing bottom to top Income Quintiles

As you might expect, direct taxes are higher as a percentage of your income the more you earn. This makes sense when you consider that the higher income tax rate shoots up to 40% from 20% once you start earning a little over £50k.

Direct taxes include income tax and national insurance (which are payslip deductions), and Council Tax (which is a tax on your house).

If you get your income from a pension, dividends, or rent from property, those taxes are included in income tax.

Perhaps more surprising is that indirect taxes run in the opposite direction, with the poorest spending 24% of their incomes on indirect taxes – things like VAT and other taxes that apply when you buy things – while the richest spend just 7%. Maybe the rich are just able to save proportionally more of their incomes.

Fig.2: Tax as a % of income, All Taxes, in chart form

When everything’s added together, we see that the people being stung the most are the richest, but ALSO the poorest. While higher earners get stung on their payslips, lower earners are feeling the sting when they enter the shops. It looks like middle earners are doing ok. But this is not the full picture.

Are You Getting Back What You Pay In?

Next, we need to look at the value of what we get back from the taxman in terms of benefits. And here we don’t just mean things like the dole and the state pension.

The ONS makes reference to “Benefits-In-Kind”, which include things like the annualised cost of your state education spread over your lifetime, and the annualised cost to the NHS from having you as a patient over your lifetime.

Fig.3: Income, Tax and Benefits by Income Decile (working population)

This table shows the average household incomes in 10% bands of the working population, from the poorest 10% of people to the richest 10% of people.

The top line is the equivalent of pre-tax salary – take a quick look and work out where your household sits on this line. Soon we’ll be telling you if you’re likely to be winning or losing to the taxman based on your income band.

Let’s look at the 7th decile as an example, which is the top 61-70 percent of earners. If you’re a regular visitor to our site we can assume that you one day plan to be at least this high up the income scale.

Total money earned for this average household in the 7th decile is just short of £48k, so a 2-adult household might contain a couple each with a £24k salary.

We don’t consider this to be particularly well-off – it’s a middle-income salary, which just about affords you a basic level of financial security.

The ONS adds to this £2.4k of benefits – things like entitlements to childcare and maternity leave, as an average annualised figure spread over your working life.

Then the taxman comes a’knocking for his first slice of your pie. £10.4k is immediately taken from you before you’ve even seen it. You lose out a further £7k indirectly, like at the shops when the taxman increases the price of your shopping basket by 20%.

But you do get a good chunk back in value from society. The cost of providing you with national services like the NHS and the school system are added back to give your theoretical Final Household Income. But at just 85% of the original, it looks like someone in the 7th decile is losing out to society.

Winners And Losers

So who’s winning and who’s losing? According to the data, the top half of earners are losing out to the tax system, while the bottom half of earners are getting a great deal.

What this doesn’t factor in though is the indirect benefits of national spending which aren’t easily apportioned out by wage bracket.

These include the value you get from the national debt (which has grown the country’s GDP), the value you get from the police and emergency services, from the army who defend us, from infrastructure like roads, and even the cost of the government (it’s arguably better than anarchy).

We’ve added these costs in equally on the assumption that the overall average win or loss for all citizens should be zero, on the further assumption that a country’s budget all boils down to its citizens’ incomes in the end.

What this means is that earners in the 6th decile are now beating the system, if only slightly, but people in the 7th decile continue to be expected to pay out more than they get back.

This is pretty much how we should expect a tax system to work, with the rich subsidizing the poor. But are a young couple on £24k pre-tax salaries in the 7th decile rich? Of course not – they’re middle earners, likely just barely scraping by.

But they are taxed as though they were rich, and are being asked to find room in their budget to subsidize everyone who earns less than they do.

So next time someone on a below average income moans to you that they are paying too much tax, educate them that they’re actually getting back heaps more in value than they pay out. It’s people in the 61-70% bracket and above who perhaps have the more reasonable cause for complaint!

What About When You Retire?

When you retire, does the benefit you get from the state pension and your greater dependency on the NHS mean you get to recoup some of your losses?

Fig.4: Income, Tax and Benefits by Income Decile (including retirees)

No, not really. Here’s the same data as before, but now including your expected state benefits in retirement, averaged out annually. The numbers have moved a little, but the bottom 6/10ths of people are still ahead, while everyone else continues to pick up the tab.

More Net Takers Over Time

Over the last 20 years, more and more people have moved from being net payers of tax to net receivers of tax. This might seem like a good thing, but in reality it means more people are becoming poorer and are in need of help from better-off taxpayers.

Fig.5: % of people who get back more than they take over their lifetime

This chart shows it nicely, with the real figures in blue and the average trendline in green. This data runs contrary to the much-cited complaint by the less well-off that higher earners don’t pay enough taxes. The trajectory is actually that higher earners are being asked to subsidize an ever-growing majority of the British population.

Of course, the other way to read into this is that more people are getting better value from the tax system.

Fig.6: Adjusted Income as a % of Salary

This next chart shows that on average, peoples’ final adjusted income is much closer to their original incomes than it used to be. Remember, final income is after adjusting for both taxes and the value you get from national services.

One possible explanation is that the tax burden for the average citizen has decreased over the years. Another is that the value they’re getting from the state has increased relative to wages. Which is it?

Fig.7: Tax and BIK as a % of Salary

It’s actually a bit of both, according to the ONS data. Total taxes as a percentage of original income for the average person has been steadily falling as far back as this data goes, which is to the 1970s. Benefits-In-Kind, such as the per-person spend on the NHS and schooling, have been increasing over time.

Taken together, this suggests that the average worker is not being screwed by the taxman. But how do we reconcile these findings with the well reported fact that the UK’s overall tax burden is increasing?

Fig.8: The evolving UK tax burden

The Office for Budget Responsibility, another semi-governmental body, recently released the above chart which shows the tax burden for the UK as a whole increasing since the mid-90s. What are we to make of this?

If the average worker is getting slowly better off over time, and yet the overall tax burden is increasing, it must be either the richest or the poorest who are picking up the tab.

As we saw in Fig.2, it’s true that the poorest and the richest have the highest tax burdens. But the poorest get a sweet deal from the free use of our public services. So who’s taking the brunt of the increased tax burden?

The answer is in part the rich, but more so, the middle classes. According to the IFS, the bottom 42% of adults by income paid zero income tax in the 2019 tax year, thanks to generous personal allowances built into the UK tax code.

That’s nearly half of all adults! When we report that the tax burden has fallen for the average worker, this is a big part of the reason right here.

Meanwhile, the top 10% of earners contributed 61% of the UK’s entire income tax takings in 2019.

And while taxes on lower earnings have reduced, taxes at the higher end have been on the rise. The top 1% of taxpayers provided 24% of the entire country’s income tax receipts in 2008; in 2019, that had increased to 30% of all income tax receipts!

A Progressive Tax System?

It’s fair to say the UK tax system is progressive, in that the bottom half of earners get an amazing deal by being subsidized by those who earn better-than-average salaries.

Whether it’s a fair tax system is another matter, and we’ll let you be the judge of that.

Keeping The Taxman’s Hands Off Your Money

If you’re more inclined to think that the tax system punishes aspiration by going heavily after those with slightly better-than-average incomes, you might want to think about the following:

#1 – Paying The Taxman Second

As an employee, you get robbed by HMRC before your hard-earned wages have even hit your bank account. You can break free from this unfair system by being self-employed, or by incorporating as a limited company.

Many careers could exist within these tax structures. Have a think about your own line of work. Could you do a similar role, but as a contractor?

These structures also allow you to offset work expenses against your income. You can’t claim the cost of your petrol or your work clothes back as a lowly employee, but a self-employed contractor could, meaning they pay less tax.

#2 – Tax Advantaged Investments

Take full advantage of Pensions and Stocks & Shares ISAs. Every pound that you put into your workplace pension avoids unnecessary income taxes.

And any income or capital gains that you make within a Stocks & Shares ISA are yours to keep tax free. Even outside of an ISA, the tax rates on dividends and capital gains on your investments are much more generous than those imposed on employee income.

Our plan is to build our investments ISAs so big that we can live off the incomes that they produce. In theory, by doing this you could avoid having to ever pay direct taxes again. For more ideas on how to limit your personal tax burden, check out these 2 videos next, on dodging tax legally, and on limiting the taxes on your investments.

Are you winning or losing to the tax system, and do you think the system is fair? Join the conversation in the comments below!

Written by Ben


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Could A 1929-Style Stock Market Crash Happen Again Soon?

With stock markets continually hitting new highs and looking very overpriced, is it possible that the stock market could crash in a similar devastating fashion to what happened in 1929?

1929 was a long time ago and a lot has changed since then with protections, safeguards, and regulations put in place to prevent such an event ever happening again.

But as we saw in 2020, whole economies can fall apart almost overnight from something as seemingly insignificant as an infected bat.

Despite the steps taken, we think it is possible – no matter how unlikely any individual negative event is of happening – that any one could easily cause a severe stock market drop that could cause your life savings to vanish in a puff of smoke.

In this article we’re looking at the crash of 1929 and other major crashes in modern history. We’ll also look at the valuation of the S&P 500 to see if it is indeed in bubble territory.

Then we’ll take a look at the reasons why a mega crash could and couldn’t happen again, and we’ll finish up with some tips to protect your investments. Let’s check it out…

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What Happened In 1929?

Over 90 years ago the US stock market imploded! During the 1920s, the United States and Europe experienced strong economic growth, and the increase in industrial production saw stock prices on the New York Stock Exchange rise by approximately 300%.

But by September 1929 the market was to reach a peak that would not be surpassed for around 25 years. Imagine investing today and not seeing a return on your money for a quarter of a century – it seems unthinkable, but is it?

The selling intensified in October 1929 and signalled the beginning of the Great Depression. The crash was so severe that the worst days are known as “Black Thursday”, “Black Monday”, and “Black Tuesday”. Theres almost a black day for every day of the week.

The ‘Great Depression’ was a ten-year recession that impacted most westernised economies, and resulted in widespread poverty and unemployment.

Although 1929 is the year that is most talked about, it was around June 1932 which saw the bottom of the market. At that point the drop was around a terrifying 86%! That’s the equivalent of a £500,000 retirement pot collapsing to just £70,000 – your life savings completely obliterated.

The Great Depression and the associated bear market is commonly used as an example of how quickly and intensely the global economy can decline.

Today, many investors (us included) advocate buying more when stocks fall, and never selling – no matter how much the market falls by. If the market did ever repeat the 1932 drop, we doubt many of these investors would have the courage to stay the course. The recent Covid crash was just child’s play in comparison.

How Big Have Past Major Crashes Been?

The bear market that began in 1929 was the mother of all bear markets, but there have been other enormous crashes since.

This interesting graphic puts the major crashes into perspective. The covid crash was quite severe at 34% but it was over before anyone even noticed – lasting just 117 trading days.

The 2nd largest crash was the global financial crisis from 2007 to 2013 with a drop of 57%. The 2000 Dot Com bubble and the combined 1973 Nixon Shock and Opec Oil Embargo were equally devastating – with declines of 49% and 48% respectively and both lasting several years.

Although we often have to wait several years or even a few decades between crashes, large drops do happen on a semi-regular basis.

Based on the history, we think it’s fair to say that as a minimum we can expect drops in the region of 50% or more – we’ve seen three such occasions in the last 70 years. This raises the question: when will the next major crash happen?

Why Could The Stock Market Tank?

Future declines could be even worse than 1929 if triggered by a global war, a health crisis, major political upheaval, a natural disaster or other trauma.

Some possible events that immediately spring to mind include a war between China and the US, a pandemic that lays waste to populations, an asteroid that smashes into Earth, or a solar flare the likes of the Carrington Event in 1859, which would paint the night sky green and wipe out the electronics that the global economy now depends on.

