Onwards to freedom!

SuperSecretSquirrel

I've been absent from my diary for a little while, baby has been keeping us occupied! I figured now would be a good time to post an update.

Everything has gone to plan, and we have now overpaid the full 10% allowance for the year. That's a total of £6,397.91 manual overpayments in 2014. As a result, the savings balance is a little lower, but that was the intention - sacrifice savings earning rubbish interest in order to reduce mortgage balance charging a higher rate of interest.

Any extra cash we might have during the remainder of the year can help boost savings a little (in the past it would have come off the mortgage). We also intend to spend a bit on home improvements this year, and I'm considering giving up the company car and buying my own car next year. At least now the OP's have been maxed it's a simple case of chucking any extra cash into savings, then when the time comes for big purchases simply make a couple of painful withdrawals!

Having reduced the mortgage term quite drastically we'll still 'sort of' be making overpayments each month, so it doesn't feel like we're going to be totally standing still the rest of the year. Manually paying off an extra £500 a week felt great, but obviously couldn't carry on forever. I hope to do the same again at the start of 2015, £500 OP each week from savings to max out the annual allowance quickly, and then rebuild savings over the remainder of the year.

My voluntary PAYE pension contribution has now increased to 20%, so that's a half decent amount being set aside for the 'so long term it can't even be called a plan yet plan'. Short term benefit is that it's much more tax efficient, though of course it does mean less money now in the hope of more later. Hoping to get used to it and let it operate on autopilot, same as the monthly S&S investment, but should it become a problem in the future I can revise the percentage back down quite easily. It should be easier to cope with after next month, when my monthly regular savings account matures there will be a little more money available each month to either spend or save flexibly.

I'm spending pretty much all my free time with OH and LO these days, and it's fantastic. Self employed earnings will take a hit (but so far not doing too badly), but it's totally worth it

A couple of mortgage milestones reached thanks to Saturday's standard monthly repayment:
Daily interest under £8 (£7.91) :j
Mortgage balance under £55k (£54,557.67) :j

I'm way out of touch with all your diaries by now (not a lot of reading time these days sorry!) I hope it's all going well for you all!

juststuff123

Hi SuperSecretSquirrel

I've just joined this forum (or any forum). My plan is to be debt neutral Dec 2018 and we seem to have a similar size mortgage though quite different incomes. So I'm looking forward to seeing how you do and getting a few tips! I love your house / payment chart, I have a spreadsheet (well I have lots of spreadsheets) that will turn from red to green when hit my goal, with a master balance sheet that tracks all the savings and all the debts so I can see exactly when I'll be debt neutral. It's one long term goal but I like your idea of having some mini goals to keep you motivated. I'll have to have a think about coming up with some.

SuperSecretSquirrel

Hello, apologies for not keeping up to date!

Thanks for posting juststuff123, have read your diary and it all seems to be going swimmingly

Just updated MFiT3, our outstanding balance is £52,213.66. Would love to increase the capital repayments, but until January that's not really an option...

The facts:

• Mortgage rate 5.29%, penalty for exceeding annual allowance 6%, savings earn about 2% after tax.
• We maxed out our 10% penalty free annual mortgage overpayment allowance back in April.
• The interest on savings is rubbish, and I'm jumping through all the high interest current account hoops (and using my isa) to get what little I can.
• It would be stupid to overpay any more this year as the early repayment charge is higher than the mortgage interest rate, so even before you factor in lost interest on the savings it's a losing proposition.
• We're not comfortable reducing the mortgage term again as the current standard monthly payments are at a level that affords us some slack should there be any unforseen disasters in the short to medium term.

So, we can make no more overpayments until January 2015. In the meantime just floundering along.

The most sensible thing for us to do in January is repeat the same process again. Pay off the annual 10% penalty free allowance as soon as possible, savings earning about 2%, mortgage charging 5.29%, the sooner that money is moved out of savings and into the mortgage account the better. Result, floundering along for the rest of the year again, frustrated that overpaying any more would cost more than it'd save.

In hindsight, a 10 year fix at 5.29% was a mistake for us, far too cautious. A 5 year fix at 4.99% would have been cautious enough and by now we could be OPing as much as we liked with just a 1% ERC. Of course a cheap 2 year fix and no ERC would have been even better, but far too risky for our liking when we were buying! Lesson learned I guess - caution is just as much a gamble as being reckless where mortgages are concerned!

To end on a positive note, the Mortgage Neutral 2015 aim is going well. Currently sat at just £6,802.30 short of neutral There will be some big spends coming up soon so expect to take a few steps backwards in the next few months, but it's still looking good!

To any MFWers reading this - keep on pushing on!

SuperSecretSquirrel

We're pretty much two thirds of the way through the MFiT3 challenge, and things are going well!

Here's how our spreadsheet house looks now, so very close to neutral!


Today's mortgage balance is £50,393.61, and our combined savings figure is £47,056.74, so we are just £3,336.87 short of being mortgage neutral Had we not spent 4k on the house earlier in the year we'd be neutral by now (for a short while at least), but it needed doing and was well worth it in the end.

All told I am quite proud of all we've achieved this year, especially considering OH was on maternity leave for most of it! Christmas is all paid for (bar spending money for a couple of nights out) so outgoings for the rest of the year should be minimal, but I'll need to buy a car early in the new year... I expect to get within touching distance of neutral and then be set back a few months by the car purchase. How far we get set back depends on the car. I keep changing my mind between newish and hassle free that will last me many years but cost a lot upfront, and older with potential hassles that will cost less upfront but most likely more in repairs and running costs and need replacing within a couple of years. If it were to all go horribly wrong at work, and unexpected redundancy is something I always try to consider when making plans for the future, I would seriously consider going full time self employed. That would likely mean selling my car as the one family car would almost certainly be sufficient, selling the older car that had already done most of its depreciating would hurt the least, so that would be the sensible choice, but we'll see...

