Should I pay or should i go...

MikeyB012009

Hi everyone

Wife (29) and I (30) have been casual viewers and users of MSE website and tips for a few years now but just joined up for the forum. We bought our (hopefully soon to come) family home in Aug 2009, got married in May and have over the past 6 months sorted out our finances so that we are "immediate" debt free by Xmas.

Looking forward, we want to start saving money, either by reducing the mortgage or putting away some savings. Anyone got any tips on what balance is best, or based on below any savings you think we could/should be making?

In £2600

Me £1400/month
Wife £1200/month

Out
Groceries £350
Mortgage £700 (112k outstanding, 16 months remaining on a 4.99% fixed rate deal)
C/Tax £200
Gas/Elec £70
TV/Phone/Net/Licence £75
Mobiles £40
House Ins £20
Car Ins £20
MOT, tax and repairs £40
Petrol £120
Train season ticket £100
Clothes £50
Hair/Beauty £50
Weekend spends £200
Hols £100
Birthdays/Xmas £50

So in total, i reckon we spend £2,200, leaving £400ish a month. At the moment we're putting £330 to loan and CC payments which will be cleared by Feb/March. so what to do with this after then??

Cheers

Mike

dawyldthing

If it was me:
Groceries - seems really high - could you cut it back a bit?
gas an electric - are you on the best deal possible?
TV.... - are you on the best package? as you can get the phone at £9.99 if you pay 12 months in advanced and £12 unlimited internet with orange, then £12 for your TV licence - so would cut it down to half.
Petrol costs seem high
Weekend costs seems high (depends where your from though as if its London then it sounds about right).

They say to allow 3 months savings for a rainy day, and you can get accounts atm easy access with interest rates of more than 2.5% to help with savings. Other than that I would pay the rest off your morgage if your provider allows for it.

dimbo61

Normally I would say 50/50 to overpayments and savings but at 4.99% I would overpay the mortgage by say £300 and build up savings by £100 a month.
Do you have any other savings ? 3/6 months in cash ISA,s can mean the difference in happiness and misery when the car goes bang or the boiler blows up!

Marco12452

If you are accurate in the £400 per month, then there are a few things that would be advisable to remain debt free.
If indeed you can use thie full amount for investment then as mentioned earlier overpayment of the mortgage is a good idea. A lot of mortgage deals will not allow overpayments though, or limit them to a % per year (though with 116K you are going to come within this even if as low as 5%).
If you are not able to overpay though, I would suggest placing your excess cash into an ISA where you will start to accumulate tax free savings. Most current cash ISAs are at a rate below 3% though which won't cover RPI, even with the tax break (without the tax break you would need around 4% to just keep even).
I would suggest setting up an funds ISA with a fund supermarket like 'the share centre' or 'interactive investor', both can be managed on the internet. If you are confident enough to do this and are happy to take this step, you can divesify your savings as investments that cover a wide range of sectors and with a little research can provide much bigger returns, but you have to accept the risk with it. Historically, over time, the returns are way above basic savings but are considered to be longer term, say 5 years. You can pay both monthly and by lump sum into these.
If you cant overpay the mortgage and choose this option, you can pay up to £10,200 per person into this kind of ISA or split 50/50 between cash or stock ISAs.
I would consider £300 of your 400 for a funds ISA (or the mortgage) and pay, £100 into a cash ISA. This would help you build an investment and a savings pot that would be available for any contingency.
It has the added bonus of not being too handy to use on a whim, but is always still available.

theoretica

Can you borrow back overpayments to your mortgage? If you can then there isn't much distinction between savings and overpaying.

If you can't borrow back your overpayments I would personally put all the money in savings until I had a comfortable level built up, then switch to overpaying the mortgage. You can always transfer money from savings to the mortgage. Personally I would want to cut down on the discretionary spending to make the savings grow faster, I really like the comfort of having a few months worth of expenses saved and if you are thinking about parenthood then going into it with savings would be no bad thing!

You could save several hundred pounds from this lot, it all depends how you balance security of savings against spending now.
Groceries £350
TV/Phone/Net/Licence £75
Mobiles £40
Clothes £50
Hair/Beauty £50
Weekend spends £200
Hols £100
Birthdays/Xmas £50

Catherine_Johnson_2

MikeyB012009 wrote: »

Groceries £350
Mortgage £700 (112k outstanding, 16 months remaining on a 4.99% fixed rate deal)
C/Tax £200
Gas/Elec £70
TV/Phone/Net/Licence £75
Mobiles £40
House Ins £20
Car Ins £20
MOT, tax and repairs £40
Petrol £120
Train season ticket £100
Clothes £50
Hair/Beauty £50
Weekend spends £200
Hols £100
Birthdays/Xmas £50

I guess everyone has their own priorities on what they spend their money on but some of your monthly expenditure seems quite high.

For instance - TV/Phone/Net/Licence £75. You should be able to cut the TV part out of this quite easily as I assume this is pay TV (as you mention the licence fee separately)? Try Freeview instead.

I assume that both the season ticket and the petrol are for getting both of you to and from work? Depends on where you work obviously but the petrol cost seems high just for work.

Stay in at the weekends and save money, or at least some of it. Start practising now for when you've got kids.

Sorry to sound picky, but £50 EVERY month on clothes? Seems a bit high, even for me!

I'll leave any comments on where to save to others. Good luck.

getmore4less

TV/Phone/Net/Licence £75
Mobiles £40

you should be able to trim these.

Mobiles can be had for very little or free still.
whats the call profile, minutes SMS dats etc.
Just keep an eye out for cashback deals
a quick look found £1.99 per month but not a lot of minutes.

TV Phone etc should be easy to get under £40 and probably as low as £30.

Groceries £350

Food is a bit high aim for £200 as the minimum and add in some discretionary on top depending where your priorities lie.

Clothes £50
Hair/Beauty £50
Weekend spends £200
Hols £100
Birthdays/Xmas £50

Mostly optional,
must have enough clothes for now, try charity shops to cut costs there.
Hair..... less often
weekend totaly discrecionary, have people round and spend less going out
hols £1200 gets a good one or a couple of ok ones.
£600 on pressies I would start cuuting back, do mutual no pressies this year with people.

Car Ins £20
MOT, tax and repairs £40
Petrol £120
Train season ticket £100

HOw much is the car worth can you make economies here wats it do MPG and whats the tax.
Nothing in the SOA for replacement they don't last forever and you don't want to be getting a car loan when you change.



£70 surplus are you really saving this every month.