If we had to bet on one event that is most likely it would be some sort of global hacking that cripples computer systems and brings our modern way of life to an abrupt halt. Imagine if we lost access to the internet.

It doesn’t matter how unlikely each individual event is. What matters is, if any one was to occur it could devastate the stock market and economies.

What’s more is that news, especially bad news, spreads faster than ever. An epic crash could not only be devastating but also swift.

S&P 500 Is Hitting New All-Time Highs

As you’ll no doubt be aware, the S&P 500 is hitting new highs all the time. If you’re living off your investments – maybe you’re a retiree or have achieved financial freedom already – then this is awesome and we’re massively jealous of you.

Unfortunately, for most of us who are accumulating wealth it means we are having to invest at potentially the top of the market. This means our money doesn’t go as far as we would like – we get less S&P 500 ETF shares for our money, and a crash or bear market is more likely to come along imminently.

All the studies, including our own research, says more times than not that you should invest as soon as you can. Don’t sit on cash and attempt to time the market, because in most cases the market continues to go up, even when it seems high. You may never get a better buying opportunity and you will miss out on massive growth.

We analysed the S&P 500 in great detail ourselves here to see what insights we could learn. It’s definitely worth checking that article out next.

The S&P 500 Price To Earnings Ratio

On its own the price of the S&P 500 doesn’t really tell us the full picture. To get a better understanding of just how expensive the market is we can look at the PE ratio.

S&P 500 is in a historic bubble according to the PE ratio

The chart above shows the S&P 500 Price to Earnings Ratio over the last 150 years. Presumably the data has been backdated somehow as the S&P 500 was first introduced in 1957. As we can see the current PE ratio is 44, making the index on this metric one of the most expensive times to buy in its history.

The PE ratio divides the price of the index by the reported earnings of each company for the trailing twelve months. It’s a good way to measure how much you are paying for current earnings. The lower the number the better.

Let’s take a look at the same chart but over 30 years to get a closer look:

The most recent 30 years

It seems that around 2009 the PE ratio went off the scales and was in extreme bubble territory. The data behind this chart put the PE ratio at 124. Without any context it might appear to be absurd to invest then. But in reality, it was one of best times to invest in a decade.

That point in time was near the stock market bottom after the 2007 financial crisis. In 2009 the trailing twelve-month earnings fell close to zero, which caused the PE ratio to get out of whack.

The S&P 500 CAPE Ratio

So, as we’ve seen the PE ratio is clearly not a great valuation metric when earnings are volatile. Therefore, a current PE ratio of 44 might not be as bad as it seems because over the past 12 months overall earnings have in many cases been decimated by Covid lockdowns. Airlines have practically been grounded and bars and restaurants had to shut up shop.

A solution to this PE ratio shortcoming is to divide the index price by the average inflation-adjusted earnings of the previous 10 years. This formula is called the Cyclically adjusted price-to-earnings ratio, commonly known as the CAPE ratio or Shiller PE ratio – named after it’s inventor Robert Shiller.

Using average earnings over the last decade helps to smooth out the impact of business cycles and other events and gives a better picture of a company’s sustainable earning power.

The CAPE ratio history also suggests we're in bubble territory

The chart above shows the CAPE ratio over the last 150 years. Just prior to Covid spooking the markets back in early 2020 the S&P 500 was already in extreme bubble territory. Since then, the market has continued to climb putting the CAPE ratio at 37.

Worryingly there has only ever been one period in 150 years when the CAPE ratio was higher. That was in the year 2000 at the height of the dot com bubble. That ended in pain as the market eventually tanked 49%. Arguably that sharp drawdown or decline was not even enough.

According to this chart it still left the S&P 500 in bubble territory, which is probably why for more than a decade from 2000 to around 2013 the S&P 500 pretty much went nowhere. It was over this time that earnings were given a chance to catch up with the lofty valuation.

The more expensive the CAPE ratio for the S&P 500 gets, the more likely we will eventually see a massive bear market.  Right now if the market crashed by 50% it would still be considered overvalued in historical terms. How scary is that!?

This demonstrates that there doesn’t even need to be anything fundamentally wrong in the economy for shock waves to flow through the stock market.

Reasons To Be Optimistic The Stock Market Will Never Repeat 1929

In 1929 the Federal Reserve was just 15 years old. The central bank’s members had no idea not only of what to do, but what they COULD do.

The Securities and Exchange Commission was set up as a result of the crash of 1929. Its mandate is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Better regulation should hopefully limit the size of crashes.

Social Security didn’t exist back then. When investors saw all of their money disappearing in front of their eyes and having no other means to survive you can understand why so many chose to flee and withdraw what little money they could. Today, social security schemes like furlough should protect people from the worst.

Asset protection schemes now exist in all major countries and are there to protect investors’ investments against platform and banking collapse. Here in the UK for instance we have the Financial Services Compensation Scheme and the US has something similar. Back in 1929 these did not exist.

We now have better information, better knowledge, and several decades of hindsight to learn from. We understand diversification more and have the means to do it.

An investor today can invest in almost every listed company in the world for a negligible fee. We can also invest across asset classes to minimise risk.

Earlier we saw the CAPE ratio near an all-time high. Robert Shiller, the economist behind the CAPE ratio, said in late 2020 that stock prices “may not be as absurd as some people think.”

He cited the effects of extremely low interest rates in making stocks attractive at higher prices, especially in comparison with bonds.

Top Tips To Protect Your Investments

If you are concerned about the S&P 500 being too frothy, then diversification is probably your best bet. The idea is that you build a portfolio of assets that are imperfectly correlated. When the S&P 500 goes down you might have another asset that falls less, or even goes up.

Government Bonds have a history of protecting portfolios when stock markets tank. The problem is nobody truly knows if that protection still stands true with interest rates being as low as they are.

Gold is another great way to diversify a portfolio. The incredible table below highlights why every portfolio should contain some exposure to the yellow metal. It shows some of the biggest S&P 500 crashes since 1976 and how gold and silver reacted. In 6 of the 8 periods gold was negatively correlated with stocks, so when stocks fell, gold actually increased in value. On most occasions, silver also fell alongside stocks but not to the same degree.

Gold usually moves oppositely to stocks during a crash

Gold’s only significant selloff (46% in the early 1980s) occurred just after its biggest bull market in modern history. Gold rose more than 2,300 percent from its low in 1970 to the 1980 peak. So it isn’t terribly surprising that it fell with the broader stock market at that point.

Cryptocurrency is the new kid on the block – after all, it has only existed for around 10 years. It might be too early to tell whether crypto can protect a portfolio in times of economic fear in the same fashion as gold. But it’s just another string to your bow.

If you’re looking for more unusual asset classes, which in many cases have no correlation with stocks, then check out our article on alternatives next. In it we look at how you can grow your wealth in a multitude of different investments including song royalties, whisky, and even livestock.

And finally, not all stocks have the same level of risk. A pioneering pharmaceutical company looking to cure cancer is riskier than a dependable utility company that provides clean water and sewage treatment. If you fear a crash, move to slightly safer stocks.

Do you think we will see another crash of 86% ever again? And what’s most likely to cause it? Join the conversation in the comments below.

Written by Andy


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From £0 To Rich In 10 Years Using Debt | Your 10 Year Plan

Here we’ve set out to prove that anyone can go from £0 of savings to financially free in just 10 years.

You don’t need a killer business idea, you don’t need to work 60-hour weeks juggling a job and a side hustle. All you need to do is accept and adapt to the new world order of money and debt that we’ve found ourselves in since the 2008 crash, and make the appropriate moves, like you would pieces on a chessboard.

But unlike chess with its infinite possible actions, this 10-year plan to financial freedom is laid out for you in this article step-by-step.

Thousands of ordinary people are doing this already and the basic ingredients are simple assets and good debt. No luck or beating the market necessary!

FYI: don’t forget to check out the hundreds of pounds worth of offers on the Offers page, including a £50 cash bonus when you open an investing account with InvestEngine. It’s free money, check it out!

Also, a word of caution: nothing in this article is advice, and investing with debt should only be done if you feel you can do it sensibly. All we can say is that following the steps here has transformed my own wealth drastically for the better.

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The Changing Financial Landscape

The financial truths that held for previous generations rarely hold true for future ones.

For instance, it used to be the case that bank savings accounts would pay you interest of over 5%, so a moderate return could be achieved with zero risk.

But the reality we find ourselves in as investors going into the 2020s is one of super low interest rates, seemingly endless inflation in asset prices, and governments and central banks the world over printing more and more currency like it was toilet paper.

As government debt has shot up to facilitate this, they have tied the fates of entire nations to global interest rates.

According to ThisIsMoney, if the interest the UK government had to pay on its debt rose by even 1 percent, this would add £21billion per year to the cost of financing the UK debt burden – making the cost around double what it is right now.

It’s unthinkable that governments and central banks around the world, most of whom are in similar positions, would allow interest rates to return to pre-2008 levels. Low interest rates are here to stay.

Even if they wanted to somehow counter rising inflation, we believe governments and central banks would first choose to pull OTHER levers before they would significantly raise interest rates: such as raising income tax, controls on wage growth, and decreasing the money supply.

Alongside low interest payments, the real value of any debt you hold falls away over time due to inflation – a £500 debt taken out 30 years ago might have seemed a fortune at the time to most people, but £500 today isn’t much money at all.

In this new world, investors who leverage low interest debt to buy assets with can thrive.

You have to roll with the punches, and to get rich today, the path of least resistance is to pick up all this low interest debt that’s lying around and use it to buy some sweet assets with.

The Basis Of The 10 Year Plan

This isn’t some zany get-rich-quick scheme, or some gamble on crypto – this is a logical, financially realistic 10-year plan to amass enough investment assets by taking advantage of low interest debt that you can be financially free from having to work another day to pay the bills.

The easiest way to invest using debt is to secure the debt against the very assets that you’re buying: like how a mortgage is secured against a property. The valuable asset is what gives the bank the confidence to lend you a lot of money. Property fits debt like a hand to a glove.

Unfortunately, this doesn’t work as well with stocks, as we’ve yet to find a bank that will lend you money to buy stocks with. But imagine if a bank did come out with an equivalent of an interest-only mortgage product for buying stock index funds? Maybe one day.

Over the centuries the property market has evolved to provide the borrower with additional perks, which include equity release.

This tool is available to everybody, but most people are too scared to use it because they have inherited the previous generation’s fear of mortgages, born out of decades of high interest rates.

Equity Release

When you are outside of a fixed term on your mortgage (or if you are mortgage free), you can renegotiate your mortgage agreement to withdraw some of your built-up equity out of your house and replace it with more mortgage debt.

As an example, a £200k home with an 80% Loan To Value of £40k equity to £160k mortgage might be reset to a 90% Loan To Value of £20k equity to £180k mortgage. That £20k difference would go into your bank account.

Equity release shouldn’t be feared unless you are financially illiterate or financially irresponsible, in that you would spend the cash on treats instead of investment assets. Instead, it should be welcomed as perhaps the single best opportunity available to any homeowner to become a millionaire in their lifetime.

That’s because it removes the need to have to first save up money from your wage-slave day job over many months or years to buy cash flowing assets with. We can think of few other ways to immediately get hold of 5 or 6 figure lump sums of cash to invest with without having to do any work!

The 10 Year Plan

For this next section we’re going to lay out an example 10-year plan that you can adapt to your own situation. The numbers are given at today’s value of money.

It assumes you have just bought your first home, worth £200,000, and have £0 of savings left after the purchase. From this baseline you can focus on building your financial freedom fund.

Years 1-10

In Years 1 & 2, not much happens other than squirreling away £500 a month from your soul-crushing day job. But hang in there – things are about to scale pretty quickly.

At the start of Year 3, after your 2-year fixed term mortgage period has become open for renegotiation of terms, you do just that and extract £23k from the house.

£23k is based on monthly equity repayments of £400 over 2 years (which excludes the interest), a 4% annual growth in property prices, and resetting the Loan To Value to 90%.

