Managing budget once Mortgage Free

Prothet_of_Doom

Not in any kind of debt, but having paid of our mortgage, about 2 years ago, I was wondering why we were not actually saving that money.

So before we we never has any spare money, and If I'm honest with myself every large bill was a bit of a surprise (although it shouldn't be), and often we'd dip into savings (which were mostly built up by relatives dying and leaving small sums - I say small but when you add up the sums over 15 years it's a decent sum of money, and it's not all disappeared:eek:)

Anyway, I decided to use the budget planner to find out where we were going wrong, why we were not saving, although no longer dipping into savings.

Basically we should (even with what I consider to be large sums put in for holidays and nights out) just about break even and have £200 a month spare. But I also realised that it's easy to turn that £200 a month spare into £200 a month over budget. A takeaway here, a pub lunch there, 2 pairs of jeans in a nice shop not in the sale (and they are the nicest jeans I've ever had)

Having realised up to £2k of our costs are spread as one off payments, car insurance, house insurance, and 'unplanned' MOT repairs and planned servicing, I set upon a plan.

I've mentioned this on MSE before, but I also realised that my wife will fritter if our bank balance shows £1200 or more, and panic if it shows £800 or less. (I asume that's because if you fill up 2 cars, go to the shops and fill a trolley, and have a couple of direct debits go out, it could drop by £400 in one day)
I'm not saying we don't communicate about money, but the trivial day to day stuff seems to !!!! her off, so I thought I'd try this rather than panic her.

So my plan has been to use our side account to keep the bank balance at £850 to £1050, by using the banks app on my not that smart phone to transfer money each way, if I have to on a daily basis.

The other plan was to gradually reduce the amount I spend on my credit card. At one point all my spending was done on the credit card, which equated to maybe £1000 every month, which I'd payoff on payday.

So over 4 months I have reduced by monthly spending on credit card to £500, and is just those things bought online, for the added Protection.

Doing this has reduced the frittering and pushed the amount on the side account to £2K, which will cover 2 of the 3 cars insurance, and the house insurance all due in the next 2 months (all to be paid on credit card, but the money is in side account when the bill comes)

Not saying it's 100% success, but I think paying off the mortgage made us think we had more money than we did, but when you look at it, we have enough to live comfortably if we don't waste it.

Tahlullah

Good luck with this. I think this is something I could slip into if and when I get to your position. Thank you for the warning. Paying off the mortgage does not make you miles richer, just more comfortably off. After all, the bills, Council Tax, car, fuel, insurances still need paying!

HelenDaveKids

We have been mortgage free before, and I must admit my mfw habits didn't change. The money was DD into a saving account instead and very quickly built a nest egg (now blown with forever house with fresh mortgage to boot) I suspect my student life of frugalness hard to shake. I personally would (and do) DD the spare money as soon as the wages hit the account and think of it as spent.

Prothet_of_Doom

Yes a direct debit for the same amount would have been an option, but I didn't set it up, at the time.

I think it was doing the budget that I realised that most of the money that went into the mortgage, was NOW taken by inflation, (pay took a drop in 2009, and has not increased with inflation), plus a loosening of the purse strings, and that if we continued to fail to budget, then our savings would gradually reduce to unacceptable levels ie Zero.

Welshlassie

I have recently started using a tool called You Need a Budget (google it) it comes with software, but in theory you could just use the rules and a spreadsheet.

It has totally taken away our focus on what is in the bank account and now we look to see if we can buy something is it's in the budget account. It has also encouraged my DH to buy into the process, which was previously just left to me to deal with.

delmar39

Welshlassie wrote: »

I have recently started using a tool called You Need a Budget (google it) it comes with software, but in theory you could just use the rules and a spreadsheet.

It has totally taken away our focus on what is in the bank account and now we look to see if we can buy something is it's in the budget account. It has also encouraged my DH to buy into the process, which was previously just left to me to deal with.

Thanks for this tip - had a look at You Need a Budget and found it really useful. I've recently overspent during the school hols and felt bad, but having read rule 3 I feel better! I've moved some cash around and made things better for next month. Job done so thanks