Saving to avoid a mortgage

ajdj

Well done on becoming debt free.

My initial thoughts-

1. House prices may be different in 10 years time, this could work for or against you so if, for example a home that currently costs £250,000 became £350,000 in 10 years time could you compromise on the type/size of home you currently have in mind?

2. Cash savings are not going to help, you will need to look at investment in order to beat inflation and benefit fully from compound interest. Example- if you were to just save £1,000 monthly over 10 years at a compound rate of 3% you'd end up with £140,000. That's great but it's some way off where you want to be.

3. As money invested is usually a longer term commitment (10 yrs +) you need to have a cash emergency fund in place. Anything between 6-12months expenses is recommended. You may wish to leave this in the Santander account and then look to invest £1,000/month.

An alternative strategy might be to look at saving a large enough deposit to get back on the property ladder earlier and benefit from lower mortgage repayments (equal to current rent) and then use the £1,000/month you've been used to saving to overpay the mortgage.

mizmir

Karmacat wrote: »

And look at your sig!!!! 2028!!! You're just trying to scare me, aren't you :rotfl:

Well that is the worst case - when OH is 60. If we can manage it, we might go for 2023 and let her retire at 55! Come to think of it maybe that should be the goal - and then extend if needed (or if she really wants to stay on!). Shuffles off to change sig....

Hurdler

That's an amazing achievement to clear that debt, and it sounds as though you have some good plans to stay debt free

mizmir

So best way I have found to keep focused is to take a leaf out of Karmacat's book and post a daily list. So jobs for today:

• [STRIKE]Food shopping[/STRIKE] [STRIKE]- running out of everything[/STRIKE] Stocked up on basics.
• [STRIKE]Hair cut[/STRIKE] Called in at a "no appointment" hairdresser that OH recommended and had it done for £5!! And it is as good a cut as I used to spend £45 on at the regular salon. She doesn't wash - just sprays and cuts - but will definitely be going again. That's £40 saved every 6 weeks right there - £80 as OH will be going there too. Almost feels like exploitation but she gets through 6 people an hour and always has people waiting!
• [STRIKE]Start on YNAB budget[/STRIKE] - [STRIKE]this may take a while as I want to be realistic so will check actual costs as much as possible. [/STRIKE] Decided just to bite the bullet. So have checked what I can and done a guesstimate for other things - lots of buffers. Will become more accurate as we go on.
• Make a plan for getting online course going

Going to the cinema tonight - all paid for so should be a fun evening. And I have just realised I have lost a week. I am accompanying OH on a work trip to the US - and I have just realised we leave next week - I thought it was in a fortnight! Oops. So better start getting things sorted out for that - both stuff to take and stuff for the dog sitter who is coming to look after the gang.

Karmacat

You realise a *lot* of people make lists, don't you but we're mates, so I'll accept the namecheck gracefully

That hairdresser sounds ace - used to be £11 for me, so £5 is fantastic :j

And, erm, you're going Stateside :j:j:j a friend of mine is in Sedona right now ... if you tell me you're going there, I'll pm you a description of her :rotfl:


ETA - enjoy the film

mizmir

Yes I *know* you didn't invent lists Karma but you use them so elegantly - and so regularly! :rotfl: :rotfl:

Nowhere near Sedona I'm afraid - heading to Wisconsin and Michigan! Will be combining a catch up with US friends with an investigation into my wayward GGGrandfather in Chicago!

YNAB budget done - scary stuff. Now I know why we were in so much debt! :eek: But at least we have a lot of buffers now - and I know how much I need to aim to earn each month - at least £1200 - ideally £1500. This is doable - I averaged £1500 until July when I stopped working to focus on moving! So there is a plan and a bit of an incentive!

mizmir

Sorry ajdj - missed this great post yesterday.

ajdj wrote: »

Well done on becoming debt free.

