Project Mortgage Neutral Begins

savingholmes

Sounds like you are making good progress. Shame about Sky

ajmoney

slowlyfading said:

Suffolk_lass said:

Why not check out The Frugal Cottage that is the blog site of @simplyfading? - she runs the "save £12k in 2020" thread (has done for years). This year she has started running simple videos and courses via her Youtube channel and her FB page (links are all on her web-site).

Thanks for sharing my blog and YT channel  

I checked out blog for the first time yesterday, I haven't checked out the investment stuff yet but will do.  I love your site and have started following on fb and youtube.

Question to everyone about emergency funds and rainy day funds, do you have 2 separate funds or do they all get included in the one?  I have savings pots for all my annual bills and have started specifically saving a small amount in cash that I have quicker access to than my S&S ISA to build up my EF but am wondering if this is enough for a rainy day fund too.  I am doing my SOA today, normally I focus on the whole thing but I am first taking stock of my bills and then see what I have left and work out if I am doing the right thing with the spread of savings OPs etc.

Lomcevak

I have them separate, but it's a relatively risk averse approach.

The way I do it is to have separate pots in YNAB for annual bills (I know when and roughly how much, so build them up each month until due), rainy day funds (I don't know when, but the expense will probably happen at some point - e.g. replacement white goods, house repairs, or car repairs), and emergency funds (out of the blue expenses). However, the likelihood of all three happening at the same time is pretty remote and I could rebuild funds pretty quickly, so strictly the rainy day funds could double as emergency funds in almost all circumstances.

I'm kind of ok with it as it is though, because overall I want to have around six months income (not expenses) in cash, and treat rainy day + emergency funds as part of that larger lump sum.

ajmoney

Lomcevak said:

I'm kind of ok with it as it is though, because overall I want to have around six months income (not expenses) in cash, and treat rainy day + emergency funds as part of that larger lump sum.

I was working towards 6 months of expenses but the SOA may shed some light on doing things differently.  I have a very secure income so maybe this is why I am not worrying so much about 6 months of income.  These are the things I want to consider though so watch this space.  I have a masterclass to watch/listen to at 11 so am going to start it then.

Lomcevak

I think it's very much a personal decision based on income and attitude to risk - i'm almost certainly too conservative in my approach. My expenses are much lower than my income but I like the security of knowing I could stretch things out for much more than six months if I needed.

There's a reasonable view that if you save a significant chunk of your income each month then you don't need an emergency fund at all - almost all realistic emergency costs could go on a credit card and be paid off again within a few months, at a relatively negligible cost. I personally dislike debt and have an allergic reaction to paying interest, so don't love that idea, but can't argue with the logic (especially if income is secure and general expenses predictable)

ajmoney

Right here we go, SOA warts and all...

2456.99 Pay

437.97   Mortgage

150.00   Council Tax

53.91     Gas/electricity

83.00     House phone/TV/Broadband

24.16     Mobile phone

13.20     TV licence

250.00   Shopping (all costs)

160.00   Fuel

54.00     Car savings (£12 road tax, £30 insurance, £12 servicing) *

15.00     House insurance *

250.00   Holiday savings *

10.36     Work insurance

25.00     Christmas savings *

70.00     Hair/beauty costs

1596.60 TOTAL

860.39   Surplus money

350.00   Cash ISA savings (I am starting this regular payment in July, I currently sweep extra money at the end of the month into this)

100.00   S&S ISA

250.00   OP (reduced from £500+ as of July while I build up EF in cash?)

160.39   Surplus after saving

All this is based on normal costs out of the current COVID-19 situation.  Fuel costs etc aren't being used in the same way so I have been putting these into my cash ISA instead.

SAVINGS

2697.60   Savings account, this is where my savings pots are denoted by * above - interest rate 0.2%

6243.05   ISA (made up of £1589.98 actual savings, £4653.07 proceeds from house sale which I am using for home improvements)

26421.72 S&S ISA (Aegon)

MORTGAGES

25684.69  Original mortgage from 2005, lifetime tracker at 2.68%

67131.48  2nd mortgage at 1.19% and the mortgage I am working on OPing - remortgaging July 2020

92816.17  Total of mortgages current MF date April 2041

My approach to OPing may seem very bizarre based on the interest rates.  My original mortgage monthly payment has been sitting at this since 2008/2009 as it has a collar on it but it means as the interest rates rise this will be static for a long time whereas the larger mortgage will start to increase straight away (it started the year at 1.84%).  I think of the smaller mortgage as offset against my S&S ISA.

I am going to check my approach towards my savings/OPs; see if there is a better way to spread the money across the accounts, do I need to build more up in a certain account, definitely check the interest rates on the accounts.

Am I missing anything in my expenditure? The hair/beauty costs don't always get used and are saved if not.  All the other bills are at their lowest possible amount, the only thing I am debating is the home phone.

ajmoney

I used to be really good at opening accounts with various institutions but seem to have got stuck with one at the moment.  Mr AJM's approach seems to have rubbed off on me, looking at a couple of tables at the moment I can definitely get some better interest rates on my savings.

Suffolk_lass

I was carrying too much cash in the instant saver of our  account for running costs when I reviewed in April, so I have moved £10k to a cash ISA (I did not have one) and £10k to Premium Bonds (reflecting the approach @shangaiijimmy has taken) in putting my money into government things. I like to have £10k available as an immediate access cash fund. This goes back to DH writing off a car and needing to get him back on the road with a replacement that weekend - some cash, some write-off value in time to pay down the CC and some on a 0% (no fee) balance transfer CC over ten months - then the dishwasher failed and something else went wrong so all of the £10k was needed quickly. Like @Lomcevak I have an eversion to paying fees or interest. We are sitting just below this and fate has it that some expensive accidents in the kitchen will need us to dip into this. I am superstitious about money and will be getting it back up to £10k as soon as possible (but might move it), to stop another accident befalling us - as that was clearly the cause of the accident...

ajmoney

I am sure I used to find it easier to find the interest rates for different types of accounts.  I looked at N$andI yesterday and also a couple of the building societies that are on the main page of this site for ISAs, I will have a more in depth look today.  There is definitely a lot to be said for having easy access to some of my money, I guess I need to work out how much this needs to be.

ajmoney

N$&I is looking like the best option so far but I haven't got a clue how much to save where.  The common sense approach is to halve the money between my savings and OPs until I build my unassigned savings up to a more sensible level.  Until I have negotiated the remortgage next month this is a paperwork exercise and I am currently waiting for news on an extension opportunity at work which will make a huge difference to the approach I take.  Whatever I do I will re-evaluate the savings approach in December when I review the funds my S&S ISA pays into.