First Steps to Solvency

strawb_shortcake

alt80 said:

@annabanana82 you see £2610/m net so about £45k/a PAYE I assume but could see av £600/d consultancy - you’d only need 75 days worth of work a year to match current salary. Assuming some additional outlay say 80-85 days worth to break even though work through ltd still more tax efficient than PAYE so maybe not required depending on the work you do.

If you got 150 days of work you’d turnover £90k/a. Absolute no brainer imo never understood the employee mentality tbh. One life don’t spend it making £2.5k/m when you could make much more.

I am risk adverse for a start so there's some apprehension there. I do have a great pension that would probably cost me £1k a month and no holiday pay I get 31 days plus bank holidays and flexi. 
The other side of my job is that I have had many opportunities and experiences that money can't buy and that would stop and at the moment that's a deal breaker. Its something I had considered doing along side or instead of my job in future
My plan is for my mortgage to be paid off in 12 years, no dependent children then I can save and play hard. 
My Husband deals in comics as a side hustle as they say, I live in hope that he finds a few valuable ones in the attic

enthusiasticsaver

mothsinmywallet_2 said:

How does the rule of thirds work if you're using all of it to keep your head above water? Asking for a friend...

It doesn't work if you have no disposable income. The idea is you work out all essential outgoings including food, utilities, housing, transport, debt repayments and whatever is left is disposable. If you have no disposable income at all then planning for the future is tricky. Of course if a large portion of income is going on debt that won't help. 

alt80

@annabanana82 we’re all different. Wouldn’t be the lifestyle for me but my choice/ your choice ultimately. No right and wrong way really. Lots of people on here concerned with paying off res home early it seems - don’t see the point when you can release the equity and buy more property personally. Security thing I suppose.

@enthusiasticsaver funny thing being on here got me obsessing on the growth planning ha. Wouldn’t have considered it before just walked in AM when the debts were down a bit but seriously sat with the calcs tonight working out post card debt/ RR payment how long of throwing the 1/3 into more property/ maybe other investment would take to walk into AM deposit/ finance of balance 100% offset against additional rental income. Net yield of HMO in some areas round here slightly bigger than AMs (stupid) interest rate so beating the banks with their own money ha and AM on the drive for managing a HMO so no big deal there. AM bought and income still coming in long after AM gone looks like total win from where I’m sitting lol. Giving me motivation for future first time in a long time so even if it’s nothing but pie in the sky at least I’m not on a massive downer. Should go to bed rather than sitting working out how to buy more property lol.

Just need to sort the !!!!!! stupid debts out now and get started making it 100 work for me no more cards/ cars I have no plan to pay for other than out of personal net income. 

getmore4less

TheAble said:

Worth pointing out that money going towards capital repayment of mortgage is technically saving. It's only the interest part that's the expense. So eg if you take home £3k of which you save £1k and pay £1k towards mortgage, of which £800 is capital, then your effective savings rate is 60%.

The idea is you are buying your accommodation cost with 1/3 so it does not count as part of the savings. 

The idea is it reduces future costs having paid for accommodation no mortgage or  rent. 

Running costs continue so count as part of spends. 

RelievedSheff

@alt80 the plan for us is to pay our mortgage off ASAP. It is a quarter of our take home pay (at the moment) that we spend on the mortgage. Our aim is to get that paid off in 12 years, or less if possible so that we can then use that money to do other things.

We have no desire to own more property and the house we have now is more than adequate for us and what we need. We won't be moving again.

We want to be set up so that we can retire early and enjoy life in our later years without being tied to debt repayments.

enthusiasticsaver

alt80 said:

@enthusiasticsaver funny thing being on here got me obsessing on the growth planning ha. Wouldn’t have considered it before just walked in AM when the debts were down a bit but seriously sat with the calcs tonight working out post card debt/ RR payment how long of throwing the 1/3 into more property/ maybe other investment would take to walk into AM deposit/ finance of balance 100% offset against additional rental income. Net yield of HMO in some areas round here slightly bigger than AMs (stupid) interest rate so beating the banks with their own money ha and AM on the drive for managing a HMO so no big deal there. AM bought and income still coming in long after AM gone looks like total win from where I’m sitting lol. Giving me motivation for future first time in a long time so even if it’s nothing but pie in the sky at least I’m not on a massive downer. Should go to bed rather than sitting working out how to buy more property lol.

Just need to sort the !!!!!! stupid debts out now and get started making it 100 work for me no more cards/ cars I have no plan to pay for other than out of personal net income. 

It really sounds like you have come to realise how much the debt has held you back not only personally but in your business. You have been forced to use every bit of profit from your BTL just to service it. With your drive and without the millstone round your neck growing the portfolio may ultimately give you the lifestyle you want. Sometime a little patience can get you where you need to be. 

I invest in a multi asset portfolio and diversification is usually the recommended advice so investing everything in property is a bit like putting all your eggs in one basket. Even if you never plan on retiring having a pension when you are sorted gives you great tax breaks which as a higher earner seems daft not to take advantage of when the debt is sorted although I can now see your eyes are on the AM which I suppose is diversification of a sort even if no tax breaks. Do they hold their value?

