Tidying up the mess

enthusiasticsaver

Good idea to keep on top of tax and doing it early for the first one means you have 9 months to sort out any discrepancies. By the time you do the next one your debt will be gone hopefully.

Sensible one on getting your pension sorted. I am a great believer in them and the sooner you start the better. Transferring old pensions into presumably a SIPP is a good start so you can start to gauge how much you need to invest to get to where you want to be (early retirement or certain level of income at a target age).

Even if you are "gazelle intense" on debt clearing no gift giving seems a tad unrealistic so I would think just giving within budget is a good aim. Do you have a gifts pot within your budget for Christmas/birthdays/charities etc?

enthusiasticsaver

They have a different mentality on giving in the US which is why DR talks about it. As you say churches are often recipients and they pay into trusts/foundations/college scholarships etc. I am not a fan of the big charities we have over here as the admin costs and salaries often equate to big businesses. There are small ethical charities you can donate to but as you say the MSE advice is wait until debt free. Personally I think if you set a budget that is fine. I like local charities and give sporadically rather than regularly otherwise I get continually pestered.

DrSpendLittle

I donate to the food bank whenever I do a supermarket shop. I don't sell old clothes online, I give them to a couple of my chosen charity shops. I also make it a habit of giving some money whenever I see a collection tin / person out collecting for another chosen charity close to my heart. I usually donate £15 to the poppy appeal and any other arm forces collections. Taken together, these charitable donations usually add up to about £300ish a year, but it's often more.

Do whatever feels right to you at the moment. There is no right or wrong approach.

BabyStepper

Thanks for that, I realised I already do give in terms of charity shop donations and the odd few pounds here and there. I have a gift fund for presents, maybe if there is extra I can give that to charity too.

enthusiasticsaver yes the pension is a sipp and I am having a bit of trouble finding all the old pensions but I will get there in the end. I will likely have to wait until the debt is paid off before I contribute properly to it but might do some token payments to get going. I've started reading Millionaire Next Door (it's full of stats which I love) and am learning about putting more into these types of savings, get the tax benefit and leave it for longer to grow wealth. If we could continue with my £1,500 wage after the debt is gone, then everything else could go in my pension. Not sure that would be enough to live on comfortably but I'll see how we go. OH's wage will also reduce when he starts contributing to his pension again, but we won't have debt to pay so monthly living costs will reduce. I don't think the book has any new information we don't already know but if I was ever in doubt that wealth is entirely about how you manage your finances, I'm not any more. Quite eye-opening.

In other news I have ordered soap nuts for the laundry. I've never used them before so we'll see how that works out.

We're managing to stay on budget and I am counting down the days until I get to clear my overdraft. Not long now.

enthusiasticsaver

Yes in terms of pension, length of time plays a big part which is why people say the earlier you start the better. If you are self employed there are massive tax advantages to paying in as well.

Managing your money is key to accumulating wealth. You have obviously got that nailed so it is just a question of deciding priorities and making a plan. Obviously first priority for now is getting rid of unsecured debt but at some point deciding on next priorities will be harder. Do you overpay mortgage, pay extra into your pension, save up for a new car, kitchen or long haul holiday or build a bigger emergency fund? We did a combination and priorities changed from year to year.

Setting out a 5 year life plan often helps. Exciting times.

BabyStepper

Just when I got my head around a one year plan you've now got me thinking about 5 years! Where do I start?? All the things you mentioned, yes, a bigger emergency fund, a car, we will need a new kitchen quite soon, all of that stuff needs looked at.

As it's the start of a new financial year I made a one year plan, it looks like this:

Pay off all debt
Keep emergency fund at £1,000
Get house maintenance and Christmas/gifts funds filled up
Build one month's buffer in business account
Book and pay outright for a holiday to celebrate being debt free
Start putting 15% of our income towards our pensions (and keep checking to see if it's enough)

It looks manageable to me and we are on track to get this done. I'll look back to this post and review at this time next year.

So how do you prioritise the rest of it, once the debt is all gone and pensions are in place? Maybe I need to talk to OH about it all. Any ideas anyone?

