Ladder of Personal Finance, the UK version

These are my notes from reading the “I Will Teach You To Be Rich” article and applying a UK translation to the rungs of the ladder. The original article by Ramit Sethi can be found here at

Three aspects of investing are mentioned:

  1. Retirement
    • Investing will help lowering the age at which you could potentially retire.
  2. Generate income
    • It’s important to have more than one stream of income, e.g., not just relying on your salary.
  3. It’s easy to do
    • Using automated systems takes the manual effort of things.

Ramit describes steps you could take toward investing as rungs on a ladder, I have used the same titles for each rung but then explain what it would look like for a resident of the United Kingdom.

Please note, I am not a financial advisor, and this post is for information only. I do not make any specific recommendations; you should do your own research.

Retirement ages, investment limits etc. are correct at the time of writing although these are subject to change.

The Ladder of Personal Finance

Rung 1: Contribute to your 401k

In the UK this is the equivalent of your work-based pension. The key to this first step is to contribute enough to meet your company’s match, e.g., if they offer a 3% match then you should be contributing at least 3% of your monthly salary.

The contributions are made pre-tax, one outcome from this is the pension can grow much faster compared to a post-tax account.

Tax is paid when your contributions are withdrawn during retirement.

It is definitely worth at least meeting your employees match as otherwise, you are just leaving free money on the table.

Usually, you will have the choice as to where your contributions go as the pension provider will have several constructed investment profiles. These may be set according to your risk profile or time to retirement.

You can start to withdraw your contributions from a private pension at 55 although this is expected to rise to 57 in 2028.

Rung 2: Pay off high-interest debt

There are a few methods commonly used to make this more achievable:

These two links are both from US resources, but they are both applicable. I have followed the Dave Ramsey debt snowball to get out of debt as I needed to see progress and get a win under my belt – that’s just my mindset, choose whichever method sounds like it fits with you.

Rung 3: Open a Roth IRA

In the UK, the Roth IRA is replaced by the ISA, an Individual Savings Account. This is a post-tax account meaning that contributions have already had tax paid on them.

There are some real benefits to the ISA:

  • There is no tax payable on dividends in the ISA.
  • There is no Capital Gains Tax (CGT) or income tax.
  • There is no tax payable when you withdraw from your ISA.

The current limit on contributions in a single tax year is £20,000 (for a stocks & shares ISA). Contributions can only be made to a single ISA in each tax year, you cannot split the allowance between ISAs from two different providers.

Commonly, you will see the action for this step is to max your contributions. This is far easier to do in the US as the limit is $6,000 – around £4370.

Once contributions have been made to a stocks & shares ISA they will need to be invested, don’t just let your contributions sit there not working for you.

Funds can be withdrawn from your ISA at any time although you should view this as a long-term investment.

Vanguard and Freetrade are both good options due to their low fees, but of course, do your own research as conditions vary over time.

Rung 4: Max out your 401k

A 401k has a contribution limit of $19,500/year (under 50’s) and $26,000/year (50 and over). With this level of cap it is easier for individuals to max their contributions. The cap for pensions in the UK is different.

At the time of writing, the contribution cap across all pension accounts is 100% of your salary up to £40,000/year. This covers private pensions and work-based pensions, as well as any tax relief contributions.

With the cap in the UK being higher, it is not a realistic expectation that someone could max their pension contributions especially if they are looking to max their ISA each year too.

Rung 5: Open a non-retirement investing account

In the UK this would usually be called a General Investment Account (GIA). There are no limits on how much you can contribute but there are also no tax benefits to this account either.

Contributions are made using post-tax money and dividends/income is taxable, CGT is also applicable too on the sale of investments (subject to annual personal allowance).

Additional steps that could also be included in this rung include:

  • Making additional mortgage payments.
    • This could save you thousands of pounds in interest and take years of your term.
  • Invest in self-development.
    • This could be through training, conferences, coaching (physical, business, life)
  • Starting a side hustle/business.
    • There are literally thousands of ideas, try a quick Google (or use Duck Duck Go search if you value your privacy 😉 ) search.


I hope you have found this article useful, I had been meaning to write this for a long time, as a lot of information in the personal finance world originates from or is targeted to the United States.

I would love to hear your feedback on this article – has it helped, are there other “personal finance ladders” or “baby steps” that you would like to see translated?

November 2020 update

Quiet month for me in general so I’ll crack on with things…

Additional Income Streams

  • Matched Betting £137 (Oct £275)
  • Surveys/studies £10.21 (Oct £16.56)

Things were a bit slower this month with my matched betting although I still made a >£100 profit which I’m fine with. I wasn’t feeling it for a good while so just dipped in and out as I fancied it.