 Glad you have found some motivation. 

enthusiasticsaver

RelievedSheff said:

@alt80 the plan for us is to pay our mortgage off ASAP. It is a quarter of our take home pay (at the moment) that we spend on the mortgage. Our aim is to get that paid off in 12 years, or less if possible so that we can then use that money to do other things.

We have no desire to own more property and the house we have now is more than adequate for us and what we need. We won't be moving again.

We want to be set up so that we can retire early and enjoy life in our later years without being tied to debt repayments.

Your goal is the same as ours was. You seem focused so I am sure you will get there. Look into rule of 3 when the debt is gone. That is the thing holding you back but equally you used the debt to improve your house so not wasted. If your house is now perfect you may want a more aggressive split when the debt is gone. Half to investing to fund financial independence and the other half to lifestyle. I liked the 3 way split though because the medium term seemed much closer so saving for a holiday to US or Australia or a new car or kitchen seemed much closer. I think even I would have balked at saving half our disposable income for early retirement, you need to live too. 

strawb_shortcake

With buying more property, you need to look at geographical areas too. I live in the south west so buying additional properties can be quite prohibitive. If I lived further up North then it might be more achievable on my income

alt80

@enthusiasticsaver 100 agree everything for me lacks diversification- business is comm / res property too lol. I don’t really know anything but property all I’ve ever done.

Need to get the debt gone first - that forces me to make some inefficient decisions tax wise. Agree tax breaks for pensions would be a good option to invest something into - no !!!!!! idea on that one though so would need right advice. Same with other investments that aren’t property based. I don’t know anything about stocks or fx or whatever. Would probably be a lot richer had I gone down the finance route rather than the property route after school haha.

Buy the right AM and they appreciate 10 years ago could buy a 80s V8V for £60/70k worth easily double that now for the right one. Obviously new AMs depreciate but currently the old ones are climbing. Don’t think it’s a particularly secure long term investment though - I think they’ll come down if there’s a massive push towards electric motoring and stops being a decent network of fuel stations. Maybe/ maybe not idk just think old cars are at about the highest value they are going to be right now. Could have called that totally wrong - I like my cars but no expert in buying them.

@annabanana82 I don’t think property is for everyone tbh for all sorts of reasons. 

alt80

Wife out for walk with son and dog can’t join her with my foot so have spent some time going through items working out if I actually need to buy or not. Sounds crazy I know but need to do this - work out what I can compromise on and what I can’t. Found a couple more items to sell so put them up for sale and going through current items for sale with wife later - probably reduce a few things get them gone and off the cards.

Got £6.5k worth of items up for sale. If we see £5k from that will put the debt at £25k. Know I dismissed it first but thinking about going through much smaller items get them up for sale too - possibly get to £22.5k to pay. Seriously thinking about making some further sacrifices - not missing having a £200/m + a bottle of Champagne booze budget. Realistically not going to cut to £0 but thinking January going to cut to £50/m use the 25% off offers on the wines and we’ve 6 bottles of Champagne - cut that to one every other month and that’s a year. Literally £200/m that can be throw at the debt.

Don’t think I can cut the entertainment spends right now tbh but thinking when lockdown is over have one meal out a month and rest on family activities. Don’t need stupidly expensive holidays. Like holidays and will go but 1x year visit parents super cheap and 1x year somewhere else maybe UK/ France. I’ve done New York/ Dubai etc and it’s just shopping and envy on another level not great for me. Would like to be able to still treat wife to a weekend in London but that’s enough for me.

Cutting the school would be financially a good move but son loves it there. I know he’s young enough to adapt to a different school / environment. Can’t say it seems value for money right now but I’d hate for him to move, hate it there and struggle with friendship groups etc when he’s happy where he is. Don’t think he’ll win academic / sports / music / whatever scholarships so have worked out over the course of his education what we need to spend to keep him in school right through to A Levels. It is a lot of money but no plans for moving to boarding type school or the ones that are really expensive. Both wife and I don’t want that.

January £90/m clawback from renewing fix on res home. Just going to throw that straight at the debts.

No idea where I’ve found the drive from but I’m buzzing to get the cards gone, free up £1k/m in minimums. Got the mad idea I’m going to pay my RR off when they ask for the balloon cash well transfer lol. Don’t want to refinance it - rate is stupid. Definitely still want to keep the car though but been having a think if I’m still driving it in 15 years time not the end of the world- it’s a great car now and it’ll still be a great car then. My Sport was no where near the end of its life I could have kept it another 10 years and probably should have. I’ve not spent six figures (well committed to spend) on this one for someone else to get it at four years old and enjoy. With cards and RR gone frees up cash to make some massive inroads into developing - will probably drop personal income I see every month as it’s better from a tax perspective for one ltd to lend other ltd money rather than ltd and me paying tax on the dividends but ultimately better off all round I think. Could have that wrong sure accountant will tell me ha.

I’ve been such an idiot with money can see that staring me in the face now but its tortured me for years. Not going to lie I’m never likely to become a saint with it. Still like nice things, see nice things and want them but it was ruining my life not just from a debt perspective but in every other way. Spent years pushing my wife and son away to her parents to go buying more stuff I didn’t need, not even thought through just obsessed with maintaining an image I’d built in my mind and getting a bit of a high that didn’t really last long anyway.