Cutting it Fine - the challenge is on!

savingholmes

Good luck on your journey. I too need to lose weight, want a craft room and a place by the sea

SandyShores

We will get there savingholmes

Well I was reading on another diary about whether to include your home as an asset on YNAB and it got me thinking about my goals.  For the past few years I measured the reducing debt balance and it kept me going and focussed.  But now I'm debt neutral and we own a heavily mortgaged house, how do I measure and motivate?  Measuring the mortgage is good and its a worthwhile goal, but I'd like something else to strive for, and I like the idea of having assets over and above the house you live in and the car you drive.  Being debt-free is great and I am sure being mortgage free will be fantastic, but I want to do more than that.  I'm not sure how I'll do it yet, or how to balance paying off the mortgage whilst building up those assets, so I'd better get my thinking cap on

SandyShores

So, I've been thinking and rethinking my goals and how to keep us motivated.  Paying off the mortgage and being debt-free is great but how to build those assets.  Its not about money for money's sake though.  I love owning even the tiniest bit of home we own, but I also love the feeling of security that it brings and the satisfaction of having worked hard for it.  So I know we will need to buy things for the house still, not loads but I want us to be able to enjoy our house.  (While bearing in mind we enjoyed it too much before and had nothing to show for it).  So I've taken the decision to put £200 into a savings fund.  This will be the savings fund to replace our car, but will also go against big house purchases that can't come out of the grocery budget.  The mortgage overpayments are reduced to £4k pa, but any payrises, bonuses, extra work etc. will go to the mortgage overpayments so that will be more.  I'm not 100% sure how this will work, but it just feels right at the moment and I can always adjust as we go along.  

One of my aims is to reduce the mortgage enough so that if one of us lost our income, the other one could remortgage on their own when the fixed term ends.  That will rely on overpayments and possibly some of MrShores pension pot, but that's almost 5 years off at the moment and who knows what will happen in the meantime, but that's where we are aiming right now as well as aiming to get it paid off by retirement age.

It hasn't really tackled the issue of how to build other assets but I feel like its a first step to opening up other possibilities, while starting to plan some leeway for the unexpected.  Its about finding a good balance which feels right.   'I don't know where I'm going, but I'm going'.  

savingholmes

Given the tax relief that mortgages offer- and your apparent proximity to being able to retire - is it worth putting extra into pensions either independently or through work schemes?

SandyShores

savingholmes said:

Given the tax relief that mortgages offer- and your apparent proximity to being able to retire - is it worth putting extra into pensions either independently or through work schemes?

Yes, that's definitely another consideration.  It was something I was thinking about a while back, so am not sure why I forgot.  Thanks for the reminder.  My thoughts were something like putting money into the pension, which attracts tax relief, then just withdrawing that element early to pay off some of the mortgage.  There's a slight risk as pensions go up as well as down, but its good to spread some of it.  I need to do some sums - e.g. pay £1000 off mortgage vs £1000 paid into pension.  With the mortgage its interest saved, with the pension its tax relief and any rise/fall.

savingholmes

Once I've got rid of the CCs plan to use a combination of mortgage OPs and saving into pension and using the lump sum to clear mortgage debt.

sofarbehind

SandyShores said:

Saturday was a lovely homely day.  Even peeling the potatoes feels better in your own home   (I can't imagine what it will feel like in your own home that's completely paid for!).

This made me smile, so true! We are very lucky to be MFWs.  I know what you mean about feeling a bit rubbish, I'm the same and I'm blaming it on the grey December days.  I'm impressed with how you are keeping up the running...need to up my game here.

SandyShores

Definitely lucky to be MFWs   And lovely to be able to go out running - I don't go far but its good to feel the cold air and even better to return home to the warmth.  I'm definitely starting to feel more satisfied - maybe even a little smug - but trying to keep realistic as I know life has the habit of sneaking up (and come on - have you seen the size of my mortgage ).

I was having a conversation with DH earlier this week along the lines of comparing a secure decently paid boring job with good pension vs a job for more money, less holidays, less rights, opportunities to earn bonuses and more interesting.  As we have become older we've become less more risk averse, but I still want a challenge.  The decision would be a more interesting job with all of the former - so wait for it to come along or go looking for it.

savingholmes

I think weigh up the value of the pension increase a year. So I am in a defined benefit pension. Say for round numbers my pension goes up £1K a year - to fund that myself  then depending on how long after I am due to retire I would have had to have more like £25K.  Just in case that helps

SandyShores

Hi savingholmes, its good to think about this.  Mr Shores is starting to realise the benefits a steady job can bring, even if its not the most exciting.

I've also been thinking about mortgage overpayments versus pensions.  In Dave Ramsay's babysteps he says to put 15% of your income into pensions, so I think we need to do that as a minimum.  I'm in a final salary scheme, and I've also got a small pension I took early.  Mr Shores is in a defined benefit scheme with work, so we can top that up to the max and/or it can go into his private pension pot (where all of his other pensions were combined).

I  also need to look at the effect of £100 overpaid to the mortgage, vs £100 paid into the pension pot to see which is best.  For every £100 Mr Shores puts into his private pot he receives tax relief - so its instantly boosted by 20% plus any investment growth (or loss) over the year.  Then when he's 55 he can take 25% out of the pot tax free.  So it should be a fairly simple calculation and I can use a mortgage overpayment calculator to compare how much we would save by overpaying the same £100 to the mortgage.

It would be lovely to pay the mortgage off and not have to use any pension withdrawals or lump sums, but at least we have got those options.  

I've managed to get a few of my things on my To Do list done today - although I haven't been able to cross them off completely.  Its no wonder my list never shrinks, it seems I do one thing, then have to wait for something else to happen before its done completely.  But isn't that life, and I'm determined to get to the end of that list, then I can start concentrating on other things!