You buy your first Buy-To-Let (BTL) property in Year 3, worth £140,000 – which costs you £40,000 with a 25% deposit plus stamp duty and buying fees.

Because this happens at the start of Year 3, you can record a full year of rental profits at £300 a month, being rental income minus mortgage interest, tax, and other costs of renting.

Year 4 is just as boring as Years 1 & 2, except now you’re saving money from the rental as well as from your job. You’ve built a second income stream. Congratulations!

Year 5 gets fun. This year you get 3 more lump sums of cash into your bank account from low interest debt sources. The first is a Money Transfer Credit Card (or even a pair of such cards, if needed). They work like a 0% loan, transferring money from the credit card directly into your bank account.

I was carrying £15k on cards like this at the start of 2021, before paying off 1 of my 2 cards. You can pay 0% interest on these cards in the first 2 years – just remember to pay them off before that interest free period ends.

You also do your 2nd and final ever equity release from your home, which might net you something similar again to what you got the first time around. You’ve made the decision to let your mortgage pay down naturally thereafter, as it seems the most responsible course of action to you.

You also get to release equity from your first rental property, which you also took out a 2-year fixed deal on. 2-year fixes are the industry standard, and in our view are the most flexible for this style of investing.

You use the cash from your borrowings to buy your 2nd BTL property. Cash profits from your growing rental empire are double those of the previous year as a result.

In Year 6 you have little else to do other than drive to the office and back home again about 230 times. But note that your rental profits are now greater than what you’re able to diligently save from your 9-to-5.

At the start of Year 7 you sadly have to pay back the credit card debt – it’s not your money after all – but you can release equity from both of your rental properties.

You can afford to buy your 3rd BTL, and you do so. Your cash profits from your 3 BTLs bring home nearly £11,000 after tax this year.

In Year 8, there’s nothing stopping you from taking out more Money Transfer deals, since your record of repayments is squeaky clean. You use it, along with last year’s money carried forwards, to buy your 4th BTL at the start of the year.

This is about where I’m up to now in the plan, with 4 BTLs, though I’ve been able to move a bit more quickly.

In Year 9, you release equity from your first 3 rentals, and buy another one, bringing your BTL empire up to 5.

In Year 10, you pay back your credit cards, release a bit of equity from BTL #4, and have enough money left over at the end of Year 10 that a few weeks later you can also release equity from 4 rentals and can afford to buy 2 more.

After 10 years (and a few weeks), you have 7 rental properties paying out £25,000 a year, with the equity value of your investments at £245,000.

What does this mean for financial freedom? A £25,000 annual investment income may mean you no longer have to work.

A couple could both follow this plan and end up with a portfolio of 14 rentals bringing in £50,000 a year. Safe to say you’d be financially free at this point if you managed your expenses carefully.

But you may have noticed that our little 10-Year plan started gathering quite some momentum as the years progressed. Couldn’t you just keep going a bit longer to get substantially more readies coming in?

Years 11-15

Of course you could, and here’s how things might stand if you pushed on to Year 15. You could have 14 BTLs by then, pumping out £50k of annual rental profits. A couple might have 28 properties paying out £100k, all things being equal.

This person’s closing investment equity plus loose cash after 15 years is £556,000. You could even sell your rentals at this point and put the money you’ve made into passive stock market funds, kicking out over £20k a year at the 4% safe withdrawal rate. Less money, but less ongoing effort.

You’d just have to carefully navigate the capital gains tax rules, for which it might have been better to have set up your property empire as a limited company rather than in your own name.

But What If X Happened?

Here’s a quickfire round of common concerns we expect people to have with the plan, and our responses.

#1 – What If Property Prices Went Down?

Property prices could go down in some years, they could go up way more than 4% in others. We’ve used 4% to be conservative. History shows house price growth to far exceed this. Price movements could make the plan take longer or shorter than 10 years for you. But prices are likely to go UP overall based on history.

#2 – Can You Use Debt As A House Deposit?

When buying a residential property – such as your home that you live in – the banks will do checks to ensure you aren’t using other debt to get a mortgage with.

BTL mortgages in my experience do not do these stringent checks. I personally had thousands of pounds of money coming in from remortgages and credit cards on my bank statements when buying all of my Buy-To-Lets.

#3 – What If I Had A Problem Tenant?

Yes, this is a risk in the early years of property investing, which becomes less of a problem the more properties you own. Give your property portfolio to a good management agent to look after them for you, as they should have better processes to filter out the worst potential tenants before they become your problem.

#4 – What If I Lost My Job?

Holding all that debt can be a worry that would keep you up at night if you were to lose your job, but remember that all the BTL mortgages are attached to assets that pay you rent, which covers your many BTL mortgage payments whether you have a job or not.

And securing future mortgages and remortages doesn’t depend so much on you having a job once you own 4 or more rentals. At this point you are classed as a portfolio landlord, and it’s more important to the bank that you can prove income from your portfolio rather than a job.

These worries aside, the most likely scenario in our view is that you gradually get richer and richer exponentially, utilizing other people’s money to build an empire of assets valued far in excess of the value of the debt and setting you financially free.

What’s your view on using good debt to grow a freedom fund? Join the conversation in the comments below.

Written by Ben


Featured image credit: KamiPhotos/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Invest In The Best Cryptos With One Fund! – Crypto 20 Index Fund Review

It’s generally accepted that most investors cannot beat the market by stock picking and those that try will often massively underperform and lose a boat load of money. So, with this in mind and assuming cryptocurrency is here to stay, is it any more likely that we can pick the winning crypto?

Bitcoin may be the most well-known and most valuable crypto by market cap, but it’s just one of many. According to, there are over 10,000 different types.

From our experience, many of the largest of these have potential issues which may prevent widespread adoption and thus risk damaging their values.

If you’re the same as us, you’ll be accepting of the fact that you are unlikely to pick the winner from that ever-growing selection. What we need is an index fund that massively increases the likelihood of owning the coins that matter. But you can’t invest in a Crypto ETF because the FCA has banned them. So, what else can you do?

Say hello to Crypto20 or C20. This is the world’s first tokenized crypto index fund, and it holds a basket of the top 20 coins by market cap. In this post we’re reviewing the Crypto20 index fund.

If you’re new here (and even if you’re not), check out the Offers page for hundreds of pounds worth of offers like free stocks with Freetrade, £50 welcome bonuses with Loanpad and InvestEngine, and more.

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What Is Crypto20?

C20 is essentially a basket of the most valuable cryptocurrencies wrapped up in a single token. Think of it being a bit like an ETF but traded on a crypto exchange instead of the stock market. You can buy and sell as you would any other coin and we’ll soon take a look at how you can do this.

C20 was launched in Dec 2017 by Invictus Capital. Invictus offer a range of investment products focussed on blockchain technology.

The C20 fund follows a passive strategy. It is invested in the top 20 cryptoassets by market capitalization, with weekly rebalancing. As an S&P 500 fund would seek to deliver the performance of the top 500 US stocks, C20 seeks to deliver the return of the top 20 cryptocurrencies.

C20 fund holdings

At time of writing the fund holdings are as seen here. Unless you’re an avid crypto fan you’ve probably never heard of the majority of these. At the time of filming Cardano was the largest holding, followed by Ethereum, Bitcoin, Binance Coin, Polkadot, and so on.

What you may have noticed is that no single coin dominates the portfolio. This is because the maximum weighting of any single component is set at 10%. Some of those positions are over 10% right now because they have gained in value since the weekly rebalancing. These will be lowered back down to 10% at the next rebalancing interval.

Crypto nerds might also have noticed the absence of Tether and Ripple, amongst others. Tether, which is the 3rd most valuable crypto at time of filming has been excluded because it’s what’s known as a stablecoin – this one being pegged to the USD.

Ripple, another super popular coin, has been excluded due to an ongoing SEC lawsuit that risks a liquidity crisis on reputable exchanges. Presumably if and when this is sorted it will take its place within the fund.

C20 is a closed-hybrid fund meaning no further supply of tokens will be created after the initial coin offering.

How Has C20 Performed?

As you can probably imagine the returns over the past year have been breath-taking, with the funds value having grown by 600%. This includes the large drop in recent months, so prior to this the growth must have been around 1,200%.

We should stress that this is in the past and the future returns might look nothing like this – we can’t predict the future sadly.

Each quarter Invictus publish an insight report and although the latest, Q1 2021, is a couple of months old now there are some really interesting facts. The annualised return of C20 is around 38% since Nov 2017 but the max drawdown was over 93%.

A drawdown is a peak-to-trough decline. This means had you invested at the top, which appears to be at the beginning of 2018, and held until the bottom, which appears to be at the end of 2018, you would have lost almost all your money. If you continued to hold you would have been vindicated but it still highlights the enormous risk that crypto investors are exposed to.

What Are The Fees?

The fund will incur an annual management fee of 0.5% and there will be zero performance fees. This appears to be extremely competitive and is much cheaper than the market average, which is 3% according to Invictus.

As crypto index funds are ground-breaking, we would expect management fees to be on the high end. But even at 0.5% we’d still like to see this come down further but don’t expect this anytime soon.

One fee that we couldn’t find listed anywhere was the costs incurred in running the fund, such as internal transaction costs from rebalancing. With an ETF or index fund invested in stocks we can compare the index with the returns of the fund to identify the tracking difference. This is the best way to identify what you are actually paying but this fund doesn’t have an index in the conventional sense.

Presumably you will be incurring substantial internal transactions costs in addition to the management fee, but as we say, we couldn’t find this.

For speculators who are just hoping the crypto market will continue to surge, or should that be go to the moon, you might not be that interested in what you might consider to be relatively small fees but as index investors, fees are one of the few things that we can control.

If you use a debit card to buy C20 you will incur a 4.5% fee on the Invictus platform – we think that’s far too much to have sliced off the top.

Our biggest concern with the fees is not necessarily specific to C20 but is part of the wider problem with many of the cryptocurrencies such as Bitcoin and Ethereum. The cost to buy C20 is astronomical! The Ethereum network fees – which is the blockchain C20 is part of – are outrageous when only trying to buy a small amount.

As part of this review, I was planning to invest in C20, but on my first attempt I was given network fee estimates of over $100 to buy just $100 of C20. That’s right – I would have paid over $200 and lost over 50% instantly to fees. Shocking.

It just so happened that the day I was trying to buy C20 was a day that markets were going crazy, so I tried another day as the fees should hopefully be lower. The network fees were indeed better but still not acceptable in my eyes – this time the estimates were around $30.

Don’t necessarily let this put you off – if you were investing much larger amounts than we were in our tests, those fixed fees would become less of an issue. A $30 fee on a few grand could well be worth it, especially if you’re of the opinion that cryptos are going to keep going up.

But at the low end, fixed fees matter. For those that don’t know, certain cryptos have exorbitant fees when buying, selling and transferring them, particularly when the network gets congested.

The average transaction fee for Ethereum has got ridiculous in recent months with a typical fee of around $20 per transaction.

How To Invest In Crypto 20?

According to Invictus there are currently 5 places you can invest in the C20 fund. 4 of these 5 places are on crypto exchanges – HitBTC, ForkDelta, Uniswap, and Ovex.

We don’t have any experience with these exchanges and none of them seem to offer the ability to exchange government currencies like US Dollars, Euros, or British pounds. Therefore, if you’re looking for an easy way to invest in the C20 fund this route probably isn’t for you. Moreover, none of these exchanges are amongst the top ranked on, so this hardly instils confidence.

The 5th and final method of investing in C20 is to use the Invictus platform and is the way we had intended to invest if it hadn’t been for the high entry fees as already mentioned.

The Invictus platform is beautifully laid out and simple to use. You’ll also get an optional wallet where you can store your C20. To invest all you need to do is click Invest at the top, choose Crypto20, and then select your payment method. There is currently a $100 minimum investment, which Invictus openly admit is due to the “substantial Ethereum network fees”.