Moneywhizz

Oh what a difference in your posts from a few months ago. One of the joys of being debt free is being able to make choices about what you do with your money and you are almost at that place. Everyone has different priorities in life and providing you have covered all the essentials, including a buffer in your business account and made provision for your future pension then it really is down to individual choices. For some people it is holidays and travel, for others it's their home, family, charitable giving, entertainment. The list is endless. Given the long commute you have by public transport and your longing for a car recently maybe that is something you should consider. You should indeed probably consult your OH and see if he has the same thoughts about the future as you do. Whatever you decide, it is going to be wonderful not to be paying out all that money every month towards debt.

enthusiasticsaver

BabyStepper wrote: »

Just when I got my head around a one year plan you've now got me thinking about 5 years! Where do I start?? All the things you mentioned, yes, a bigger emergency fund, a car, we will need a new kitchen quite soon, all of that stuff needs looked at.

As it's the start of a new financial year I made a one year plan, it looks like this:

Pay off all debt
Keep emergency fund at £1,000
Get house maintenance and Christmas/gifts funds filled up
Build one month's buffer in business account
Book and pay outright for a holiday to celebrate being debt free
Start putting 15% of our income towards our pensions (and keep checking to see if it's enough)

It looks manageable to me and we are on track to get this done. I'll look back to this post and review at this time next year.

So how do you prioritise the rest of it, once the debt is all gone and pensions are in place? Maybe I need to talk to OH about it all. Any ideas anyone?

Sorry to give your poor overloaded brain more to think about it but I am a planner (not everyone is the same). :rotfl: You sound like you might be too and doing a 1 year plan is definitely a priority.

What I would say is don't make plans too rigid. They need to be fluid as they could change due to change of priorities or circumstances or simply because you suddenly fancy a month trek around Cambodia or wherever.

Definitely talk to your OH. DH and I discuss these sorts of things usually at the beginning of a New Year. What work on the house is a priority, where we fancy going on holiday, how long before we need to replace a car etc, whether to gift our daughters or grandchildren anything etc etc. Then I do costings and we decide which is most urgent or when would be the best time to do something so an outside job will be any time other than winter and decorating in winter or autumn.


Your one year plan looks great and some of those plans will be ongoing and you just need to review it each year. For example the pensions one you will see the quotes at the end of the year and discuss how you have found putting 15% away and maybe leave the same or increase the older you get. I don't think you have children (correct me if wrong) but these throw a massive spanner in plans so they need to be adjustable if you want to have kids at some point.


A holiday fund is definitely a good plan. We used to do a cheap holiday one year and then more expensive one the following year to ring the changes so often cottage break in UK (we are not campers) then an overseas one.


Something like a kitchen or bathrooms or new car take around 5 years to save up for (in my experience) so that is why I say 5 years. It does not have to be 5, you could settle on 2 or 3 or 10 even. Just having something to aim for helps motivate me.

enthusiasticsaver

As Moneywhizz says everyone has different priorities. Holidays, nice cars, improving their home or moving up the property ladder, lots of disposable income for hobbies, entertainment etc and for some early retirement (which is where paying off the mortgage and pensions come in).

I was never one for saving for anything indeterminate, in other words just saving for savings sake to see money accumulate but some find that motivating. I think having a balance of doing the things you enjoy doing and saving for the future is a good way of going. We always did holidays and we saved lots of money on home improvements by my DH doing DIY as he is quite handy and we never spent loads on cars except a lovely hard top convertible my DH suggested we buy for my 50th birthday. The rest of the time it was make do on cars, never bangers but mostly 2 or 3 years old and luckily DH had a company car until he retired. Cars depreciate quicker than any other asset.

BabyStepper

Nothing much to report, just thought I'd check in to help keep me on track.

The soapnuts have arrived, let's see how they do in a wash today.

Millionaire next door was a great investment. It hammered home a new long - term strategy, from paying off debt to building wealth and security for me and OH. This is helping with those moments of impatience and frustration with the debt (much less frequent now but still appearing sometimes).

My First Direct account is open and the switch is complete. I may move the emergency fund in and then back out to trigger the £100 reward. Or I might wait until payday and move my wage through it, we'll see.

Plans for the weekend have all been paid for with spends. Then it's only a week and a half until pay day and becoming overdraft free. I got a formal letter yesterday about my overdraft reduction, full of info about how they might call in the rest at any moment. I cannot wait to be rid of this one. So close.

Other than that not much happening.