Saving
The emergency fund question is really a question about your job
Three months, six months, a year — the standard answers ignore the variable that actually decides it.
Finance Ridge — Money decisions, worked through properly
Budgeting
Zero-based budgeting survives contact with an irregular income
Most budgeting methods assume a predictable salary. Here is the version that works when the number changes every month.
Latest analysis
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Investing
Fees are the only part of an investment return you can predict
Nobody knows what markets will do. Everybody knows what a one per cent annual charge does over thirty years.
Investing
Risk tolerance is not a personality test
How much risk you should take depends on your time horizon and your capacity to absorb loss. How much you feel comfortable with is…
Debt & Credit
The avalanche and snowball methods, and when each is right
One pays less interest, the other is finished more often. The evidence on which works is not what the arithmetic suggests.
Debt & Credit
What a credit file actually records, and what it does not
Credit scores are widely misunderstood, partly because the number most people see is not the one lenders use.
Housing
The costs of buying a home that never appear in the asking price
The purchase price is the number everyone negotiates. The running costs are the number that decides whether the purchase works.
Quick reads
- Inflation does not affect everyone at the same rateLong-term Planning
- Insurance is not an investment, and treating it as one is expensiveLong-term Planning
- Compound interest is not magic, but the time axis isInvesting
- Track spending for one month before you change anythingBudgeting
- Sinking funds are the reason some households never have an emergencySaving
- The true cost of renting is not just the rentHousing
- The 50/30/20 rule breaks wherever rent takes half the incomeBudgeting
- Subscriptions cost more than the sum of their monthly pricesBudgeting
- Friction is the cheapest spending control there isBudgeting
- Splitting household bills when the two incomes are not equalBudgeting
Budgeting
All budgeting →Budgeting
Zero-based budgeting survives contact with an irregular income
Most budgeting methods assume a predictable salary. Here is the version that works when the number changes every month.
Budgeting
Track spending for one month before you change anything
Budgets fail because they are built on an estimate of your spending. The estimate is almost always wrong.
Budgeting
The 50/30/20 rule breaks wherever rent takes half the income
A budgeting heuristic written for a different housing market still gets quoted as though the proportions were laws of nature.
Saving
All saving →Saving
The emergency fund question is really a question about your job
Three months, six months, a year — the standard answers ignore the variable that actually decides it.
Saving
Sinking funds are the reason some households never have an emergency
Most financial emergencies are not emergencies. They are known costs that nobody set money aside for.
Saving
Bonus rates expire, and the account stops being the one you opened
Introductory savings rates are a marketing cost with a defined end date, and the business model depends on you not noticing it.
Investing
All investing →Investing
Fees are the only part of an investment return you can predict
Nobody knows what markets will do. Everybody knows what a one per cent annual charge does over thirty years.
Investing
Risk tolerance is not a personality test
How much risk you should take depends on your time horizon and your capacity to absorb loss. How much you feel comfortable with is…
Investing
Compound interest is not magic, but the time axis is
The famous curve is not about the rate. It is about how many years you leave it, and the last decade does most of the work.
Debt & Credit
All debt & credit →Debt & Credit
The avalanche and snowball methods, and when each is right
One pays less interest, the other is finished more often. The evidence on which works is not what the arithmetic suggests.
Debt & Credit
What a credit file actually records, and what it does not
Credit scores are widely misunderstood, partly because the number most people see is not the one lenders use.
Debt & Credit
APR, AER and the flat rate are three different numbers
Lenders quote whichever rate makes their product look cheapest, and the differences between the measures are not small.
Housing
All housing →Housing
The costs of buying a home that never appear in the asking price
The purchase price is the number everyone negotiates. The running costs are the number that decides whether the purchase works.
Housing
The true cost of renting is not just the rent
Comparing rent to a mortgage payment is the wrong comparison, and it misleads in both directions.
Housing
Early mortgage payments are almost entirely interest, and here is why
Amortisation is not a trick played on borrowers. It follows inevitably from charging interest on a balance that starts at its…
Long-term Planning
All long-term planning →
Long-term Planning
Inflation does not affect everyone at the same rate
The headline figure is an average across a basket that probably does not resemble your spending.
Long-term Planning
Insurance is not an investment, and treating it as one is expensive
The purpose of insurance is to transfer a loss you could not absorb. Every other use of it is worse value than the alternatives.
Long-term Planning
Retirement planning starts with an annual figure, not a total
The pot everyone talks about is an output. The input is what you intend to spend in a year, in today's money.