The Lights Just Went On!

I_should_be_rich_2

I have been lurking on this thread for a few weeks, which inspired me to finally register today. I have a relatively large mortgage which I should be overpaying - so why am I not doing this?

One reason is that - believe it or not - I actually never thought about doing this until I read this thread, or even realised that I could. Another is that, even though my income significantly exceeds my outgoings (at least on paper!), I don't seem to have the amount of money left over each month that I should have! Sounds familiar, no doubt...

A bit about me. Age 43, married with 2 small kids. Living abroad for the last couple of years (and probably for a couple more). I am lucky enough to be debt-free (apart from mortgage). I own one credit card, just used for flight/hotel bookings online, amazon etc and paid off every month.

Re: mortgage. We have a 25 year mortgage in UK with RBS. Term remaining is 21y11m and amount outstanding is STG 309,000K. House value currently approx #410K - acc to Zoopla & Mouseprice?). There are no penalties for overpaying on the mortgage - I just checked. This was our family home, purchased April 2006 but is now rented out while we are away, and rent almost covers the mortgage since interest rates gone down so no issue there.

I have a good salary, free housing and car etc. and when I add up all the other bills I do pay, I should have plenty of money left each month to overpay the mortgage, even though food, utilities, etc are much more expensive here than in the UK, and much less choice (ie one water company, one electricity company etc).

I think the main problem has been that being fortunate enough to be debt-free and having a good income has meant that I have not had to watch the money - and by not watching it, I have lost control.

Not sure there is much point doing an SOA until I see where the money is actually going, and also because I dont live in UK at the moment, so some things are very different.

So, just wanted to say that I've been at first shamed and then inspired by you lot - first thing I need to do I reckon is to start a 'Spending Diary' - starting today! - and get hubby to do the same. Once we figure out where all the money is going, I will work out what I can commit to overpaying and hopefully update here to keep me on track! I then need to find the calculator on here somewhere to work out how much I can actually reduce the mortgage term by.

Thanks to all who have shared their stories on here, and by doing so, have helped me 'switch the lights on'!!

SmlSave

Hello! nice to meet you...lookign forward to reading your diary

I_should_be_rich_2

Thanks SMLsave,

I think my Spending Diary is going to be very interesting - we are not big drinkers, don't gamble, just eat out occasionally. So I really can't fathom where the hell it is all going!!

My kids are 3 and 5 so my minimum MFW date will be 'before the oldest reaches College age' which allows me about 12 years, though hoping I can improve significantly on that.

ShineOn

Best of luck with this. It sounds oh so similar to our situation, although we're a little further down the road with 2 kids now at college/uni.
A couple of years ago we, too, found ourselves constantly overdrawn despite two healthy salaries. We decided to upsticks and move to a slightly cheaper area and get rid of the endowment, which was heading for a £40k shortfall :mad:, plus a large slice of the mortgage.
We then made a concerted effort to pay off the car, new kitchen and new bedroom furniture loans before changing banks, utility suppliers, internet providers etc.
As a result, our monthly outgoings have been slashed from more than £1,800 a month before food and petrol to £500 a month.
Suddenly, the worries about losing our jobs have disappeared and we can plan what we really want to do with our lives. It is our intention never to borrow again, although that may be wishful thinking as we plan to move on again at some stage.
If you follow Martin's advice for finding cheaper suppliers, cheaper insurance etc etc it soon makes a big difference.
Enjoy the journey..:D

I_should_be_rich_2

Thanks Shine On,
Unfortunately I cannot change utility suppliers as there is no choice in the country where I am living. Monolopy rules - which of course makes things very expensive (eg my electricity bill averages over STG200 equivalent per month, and water over STG100 per month.

There are also other expenses here which I would not have in UK.

But I honestly don't think these are the issue. It is what is being wasted - the 'missing money' that is the issue I believe. I am ashamed to post my salary on here, as it seems ridiculously high, and I know most of you would probably have finished paying off all of your mortgages already if you were me, instead of just starting!!

Anyway, I've just completed a lovely (though simple) colour coded spreadsheet to be presented to hubby tonight, with columns for each of us to complete daily. So that's a start at least...........

I also get paid a bonus at the end of this month, so have decided to make my first once-off payment to my mortgage in June and then set up a monthly regular payment after that.

