One domestic drama away from debt: future-proofing our finances

PlaysNicely

Thanks to Mothernerd on the NST thread, I’ve had an alternative kind of LBM ...

We don’t have debt at the moment and we no longer have a mortgage thanks to a major downsize / downshift which was our primary debt removal technique at the end of 2016 – sell up, pay off, shrink everything down to frugal proportions, all of which happened once we realised the writing was on the wall for my OH in his job through absolutely no fault of his own, with just two months’ pay as a goodbye gesture after 16 years.

Sooo, current situation:
We’re low-income in-betweeners, not of the teenage kind but the 50-something kind – been spat out the other end of our lifetime careers (education) but not old enough, or rich enough to retire. Currently, we’re living on:
• what I bring in from small self-employment business, working from home.
• additional part time job I’ve just started, mostly on the weekends.
• what we’ve still got left from the house sale (four figures, shrinking fast & needs to stretch until end of financial year at least).
• Exam marking which OH can do in the summer (he’s just finishing a round of that).

Future finances:
* OH may be able to boost current finances with a bit of supply work in the future, but the whole issue with his previous employer made him quite poorly for a while and he’s now on lifelong medication, so for the minute he needs to just enjoy a stress-free time. He can access his occupational pension next spring when he hits 60. However, even though our budget is frugal, it’s still higher than the amount his occupational pension will bring in.
Later on, he’s not likely to gain full state pension because he worked abroad for a number of years (but did not receive financial rewards which would offset the lower SP, unfortunately, a whole other story).

* Me - I can access occupational pension in 9 years, but not SP for another 15 or so. I should get the whole lot, depending on what games the government decides to play between now and then.
Currently, after a long period of illness, I work as much as I can whilst maintaining a level of health which gives me a bit of a life rather than tips me into being unwell and incapable of anything. Taking on the new weekend job (and maybe a few extra hours which crop up occasionally as part of it) kind of puts me at my max for a moment as the self-employed end of things has just got a bit busier.

Aim of diary:
We’ve moved into a tiny place which is fine for us, but was empty for a long time and has the potential for a few expensive repairs if not this winter, then probably next year, so I joined the NST thread to try to save a bit of an emergency fund. Mothernerd's wisdom has made me realise that we have nothing else behind us - we’ve had the mindset that the small amount left over from the house move and OH’s joke ‘redundancy’ payment (what we call our living fund) will see us through at least until OH can access his occupational pension, but ...
• If we think of our living fund as also being our emergency fund for repairs etc (yup, that was our thinking), we’re effectively putting ourselves into debt. This money has been carefully budgeted to last us, there’s no wiggle room in it. If we needed to use it as an EF, I don’t know what we’ll top it back up with apart from what I’m earning which isn’t likely to be enough or necessarily going to be a stable income.
• We have an overdraft that we’ve been thinking could be an EF if needed.
• We have two credit cards that we’ve been thinking could provide EFs if needed.
And that was the LBM – our thinking is just all wrong: anything we think of as an emergency fund isn’t – it’s debt. If there's any domestic drama such as the chimney blowing away (it did this between exchange of contracts and completion just before when we moved in) or if the ancient boiler gives up, or the recommended rewiring and repointing becomes more urgent, we'll have to get back into debt to sort it.
I need to address this as a matter of urgency really otherwise, having just scaled back just about as far as possible, there won’t be much more we can do which won’t put our home at risk – and, assuming our finances stayed the same as they are, the risk period could be the whole 9 years until I access my occupational pension (at least).

So, although our goals will relate to savings, frugal living and pension-prepping, it’s all under the banner of debt avoidance, and as everyone over this side is so awesome and friendly, I’m wondering if I could just join in over here, so that I can keep the right focus on the finances?
Currently working on the goals, so will be back hopefully this evening or over the weekend with a proper plan of action! Thanks for listening, PN x

UncannyScot

Hello and welcome
Will subscribe and follow your progress.

enthusiasticsaver

Sensible to plan ahead for contingencies so congratulations for recognising that saving for emergencies is a better option than credit cards. As you probably gather from my user name I love the security having a rainy day fund gives us.

PlaysNicely

:wave:

Many thanks for stopping by and for the welcome UncannyScot and EnthusiasticSaver, I appreciate the company as I muddle along.

Current short term savings goals are pretty much as laid out in my signature.
1) 'Grand' emergency fund is literally to save a grand (£1,000) by end of October 17.
2) The cost of Christmas will be covered by what I can save between now & then, using the 30 Fridays challenge) - started this last month over on the challenges thread. Aim is £465, which should cover niceties and necessities.
3) House works fund goal is £667 by end of the year & is the total of the 365 in 365 challenge. This is to be separate to the Grand emergency fund as we will certainly need to do one of the more major jobs by the spring and I don't want to have to empty the emergency fund as soon as we've built it up!

So that's a broad outline of initial savings challenges, to be going on with. I'm a great one for setting myself monthly challenges, to keep things interesting, so plenty more to come! I'm sure. Hope everyone has a good evening, PN x

pelirocco

If he was made redundant he was entitled to more then 2 months pay if he had worked there for 16 years

PlaysNicely

pelirocco wrote: »

If he was made redundant he was entitled to more then 2 months pay if he had worked there for 16 years

Hi, yes, you're right, it should have been a very different outcome for him. This was a really tricky one and a ghastly story which I won't share on here ... he had union support throughout and this was the best 'deal' negotiated by his Union who said that this was the best deal he could get and anything else would involve an age discrimination tribunal (which the Union said they'd only seen be successful once, despite supporting lots of 'older' professionals being treated the way my OH was). He fought considerably against the situation he was in and even alienated the union by not taking a worse 'deal' earlier on in the process. All a bit of a nightmare we're glad is behind us, to be honest.