You’ll have to sign up with its payment gateway provider and then you’ll be able to buy, with the C20 tokens sent to your wallet. In this example, I’m only getting $100 of C20 but it’s costing me $137. Ouch!

Don’t forget you’ll incur similar network fees if you ever plan to convert back to government money like pounds.

How To Store Your C20 Tokens?

You’ll be able store your C20 tokens in any ERC20 compatible wallet, such as Ledger or Metamask.

For convenience though, Invictus launched their own wallet in 2020, which is really handy as you’ll be able to see all your investments when you log in to the Invictus platform. This would have been perfect for my needs!

Also, Invictus even encourage you to use completely offline storage through devices such as Ledger or Trezor if you are storing a significant value or do not plan to access your funds in the near future.

Other Considerations

As mentioned, the fund has a component cap of 10% – preventing a single asset, and thus single source of risk, to dominate. This satisfies our attitude to risk but 10% seems like an arbitrary number. Over time it might become apparent that one or two cryptocurrencies are going to become the standard, so limiting exposure to these superstars might be a huge drag on performance.

Should You Invest?

This is the million-dollar question, or should that now be the million-bitcoin question?

If you think that the future is Crypto but don’t know enough about the individual coins or understand the different technologies at play, then C20 could be your route into this new asset class. However, the large fees to invest would suggest that you need to buy at least several hundred pounds or dollars’ worth of C20 to justify the entry and exit costs.

When we like to invest – no matter what it is – we like to invest regularly to average out the high and lows – what’s known as pound cost averaging. Doing this with Crypto like C20 would prove very expensive.

Even if you think the future is Crypto you would need to be a long-term investor. The asset class is so volatile that on paper you could lose nearly all your money in a matter of months based on the history.

As for us, we can’t justify paying the large network & card fees to purchase but if there ever becomes a point where the fees drop substantially, then we definitely will consider investing.

What do you make of the C20 fund? Will you be investing? Join the conversation in the comments below.

Written by Andy


Featured image credit: stockphoto-graf/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Just One Fund – Is The S&P 500 All You Need?

S&P 500 vs global diversification. Which is right for your investment portfolio? Which will perform best?  Is it crazy to invest your entire equity allocation in just one country, and does the increased costs of wider diversification outweigh the benefits?

We’re wondering what would happen if we scrapped the global approach and just went with a low-cost, top performing US ETF. That’s what we’re finding out today.

If you’re looking for the best place to invest, then check out our handpicked favourite investment platforms here. Also, don’t forget to check out the Offers page where you can grab free stocks with Freetrade and 25% off Stockopedia, plus many more.

Alternatively Watch The YouTube Video > > >

Why Are We Considering This Now?

When I first started investing properly around a decade ago most of the literature and information sources were heavily biased towards investing in the UK market. Even to this day there’s still far too much emphasis from the media on investing in our home market. FYI, the UK only makes up around 4% of global market cap, so it makes no sense to put all your wealth there.

It took me years to wean myself off this UK focus, and now as our regular viewers will know both Ben and I invest in stocks from all around the world. This wide diversification and global stance is probably what the UK FIRE community advocates most.

However, a lot of Americans only invest in US stocks, particularly the S&P 500, and they do alright. We always put this down to the same sort of home bias that we used to demonstrate ourselves, but one they could get away with as the US stock market and USD dollar is so dominating. 57% of the FTSE ALL-World index is comprised of US stocks.

Also, investing gurus like Warren Buffett have reinforced the idea that the S&P 500 is all you need as he has instructed the trustee in charge of his estate to invest 90 percent of his money into the S&P 500 and 10% into government bonds for his wife after he dies.

For index investors there’s really not that much you need to do, other than invest as much you can and wait for time and compounding to work its magic. We spend most of our efforts on strategies to minimise fees and taxes, so we capture as much of the index returns as possible. In other words, what we’re attempting to do is track the REAL index as closely as we can.

What we’ve learnt is that this is much easier to do with certain indexes like the S&P 500 than it is with others, such as global indexes. So, this raises the question: is it worth paying extra for global diversification… or is the S&P 500 all you need?

What Is The S&P 500?

If you’re considering investing solely in the S&P 500 then we should definitely take a look at exactly what it is first.

The S&P 500 index contains the majority of the biggest and best companies domiciled in the US. The word “domiciled” is key, and we’ll come back to this. The S&P 500 is considered to be one of the best single gauges for the U.S. equity market, and the index captures approximately 82% of the total U.S. equity market value – practically all of it.

It is a market-cap-weighted stock market index, effectively meaning the largest companies make up a larger slice of the index. Everyone will be familiar with the top holdings as it includes huge companies like, Apple, Microsoft, Amazon, Google’s parent company Alphabet, Buffett’s Berkshire Hathaway, and so many more behemoths.

Recently it has become known for its large technology exposure with most of the top holdings being tech giants.

S&P 500 Returns vs The World

We’ve seen some people wrongly assume that the S&P 500’s incredible returns and outperformance over the last few years will continue. Basing investing decisions on historical performance of just a few years is probably madness, but how many years do we need to look over before that madness becomes a long-term trend – potentially signifying a long-lasting advantage?

We decided to compare 51 years of total return data – which was the max we could get – to see how the S&P 500 stacks up against the MSCI world index.

The MSCI world index is an index comprising of 23 developed markets and covers 85% of the market cap of each country.

In annual terms the difference was fairly close, with the world index returning 9.8% vs 10.7% for the S&P 500. But in total terms, that’s a huge difference. $100 invested in the world index would be worth $11,625 vs. $18,197 for the S&P 500 – that’s 56% more!

Bear in mind that as of now, US stocks make up 67% of the MSCI world index, so for the S&P to outperform it by such a large margin, would suggest that US stocks absolutely annihilated the non-US stocks within the world index.

Of course, there’s no guarantee that history will repeat itself, but we think there’s something about the United States that gives its companies a sustained competitive advantage.

Despite this long-term outperformance, there’s something reassuring about the wider diversification achieved by investing in global markets. For the sake of argument let’s assume that we’re all happy to sacrifice that extra potential return. How much is that extra diversification worth paying for?

The Real Cost of Tracking An Index

As we mentioned, the world index returned 9.8% per year and the S&P 500 returned 10.7% per year. Fantastic, but we can’t actually get those returns because there are fees and taxes that will massively drag on what we get to take home.

We think most investors are aware that fees and taxes exist but don’t really understand their magnitude. We hope that what we’re about to show you will shine a light on these unwelcome performance headwinds, and help you organise your investments to maximise after-tax and after-fee returns.

Our favourite investment tool is the ETF, and the most common way to compare ETF costs is with the Ongoing Charges Figure or OCF. OCF’s are extremely useful to get an idea of costs but they too are not fool proof.

Tracking difference is a much better gauge of the true cost but even that has its limitations. Tracking difference is the difference between the returns of the fund and the target index. Unfortunately, all ETF and fund providers mislead their investors about which index they should be benchmarked against.

For example, it would be reasonable to assume that an S&P 500 ETF tracks the S&P 500 total return index, but you’d be wrong. They all track the S&P 500 NET Total Return index, which has a deduction for 30% withholding tax – even though no sensible UK investor would ever pay this much.

VUSA performance

A quick glance at the performance chart of an ETF would lead you to think that you were beating the index, when the reality is you are most definitely not!

The best way to calculate your ETF costs (and taxes) is going to require a little work. We’ve gone ahead and done this for the ETFs that we like to invest in and a few other popular ones, so we can compare and refine our investment strategy.

We’re comparing the actual index total returns – commonly known as gross returns – and comparing them to the actual returns of the ETF. The difference we’re calling the Real Tracking Difference.

The Real Tracking Difference

MSCI World Total Returns

What we’re looking at here is the actual returns of the MSCI World index over the last few years. We’ve then benchmarked it against the iShares ETF, which is the most popular ETF tracking this specific index. Despite it only having an OCF of 0.20%, it is on average under hitting the index by -0.55% every year.

The Invesco ETF, which is synthetic, does a better job because it avoids certain withholding taxes, but still under performs the index by an average of -0.44% per year.

FTSE All-World Total Returns

A not too dissimilar index is the FTSE All-World that Vanguard’s VWRL ETF tracks. Shockingly, the Real Tracking Difference for this ETF is -0.59% per year on average.

What this means is if you are tracking global stock markets you are not actually achieving the returns you might have thought you were.

The next question is: how close to the index can we get with an S&P 500 ETF? For a start, the OCFs are much lower. The Invesco ETF is as low as 0.05% and iShares and Vanguard are both 0.07%.

S&P 500 Total Returns

When we benchmark these with the actual S&P 500 total return index, we see that both iShares and Vanguard still have Real Tracking Differences of -0.40% and -0.41% respectively. Not great but noticeably lower than the world alternatives.

Moreover, it is possible to get that Real Tracking Difference down to practically nothing with a synthetic ETF. The Invesco ETF does exactly that – under hitting the index by just -0.10% per year on average.

The best MSCI World tracker misses the target by -0.44% and the best S&P 500 tracker just misses it by -0.10%. That means the World Index would have to outperform the S&P 500 by 0.34% every year just to match its returns. An outperformance of this size seems highly unlikely mathematically considering that 67% of that index is comprised of US stocks.

When we add in the tracking difference to the historical index returns, the world index returned 9.3% vs 10.6% for the S&P 500. Over the 51 years, the total difference is now even greater. $100 invested in the world index would be worth $9,472 vs. $17,377 for the S&P 500 – that’s 83% more!

Tighter Spreads

The cost benefits for the S&P 500 don’t stop there. The ETFs tracking the S&P are much bigger in terms of assets under management and have much more volume passing through them, which means the spreads are far tighter.

When you buy a stock or an ETF the buy price is higher than the sell price. It’s what’s known as the bid-offer spread. The more liquid an ETF is the tighter that spread will be, which is precisely what you want.

Indicative spreads

Again, we compared the spreads for a bunch of ETFs and the S&P 500 ETFs were cheap as chips. Their spreads were 0.03% which is practically non-existent. Although the other ETFs we were comparing to were also cheap there spreads were large enough to think twice about frequently trading in and out of them.

Qualitative Factors

#1 – Diversification

Investments should not be chosen just on the potential return – risk should also be considered. The main reason beyond this cost analysis to still invest globally is diversification – not putting all your eggs in one basket.

However, the counter argument to that is that although the S&P 500 is just US domiciled stocks, they are in fact global companies that just so happen to be based in the US. 29% of their revenues come from foreign markets.

Also, the S&P 500 has an increasingly growing concentration risk. The top 10 components make up 26% of the entire index. That’s a lot of exposure to just a handful of companies. Adding in stocks from around the world helps to dilute this.

#2 – Follow The Leader

A qualitative argument for just investing in the S&P 500 is that the US market dictates what happens everywhere else. In this interconnected world it would be unthinkable for the US to suffer a recession and Europe to be cruising along at the same time.

In fact, this can be seen in the behaviour of the UK stock market. In any given day it might be performing well, but as soon as negative news comes flooding in from the US this can be turned on its head in an instant.

#3 – Blurring The Lines Between Active And Passive

One potentially important point to note is that there are certain eligibility requirements to be included in the S&P 500 and a committee ultimately has the final say, which is why a giant like Tesla was only recently included despite being one of the most valuable companies on the planet.

Excluding certain stocks in this manner is dangerously close to active management, which is fine if you want that but a red flag if you don’t. World indexes are much more reliant on a rules-based approach.

#4 – The US Is A Safe Haven

This probably won’t last forever but for several decades the US and the US dollar have been a safe haven. When markets were tanking in 2020 during the Covid crash, investors rushed to the US dollar. So, as the S&P fell in dollar terms, the impact was softened by the increasing value of the dollar against the pound – meaning UK investors holding wealth in the S&P were affected less than what they could have been.

