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Tips for Reaching the Pillars of FI in the UK

As you can see from my bio, I’m currently living in London, England. In the UK, there appears to be less of a FI presence than in the US, but it is growing as the meetups show (the picture above is me at one of the FI London meetups). That said the overwhelming amount of FI resources are for the US, and I thought I’d take a stab at trying to take a starting point of FI and make it more UK friendly, that starting point being the Pillars of FI.

I’ve talked about the pillars of FI from a personal stand point, but today I want to try to approach them from a person living in the UK. Please note though, that as an American citizen living anywhere else in the world, there are complications, so this post is not for them. Next week, I will write up one a post on being an American and trying to achieve FI in the UK. For now though, let’s go through the Pillars of FI in order and see what they are like in the UK.

Index Fund Investing

Index funds are called tracker funds in the UK. Vanguard also exists in the UK and has a number of fan there as well. A good overview of the funds available from Vanguard is on the Bogleheads wiki.

Low Cost Housing

There are a few ways to get cheaper housing in the UK. One is called the property guardian scheme, where rents are cheaper, but places are not as nice some of the time and you don’t have a long term lease or security (you are sometimes required to move out within a few weeks of notice). For the wannabe house hackers out there, there are also Help to Buy mortgages as well which are like FHA Loans with 5% deposits instead of the usual 20%.

Crush your grocery bill

Everyone eats, no matter what country you live in. And it’s generally cheaper to eat in than to eat out in most places you go. Definitely sign up for grocery store rewards programs like Nectar and Tesco Clubcard though, as they do provide points for future purchases.

And if you must get food from a restaurant like we are prone to do on occasion, try to see if your eatery is on a British Airways partner like Just Eat or Hungry House, so you can collect a few points on the order. Also, another interesting way to save money on restaurant food is using the Too Good to Go app, an app made to help restaurants get rid of excess food and not throw it away.

Buy Used Cars/Save Money on Transport

I don’t own a car in the UK, but from what I can tell it’s roughly the same idea as the US.

If you are like me and take the train, though, I do recommend Train Reeclaim, a free service to automate your train delay refunds in London. Just link it to a Transport for London account and it will attempt to fill out the refund request for you. Recommended for locals and travelers alike.

Tax Optimization

Unlike the US, taxes aren’t nearly as complicated. Most people don’t even have to file taxes, as they are just taken from your pay check and you just get a p60 form at the end of the year letting you know what you paid in taxes (this is called return free filing). Most people can also see how much will they will pay using a simple calculator. As the advanced options on the calculator show, the easiest way to lower your taxes is contributing to your personal pension. Generally, you can contribute £40,000 for tax relief to the pension each year and that allowance does carry over for three years in case you didn’t meet the allowance the previous years. Taxes are the part that get complicated for Americans, so I’ll go more in depth on this for them next week.

College Hacking

This is sadly where the UK also resembles the US, where there is a decent amount of student loan debt building up, but is unlike a lot of other countries in Europe. Admittedly, this is where my knowledge is weakest, even in the US, though that free college in another country plan is likely more accessible from the UK than the US.. So I’m soliciting community feedback on this.

Travel Rewards

You can earn travel rewards in the UK like you can in the US, just without the benefit of Chase and Citi cards. The bonuses are also not as a good and there aren’t as many no foreign transaction fee cards in the UK as there are in the US. Check out Head for Points for a great resource on travel rewards in the UK.

Cut the Cord

I think this should be called No TV license in the UK, which a tax the government makes residents pay to watch live TV (admittedly this was annoying during the World Cup). This also counts against live streaming of British TV stations as well, and recently you also need the license to watch BBC programs online as well. However, you can still watch the other stations online along with Netflix and Now TV (a streaming service that has HBO programming and other cable programs) without a license.

Multiple Streams of Income

There’s a great resource for that in UK, the Popup Business school. Their lessons transfer anywhere really, but feel the UK folks are lucky to have this particular home grown resource.

Savings Rate and the 4% Rule

Yep those rules still apply in the UK as they do just about everywhere (4% depending on your country’s inflation rate of course). Savings rate can be easily done with increased pension contributions. Also for UK residents who aren’t also US citizens, you also have an ISA allowance which is like an IRA in the states.

Next week, I’ll cover how I as an American citizen am trying to hit FI in my stay in the UK. Did I miss anything else about hitting FI in the UK? Let us know in the comments below.

Posted in Financial Independence

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