My initial thoughts-

1. House prices may be different in 10 years time, this could work for or against you so if, for example a home that currently costs £250,000 became £350,000 in 10 years time could you compromise on the type/size of home you currently have in mind?

Very true. We would be prepared to move area and adapt to what we could afford so I think this is OK. My ideal would be moving back to Cumbria where cheap (currently way under £250K) rural homes are still available.

2. Cash savings are not going to help, you will need to look at investment in order to beat inflation and benefit fully from compound interest. Example- if you were to just save £1,000 monthly over 10 years at a compound rate of 3% you'd end up with £140,000. That's great but it's some way off where you want to be.

The cash saving is a temporary measure until we can sit down with BIL and put together a proper plan which I am sure will be investment based. The plan is also to double the £1K a month saving after 4 years (when I can take my pension) by committing that in its entirety to the pot. There will also be a lump sum at that point (about £40K). I calculated that - with these - we could get to £250K with an average of 4% return over 10 years - is that realistic?

3. As money invested is usually a longer term commitment (10 yrs +) you need to have a cash emergency fund in place. Anything between 6-12months expenses is recommended. You may wish to leave this in the Santander account and then look to invest £1,000/month.

Currently have about 2 months emergency fund separate to the savings (3 months if we were just covering essentials and not saving). But could certainly keep a chunk out in that account to boost that to 6 months. Will look at that possibility.

An alternative strategy might be to look at saving a large enough deposit to get back on the property ladder earlier and benefit from lower mortgage repayments (equal to current rent) and then use the £1,000/month you've been used to saving to overpay the mortgage.

That's a possibility - though we would probably buy somewhere and use it as a holiday let and then move into it when we retire as we are likely to retire to a different area. The thing with the rental is that it is a dream property that we could never afford to buy but which has space for me to work (am a dog trainer) with no significant overheads and to operate as a smallholding. So while we can afford the rent and are fit enough to be here, it is ideal for us. When we both retire we can move somewhere smaller (won't need office space or workspace for me) - but doing that before that time might be more tricky.

Thanks for the feedback - really helpful to get me thinking this all through.

mizmir

OK - managed everything yesterday apart from the plan to get my online course up and running so that rolls over. I am also going to set up a separate YNAB budget for my business and use it to make sure the business is paying its way. Plus I have to finish off an online course I am taking - last lecture and final exam to complete. Will take most of the day. So today's tasks (once I get off MSE):

• Finish online study - [STRIKE]2 hour lecture to go through then final exam - at least 4 hours work I think.[/STRIKE] Was actually 2 x two hour lectures so have been through those. Final exam will have to wait until Sunday!
• Plan for online course - need to check current state, make a list of revisions needed, plan timetable/strategy for promotion - [STRIKE]may not all get done today but needs doing this weekend.[/STRIKE] None done today - carried over.
• [STRIKE]YNAB business budget[/STRIKE] - [STRIKE]currently all included in one big YNAB budget but I need to separate it out so I can see how it contributes clearly. [/STRIKE] Done - and allocated money in the business account - but need to earn enough to cover and pay me a salary - quite a way off that yet!

Other than that nothing much to do today - a few household chores and dog walks to break up the computer work.

Karmacat

Those are big chunks of work! Good luck

Its fascinating when somebody as well informed as ajdj obviously is, will comment on what you're planning.

Also fascinating, genealogically speaking, is that your gg grandfather scooted off to the States. So did one of mine, leaving half his kids in this country and taking half to America, in dribs and drabs. Luckily, the American rellies got in touch, and had done loads of research - our Patrick blew himself up in Brooklyn during Prohibition, using a still to make whiskey (he was Irish originally). A gg grandmother went off to the States as well ... we're a restless lot, on the whole :cool:

mizmir

Thanks Karma. Yes he disappeared - abandoning his family - youngest age 10 plus an epileptic daughter. I traced his death certificate which is ambiguous - could suggest suicide as contributing factor is acute melancholia. So I am going to see if I can fill in any of the 15 years he was there!