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Friday, 9 October 2020

We're Emigrating

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Trading flags. 
When it comes to my finances, I have realized that being efficient is a key skill. Doing the things that gives me the best return per unit of time, money and effort allows me to take the biggest strides forward.

This focus on efficiency is what lead me to move closer to my work, focus on a top down approach to cost cutting, and pretty much why I started forging my own path when it comes to retirement.

And during all of this, I started noticing more and more that one of our biggest expenses is also one of our most inefficient.

Make no mistake, I absolutely love South Africa, and this will forever be my home. We have an amazing country which is still filled with incredible opportunity. But as time has gone on, the awesomeness of South Africa has slowly started getting jaded by an ever growing inefficiency in our expenses.

In fact, this expense is so inefficient, that I end up paying most of it two, three and, now with our second son being born, even four times over. And I have the feeling that this expense is only going to get worse and worse and more inefficient going forward.

Now just to be clear, I absolutely don’t mind paying tax which helps uplift and support those who need it most. I also really don’t mind paying tax for the services which I use. 

But man does it irk me every time I see that PAYE line item on my payslip going off and reminding me that I am forking over a large amount of money every month without getting much back in return.

In fact, many of the services my tax money is meant to be paying for, needs to be bought again in my private capacity (in the form of medical aid and school fees – another two of my really large expenses).

Compounding the problem is that inflation on schooling and medical aid often outstrips CPI by a factor of 2 and sometimes even 3. And on top of all of this, is my belief that tax rates are going to be increasing over the next few years. 

Our country's budget was pretty much already on the edge before Covid, and now there is an extra burden of a large tax shortfall that needs to be recovered as well as a mountain of extra debt that we will need to repay.

I can’t shake the feeling that we may be heading into a bit of a Tax vicious cycle – more of our small tax base are going to get fed up with high taxes, which in turn will mean more of them will emigrate, which will in turn decrease the amount of tax collected, and that will result in the need to increase tax rates further - circling back to more people getting fed up with the high tax rate.

(Of course that’s just a theory and my own personal viewpoint - South African’s are a resilient bunch and have been known to overcome some pretty immense challenges. Maybe (and I really really hope) I am wrong.)

So this inefficiency (and yes I know, I know crime is bad (although if we going to be complaining about crime we should be complaining about our road death rate too) and corruption, and SOEs and unemployment) has reached a point where I felt it was starting to outweigh the awesomeness of staying in South Africa. 

And so I have taken the sad and terrifying, but also immensely exciting decision to accept a job offer in the UK. 

In a few weeks’ time my family and I will be packing our bags and emigrating.

Now I am sure there are some questions around this, so let me try address what I think will be some of the more common ones.

Isn’t emigration really expensive?

Yes– Visas, plane tickets, shipping containers, selling up stuff etc etc. adds up very quickly. I am extremely fortunate that the company I am going to are footing most of our relocation bill.

So yes it is going to cost us, but it won’t set as back as much as we initially thought. 

Aren’t tax rates in the UK high?

Interestingly the average percentage tax I will be paying in the UK is almost bang in line with the percentage of tax that I am paying in South Africa. But my UK tax expense covers all schooling (with two kids that’s worth north of R1 Million here) and medical (difficult to put a figure on that, but medical aid for our family of 4 (on our cheaper hospital only plan) is around R60,000 year, and that’s excluding all the Doctor’s visits and medicine.

In addition there is also a fairly generous state pension that tax payers are entitled to once they hit retirement age.

So yes, the UK has similar tax rates, but you get a lot back for the money you pay. 

But the UK cost of living is crazy?

Housing in the UK is generally very expensive. But note I said generally – because while in places like London you can easily pay upwards of £1200 (~R30,000) per month for a 1 bedroom shoe box, where we are going you can get a 3 bedroom house with a garden for half that cost. That is a little more expensive than in South Africa, but actually pretty comparable.

Then anything service related is pricy – eating out, haircuts, that sort of thing. (And that’s mostly because the minimum wage is so high). But this also varies according to where in the UK you are.

Groceries are maybe a little more expensive, but more or less in line with South Africa.

And of course the higher cost of living is offset by better salaries (at least in the industry I am in). Converting the pound salary I am getting back to rands gives me about a 20% increase in salary.

And then when you consider that minimum wage is around R180/hour, most households do okay even with entry level jobs. So our pretty solid plan B would be for the missus and I to flip burgers if needs be :)

What are you doing with your investments?

For now I have started cashing everything out that is non-tax advantaged. My wife and my discretionary investments are going to be phased out and converted to pounds on the other side. 

The UK has what is called ISAs (individual savings accounts). Think of it like a very generous TFSA with a lot of flexibility, a huge annual limit, and no lifetime limit. So these investments will find a welcome home there.

I have left my TFSA, Preservation and Pension funds alone for now, but these will likely get moved over as well sometime in the future. I first want to bed down the physical emigration before the financial emigration. 

Are you still aiming for early retirement?

In short yes. 

In fact I think I have a better shot of making our early retirement target of 2030 by being in the UK (especially when my wife starts working after our youngest son starts school).

We are definitely taking a step back by moving over (converting our Rand investments to Pounds does not go very far). So our "relative net worth" will be taking a knock over the short term. But I see this as an investment into hopefully getting further ahead over the remaining years.

Having a UK state pension for both my wife and I, and the free schooling and medical is a HUGE plus. 

Of course I only have an idea of what our cost of living will be like, and the real planning and journey end date estimation will only happen once we have a better handle on our expenses and plans going forward.

Whether I will make 2030 remains to be seen (and remains an extremely tough ask), but I am certainly going full steam ahead to try make it! 

What’s going to happen to the blog?

Well, for now not much. 

After more than 4 years of blogging here, there is quite a collection of articles which I believe people will still find useful. You may have noticed some ads have appeared on the website of late (please let me know if you think they are too intrusive or whether you think they are at an acceptable level which does not degrade the reading experience). At this point the ads should cover the hosting and domain name costs of the website, allowing the site to pay for itself.

As I mentioned, I will be leaving some investments behind in South Africa for now, so I may well still post going forward, but it is not going to be as regularly as the last 4+ years.

Some pages will also be “retired” (they will be left at their URLs to ensure no broken links, but they won’t be listed on the home page etc. anymore). Unfortunately no more meetups, and the tracker page won't be updated going forward as I move my money over to the other side. 

I am going to try stay responsive to questions I get via the website's contact form, but expect a slower turnaround time as I try simultaneously deal with all the emigration admin.

As for my social accounts (Twitter and Facebook) I will probably keep those going. While a lot of financial principles and my thoughts around personal finance transcend currencies and geographies, there will naturally be some Pound, Fish and Chips (and obviously) kak weather related content appearing on my socials in future :)

I may start a new blog once we are settled in the UK, but that could be a while away as my focus moves fully towards getting set up and settled in our new country. I may even continue to keep this blog going. Who knows! :)

Yes, but isn't the weather really horrible in the UK?

Well would you look at the time, that's enough questions!

Farewell, for now...

This blog has given me an immense amount of pleasure and I have had a lot of fun interacting, sharing and learning with all of you. I have also had some incredible opportunities open up as a result of the blog - including a few radio spots and even a TV appearance :)

I thank every one of you who ever left a comment, shared a post, liked a tweet or gave me a mention - you have helped grow the personal finance and FIRE community by spreading the word. 

Over the years I have seen a really vibrant, inspiring and just downright cool community forming around helping South Africans be better with their money. Long may it continue!

Thank you for joining me on my journey up until this point, and I wish every one of you every success in your own journey. 

May you all achieve financial freedom!

Till next time,
Stay Stealthy!