How did I do in November?


  • Emergency Fund £1,150.80 (£1,107.69)
  • ISA, Freetrade £3,546.79 (£2,187.76)
  • ISA, Hargreaves Lansdown £2,682.73 (not recorded)
  • Pensions £97,194.47 (£94,943.49)
  • SAYE £390.00 (£360.00)
  • House £350,883 (not recorded) *HPI current valuation


  • Credit Card -£1,728.26 (-£2,299.60)
  • Student Loan -£3,806.77 (-£3,960.77)
  • Mortgage -£189,487.04 (-£190,668.62)

Total Assets (excluding house) – Total Liabilities = Net Worth
£104,964.79 – £195,022.07 = -£90,057.28

Yes, I have a big mortgage and the repayments are pretty hefty but the decisions around that were made pre-FIRE journey.

We could downsize as we have a spare bedroom and an office/5th bedroom but when we looked into this a few years ago there just wasn’t much to gain if we want to stay in the current area. We’re not looking to relocate just yet as my daughter is in her final year at high school and then hopefully starting college. Renting out the spare room could be an option we considering though…

It’s not something I’d rule out in the future as I like the idea of geo-arbitrage although that comes with other considerations such as having the best dog in the world that we would have to take with us as I’d not even think about giving her up.


As you can see, although my spending and credit card payments are down this month, my savings rates are down too. Part of the reason for this is a bit of lethargy, I just struggled with motivation to bring in extra money which would have been used to reduce debt and increase savings.

Thankfully, my credit card payments should be done with ahead of schedule – it’s now looking like the bulk of the balance should be cleared in December and then January will mop up the remaining balance.

Whether then to start on paying down my Student Loan or to add to my Emergency Fund is the question. My Student Loan is under £4,000 and attracts a rate of interest of 2.6%.

I’d be interested in hearing your thoughts on this – would you clear the loan and be rid of all debt (except mortgage) or build your EF a bit more?

Future Fund

Continued good performance from my Scottish Widows pension scheme and a boost to the Freetrade ISA saw me edge past the £100,000 milestone.

So happy about this as it is the first big milestone that I have hit on my way to FIRE 🙂

Also, just while compiling my list of assets and liabilities/debts (above), I realised that I have not included my HL ISA in my Future Fund so that’ll be added from December onward.

I have set the next milestone at £150k which I plan to make in the next couple of years. Increased pension contributions, both from higher saving rate & higher salary, plus side hustles and general market performance although the latter cannot be relied upon.

Yay! I’ve awarded myself a badge 😀

Started recording my dividend payments in my Freetrade ISA (lazy portfolio) which can be seen in the graph below. I’ll provide a breakdown of my lazy portfolio in the future showing what funds I have.

Dividend Payments

Not likely to be retiring any time soon on the above level of payments but I expect these numbers to grow nicely over time. I’ve set an informal target of the monthly dividends being enough to cover my mobile phone payment which is not much, like £5, so should hopefully be achievable in the next 12 months. I’ll then add the next notional target – over time the goal is to have the dividends covering a significant proportion of my regular expenses.


I have taken inspiration and assistance from a couple of other FIRE bloggers in the creation of my monthly updates so I’d like to take the opportunity now to say thank you.

Weenie over at QuietlySaving – thanks for providing quality posts, yours was the first FIRE blog I started reading and it was from your updates that I “borrowed” the Future Fund concept. Also a big thank you for your help with my dividend graphing (see above) – I was banging my head against the wall with Apple Numbers trying to get it right, I then went from Excel (thanks!) to Google Sheets and I’m pretty happy with the result.

You can read what Weenie’s November looked like here.

Sassenach Saving‘s monthly updates provided me with the thought of breaking down my assets and debts for a month-on-month comparison. Check out their November update here.

Age Increase for Access to Private Pensions

Photo by Ena Marinkovic from Pexels

Dreaming of lazy days relaxing with a nice cup of tea or coffee pondering what useful contribution you will make that day?

Well, you may have to put that thought on hold, at least for another couple of years, thanks to the government.

From 2028, the minimum age at which those with a private pension can access their funds will rise by two years from 55 to 57. This was originally announced back in 2014 but the legislation was not amended to include provision for implementing the change.

On the 28th August, Labour MP Stephen Timms tabled the question asking the Chancellor of the Exchequer what plans he has to increase the minimum age at which people can access their private pensions.

John Glen (pictured right), Secretary to the Treasury, responded with the following statement on the 3rd September.

“In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.”[1]

This change will affect those in their mid-forties or younger with any future plans of retiring early at 55 or drawing down to supplement their salary will have to wait a further two years. This may not sound terrible, but it does demonstrate that the government are willing to poke their finger into the personal finance pie.

