the unbearable heaviness of mortgaging

BakingC

Well done on setting your sights on slaying the mortgage beast. Sounds like you have the right ideas.

Just a point I always see on other MFW diaries which I am going to steal. Make sure you have an emergency fund first (around 6 months of outgoings normally works) as it gives you a buffer incase anything were to happen.

You could also concentrate your savings / overpayments into high paying bank accounts e.g. regular savers as long as the interest they get is more than your mortgage rate you are better off.

If you might be tempted to spend by the large savings balance then it might be better to just overpay regularly as it removes the option.

femina

Thanks @BakingC!

I have some savings - as I had been saving for home renovation and leasehold extension, then I changed my mind on the renovation. I do plan to extend the lease soon, as there are only 91 years left on it. The home renovation fund is now my emergency fund, as I'm not renovating anytime soon. I'm considering a move to a cheaper area instead, when my child finishes secondary school (8 years from now*). I might renovate the bathroom, but that will still leave me with an emergency fund.


*Who knows what happens by then, Brexit and all... so nothing in set in stone.

DeterminedSingleMummy

Just wanted to say hi. I'm also a single mum who wants to be mortgage free. I've not been on here for a while but hoping to get back into the habit of posting on here and my own thread as it really helped me get to where I am now!! (Not mortgage free yet but I have now got a BTL to help me be mortgage free in the long run... ) x

helibob

Salary sacrifice just means that your pension gets taken out of your pay before any tax or NI. You'd save the tax anyway, but you get an additional NI saving with salary sacrifice. Your employer also gets an NI saving and may pass part or all of this on to you, but they are not obliged to, so may not. It is almost always worth paying your pension by salary sacrifice if that's available, IMO.

The thing that is worth checking is that, if you get death in service as a multiple of your salary, whether they base that on your contracted salary or your sacrificed salary. I think most go for your contracted salary, but it's worth looking into.

(There are probably other issues that I'm unaware of, but your HR/payroll should be able to give you more info)

mikenolan

femina wrote: »

I'll post a breakdown of spending when I do my October budget, which is next week after I get paid (25th)

Do you do annual budgeting as well? Many things you'll only pay once a year (insurance / MOT / tax / birthday presents etc) so it's important to accurately account for these bills too. The MSE budget planner spreadsheet is quite good and is useful for helping to identify areas where you might be spending money without accounting for it and highlights how much small but frequent spends add up (e.g. £600+ for a fancy coffee every workday)

femina

Thanks all! @determined: good luck!

helibob wrote: »

Salary sacrifice just means that your pension gets taken out of your pay before any tax or NI. You'd save the tax anyway, but you get an additional NI saving with salary sacrifice. Your employer also gets an NI saving and may pass part or all of this on to you, but they are not obliged to, so may not. It is almost always worth paying your pension by salary sacrifice if that's available, IMO.

Yes, but I'm not sure in my particular case which route is more advantageous: what I'm doing now i.e. voluntary pension contributions after tax, then claiming extra tax relief as I'm a higher rate payer OR salary sacrifice, and if salary sacrifice, how much shall I sacrifice so that I don't pay 40% tax at all?

mikenolan wrote: »

Do you do annual budgeting as well? Many things you'll only pay once a year (insurance / MOT / tax / birthday presents etc) so it's important to accurately account for these bills too. The MSE budget planner spreadsheet is quite good and is useful for helping to identify areas where you might be spending money without accounting for it and highlights how much small but frequent spends add up (e.g. £600+ for a fancy coffee every workday)

I don't have annual bills apart from Google Drive storage which is negligible £16/year. I don't have a Christmas fund but I usually get a bonus at Christmas. Other presents just go out of the daily spending account. I don't have a car, I use public transport (London).

I do monthly budgeting on the 25th. If there's a small surplus on the 24th just before pay day I just leave it in the accounts, if it's a larger one I add it to savings. I use 2 accounts, one for salary and bills, one for daily spending. All bills go out from the main account between the 30th and the 4th, and they are all monthly bills. On the 25th I transfer the spending money to the 2nd account, and make sure I don't spend more than it's there.

For budgeting I use an Excel spreadsheet. I was planning to get a budgeting app but haven't gotten around to it. Need to research a bit.

helibob

"Yes, but I'm not sure in my particular case which route is more advantageous: what I'm doing now i.e. voluntary pension contributions after tax, then claiming extra tax relief as I'm a higher rate payer OR salary sacrifice, and if salary sacrifice, how much shall I sacrifice so that I don't pay 40% tax at all? "

The tax relief should be equivalent to the tax you don't pay if you do it salary sacrifice, so that element should be pretty much equal, plus you get the NI. In order not to pay 40%, you need to sacrifice enough so that your taxable pay is less than £46,350, assuming your tax code is 1185L (if not, then less than £34500 plus your tax free allowance). I think you can put up to £40k into a pension per year (remember to include your employer contributions), so if you're a very high earner, you may not be able to get it so you don't pay 40% on any of it.

femina

Thank you! I'm not a very high earner and the last tax year was the first one in the higher rate tax bracket, so it's all new to me.

Looks like October is going to be frugal, as I had a root canal done this past week, and I need to pay the bill in the 2nd session which is mid-Oct. The private dental insurance only covers a portion of it.

So here we go, copy and paste from my Excel sheet:

income £3163

bills:
mortgage £1,200 (£298 is the over-payment planned)
insurance: mortgage £35
insurance: contents £5
insurance: WW travel & mobile phone £13
service charge £90
council tax £110
gas & electricity £74
water £22
TV license fee £13
Netflix £8
fibre broadband £20
mobile phone & int'l calls £36
child mobile phone £5
groceries delivery fee £3
child savings 4.5% £100
childcare £331
school clubs £105
dental invoice £490
total bills £2,649 -> amount to keep in my Barclays account.

That leaves me with £514 to transfer to my Nationwide account, and I will only have £20 or so left from this month, September back to school is always tough on finances! The £525-ish is for food, clothes, fun, pampering and Oyster top-ups and has to last from 25 Sep to 24 Oct. So this means no eating/drinking out until October half term. No need to buy clothes either and can skip haircuts this month.

From next month my available income will drop, as I decided to increase a bit my own contribution to the pension, from £100 to £225. Between my contribution, automatic tax relief, and employers' contribution, I'll be adding £600 to my pension pot each month. Won't be able to increase it until end of May, when I will stop paying for childcare. My meeting with the pension adviser was postponed until mid-Oct, I still need to check with him the numbers on the salary sacrifice option vs what I'm doing right now.

Off to look for a budgeting app now... lovely way to spend Saturday night

zagubov

Another vote for looking to boost your pension.:beer:

femina

Thanks.

Had some time today - it rained and my child's at a bday party - and decided to give YNAB a try. My dad bought a licence to YNAB 4 desktop version a long time ago and never got around to setting it up, so he gave the license to me. It looks like it has a mobile app as well, synchronising data via Dropbox... I won't be paying for the online version for now.

Can't say I'm sold yet but I have added all my accounts and balances and I now have the full picture of my finances in one place - including mortgage and pension and even the flat value! Net worth £231,451 - not bad - at least my flat purchase was a good one, let's hope Brexit won't ruin it :-) I will try not to.

YNAB's approach 'give every dollar a job' and 'live on last month's income' is interesting. I'm pretty good at updating my Excel sheet, but YNAB requires much more work, entering all transactions and budgeting every single pound... so let's hope it works.