Thanks for stopping by, PN x

PlaysNicely

:wave:

So, a few bits of planning done and one alteration to signature / OP goals:

* 'Grand' emergency fund is literally to save a grand (£1,000) by end of [STRIKE]October[/STRIKE] 17. Chatted with OH about this, and have adjusted to more realistic target of end of 2017.

* We've also talked about the fact that future-proofing will require setting up a few pots - as well as the home and living fund etc, it seems important to organise something for health and pets, as our life insurance and pet insurance both ridiculous and unaffordable really:
- one of the pet insurances is unlikely to ever pay out as eldest pooch is now getting a bit old. Younger pooch's insurance another used to pay out in relation to his allergies but after a few payouts (which we always had to fight for) they decided the condition was pre-existing because they'd paid out previously. However, since we moved, he's remarkably improved so I'm not sure if he wasn't allergic to something in the local park we used to use for main walkies before? Additionally no renewal quotes are coming back reasonable so it seems a good time to reconsider how we approach pet bills.
- ditto with health insurance as both of us have health issues and the existing insurance was running alongside the mortgage which we now don't have, so that level of cover isn't needed. Since OH's recent illness necessitated being under a consultant etc, life insurance quotes I've been getting back have been just silly!

* My aim is to do something on most days which will help things along, under one of these kinds of headings:
* Not spending
* Savings challenge
* Sourcing rather than spending - including making / doing for ourselves / repurposing / upcycling or sourcing elsewhere (Freegling, Charity shops etc)
* Frugal focus & future-finance-friendly - such as budgeting, reducing outgoings or upping income.
Overall I'm really hoping the diary will help with achieving our goals, help me to be accountable and also help me keep a track of things.

So, as I haven't been working today, today's mostly been all about Future Finance:
* Re-jigging accounts to create pots for health and pets
* I've also cancelled the insurances and organised direct debits into these pots to begin to build up a bit of an EF in each (and again help to remove the possibility of having to get into debt if there's a costly health issue for one of us or our pets.
* Because the direct debits are lower than what we were paying for insurances, it's given us a bit extra (approximately £25) in the monthly budget, so happy with that. and have started to set the budget for next month.

:eek: Just need to decide what's a realistic figure as a buffer in each pot - hard to know when you're thinking of possible vet bills as everyone knows what they can be like!

And I'm thinking the health pot will need to cover the ultimate health-related eventuality x 2! So will try to organise a realistic goal for this in the short term, as money will always be needed for health, but in the long-term will maybe look into funeral plans to see if that's a more cost-effective option. Happy to hear what anyone thinks of those as an option?

Meanwhile, I really hope everyone's having a good weekend, PNx

PlaysNicely

:wave:

Just a little pot-sorting today, but otherwise muddling along quietly and waiting for the end of the month and final organisation of pots for August.

Not spending:
NSD today so that's all good - thought about going out for breakfast as part of a nice long walk with dogs but have less than £5 left of 'fun' money for this month, so walked in the other direction and had lovely eggs we already had indoors (from hens up the lane) as a hearty brunch at home instead!

Saving for ... shhh, that mid-winter festival no-one wants to hear about during the Summer ...
Emptied pockets, purse and drop zones of shrapnel to add into 365 day challenge. Total now £142.

FF&FFF: Extra income:
Work rota for 2nd (part-time) job has been received, with the possibility of some extra hours through August. Have decided I'll be looking to treat any extra hours I get there as 'wouldn't have had it, shouldn't miss it' money to put straight into the grand EF effort, rather than as extra income for the budget, so I think that's a goal starting to take shape for next month too! So, just need those extra hours to happen!
OH has been allocated some more marking for the next week or so, so that will be split between a little extra fun money for him (he has family coming to visit over the summer & also needs to take a little trip to visit his DD in Sept, so he'll need a little cash in his pocket) but we're planning on diverting a bit straight into the EF too.

So, pro-active planning rather than action, I guess, today. Hope everyone else is having a good one, PNx

enthusiasticsaver

Is your OH not entitled to any benefits due to his medical condition?

I too am prepping for retirement by trying to reduce spending as far as possible. I will be taking voluntary early retirement at the end of this year and have been tracking all spends for last few years just to see how much we really need to live off.

PlaysNicely

enthusiasticsaver wrote: »

Is your OH not entitled to any benefits due to his medical condition?

I too am prepping for retirement by trying to reduce spending as far as possible. I will be taking voluntary early retirement at the end of this year and have been tracking all spends for last few years just to see how much we really need to live off.

:wave:

Hi Enthusiastic
Entitled, probably, willing, certainly not I'm afraid. He's reluctant to apply for any benefits (JSA or sickness) as he feels he's on the mend and may be well enough for supply in September. As his preference would be to do that on a semi-retired basis, he doesn't want to claim anything, just get used to managing as we are so that anything else he can bring in will go straight towards refilling the gradually diminishing living fund!

:T Sounds like you're really on top of the planning there and it sounds like a good plan - I was watching our budget for a long time so we could overpay the mortgage and get ourselves into a better position for eventualities and you're certainly right to be so pro-active to get good measure of what you need ... really hope it all works out for you.

Have to say, in reality, we've actually managed on a little less than we'd anticipated, largely I think because we're using the car so much less now that OH isn't working and also because he's not nipping to the shop as often (for his lunch bits, £30 later ... etc), so hopefully there will be some nice surprise underspending for you too!

Do you have a diary on here? Would be nice to visit you too, check out how you're doing and pick up a few monster saving tips! PNx

Orange_Ena

Good luck with all your plans PN. Doing something everyday towards a goal is so achievable. Whether that's not spending, throwing out a useless item, cleaning that dreaded drawer out, it all helps! I'll be cheering you on