How Are We Responding To This?

We’re generally undecided. Changing how you think is not easy and takes a while – think of it like an oil tanker turning.

Also, when everyone else is saying you need global diversification it’s difficult to go against the grain. We fully agree with the benefits of diversification but is the additional cost worth it?

What do you think? Is the S&P 500 all you need? Join the conversation in the comments below.

Written by Andy


Featured image credit: Immersion Imagery/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Top 3 Dividend Stocks For Summer 2021 (Trading 212 Dividend Pie Update)

Now that things have settled down a bit in the economy, we can see more clearly through the fog of uncertainty with regards to dividend stocks. What are the best dividend stocks to buy this summer for long term stability, yield and growth?

Back in February, we put on our analyst hats and used a set of rules and data to automatically select 20 dividend stocks while removing the human element from the decision – and it’s done great!

It’s well documented that institutional stock pickers underperform indexes 85% of the time. The thinking was to remove our instincts to second-guess which dividend stocks will and won’t do well, by building a portfolio of dividend stocks using rules.

We’ll show you how well the dividend portfolio performed, and the essential changes we’ve just made to the portfolio for Summer 2021.

We also go on to single out from this pool of rules-based stock picks what we think are the 3 best placed dividend stocks to outperform over the next year. Let’s check it out!

Our dividend stock portfolio was made possible by the innovative investing solutions offered by Stockopedia and Trading 212. Get a free stock worth up to £100 when you open an account with Trading212 (at time of writing there’s a waiting list you can join which secures your free stock), and 25% off a Stockopedia subscription after a 2-week free trial. Don’t miss out.

Alternatively Watch The YouTube Video > > >

You can find our updated dividend stocks Pie on Trading 212 here.

The MU Dividend Aristocrats Pie

We originally built this portfolio on the Trading 212 app, specifically chosen because of their awesome Pies feature, which lets you build a portfolio of stocks with specified percentage allocations.

The app lets you invest on a percentage basis as much as you want into each stock or ETF in your Pie.

We chose 20 stocks, equally weighted at 5% each. Their values of course drifted over time, but today we’ll be resetting the pie back to 20 stocks at 5% each. This is super easy to do, and we’ll show you exactly what we did in a moment.

The methodology we followed is fully documented in our previous episode/article, linked here.

But briefly, we cross analysed the best dividend stocks as per Stockopedia’s StockRanks, with the best stocks according to the S&P Global Dividend Aristocrats Quality Income Index, which in our view is the ultimate index for dividend stocks. The top ranking 20 from our model made the cut into the Pie.

MU Dividend Pie: The Last 3 Months

When we built this dividend pie 3 months ago, we dropped £1,000 into it as an experiment to see how well this approach would work. Performance since inception has been fantastic, with total returns of 12.51% in just 3 months.

1.00% of that came from dividends, and the other 11.51% from share price growth. We had set the app to reinvest dividends, but it looks like the pound amounts were too low for this function to kick in. Returns would therefore have been marginally higher if we’d invested more money.

We got 15 dividend payments over the period – some of the stocks pay dividends twice yearly, some quarterly, and so on.

Some of the individual stocks did amazing, with 4 returning around 30% and several others with really good hauls. 4 performed negatively, but only 2 did really bad. Watch the video version of this article for more details.

How does our return of 12.51% compare to a benchmark? The best benchmark to use for comparison is the returns on the SPDR S&P Global Dividend Aristocrats UCITS ETF (GBDV).

This ETF tracks the index that we are selecting stocks from, and the returns are what you could really have gotten if you had bought this ETF instead back in February.

The growth in the ETF price plus the quarterly dividend distribution paid in early May would have given you a total return of 10.41%. Our Pie has returned 2.10% better than this, at 12.51%! So, we managed to achieve what we set out to – we beat the index. For now at least!

Now We Need To Rebalance

A lot can change in 3 months. Especially as we’re coming out of one of the biggest periods of uncertainty for dividend stocks. After the markets crashed in 2020, cash flows became tight, and many companies had to cut or cancel their dividends.

But not any of our champion stocks. Below is how the Pie stood at inception – now 3 months later, 6 have to go. Not because they couldn’t survive the pandemic (all remain in the Dividend Aristocrats index), but because even better stocks have come along to take their place.

The Pie when it started (3 months ago), showing today's cuts

2 had to go because we only allow 5 stocks from any one sector in the Pie – it’s one of our rules to ensure we get adequate diversification – and there were 5 Financials that ranked higher than these this time around.

The others’ Stock Ranks fell out of the Top 20 this time around. These 6 will be cut, despite some of them doing ace – People’s United grew 20% and United Bankshares grew 14%. Verizon, Moneysupermarket and B&G Foods all did poorly over the quarter and are amongst the cuts.

But the main reason we’re having to swap as many as 6 stocks out on this rebalance is that, as we’ll soon see, Trading 212 recently massively updated their available range to now include almost all of the Dividend Aristocrat stocks from the US, UK and Europe. 5 of the 6 replacement stocks were not available back in February.

If they had been, this rebalance would be a lot smaller. For this reason, we’re not overly concerned about the temporary increased impact of transaction fees from FX, Bid-Offer Spreads, and Stamp Duty.

The Updated Pie

The updated Pie, showing today's additions

Here’s the details of the new Pie, updated as of the end of May 2021. This is what the data and algorithms are telling us are the best dividend stocks for Summer 2021.

The process has added 6 new stocks, 5 of which are due to Trading 212 adding them to their available range since we last carried out this exercise, and Exxon Mobil because it has staged a miraculous comeback from a prior Stock Rank of 50.

Most of the other stocks are more or less where they were 3 months ago, but with big improvements in Stock Rank for Pfizer and Swisscom.

We added the 6 new stocks into the Pie on Trading 212 at 5% weightings, removed the 6 that our data is telling us must now to be dropped, and rebalanced the whole Pie back to equal 5% weightings for all stocks. This also redistributes our existing gains amongst the new mix of stocks.

You can find our updated dividend stocks Pie on Trading 212 here. Feel free to copy it or to use it as inspiration for your own portfolio. If you previously copied the original Pie you will have to use the new link as we will be closing the old version.

Top 3 Dividend Stocks For Summer 2021

If you don’t fancy building an entire portfolio using rules, then we’ve hand-picked our Top 3 Dividend Stocks for Summer 2021 from within the MU Dividend Aristocrats Pie.

That’s because we know that these stocks:

[a] – all have 10-year consecutive records of maintaining or increasing their dividends, courtesy of being on the Dividend Aristocrats index;

[b] – all are ranked highly by Stockopedia for the overall average of their Value, Quality and Momentum; and

[c] – are all available on Trading 212, and hence anyone can trade these stocks without having to pay commissions.

See the video above for a full walkthrough of these stocks on Stockopedia.

Top Dividend Stock #1 – Janus Henderson Group

Being top of the list in terms of Stock Rank, the fact that this Dividend Aristocrat was excluded from the Trading 212 available range until only recently is, in our view, almost criminal.

It is the best rated stock from the Financials sector in a Pie where 5 of the top 9 entries are Financials. The sector, known for its value stocks, is making a big comeback after covid.

Janus Henderson is an independent global investment manager, focusing on the United States, Europe, Asia and Australia.

It scores amazingly in Stockopedia across all ranking areas. At a market cap the equivalent of just £4.6bn it has plenty of scope for growth. Its forward PE ratio looks very tempting at just 10.5, suggesting this US company is valued on the cheap side, both within the market as a whole and within the finance industry.

Its growth momentum over the last year gives it the feel of a growth stock, but it’s a strong dividend payer too with a forecast yield of 4.0%.

It qualifies for 4 Stockopedia Long Screens, which is impressive – more screens means more ways by which it is considered a good stock and likely to get the attention of other investors. That puts them in the top 350 stocks by screens of the 19,000+ US, UK and European stocks that we have access to with our Stockopedia memberships.

Its revenue and profits are forecast to grow, as are its dividend per share and dividend yield. And there’s a big sign of safety – negative debt. This means the company has more cash than debt, which means it has fantastic liquidity. After poring through their accounts we can also confirm that they have negative debt after excluding ring-fenced client cash.

Want a dividend aristocrat stock with growth potential, which ticks all the right boxes? Then look at Janus Henderson Group.

Top Dividend Stock #2 – Exxon Mobil

The pandemic took a hammer blow to the Oil industry, but the story of 2021 so far has been one of recovery. As the world opens up again, oil is once again going to be needed.

That said, investing in the old energy companies is still a contrarian position to take.

A play on Oil is a bet that the harsh economic reality of going green will come home to roost, and the switch away from fossil fuels will take longer than wished for by the global elite.

One good thing about investing in an old-fashioned energy company is that you’re not investing directly in a commodity like Oil.

Rather, you’re investing in a multinational operation stuffed full of cash, patents, and research scientists; and you can bet your bottom dollar they won’t be sitting around meekly waiting to become redundant.

They might be the companies who lead the market in the energy technologies of the future, like hydrogen and fusion.

Back to Exxon then, what’s so good about this stock in particular?

Despite being one of the worst effected industries by covid, Exxon maintained its dividend payments throughout the pandemic, despite fears that it would have to cut them.

Exxon didn’t make it into the Pie back in February because it was rated terribly at just 50 out of 100. Since then, it has shot up to a ranking of 88, meaning fears for this stock may have been misplaced.

If you’re looking for price growth potential, it’s still there in spades in the oil industry, and Exxon has a strong run of momentum in price growth since October 2020.

Revenue is forecast to return to strength in 2021 and 2022. It increased its debt throughout the pandemic, but only to 3x its 2018 profits – not yet a red flag issue.

With a yield touching 6%, this is a consistent dividend payer that’s cheap to own, and unloved as a stock due to the negative press around the industry.

If you feel you can ignore the peacock feathers of the clean energy industry and the showboating politicians, you might find you can get a few more years of value out of Exxon Mobil.

Top Dividend Stock #3 – Pfizer

If Exxon Mobil had a rough pandemic, Pfizer has found a lot to be cheerful about.

The Pfizer vaccine was the first on the scene at the end of 2020, and has led the way in the US, UK, Europe, and elsewhere in the world as the vaccine of choice.

Pfizer has so far managed to avoid controversies on the scale of those which have dogged AstraZeneca, and their brand and profile have been vastly improved by being perceived as heroes of the pandemic.

If you search Google Trends for the word “Pfizer”, you’ll see its journey from a non-entity to a household name since the end of 2020.

Pfizer are ranked very high in Stockopedia for Quality, reflecting their stability as an established pharmaceutical giant with a market cap the equivalent of £152bn.

Revenue and profits are forecast to be up massively in 2021 and 2022, obviously a result of its recent success with the vaccine. Its dividend per share and dividend yield are increasing and this is forecast to continue.

Sales have grown 44% in the last year, but that can be put down to the vaccine rollout. The real question is, will Pfizer’s success continue in the post-pandemic era?

We think it will. People will remember Pfizer’s role in this pandemic, and so long as the vaccines don’t cause long-term side effects, Pfizer’s brand should retain a permanent boost.

They are well placed to take advantage of a world that now cares a lot more about virus control.

What do you think of the stocks in the Money Unshackled Dividend Pie? Will you be investing? Join the conversation in the comments below.

Written by Ben

Featured image credit: jittawit21/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

10 Outdated Money Rules That Just Aren’t True

In todays’ post, we’re looking at 10 outdated money rules that just aren’t true anymore or in some cases never were. Forget this nonsense and instead live by the new money rules that apply today.

Money plays such a pivotal role in our lives that it’s essential to be playing the game of money properly. Some of the outdated rules mentioned here have not stood the test of time and others only lead you down the path of mediocrity.