Thanks to MFW I'm able to play out disaster work scenarios in my head without feeling panicked. I think that has to be the greatest gift this has brought me. Saving many thousands of pounds is awesome, but the calm is priceless. I find myself thinking of redundancy as a possible opportunity, and not the worst disaster imagineable. I believe there's a slim chance of earning more if I were full time self employed - I wouldn't walk away from a good job that I enjoy to try my luck, but if redundancy were to force my hand I'd give it a shot! The other bonus is thanks to having OPd when the getting was good we could reduce our monthly commitments massively (either pay the mortgage off in full, or revert to the original term with much smaller monthly minimum payments) and should be able to scrape by ok on OH's wage, with whatever I earned while getting back on my feet being gravy on top. I've never felt so confident or in control, it's very empowering this MFW lark

Finally, a quick update on investing... My fund supermarket has finally started offering vanguard funds I'm now investing £250pm in my S&S ISA, split between vanguard lifestrategy80 and my original mix of low cost trackers. Coupled with the £640pm paid into my 'adventurous' pension fund, I think the transition from cash saver to investor is going rather well!

jodles16

Wows your diary was an intense overpaying read! So impressed!! And well done on being in touching distance of mortgage neutral, hopefully no matter what you buy you wont get to far from it! Congratulations on your baby as well, and the house spreadsheet is amazing!

Jodles

Marcello

Welcome back squirrel,I have been wondering when you would emerge from hibernation

SuperSecretSquirrel

Thanks for posting Jodles and Marcello, and for reading/thanking Edinburgher Nice to know that even though I'm not posting often people are still reading along! I do try to keep up to date with a number of diaries, and tend to read all the new ones that are under 50 posts long, but I only login when I have an update to make so haven't been posting/thanking much.

I've re-read my diary from the start today, and I'm really glad to have it written down here. It's amazing how much has changed over the past two and a quarter years, hard to believe it has only been that long. We've smashed through what we once saw as the best possible scenario regards mortgage (original optimistic target was mortgage neutral 10 years from purchase date, but we should hopefully manage it in just 5!), are fortunate to have developed additional revenue streams, and most important of all we have gone from being a couple to being a little family. Life is good, I'm in no doubt, and re-reading my diary has just reaffirmed that

I've been playing with my spreadsheets and the ERC debate isn't really all that clean cut anymore. I know once we're mortgage neutral the temptation to settle in full will be huge. If we were to do so we'd face a 6% fine, but that's not a massive amount over the 5.29% rate we have, and having run the figures in isolation we would actually be better off paying the ERC than paying off monthly over say two or more years. I'm still leaning towards avoiding the ERCs being the logical choice once the lost savings interest is factored in, but based on current interest rates we're not talking about massive numbers here... I can quite imagine that when we approach July 2015 (5 years on from purchase date) I'll be really tempted to pay off the mortgage in full! With the annual ISA allowance being so high now, I'm not even sure that there's a convincing argument for leaving the ISA untouched and just paying the mortgage down with unwrapped cash savings. I guess what we end up doing will depend on what happens to interest rates, so only time will tell

lisa110rry

Well, I've just read this thread from start to finish, and what a good read it is! I'm not a MFW as we have lived in our home for 28 years, and 28 years ago endowments were all the rage. Still, we had no bad shocks with the endowment and have been mortgage free for three years.

Your writing style is excellent SSS, I'm so pleased your family life is going so well and it's been a pleasure see how much you've achieved, how focussed you are and that you are spending all your free time with the family now.

Regards, Lisa

SuperSecretSquirrel

Ah, New Years Eve... I find no better time for an annual financial review!

2014 has been a good year for us, both financially and otherwise. Even with OH on maternity leave for most of the year we have managed to make fair progress towards financial independence. We are in a better position now than this time last year - that in itself is better than I had dared hope for before baby squirrel was born, but when reviewing the figures in detail I was very pleasantly surprised at just how well we'd done :cool:

Here's a snapshot of how things currently stand regards assets and liabilities:
House Value £125,000.00
Cash £59,482.43
Pensions £31,113.46
Car Value £9,000.00
S&S £3,052.50
Mortgage £50,546.60
Tax Due £14,088.23
Student Loan £6,905.75

That gives us an estimated joint net worth today of £156,107.81. According to my figures we were at £125,813.52 a year ago, so I'm very happy with the progress made this year! We must not have spent all that much in 2014... I'll admit that we're looking forward to spending more on holidays in 2015! :rotfl:

For the mortgage neutral calculation I take the sum of cash and s&s balances, then deduct estimated tax due and the outstanding mortgage. At the moment that calculation has us £2,099.90 short of neutral. I always overestimate tax by quite some margin so we are almost certainly mortgage neutral right now (until we buy a second car at least), but since the final tax calculations are done in arrears we can't really know for sure.

I'm looking forward to January and the fresh new fee free annual overpayment allowance it brings Sad as it may seem I've been looking forward to it for months! All being well I'm all set to shift £499.99 a week from savings to mortgage until the allowance is maxed out in March. Plenty of milestones to look forward to in the first quarter of 2015!

Happy New Year to you all!

PS - Thanks for reading Lisa, and for your kind words!

pathtofreedom

I had a read of your diary last night while trying to calm a panicked dog due to the firewords who was superglued to me.

You've done amazingly well in your time here, and it is a real inspiration. I was thinking of focusing more on savings this year than the overpaying but after reading your diary I realised it would be "only" 3k of op's to get me below the 100k mark and I think that would be a brilliant thing to do.

Good luck with your plans this year and congrats on the baby.