Onwards to freedom!

SuperSecretSquirrel

jodles16 wrote: »

Hey SSS amazing update and I imagine you will definately reach your target over the next three years! I like the different way you are attacking the MFW mission and think the neutral aspect is also an important way of working it!

Thanks Jodles

edinburgher wrote: »

For the purposes of 4% rule and NW, I think there are three camps. 1) Those adventurous souls/people with no ties who would literally sell their house and then rent/become nomads exploring the wider world; 2) People who don't include their property in NW because they can't do anything with it (but realise it lowers their eventual monthly expenses) and 3) folk who downsize/free up some of their equity to make up the difference between house wealth and liquid wealth.

...

I'd expect to have shifting income in retirement, having a paid off house removes at least part of the uncertainty.

I guess you're right. In my examples, the homeowner could sell up and be in the exact same boat as the renter, essentially going from 0% independent to 100% independent as soon as they sell up.

I think as a couple we are firmly in "Group 2". We'll always need somewhere to live, and we'd prefer our own place than rented for many reasons - the fact that the mortgage eventually ends whereas rent is forever (and keeps on increasing forever) is certainly one (or is that two?) of the more highly ranked reasons! In about three years time, we will be mortgage free, and that will have a huge effect on our monthly outgoings. The smaller your core outgoings, the less you need, so the closer you are to FI

maxie014

Good stuff SSS,i managed to pay mine off 3 years early,thought id have done it sooner but was in the bad old endowment mortgage days.
I took out a £50 monthly investment trust at the same time i began my mortgage,claimed for the endowment and cashed one in early,paid a lump sum off using all of the above which left me with only the small endowment ,which i overpaid at £200 extra a month,then cashed that in early and paid it off.
How the hell nobody got jailed for that endowment scam i dont know,they were promising a lump sum extra at the time!
Good luck with the rest of it was happy days when i got shot of mine.

SuperSecretSquirrel

Thanks for posting Maxie The endowment sounds rough, but well done on still managing to become mortgage free early regardless!

Endowments were a thing of the past when we bought, but we did allow ourselves to get talked out of an offset by our mortgage adviser. That mistake has cost us a few thousand pounds I reckon No point dwelling on it though, can't change the past, like you we'll do what we can to improve the future instead

SuperSecretSquirrel

Well, that was unexpected...

My slow stooze card is less than £150 away from being maxed out, and they refused to increase the credit limit. Applied for a separate card from another provider and entered a ridiculous desired credit limit expecting to be offered about half the amount I asked for... Application successful and full requested limit granted :eek:

Slow stoozing for the next 24 months well and truly sorted!

In other news, it's the first update of MFiT4 this weekend. We are now mortgage neutral plus £19,457.09, which means we are slightly ahead of target, so off to a good start

SuperSecretSquirrel

Forgot to add: When on the phone to mortgage company I asked for confirmation of ERC... Right now it's 6%, but from 1st September 2016 it drops to 5%, and continues dropping a further 1% annually from that point on.

With a mortgage rate of 5.29%, 1st September marks the first time ever that the ERC will be less than the mortgage rate!

Would be silly to pay off in full at that point as my savings earn a damn sight more than 0.29%, but I can imagine giving in to temptation an paying off in full two or three years later. It depends on what happens to savings rates and how my stocks and shares perform really, but once that gap between potential earnings from savings and interest charged on mortgage closes enough, I think I'll go ahead and wipe it out

Teacher2

Re:- endowments. Friends of mine took a 25 year endowment mortgage out which was due to pay off the £40,000 mortgage and give them a lump sum of £80,000 for their retirement. He lost his job ten years in and, reluctantly they cashed in the endowment and paid the mortgage off in one go. They rued the day - for about five minutes - as the interest rate crashed. Two years later they had an asset worth £400,000 in the house and the endowment would have been in the red by the end of the term and wouldn't even have paid off the mortgage. They were very lucky in their timing!

In 1982 we took out an endowment policy for my husband's retirement on the basis it would pay out £84,000. Sometime, about ten years in, we realised it wasn't going to pay a quarter of that amount but we were only paying £35 a month so kept it going for a laugh. Actually, the market recovered a little over the 35 years and we have just collected enough to pay for a nice car.

You can never tell what's going to happen. But still, saving is a good habit and always pays off.

edinburgher

Re. the closing gap, I think you've got the right idea! Yes, it's great to have a healthy base of assets that *isn't* our house, but I've yet to find anyone who regrets paying off their mortgage. With the possible exception of Ermine from Simple Living in Suffolk, but I think he's probably experiencing hindsight bias.

Teacher2

" Using the 4% rule, "

Where can you get 4% on your savings/assets today? Seriously. Is there somewhere I don't know about?

edinburgher

Teacher2 wrote: »

" Using the 4% rule, "

Where can you get 4% on your savings/assets today? Seriously. Is there somewhere I don't know about?

The 4% rule refers to the results of the 1998 Trinity Study, in which the researchers looked at the return from a balanced portfolio of stocks and bonds and stated that a withdrawal of 4% annually should be safe to maintain your portfolio in perpetuity (i.e. the money should never run out completely).

It's widely used as a rule of thumb when retirement planning.

Here's an article from Vanguard (2011) that revisits the study.

SuperSecretSquirrel

Thank you both for posting

That paper makes for interesting reading. The situation is rosier than I thought!

Nothing much to report recently, just plodding along. Plodding is good.

Have been reading a reddit thread ed posted elsewhere over the past few days, about very poor people and how they live, what they buy etc. Felt a little guilty when reading, almost voyeuristic. I was there for useful tips on where we can save a little here and there, but we're far from poor, so these tips are a handy bonus for us, not a necessity... Some (most) I wouldn't dream of following unless we were destitute, I was expecting good meal/leftovers ideas (and they are to be found in there too), but what I mostly found was an eye opener - quite commonly in some families meals/leftovers just don't happen.

In our little bubble it's easy to fall into thinking we are average, or perhaps a little below average. Compared to some even, we might consider ourselves poor. In reality, compared to the national average, we are doing ok, compared to the world average WE are probably the evil one percenters.

Even though I like to think that we are making it in life ourselves without a leg up from anyone, I've started realising that is not really the case. We don't live in a closed system, it's not all down to us. Sure we work hard enough, earn decently, have (Graciously? Foolishly? Stubbornly?) refused to accept parental help towards house deposit and the like in the past, haven't ever received benefits other than child benefit, always strive for the best deals, prefer saving and investing to spending frivolously, actively seek out opportunities, etc. We do what we can to make the best lives for ourselves, its not like we're just coasting on a sea of good fortune, but really, that doesn't amount to a whole lot when you consider how lucky we were to simply be born in this country to relatively stable families, with all the social support structures we have around us (both at a national government level, and a more local friends and family level).

You play the cards you are dealt, and it feels like we were dealt a really good hand.

The thread is here if you feel like reading - https://www.reddit.com/r/AskReddit/comments/2sbi17/what_do_insanely_poor_people_buy_that_ordinary/.compact