If you’re living by any of these outdated rules you’ve probably picked them up from your parents and society, but are they living the life that you want for yourself? Let’s check it out…

Keeping your investment fees down is vitally important. Make sure you have the best investment platform for your circumstances. Don’t forget to check out the curated list of the best Stocks and Shares ISAs, along with free stocks and other discounts.

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#1 – Don’t Talk About Money

Financial losers don’t like talking about money, which means most people don’t like talking about money – making it a taboo. You can’t talk about money with your colleagues, with your friends, or even your loved ones. But this relationship and attitude with money keeps you broke.

Your employer may even actively discourage you from talking about salaries and bonuses with your co-workers. Why would they do that? They know knowledge is power and putting you in the dark about how little they’re paying you compared with others makes you less likely to kick up a stink and demand more readies.

Winners talk about money all the time with anyone and everyone that is willing. They love it! They talk about salaries, income, expenditure, tax, investments, pensions, stocks, property, gold, crypto, budgeting, business ideas, money making schemes, the economy, and everything in between.

The fact is, money flows from those who value it least to those who value it most, so the new rule is: Don’t stop talking about money!

#2 – Rent Is A Waste Of Money

This might be the rule that we hear most frequently. Young people often refuse to rent because – in their words – “rent is just throwing money away.” Of course, this is total nonsense, but we reckon the majority of people believe this.

Renting gives you somewhere to live, independence, flexibility to move at a whim and hence opportunity, and saves you the hassle (and costs) of buying and maintaining a property.

Long-term home ownership is likely to be better financially than renting. However, young(ish) people who are likely to want to move home every so often – due to say moving from a city to a more rural area, or the need for a bigger home due to becoming a family – are likely to be better off renting for a short time.

Moving costs like surveyors, solicitors, mortgage arrangement fees, and stamp duty, can make short-term home ownership a financial disaster. Most people aren’t aware of this because they’ve been saved by increasing house prices, which is not guaranteed to continue every year.

The new rule should be: Buying for a short timeframe is likely to be a waste of money.

#3 – Pay In Cash

Now, this rule has two meanings. The first is you should pay in cash because you’ll be able to knock the purchase price down, saving you money.

The second meaning is that physically paying in cash has a psychological effect on you. Those who pay by card statistically spend more money – probably because it’s so effortless. Actually digging into your wallet and handing over those crispy notes is more noticeable and more likely to be resisted.

Let’s first address point one. In some situations, cash might get you a cheaper price. If you’re selling your home a cash buyer is more attractive because there is no chain and risk of mortgage decline. However, in most other circumstances credit is better than cash. It used to be believed that a car salesman would prefer cash and be willing to mark the price down, but this isn’t true today. They make a good chunk of their money selling you the car on expensive credit.

On point two about the physical handing over of cash – there are more downsides than advantages. Card payments offer payment protection, an audit trail of transactions, make budgeting far easier, and is much safer – you’re less likely to be mugged for a useless card that will be blocked within the hour.

We think reckless spenders are skewing the figures. Those that live to an intentional budget – which we all should – are unlikely to spend more. In fact, we actively avoid places that don’t accept card, so not carrying cash saves us money.

The new rule should be: If you’re good with money – pay on credit card, if not – pay by debit card.

#4 – Don’t Pay Someone Else When You Can Do It Yourself

Poor people think they must do everything themselves. They mow the lawn, do the cleaning, do the ironing, cook meals, decorate their house, and some even install their own new kitchen and bathrooms.

Whereas if it doesn’t bring them joy, rich people pay someone else to do it. You might think this is because rich people can afford to pay and poor people can’t, but this isn’t true.

Doing everything yourself can only save you so much money – but saving the time that would have been spent on these boring, and in some cases difficult and high-skill chores, has potentially an unlimited upside. Rich people outsource all low value tasks, so they can work on higher valued income generating tasks.

You might be thinking that your spare time isn’t worth anything because you can’t bring in extra money during that time. This might be true now, but it will always be true unless you make the decision to start working on income generating tasks.

Not that long ago most people would have had very limited opportunities to bring home extra bacon outside of a day job. Thankfully, the internet has revolutionised how we can all make money. The world doesn’t sleep, so you can make money at anytime from anywhere.

From now on the rule should be: Outsource all low value tasks.

#5 – Overpay The Mortgage

This was probably a very good rule back in the day when interest rates were much higher.

Back in the 70s and 80s the Bank of England interest rates were in the double digits, so you can expect the rates by the mortgage lenders to be slightly higher. Even in the 90s and 00s they hovered around 6%.

Rates like this would have meant paying down the mortgage was a good idea because it would have been far more difficult to get a return greater than this elsewhere – at the very least it wouldn’t haven’t been worth the risk.

This is not the world we find ourselves in today – with interest rates being almost zero for a decade.

Unfortunately, there are influencers and self-proclaimed experts in the media still preaching this rubbish and telling everyone to pay down their mortgage as fast as possible. On YouTube, we’ve seen these misguided souls foolishly telling their audience that by overpaying their mortgage you can shave a few years off its life and save thousands in interest.

While that is true, this money has an opportunity cost. You would have been much better to have invested the overpayments instead.

With interest rates looking like they will remain low for a very long time the new rule is: Pay as little as you can on the mortgage and invest the surplus.

#6 – Buy Low, Sell High

Buy low, sell high could well be the most overused phrase in investing. If it’s not obvious it means buy investments when they’re cheap and sell when the price is higher.

The problem with this rule is that it’s notoriously difficult to do. So difficult in fact, that barely anyone on the planet can do it. Buying and selling incurs fees and taxes, and theory says that markets are mostly efficient, and so already factor in all known information into the prices.

Moreover, the long-term trend of the stock market is that it’s always climbing ever higher. Waiting for lower prices is likely to result in you sitting on the sidelines and missing out on years of stock market gains.

We analysed the S&P 500 going back to 1988 and we discovered some fascinating insights. See that post here.

One interesting nugget that we found was that in 99.3% of cases, an all-time high was followed by another in less than 6 months.

The rule should be: Buy whenever and hold forever.

#7 – Money Is There To Be Spent

People see money and they spend money. Consider any gameshow. The host always asks what the contestant will spend the money on if they win. Every time, without exception the answer is a holiday, new car, or a house extension.

We’ve never heard any contestant ever respond with “investing in income generating assets”

Likewise what people refer to as savings is really just ‘delayed spendings’. They call it saving but the reality is they are just putting money aside for an expensive infrequent purchase like Christmas or a new TV.

Money that is invested or saved for your long-term future gives you options, opportunities, and freedom.

A healthy pile of cash gives you the freedom to tell your boss to do one if you don’t like the way he talks to you, or perhaps you need the financial breathing space to start a business but can’t because you squandered that money on a new conservatory.

Some people argue that you don’t want to be the richest guy in the graveyard, but we’d counter this with it’s not a waste to die with some money if it provided liberty while you were alive.

The new rule should be: Money kept gives you options, opportunities, and freedom.

#8 – Investing Is Risky

We blame the terrible education system (including the financial regulators) on why this rule is so pervasive. People believe that investments are risky because they can lose money.

The reality is cash stored in a bank loses value. The figure you see – known as the nominal value – might be the same or even slightly more than what you deposited due to interest, but the real value has declined. This explains why your grandad could buy a house for under £10,000. The average person doesn’t understand this.

Real returns are calculated after inflation and is the only thing that matters. The formula is dead simple. Real return = nominal return – inflation. As the interest rate your bank pays is likely zero, and the target inflation rate is 2%, your bank savings fall in value in real terms by 2% every year.

Investing doesn’t guarantee real growth but at least it gives your money a fighting chance.

The new rule should be: Not investing is risky.

#9 – Buy The Most Expensive House You Can Afford

Another rule that is total nonsense and potentially very damaging. This is perhaps built on the belief that house prices always go up, so the mortgage leverage will make you rich.

Long-term we do think house prices will continue to rise but if you want exposure to property, it should be through a proper cash generating buy-to-let investment.

Owning the most expensive house you can afford will cripple your cashflow and limit the opportunities that you can seize as your mortgage payments will always be overbearing – you become a mortgage slave.

A buy-to-let investment on the other hand will get you same market exposure but you’ll also receive cashflow in the form of rent.

The new rule should be: Buy the house you need, and invest the rest.

#10 – Reduce Investment Risk As You Age By Buying Bonds

Bonds have their uses – such as being great at stabilising portfolio returns. Back in the day you could quite happily switch from stocks to bonds as you age to reduce investment risk without sacrificing too much return.

This strategy worked well because you were forced to buy an annuity with your pension pot, so you wouldn’t want the value of your investments to tank right before buying the annuity. An annuity is an insurance product that pays a guaranteed income until you die.

Today though you are no longer obliged to buy an annuity, which is handy because their rates are woeful in today’s low interest environment. The alternative is to leave your investments more heavily allocated to stocks.

This is necessary as the return on bonds is likely to be low, causing your retirement pot to run down to zero before you die and leaving you broke in old age.

The new rule should be: Maintain risk as your portfolio needs to out survive you.

What other money rules do you think are outdated? Join the conversation in the comments below.

Written by Andy


Featured image credit: Andrew Rybalko/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Investors With Kids: What You Need To Do To Secure Their (& Your) Financial Futures

At some point during your financial journey, chances are you’ll end up having to factor in kids.

The media is full of scare stories with huge numbers about how much kids cost you during a lifetime, and it’s enough to make any investor think twice about saddling yourself with these little liabilities.

But these stories are more often than not just using silly assumptions to get you to click. And let’s face it, the decision to have kids comes down to so much more than just finances.

But once you have them, you need to change your approach to investing and financial freedom. Suddenly you’re now also responsible for someone else’s financial future.

You want to give them the best possible start in life, while balancing your OWN money goals. You need to make sure they’re provided for if the worst were to happen.

You want them to respect the value of money and investing, and to give them a little monetary head-start when they reach adulthood, so they aren’t tied to a desk for their whole adult lives.

We’ll show you how little changes now on your part can make a life-changing difference to your child by the time they hit 18-years-old. We’ll cover the investment vehicles to use for kids, and the other considerations you need to have in place.

You might even be trying to retire young yourself, in which case, we’ll show you how you can do this with kids without necessarily being tied to one location, and how much longer you might have to hustle before you can retire. Let’s check it out!

Alternatively Watch The YouTube Video > > >

Investing For Kids

If you’re into investing, it’s probably because you want to give yourself the best future. Well, when you have kids, you also want to give them the best future.

Which means you need to be investing for them too.

Arguably the best way to invest for a child is to use a Junior Stocks & Shares ISA.

You have to invest in assets like stock market funds instead of say using a Cash ISA, as holding cash long-term is like burning money – left over 18 years it would massively devalue against inflation.

The simplest Junior Stocks & Shares ISA we’ve come across for those who don’t know how to invest or don’t want to do it themselves is with Nutmeg. It’s no more complicated than opening an account and setting up a monthly direct debit, and checking back in 18 years’ time.

Check them out on the Best Investment Platforms page – if you do open an account with them using our offer link, you’ll pay no management fees on the account for the first 6 months.

Unless you have your young uns’ out cleaning chimneys to earn their keep, you’re going to have to cut back on your own monthly regular investments to give them a slice.

Do you want to give your kid £100,000 on their 18th birthday? Invest £300 a month with compounding for 18 years. What about £200k on their 30th birthday? Invest £250 a month with compounding for 30 years.

I don’t know about you, but I could have really done with an extra £200k on my 30th birthday!

The MOST you can invest for your child in a Junior Stocks & Shares ISA is £9,000 a year for the tax year 2021/2022, which is £750 a month if you want to make it a regular investment. £750 invested with compounding over 18 years is £266,000. Over 30 years it becomes £628,000.

These are big numbers, making for big life opportunities. All these figures factor in inflation and are given at today’s value of money.

2nd Generation FIRE

Imagine having the investing knowledge and the skills you have now, but being 18 again, and also having a large starter pot built up since your birth by your parents.

