Frugaliza Is In The House

Frugaliza

Mortgage free wannabe with a redemption figure currently standing at £137,177.66. I've been lurking and learning the boards for a couple of weeks now and I'm picking up that feeding an overall wealth strategy makes more sense for now than throwing everything at the mortgage. There's a definite psychological benefit to overpaying a mortgage and it's quite hard to resist that instant gratification. However Frugaliza will be super sensible! I aim to keep evaluating the best option overall in terms of budgeting/saving/investing/overpaying. I aim to build a savings/investment pot to offset the mortgage.

On the other one also has to live. As the Thoreau quote goes: “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived." Where does the balance lie? Is it possible to have it all? I'm hoping you guys will be able to offer some support and advice along the way.

pawlala

welcome

Frugaliza wrote: »

it's quite hard to resist that instant gratification.

If overpaying were a drug I'd be in rehabilitation by now!

Frugaliza

Some figures:
Single parent household with moi, DS 15 and DD 13.
Secure civil service job/good pension (for which I count my blessings.)
Approximate value of House £550,000
Mortgage £137,177.66
Mortgage redemption date September 2033 when I shall be 67. Grrr! I want to be free of the mortgage yoke asap and by 60 years old at the very latest. So we have a 10 year plan.

Frugaliza

pawlala wrote: »

welcome :DIf overpaying were a drug I'd be in rehabilitation by now!

Thanks for the welcome Pawlala - I totally get you on the addiction issues re overpaying. It's a dopamine producing reward pathway like any other. Be strong! I made an OP last month before I figured out this 'overall wealth strategy' concept - I just kept on opening up that online mortgage account and oggling that payment - looking at the little numbers at the end of the six figures and wanting to keep chip chipping away. STOP! 5% in a regular saver makes you a wee bit more at the end of the year than saving yourself 1.69% on a mortgage payment....

Look after the £1s and the £1000s look after themselves.

Frugaliza

There is a calculator in one of Martin's articles that helps you figure out at what interest rate it is better to save rather than overpay the mortgage. From this I worked out that for savings to be better than overpaying the mortgage I need to beat my mortgage interest rate of 1.69% up to the point of earning £500/year interest (personal savings allowance for 40% tax payers.). Once I've earned £500 interest in a year then I have to get an interest rate that beats 2.8% for saving to be better than overpaying the mortgage (and you have the faff of a tax return)

The small savings pot I had up until about two weeks ago had been invested in premium bonds. I bought them for a chance to dream of a big win whilst not losing any initial stake. Well I had one win of £25 in 12 months. A paltry return of far less than even half a percent so the premium bonds have to go. If life is so rubbish you want to escape into the lottery fantasy - change the life - you've got more chance of winning!

Premium bond money is now divided between a couple of those high interest current accounts. I used this super website to figure out the best accounts to open. (Thank you Eco Miser.). http://www.bankaccountsavings.co.uk/

I've joined the Save 12K in 2017 thread - I'm aiming to save £6000 this year. This will be made up of the following monthly contributions: £240 into a NW regular saver at 5%. £100 into a stocks and shares ISA (a global tracker) and £100 into a Civil Service Additional Voluntary Contribution pension scheme - plan to join this tomorrow. The CSAVC scheme won't pay out until I'm 60 and 75% of it is paid net of whatever tax rate I'll be on at the time - most likely 20%. But as I get 40% tax relief on every contribution it is super sensible albeit not sexy and not instantly gratifying.

Those contributions add up to £5280 over the year - a struggle and cuts will have to be made. It is a shortfall of £720 on the £6K savings goal and so that will have to be made somewhere or other. Any ideas?

TheShape

Hi Frugaliza,

Just to check,

Is the £240 p/m into the Flexclusive Regular Saver just the new money you're saving? Are you putting in the maximum £500 p/m?

What are the current accounts you have, I assume FlexDirect and......?

Do you use any of the cashback sites (topcashback, quidco)? By getting cashback on the things you buy anyway you will be able to add an extra bit to savings.

I guess it would be nice to save £6k but I wouldn't necessarily go to the point of struggling to reach it. Saving over £5k a year is very healthy amount to be saving/investing.

Frugaliza

Hi The Shape, I've started looking at Topcashback and Quidco thanks - never heard of them before and so might make a few pennies there provided only used for what I would have bought anyway.

Yes I got the FlexDirect current a/c at 5% and I also liked the look of the T@sco current account which pays 3% on £3K and doesn't require any minimum pay in or direct debits:j

Yes the £240/month is just the new money - so if I make any money on £co/TCback I could top up those regular savings....

Frugaliza

TheShape wrote: »

I guess it would be nice to save £6k but I wouldn't necessarily go to the point of struggling to reach it. Saving over £5k a year is very healthy amount to be saving/investing.

This is so true, thanks for that - I don't want to go doolally - am sitting here in 16 degree and a woolly hat! See earlier notes re living deliberately...

TheShape

Frugaliza wrote: »

Hi The Shape, I've started looking at Topcashback and Quidco thanks - never heard of them before and so might make a few pennies there provided only used for what I would have bought anyway.

Yes I got the FlexDirect current a/c at 5% and I also liked the look of the T@sco current account which pays 3% on £3K and doesn't require any minimum pay in or direct debits:j

Yes the £240/month is just the new money - so if I make any money on £co/TCback I could top up those regular savings....

What you can also do each month is move money from the Tesco at 3% into the Flexclusive Regular Saver at 5% to always try to maximise the £500 p/m that you can deposit.

Can you tell me more about the CSAVC. I have a CS pension and I'm also looking to make AVCs.

Suffolk_lass

Hi Frugaliza :wave:

I have subscribed to your diary, so I can follow your progress and chip in occasionally. I wish you every success.

SL

Frugaliza

TheShape wrote: »

Can you tell me more about the CSAVC. I have a CS pension and I'm also looking to make AVCs.

Hi Shape

Paying into the CSAVC scheme is a way of making an additional boost to your pension pot. Details are on the civil service pension website. LIke all pension contributions you benefit from tax relief - I like the CSAVC route as I'm happy with the number of years I'll get under my Classic/Alpha pension and this provides a lump sum of cash in addition. The government recently changed the rules so you can draw down this lump sum totally in cash rather than have to take an annuity. I think it might be a good way to save for paying off my mortgage....

So if you're a 40% tax payer you pay in getting 40% tax relief. When you retire your income reduces probably down into a 20% tax bracket so you can draw down your cash lump sum getting the first 25% tax free and the remainder at your new income tax level I.e. 20%

CSAVC providers are either Sc0ttish Widows or St@ndard Life. I'm with SW and just filled in my form to pay in a monthly amount. Hope this all makes sense and is accurate - please do your own research as well though! I'm just a lay person re finance:money::money.

You can't drawdown the cash until you're 55 at least - I wouldn't want to do that as I'll probably still be a 40% tax payer then. However when I retire I won't be. This is a long term plan and obviously we have to be aware it is a stock market investment and so as Martin says the only thing that is certain about the stock market is that prices can go up or go down or stay the same:)

Do you think you'll do this? What proportion of your savings would you stick in the CSAVCs? If you do let me know which fund you opt for. I chose a global tracker just now.