There is no saying whether the government will return to private pensions in the future making additional changes to the age at which we can access our pension.

In my opinion, if I choose to invest money in a private finance vehicle then it should be up to me when I access it, in accordance with the investment criteria that is. Private pensions and investments should provide individuals with options on how they spend their years whether that be working or pursuing other interests.

Mr Glen suggests that the change will encourage “individuals to remain in work” – well, what if individuals do not want to remain in work? If we have worked hard and invested wisely, it should be our decision to make. Some may be happy to stay in work and that’s fine, nothing wrong with that at all, but others there may be something else they want to try out to increase their happiness and wellbeing.

Despite my feelings on this I will continue to contribute to my private pension, I still feel like it is the right thing for me to do at this time, plus it would be silly of me to not take advantage of my company matched contribution too.

I will, however, be reviewing my numbers and adjusting accordingly to accommodate this change. I expect it will mean that I will need to depend on a higher level of income from my ISAs for those two years if I am at the point of Financial Independence by the time I reach 55.

How do you feel about this change?

Will it affect your plans for financial independence or early retirement, and how will you mitigate the change?


1. Glen, J. (03/09/2020). Pensions – Question for Treasury. Retrieved from on 13/09/2020.

June 2020 update

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Some good news on the work front this month, my team were told we would be returning to 100% hours from July – yay!

By Skitterphoto on

The entire workforce was put onto 80% time/salary at the start of May as a precautionary step to protect the financial wellbeing of the company. I was initially worried about the financial impact this reduction in hours would bring but we have coped fine thankfully, my wife picked up extra shifts so it lessened the blow a bit.

How did I perform financially? I’ve put together a few figures to try and establish some benchmarks for future months, there may be a bit more detail for some areas than others at the moment but I’m working on that.


This covers our expenses such as groceries, travel costs, pets, and any other discretionary spending for the month. Not sure how this would compare to other families of four but it is the lowest for amoutn spent in a month this year – not sure if that’s because we have been doing less or if I’ve messed up the tracking somewhere!

Travel costs are really low at the moment as my wife is cycling to work, I’m still working from home, and we have declared our car off road with the DVLA.

I anticipate a much improved accuracy for spending in July as I have taken up the use of an app called “Emma” which utilises the open banking here in the UK to amalgamate transactions and balances across mutliple accounts. More on this app in another post, but it you’d like to take a look and sign-up in the mean time, please use my link* as I earn in-app points 🙂

Credit Card

I was a little hesitant in adding this category as I feel a degree of shame about getting into credit card debt. In fact, I have carried around this type of debt since my twenties, occasionally paying off the balance in full only to build it back up again. But, as Vicki Robin says, “No shame, no blame”!

Decided to use some extra money we had to pay down the debt a bit more aggressively this month than we usually would. Feels good to see that number come down and also get the balance below 25% of my credit limit.

Having been listening to the ChooseFI podcast for a little while now, the idea of using travel reward credit cards has grown on me but I still harbour a “fear” of the cards and the trouble they can cause without sufficient will power.

Company Pension

I use salary sacrifice to make the most of my income, this reduces the amount of income tax I have to pay as my salary is effectively reduced. My company offer a 3% contribution match which I take advantage of plus I add a decent percentage on top of that.

The scheme is run by Scottish Widows and typically does okay but the 2019/2020 year ended in a negative performance percentage. This resulted in my pension pot losing a few hundred pounds despite the contributions.

Emergency Fund

Contributions to my EF were low this month, mainly because I forgot to add the money 🙁

Note to self: automate this to avoid the same happening again!

Pretty much all the podcasts and books talk about setting up an EF to cover three to six months of expenses, this feels pretty daunting when starting out. My first target is to cover one month’s worth, then I’ll aim for two months. I feel much more inclined to keep going when the goals are achievable, they don’t have to be easier but achievable none the less.

ISA, Freetrade

I opened my Freetrade ISA in May and added a further £310 to it during June. The cash balance was invested in funds according to my portfolio strategy which I’ll talk about in another post. I don’t have a magic link for Freetrade but if you are interested in opening an account (in the UK) then message me and I’ll send one through, we’ll both then earn a free share worth between £3 and £200 – nice!

That pretty much rounds out my thoughts on my June finances, a bit late in getting these written down and published but heh-ho 😀 Next month, I intend to get round to this a bit earlier and making small incrementally improvements to my systems should enable this.

Quick question for you, do you use reward credit cards? If so, what have they enabled you to do, what places have you visited courtesy of using these cards rather than using a debit card?

Thanks for making it this far! Let me know what your thoughts are on financial updates and the kinds of things you measure.

Have a great week 🙂

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