Warchests Warchests - Page 2
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Thread: Warchests

  1. #11

    I live on CUK

    Old Greg's Avatar
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    If you are paying down your debt, you are building up your warchest. But your starting point was a negative number.
    Quote Originally Posted by Bean
    I admit that I'm a lazy lying cretin, but so what?
    25 June 2018

  2. #12

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    It is possible to build up a decent stash, you just have to be disciplined about it. I've gotten less disciplined rather than more over the years and had a bit of a squeaky bum time of it a while ago. I had to cut right back and account for every penny and now have a rolling three month budget planning everything out.

    My formula for deciding my optimum daily rate is:

    ((Annual outgoings * 2) + 20%) / (5 * 40)

    So essentially earning twice my annual expenses in a 40 week year. That means I can stash the cash and take time off without worry. The 20% is roughly tax.

    I tweak the formula to work out the absolute minimum I could charge per day and still cover my expenses with a time off buffer.

  3. #13

    Godlike

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    I just winged it. you can't know what happens tomorrow.

    do what suits you, and any dependents.
    Entropy is NOT what it used to be.
    Inertia, however........................

  4. #14

    Still gathering requirements...


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    I’ve been contracting for just over 3 years. Before i went contracting I had my own savings war chest that would keep me going for 6-9 months if I made a hash of it / failed to get a contract.

    Luckily that war chest never got touched...because I’ve been in contract all that time.

    My other mission was to retain the standard of living I had as a permie (I’m fairly cautious) whilst building up a pot in the business.

    I’m now at a point where:

    1. I have a better standard of living than I did as a permie, because I pay myself a similar amount, but obviously more tax efficient, building up personal savings as I go (plus paid off small mortgage I had left)

    2. Every day I invoice I see as a day I don’t need to (if that makes sense), e.g. I only need to be in contract 5-6 months a year to retain my standard of living. Anything over that goes into the business pot.

    I know some guys, who’ve been contracting for 10, 15, even 20 years who fear being out because they’ve not put anything behind them.

    So I guess it defends his much you pay yourself, and ultimately how much you spend.

  5. #15

    More time posting than coding


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    Quote Originally Posted by DSF70 View Post
    I’ve been contracting for just over 3 years. Before i went contracting I had my own savings war chest that would keep me going for 6-9 months if I made a hash of it / failed to get a contract.

    Luckily that war chest never got touched...because I’ve been in contract all that time.

    My other mission was to retain the standard of living I had as a permie (I’m fairly cautious) whilst building up a pot in the business.

    I’m now at a point where:

    1. I have a better standard of living than I did as a permie, because I pay myself a similar amount, but obviously more tax efficient, building up personal savings as I go (plus paid off small mortgage I had left)

    2. Every day I invoice I see as a day I don’t need to (if that makes sense), e.g. I only need to be in contract 5-6 months a year to retain my standard of living. Anything over that goes into the business pot.

    I know some guys, who’ve been contracting for 10, 15, even 20 years who fear being out because they’ve not put anything behind them.

    So I guess it defends his much you pay yourself, and ultimately how much you spend.
    I took the same approach in having a war chest of about 9 months worth as I packed in a high paying permie role.

    I think of a warchest as any savings, so that includes ISAs etc as well as money in MyCo.

    I tend to save as much money as I can and if I get an extension or new contract, that's normally when I feel a bit more confident to splash out on larger purchases such as a planned holiday.

    I got down to £500 in MyCo at one point after a lengthy break. I still had other savings but psychologically I knew I had to build up the company funds when I got a contract shortly after.

  6. #16

    Fingers like lightning


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    Maintain 6 to 12 months worth of living costs (depending on your attitude to risk)...

    Do what the hell you want with the rest...

    I don’t think it needs over thinking beyond that...

  7. #17

    Should post faster


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    Quote Originally Posted by djm View Post
    I'm a Business Analyst, on £400 a day. That's a decent wage compared to other jobs, I've always been between £300 and £400. Talking to other analysts, and PMs, that sort of day rate seems to be the going rate. I've never met a BA or PM on more than 450.
    I think that's industry/location dependent. I'm a BA and seek a minimum of £500/day, and I'm not especially experienced/brilliant, but work in London in FS. I'm probably at the lower end of the spectrum in terms of day rate.

    I've also struggled with building up a warchest over the last year - wife currently not working (young child/possibly another on the horizon) and chunky expenditure (£5k / month), but we do save £500-750 per month. However, I tend to treat personal and business savings as separate - were I to be benched, I would prefer not to have to dip into my personal savings.

    You mention a max dividend of £3,667 - of course, you can take more than that, but it'll push you into higher dividend rate tax.

    I tend to take circa £400/month expenses (petrol, use of home office), salary for myself and my wife (who does the administrative stuff), and then split £3500 dividends 50/50.

    If you're single, or have another household earner, I think contracting works much better. For us, it's been a way to amass cash very quickly, shoot up the housing ladder and give me a broader experience in my career, but it's a helluva risk and it does give me sleepless nights. At the moment, beyond 4 months benched and we'd be in very hot water, which I think makes me susceptible to having to take permanent roles when the time comes to move on.

  8. #18

    Should post faster


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    Rule of thumb I live to is that I only take up to the high rate tax threshold plus any expenses I have in the month. From that I then live on what I was taking home after tax as a permie which saw me comfortable enough. Anything else I put into a personal savings account.

    At the end of this tax year, and only after three contracting I'll safely have at least 18 months in the company and a few quid put away personally which has already been subject to tax.

    I live on my own and don't live a frugal life - it's easily comfortable to achieve a decent war chest particularly if you've had a good run without any bench time.

  9. #19

    Contractor Among Contractors

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    Quote Originally Posted by Old Greg View Post
    If you are paying down your debt, you are building up your warchest. But your starting point was a negative number.
    Very good point.

    One of the first things I did when I had a decent 'chest going was clear down an old (and horrifically APR-laden) credit card from a debt I'd taken on in more desperate times. The kind of thing where you pay off £20 and they add £50 of interest a month.

    Getting rid of the rubbish is all part of shoring yourself up. I could've moved it to a 0% deal but it was nice to just get rid.

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