I_should_be_rich_2

Sorry if this is a silly question. But if I were to pay, say 10K in a once-off payment off the mortgage, would I see a straight 10K decrease in the amount outstanding, or would some of this be taken as interest?

Probably doesn't make much difference in the long run I guess, but for us it would mean having a mortgage beginning with a 2 instead of a 3 - which would sound so much better!

RosieTiger

Easy to spend money when you don't think about it - and generally waste it !
Welcome and good luck

Trying_to_be_good

I_should_be_rich wrote: »

... if I were to pay, say 10K in a once-off payment off the mortgage, would I see a straight 10K decrease in the amount outstanding, or would some of this be taken as interest?

You should see a £10k reduction in the amount outstanding, i.e. the capital owed.



Worth checking, though, whether your mortgage interest is calculated:

1. Daily (if so, pay overpayment asap)
2. Monthly (find out what day of the month, and pay overpayment in time to have cleared for this day)
3. Annually (find out the actual date, save elsewhere and pay overpayment to have cleared for this date).

Other will also advise to make sure you have sufficient savings for the 'bad times' - don't leave yourself without the security of savings of a few months outgoings.

Best of luck!

I_should_be_rich_2

Many thanks for this info, tryingtobegood. It's really helpful.
I will check with the bank as to when they calculate the interest, as I have no idea.

Good point on the savings. Because we have moved quite a bit for work (4 countries in 7 years) I have bank accounts all over the place, and I only know the balance for one of them, as I have online access for that. So that is another job for me this week to check what is where and possibly transfer all into one or two places.

I am only realising how disorganised I am. Strange, as I am very organised at work, it just seems to be all this personal and finance stuff I have lost control over.

StuartGMC

Good to see your honest posting here and that you are grasping the nettle. Gathering your data on expenditure will be the key to this and if possible it would be good to put it on the credit card if you can so you easily track it (i.e. minimise cash spend although I recognise that is not always possible depending on local circumstances).

If you can get a handle on things then you can save at the start of the month, that will likely give you 15% more than seeing what's left at the end of the month too.

(I've sent a spreadsheet for household budgeting to a fair few MFW here, drop me a PM if you want a copy to extract ideas from or use as is if it would assist)

You note 12yrs before colleague requirements but, why not consider that your latest date to achieve it, i.e. aim for 10yrs and then you have two years to start the savings for your eldest?

Good luck and I look forward to hearing of your progress

I_should_be_rich_2

Thanks Stuart for this. The spreadsheet would be great - I have many talents, but Excel is not really one of them!

I see what you are saying about tracking everything through the credit card, but they are not widely accepted where I live (supermarkets, hotels etc would though). Also I have a low limit (by choice).

For some reason I have all my life been scared of credit, I don't think a credit card company have ever made a penny from me. Just various mortgages along the way. It's weird, having a credit card with 10K credit would scare the life out of me, but having a 300K+ mortgage never made me lose a night's sleep. Strange how our minds work sometimes.........

So anyway, my plan is to:

1) do a spending diary for the remainder of May, which should start to give me some idea of the 'wastage'. (Just worried that we will be so aware of spending now, that the wastage will stop, and I will never find out where it was going!!)
2) make a comprehensive list of all regular monthly bills, allowing a reasonable amount for 'extras' (I am not considering bread and water stuff yet), and then from beginning of June transfer that much money into a local account here to live on.
3) The remaining money for each month to be paid into mortgage account.
4) Find out how much money we have in dormant accounts in other countries and move all to one account - probably in UK. Depending on how much is there, hoard approx 10K (??) as 'savings' and use remainder if any, for mortgage overpayment.
5) I get paid a bonus twice a year and will now pay this (2 X 10K) off the mortgage also.

That's all I can think of right now, but I think it would be a good start. Seems simple on paper, no doubt it will be more difficult in practise, especially the Spending Diary to remember every day.!


Edited to Add: Stuart, re: College thing. Yes, I would use that as my LATEST MF date. But am hoping I will have booted this mortgage out of my life way before then. Don't want to commit to a Goal Date yet, until I see how much we can realistically throw at it first. I believe targets should be tough but achievable. So by next week I shoudl have a Goal Date to update here!!