FIRE Finances in the UK - Quarterly Review: Q2 2023
Welcome to quarter 3 of 2023, if you’re anything like me then you’re still wondering what the hell happened to 2019.
The end of June means it’s time for the Q2 review, so let’s get straight into it…
This is how we’re looking – if you ignore the artificially inflated Q3 & 4 from last year (when I was holding some non-retirement cash in my premium bond account temporarily), we’re hitting all-time highs!
I’m riding an upward trend in the markets. The diversified fund that I keep most of my ISA and SIPP holdings in, Vanguard’s FTSE Global All Cap, has had a strong first two quarters, making me feel somewhat better about the dismal performance last year.
So, things are looking broadly positive. A reminder that I focus on liquid net worth when reviewing my finances (you can read about why in my last quarterly review), so these reviews don’t include house price movement. If they did, I can imagine that I’d be slightly more concerned with the immediate future.
Interest rate rises to combat inflation are going result in a house price crash. If you look at inflation-adjusted house prices over the last few years, we’re already seeing house prices coming down.
In Q2 2021 the average house price was £242,709.
In Q2 2023 that average house price has risen £261,995 (an increase of roughly 7.9%).
But inflation over that period has been more like 17%!
Inflation continues to suck. Like most people, I’m just paying more for essentials. My spending choices don’t really have much fat left to cut. I live in a modest area with a small mortgage, I’m not taking holidays abroad, I ride a bike to work, and I’m living relatively frugally while saving 40-50% of my income…
I do all of this as a top 10% earner in the UK, and yet according to my own estimates, thanks to massive price increases over the last two years, which haven’t been accompanied by equally large salary increases, retiring at 55 might be beyond me.
I’m deeply concerned about the majority people in my generation who are not as well off as I am, and who are almost certainly sleepwalking toward an under-funded retirement.
What happens to those people when they are unable to continue working? Most likely, grinding poverty and dependence on a welfare system which isn’t designed to provide anything like a dignified or comfortable quality of life.
So, once again, I’m ringing an alarm bell here: our current economic system is no longer working for most people. We desperately need radical reforms.
I don’t know whether UBI or a similar scheme is the answer. All I can say with certainty is that meaningful change is long overdue.
My local MP happens to be Rachel Reeves, the woman who will probably be the next Chancellor of the Exchequer. Maybe I’ll invite her to answer some questions from a constituent on how the Labour party plan on making radical changes to the economy. Recent headlines do not fill me with hope.