You might have a 10-year path to guaranteed freedom ahead of you. You could be financially free before your 30th birthday!

This is entirely possible for your child and is called 2nd Generation FIRE. FIRE is the goal of being Financially Independent and Retiring Early.

Many of our viewers are pursuing this path for themselves, but how much easier would it have been if you’d been raised to be an investor?

FIREing If You Have Kids

Is your investment endgame goal to be able to retire earlier than what’s considered “normal”?

If so, you probably have a figure in mind for how much money you’d need to have built up in your portfolio before you can sack off the day job. If you haven’t calculated this yet, do so now using the early retirement calculator that we’ve built for this very purpose.

The problem raised by inserting kids into the equation is that your “expenses” boxes are very likely to now be higher, which has a ripple effect both on your required pot size to be financially free, and also on the number of years it will take to reach it (because you are saving at a slower rate). But how much do children really cost?

Ridiculous sensationalist numbers fly around the media every so often like in this article from the Guardian, which claims kids cost their parents over £230,000 each.

How could anyone with 2 or more of these little money leeches ever afford to retire?

The True Cost Of Children

Well, the truth is that kids don’t need to cost anywhere near £230,000. For a start, there are economies of scale which mean that having two or more kids can cost much the same as having just the one, at least until they hit their teens.

If one of the parents has left work to look after the kids, that’s one lost salary regardless of how many kids you have.

For the first several years, hand-me-downs mean you only have to buy clothes, toys and equipment for the first child. And food doesn’t have to cost too much, especially relative to the other costs.

So if we could trim that cost down from the reported £230,000 per kid to more like £230,000 for all of them, would that be a more realistic figure?

Well, no. You could spend that much, but there’s no real need. Let’s look at some of the costs.

Tax-Free Childcare

The nursery my daughter goes to costs £800 a month for full time care after childcare tax credits, and is needed from age 1 for the next 3 years – before age 1, maternity/paternity leave removes the need for childcare.

If you or your partner have a low salary, you might quit the day job to look after your child yourself instead until they go to school at age 4.

If both parents are in work, even part time, you will be given money towards the cost of nursery for pre-school children. If there’s only one parent living with the child, only they have to be in work. Other rules apply, but most people will qualify for this unless one of you earns over £100,000.

For every £8 you spend on childcare, the government spends £2. It means childcare that would cost £1,000 a month in reality costs you £800.

The Other Costs

Then there’s food, and you can spend as much as you want on food – if you want to be frugal, it’s possible to be frugal. You could probably get away with £40 a week.

I get all clothes, equipment, furniture and most of our toys from hand-me-downs or family friends, or you could use Facebook Marketplace or Freecycle instead. And again, holidays cost as much as you want to spend.

Your gas, electric and water bills will go up by maybe £20 a month – mostly independent of how many kids you have. They share the same central heating, and in the early years, the same bath.

Kids don't HAVE to cost the Earth...

Here’s what 1 or 2 kid might cost you if you’re careful, if you make the choice to live outside of the expensive hubs like London which have excruciating early-years childcare costs, and if you’re sacrificing a low salary and making economies of scale. If your family’s number for FIRE is £1m, an extra £150k isn’t going to set you back by that many years.

Maybe you think these numbers are being overly optimistic, but remember that many people do manage to raise well-rounded kids while on minimum wage salaries. The point is, kids don’t inherently have to cost the earth – a lot of it is personal choice – and you have a lot more control over the costs than the newspapers would have you believe.

For the record, neither of us have the intention of raising kids on the bare bones, but there is definitely some sort of balance that can be achieved.

And as for FIREing while your kids are still under 18 – don’t forget that for 8 hours a day they are safely imprisoned in school, meaning you can still get on with enjoying your hard-earned freedom!

World Schooling

Here’s a wild idea for those wanting to retire early with kids – World Schooling.

It’s basically home-schooling or digital remote schooling done while you’re travelling the world as a family, often with other families doing the same thing so the kids have a peer group.

It’s an answer to the problem of being tied to one location so your child can go to school, when all you want to do is see the world now that you’re retired.

We won’t go into it any more here, but just be aware that an international network of travelling home-schoolers exists, and that you can find out more about it starting with this World Schooling article.

Teach Them What School Won’t

Wherever your kids go to school, you will have to personally take a firm grip on their education around money. Financial education is appalling in this country – let’s be fair – in all countries.

Around the world, kids are pushed towards entering the workforce as young adults, to trade time for money from the day they leave education until the day they slump down defeated into their armchair in old age.

It needn’t be this way for your kids. But they won’t learn in school how to manage money and how to become a successful investor, so you’re going to have to teach them yourself.

If you are building them an investment portfolio, why not show them what you’re doing and get them involved?

Let them apply what you teach them about money to their early spending and earning decisions, rather than leaving them to discover the idea the hard way after a decade or more of miserable 9-to-5 graft and a string of avoidable financial mistakes.


There are 2 stages in your life as an investor that should be approached entirely differently when it comes to insuring your family’s future.

The first phase is during the accumulation years of your investment portfolio, when it’s not yet big enough for you and your family to draw-down on, should the need arise.

It might be sensible during these years to take out income protection insurance to keep money coming in each month if you lose your capacity to do your job.

You might also consider life insurance to cover you in case of death, and health insurance to cover you if you become incapacitated.

The second phase comes during the draw-down years of your investing career, when you probably no longer need any of these insurances.

If your pot is large enough, you can afford to self-insure against mishaps, meaning your investments will be providing your family an income in perpetuity, regardless of any further input from you.

Check out the Lifestyle Insurance page for more information on the relevant insurances that you might want to consider with Assured Futures. This is the very insurance broker that Andy uses for his income protection insurance.


Finally (in a very real sense of the word), you need to write a will. An investor’s financial situation is likely to be far more complicated than a normal person’s.

Where normies might keep their wealth in a high street savings account, YOURS might be spread across pensions, multiple properties, stocks, gold, artwork, and so on.

Take the time to properly document where all of your assets are, how they can be accessed by the appropriate people, and how they should be divided up.

For your kids, and hopefully one day your grandkids and great grandkids, the decisions you make here might help change the course of their own financial futures for the better.

For those of you with children or planning to one day, how do you invest and manage your finances? Join the conversation in the comments below.

Written by Ben


Featured image credit: Sharomka/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

UK Retirees At Risk Of Running Pension Pots Dry

We spend a lot of time looking at ways to become financially free and retire early should we wish. We regularly look at ways to slash unnecessary spending, boost income, invest better, reduce taxes, implement early retirement strategies and more.

And today we’re looking at an in-depth review of the current batch of retirees to see if we can learn anything that will help our own finances and retirement preparations.

Standard Life Aberdeen, an investment company, have surveyed 2,000 UK adults who were either due to retire in the next 12 months, or had retired in the past 12 months.

The report they’ve published is a treasure trove of information looking into the minds and finances of those retiring. In this video we’re going to share with you all the key points, so we can learn from those who’ve done it. Let’s check it out…

And don’t forget: we have hundreds of pounds worth of offers, like free stocks with Trading 212 and Freetrade, plus many more, up for grabs on the Offers Page.

Alternatively Watch The YouTube Video > > >

Redefining Retirement

Only a few a years ago, before 2011, employers used to be able to force workers to retire at 65 (known as the Default Retirement Age). A few years later saw the most radical changes to private pensions for a generation, as everyone was given more choice in how they take their private pensions – previously they were almost always forced to buy an annuity.

These, plus many other factors have contributed to the changes to what it means to be retired.

We’d say there used to be a perception that retirees were sitting around and waiting to die – let’s not forget that it wasn’t that long ago when they were frequently called old age pensioners, which isn’t the most flattering of terms.

According to the Standard Life Aberdeen report, there is a noticeably growing trend towards flexible retirement and continuing to work in SOME capacity.

56% of the 2021 retirees don’t plan to give up work altogether, and 27% will work part time to support themselves. It’s not clear whether they are doing this out of necessity, but we suspect that many want to work a little.

We’ve long said that work is not the problem. It’s the number of hours of forced labour that you have to endure every week that’s the issue. It leaves no spare time to relax and enjoy yourself, but working on your own terms is a very different story.

If we apply this logic to our own early retirement plans, then maybe we don’t need to build such a large freedom fund after all. Maybe we should be looking to partial FIRE instead. FIRE stands for Financial Independence Retire Early.

Back to the report, 6% of the retirees want to set up their own business and 45% are looking forward to learning new skills. We can totally relate to this having ourselves always wanted to start a business, and the fact that these retirees now have more time and far less financial risk should they fail, means they can finally do what they always wanted.

What Does It Mean To Retire In 2021?

The average age of the retirees in the survey was 60. Three quarters were married or in a relationship, and the rest were not.

The average value of their pension pots is £366,000, which in our opinion seems a very good haul considering most people are very lax when it comes to retirement planning. Worryingly though, a third have less than £100,000, which has no chance of lasting for any meaningful amount of time.

On average, the retirees plan to spend £21,000 per year in retirement, so £100,000 for sure wouldn’t go far. £21,000 is almost £10,000 less than the average UK household income. Presumably as the average age is 60 most of them will own their home outright, so don’t have the largest household monthly expense to worry about.

So, what does it mean to retire?  The quintessential meaning is “spending time doing what I want”. That sounds like freedom to us and that is also exactly how we describe it.

44% see retirement as giving up work completely and 30% see retirement as never setting an alarm again – now that sounds good. And 19% plan to do charity work or volunteering.

We think it’s fair to say that retirement is about living life on your terms. No more doing soul-destroying work for a boss and job you hate, no more commuting in darkness bumper to bumper, and no more losing friends and relationships due to lack of time.

Will Their Pension Be Enough?

Ok, so far, we’ve mostly looked at the positive side of retiring but is all that affordable?

We’ve seen that the average planned spending is £21,000 a year, and according to Standard Life Aberdeen retirees would need around £390,000 in savings to retire at 60 on top of their future State Pension income, to cover their expenses over the course of a 30-year retirement.

Presumably that’s based on holding most of their investments in low risk, low return assets such as bonds and on running the pot down to zero, which differs from what we need in the FIRE community who might need our pots to last 50 years or more.

So, they need £390,000 but the average as we’ve seen was just £366,000, meaning some of them are in serious trouble. We can’t imagine what it might feel like to be 80 and broke.

The report says, two thirds of the retirees risk running out of money in retirement based on the average spend of £21k a year. It was a similar dire story no matter where they live in the UK.

We hate to say this as ambassadors of financial freedom but some of them – like the ones with only a hundred grand – should probably struggle on working a few more years. Every extra year worked is more time contributing to your retirement fund, more time for it to grow, and less time withdrawing from it. This might be easier said than done as things always seem to get harder when success is in touching distance.

For the rest of them, and assuming they’re invested in lacklustre assets, they just need to accept more investment risk to reduce the chances of them outlasting their money.

These are the estimates of what someone today might need at different levels of retirement as quoted in the report:

The minimum looks to be impossible, and we wouldn’t wish this on our worst enemy. How anyone can live off £850 a month in the UK is a mystery to us.

What’s being considered a moderate retirement is £20,200 a year for a single person. We might just about agree with this, but it really depends on whether the retiree owns their home.

The current state pension is just over £9,000 a year, so goes part of the way to covering their essential bills but that still leaves a lot that needs to be covered by their own savings. Disturbingly, 1 in 20 plan to rely the state pension alone.

Do They Feel Financially Confident?

37% are worried about not having enough money to last throughout retirement. And we think they’re right to worry.

As we’ve seen, most of them have not collected enough nuts for winter. Most of you reading this post still have potentially decades to correct this. Personally, worrying about money is one thing that we don’t want eating away at us, so we’ll certainly be aiming to overprepare.

48% plan to reduce their spending habits to support themselves in retirement. We don’t think this is as easy as they might think it is. Free time is often spent, literally. While you’re at work you probably aren’t spending much money, but when your diaries clear you will likely be out spending more – a lot more.

27% will work part time to support themselves in retirement and 21% plan to sell their property or downsize to fund retirement. We think downsizing is a great way of freeing up some money if needed. As the kids will have hopefully flown the nest, you don’t need to have all that capital tied up in a 5-bed castle if there’s just 2 of you.

Sources Of Income

The report only briefly covers this, so we don’t get that much insight. Almost one in five retirees say they plan to rely on one form of income. Not surprisingly pension pots are without a doubt the most popular option. We put this down to a few reasons:

  1. The government push pensions as the main retirement vehicle. This is truer today than it’s ever been with policies like auto-enrolment.
  2. Most people have a lack of financial discipline, so any money available in accessible accounts such as ISAs or savings accounts is probably spent on cars, holidays and house extensions long before retirement approaches.
  3. Most people never consider establishing multiple sources of income. Throughout their lives they’ve only ever had one – usually from a job, and so having one in retirement is normal to them.

If you watch our YouTube channel or read these blog posts regularly, you’ll know we always encourage having multiple streams of income.

How To Know If You’re Financially Ready?

The report gives some good advice about how to calculate when you’re ready to retire and it’s essentially the same as what we say here at Money Unshackled. Although, one major exception is everything they say is geared towards the retiree getting financial advice. Whereas we think most people are fully capable of running their own finances if they are prepared to do some research.

The 3 steps are:

  1. Estimate your annual cost of living. Take what you spend now and make some adjustments for the things you will no longer have – goodbye expensive slave unforms and commuting costs, and hello new costs like world cruises, or maybe more likely care costs.
  2. Calculate how much you have. Check all your pensions, ISAs, savings, and insurance products, and don’t forget to check what state pension you’re entitled to. You might even have the potential for an inheritance.
  3. Plan your estimated income. Here they encourage you to check out online calculators or speak to an advisor. If you’re hoping to retire young as WE do, we suggest you read up on the 4% safe withdrawal rate, which we’ve covered on our website and YouTube channel numerous times before.

What Are They Most Excited About?

The 3 things they’re looking forward to most are all forms of freedom:

  1. The freedom to have their own schedule.
  2. Simply not having to work.
  3. Spending more time with their family and friends.

Who Gets Retirement Advice?

Before we read the figures from the report our perception was that most people feel overwhelmed with investing and managing their personal finances, so when it comes to a big life event like retirement, they think a financial advisor can do it better.

The report found that 40% of soon-to-be retirees have already sought financial advice and 16% say it’s on their to-do list. Only 44% don’t intend to get advice at all.

Before the internet, learning about investing or anything for that matter was much harder, so professional advice was probably a good idea. Nowadays, you could spend a little of your time and learn everything you need to know and probably do it better yourself.

55% of the retirees research their options online, 30% ask friends and family for advice, and 23% get support and information from their employer. Just be careful getting advice from friends and family. It might be the blind leading the blind.

Words of Wisdom

And finally, is there anything we can learn from last year’s retirees? Their words of wisdom include:

  • “Theres a whole new happier world out there.” – we knew this all along.
  • “Factor in a little bit more [money] for the unexpected items” – sound advice for retirement and through life.
  • “Have a plan B” – again, invaluable advice. That’s why we aim for multiple streams of income.
  • “Have projects to keep you busy” – this one really is important. Make sure you have a plan as boredom really is a killer.

What are your retirement plans? Join the conversation in the comments below.

Written by Andy


Featured image credit: Timofey Zadvornov/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

How To Get £1000 Cash Fast – 10 Ideas

So you need an extra £1,000, and you need it quickly. How can you do that? In this article we’re brainstorming 10 ideas to get your hands on £1,000 as fast as possible.

We’ll cover a bunch of legitimate ways for you to earn that money swiftly – often from the comfort of your own home – plus the smartest ways to borrow a grand without screwing up your finances. Let’s check it out!

Alternatively Watch The YouTube Video > > >

#1 – Cashback Offers

The internet is littered with cashback offers, and we’ve collected a whole bunch of them into one place on the Money Unshackled Offers Page.

This page has hundreds of pounds of cash bonuses, mostly for opening investment accounts, or switching energy or home insurance provider.

You can also get cashback offers by switching your bank account, the best current deals being on

At time of filming, HSBC were giving away £125 cash plus a £20 Uber Eats voucher just for switching, and First Direct £100 cash – why not take advantage of both over a couple of months?

After exhausting these, you can take a deep dive into, where you get cash back from purchases when you shop online. Obviously, this should only be used to get paid a little back for things you were going to be buying anyway.

#2 – Matched Betting

Matched Betting is risk-free, unless you don’t follow the instructions correctly, and these can be found in our guides here.

You use the bookies’ websites against them to milk them of their cashback bonuses by placing bets on both possible outcomes of a sporting event. That’s why we say it’s risk free – you can’t lose!

But you can make a lot of money – when I tried it I was able to make £500 a month in the first 2 months by spending just over half an hour a day placing bets.

If I had doubled up my efforts I have no doubt that I could have made £1,000 in the first month.

Indeed, that’s exactly what lots of people do. Matched betting is an easy way to make extra income each month in your spare time, and a fast way to earn £1,000. And if you now work from home, there’s nothing stopping you doing this on your boss’s time!

To do it properly you need to sign up to a matched betting site, like OddsMonkey or Profit Accumulator.

We have introductory offers for the top matched betting, including 60% off the first month or the first 12 days for just £1 (normal cost £19.99 a month), which more than pays for itself if you do the maths.

For more information about how you too can profit, check out our full video guide here.

#3 – Credit Cards

These next two ideas discuss ways to get your hands on £1,000 or more quickly, but by borrowing it over a long, low interest repayment period, rather than earning it.

As such, they should be approached with proper respect and financial literacy. Debt is like fire – if you don’t know what you’re doing you’ll get burned, but if you can use it effectively it will both cook you a steak and run you a hot bath.

Not all credit card debt is created equal.

The way we’ve successfully got money out of credit cards in the past is to use either 0% Money Transfer Credit Cards, or 0% Purchase Credit Cards. Both typically have long interest-free repayment periods of 20 to 36 months.

A Money Transfer Credit Card is good for accessing money immediately, as they literally transfer thousands of pounds into your bank account.

It’s like a 0% loan, but there is a small fee to do the transfer which gets added to the debt.

I have held a balance as high as £15k on this type of card at one point, as I used the cheap borrowing to help me to buy rental properties with.

A Purchase Credit Card might have a similarly long interest-free repayment term. But the way you get cash from it is you use it to buy your everyday outgoings – things like your food shop and petrol – and pocket the cash you would have spent.

In both cases, you need a plan for how you will pay back the balance before the end of the interest-free period.

Putting a few grand in your pocket at a key financial crossroad in your life might make all the difference to your future. It’s a balance of risk you have to weigh up for yourself.

#4 – Cut Back Without Cutting Out

One obvious way to get £1,000 fast is by selling some of your stuff. This is aften a non-starter for most people as they don’t want to sell any of their trinkets, and in any case, they need their Louis Vuitton clutch purse with Damier Ebène canvas and natural cowhide trim.

But we’re not suggesting that you go without – but think about the cash you could claw back quickly by switching out your existing stuff like-for-like with less expensive alternatives.

One easily tapped area is cars. Can you trade in your 3-year-old BMW for a 3-year-old Mazda? You might make several grand on the transaction.

Can you sell your iPhone 20 Pro Max on the second-hand market, and buy a second-hand Samsung Galaxy S9? You could be up several hundred quid.

Also, go through your house and single out things which no longer give you joy, and whack them on Facebook Marketplace. Do you need 3 sofas? Is that £500 of home gym equipment still doing it for you?

#5 – Trading Stocks

Next up is stock picking, and the tool we use for this is Stockopedia. While long-term investing seeks steady long-term returns of around 8-10%, stock picking CAN result in 100%, 1000%, or even higher returns.

Stockopedia works by first serving you up a series of stock suggestions based on specific criteria – such as growth, dividends, mirroring an investing guru’s methodology, and more – and then tells you pretty much everything you need to know about a stock’s financials all on one page.

Stocks are ranked by Value, Momentum and Quality out of 100, and you can easily find stocks that excel in all areas.

While highly ranked individual stocks are by no means guaranteed to be winners, historical rankings have had a high correlation overall with whether stocks performed well or did badly.

Try Stockopedia for free for 14 days using this link, and see what you think. The link gets you a 25% discount too, if you stick around for more!

#6 – Crypto Mining

Now here’s a way of taking advantage of the crypto craze without feeling the need to buy speculative investments. All you need is some graphics cards, a computer, and an internet connection, and you can set your computer to mine cryptocurrencies while you go off and do something more fun,

Mining crypto can pay hundreds or even thousands of pounds a month, and scales with the number of graphics cards you own.

You might already have the equipment if you have a gaming or video editing machine. With just one graphics card you might make a couple of hundred quid a month. Add this on to some of the other ideas in this article and you’re on your way to 1 grand. Invest in several more graphics cards and you’re already there.

For a more in depth look into crypto mining – check out this article next on the 3 Big-Money Side Hustles To Start In 2021.

#7 – Use Your Assets

Do you own a driveway? Rent it out for someone to park on. Do you own a car? Get paid up to £100 a month for placing an advert on your car at

Do you own your home, whether outright or with a mortgage? Then rent out a room or two to lodgers, for hundreds of pounds a month each.

I once rented out a room in my home for £400 a month over an 18-month period, netting me over £7,000 tax free.

An asset doesn’t have to be physical, or even something that costs money. Do you have a risqué story to tell, that a magazine or newspaper might pay good money for?

Gossip magazines love this rubbish. According to, you can get £10,000 or more for a good bit of goss.

Similarly, if you’ve caught a unique video or photo on your phone, someone in the media might want to buy that too – preferably of a politician eating a sandwich in an unusual manner (sorry, Ed!).

#8 – Online Jobs

Next up are a whole bunch of ways you can make money online from your sofa, while reruns of 90s sitcoms play away in the background.

Anything you can do online that trades your time for money is really a second job, but there’s nothing stopping you having several online “second jobs” at the same time, and anyone can qualify for them.

PeoplePerHour is a popular site which matches paid project work with people who want to do the job. Here’s some current trending examples of work on offer.

Do you have a skill that you can use in the evenings and weekends to bring home some extra cash from doing online project work? This might range from being able to type to being able to code. The rarer your skillset, the bigger the bucks.

Then there are sites like, who pay you to test websites and apps.

You might also try your hand at designing stuff for sale on Etsy or – stuff like this sweet MoneyUnshackled Wage Slave mug. Of course, people would actually have to want to buy your products for you to make any serious money fast…

Finally, you can make fast money from online surveys and market research video calls. Someone we know who does this in their evenings in front of the telly made over £1,600 over the last 12 months, split out like this. The pay-out rate varies wildly, with household name YouGov amongst the stingiest.

12 months of actual returns from various Survey sites

#9 – Physical Side Hustles

And then, there are real world physical side hustles that almost anyone can sign up to and start making decent money fast in their spare time.

These include gig economy jobs like Deliveroo and Uber that you can do in your own time, product testing where you get sent stuff in the post to report back on, being a mystery shopper, and cat sitting.

#10 – Medical Trials

People are also paid good money to take part in medical trials – a quick google cites numbers of £100 a day to £4,200 per trial.

Medical trials don’t normally get to the testing on humans phase until they’ve been thoroughly laboratory tested in all other regards, and can range from initial human testing through to a box ticking exercise before a new product goes to market.

The medical testing companies all cite ensuring your safety as their main concern of course, but that’s a judgement call for you to make.

What other ways are there to make £1,000 fast? Join the conversation in the comments below!

Written by Ben


Featured image credit: Inked Pixels/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday: