Ready to embrace a mortgage-free journey

South_coast

Could you try looking at it the other way round, start the budget with the £1250 OP in it and then fit the other line items into what's left? Even if you have to nibble away at the £1250 target to balance the budget, you might end up with more OP than if you start with the expenditure and try to cut that to fund the OP?

IAAM

So…..like the concept of paying yourself first and then seeing how much you’ve got left to spend?  

I really like that idea. Thanks South_coast! 

South_coast

You're welcome. It's what I've been doing for the past few months while I've been trying to ramp up my savings and it's really working for me 😀

IAAM

There are still a lot of things for me to look into and work out. But, today, I used the MSE overpayment calculator and discovered that (at today's rates) I'm better off paying my overpayments into a regular saver account and then paying this as a lump sum onto my mortgage, once the interest has been added.

The difference is quite significant for me:

Overpaying my mortgage by £250pm would save me £2,183 interest
BUT
By paying £250pm into a regular saver account (paying 4.5% interest) I would make £5,561 in interest over the same period.

Admittedly, the above figures assume everything stays the same over the rest of my mortgage term - and this is highly unlikely to be the case in practice.
However, the regular savings rate of 4.5% compared with my fixed rate on the mortgage (1.64%) means that the regular saver approach has to be the way I do this for the next 12 months.
Unfortunately, the regular saver has a cap of £250pm so I need to check out others that I can use too, to maximise this financial advantage. I might wait a week or so to see if there are any improved products coming onto the market following the BoE base rate rise.

In some ways, I'm really disappointed that the regular saver is so much better than making the OPs directly into my mortgage. I'm sure others would agree that there is something very satisfying at seeing your mortgage balance go down every time you overpay. But....the figures speak for themselves and so I'll just have to bite the bullet on this and accept that I have to wait 12 months to see a real reduction

IAAM

So, the £250pm standing order is now set up to pay into the 12 month regular saver. However, I'm also setting up a spreadsheet which will show my mortgage reducing by £250 per month as I do need to see the mortgage coming down (even though I'll know I'll need to wait until next November to pay the money in and see the reduction).

I've now found another regular saver that offers 5% over a 12 month period, so I will set up a standing order for the maximum amount of £125pm.

After that, there's a further regular saver (with the same building society) at 3.25% pa interest, with a maximum deposit of £250pm so I might see if I can hold two accounts with them, and then go for that.

After that, I will make any additional amounts either into Premium Bonds for a year or directly to the mortgage (or maybe a combination of the two).

I'll be setting up a spreadsheet tonight to keep track of all of these payments, as well as the "artificial" reduction against my mortgage each month.

IAAM

Woo hoo! I've received my loyalty vouchers from my M&S credit card today and I'll be using those to buy another Christmas present from my remaining list. 

Has anyone else noticed in shift regarding Christmas presents within their family this year? Most of mine have already started saying they will be making gifts for everyone instead of buying them this year, which is brilliant. (And it makes me feel so much better about really scaling back on costs this year). 

IAAM

I’ve reviewed how well I’m doing so far in November and it’s fair to say that I get a C- for effort!

I’ve done well finding new bank accounts and savings accounts, and working out my target mortgage-free date, but the spending side of things isn’t going so well……

I’ve only got £164 left out of my £352 budget for the month, and I’ve almost spent half of my grocery budget. And we’ve got more than 3 weeks left before the end of the month!

 The budgets I’ve set myself are absolutely achievable, but I still need to work on how I’m spending my money and the decisions I’m making. 

IAAM

The new bank account is going well (i.e me paying for everything by debit card and my monthly budget reducing whenever I spend).

However.....the rate of my spending has become really apparent with this new regime as there is no overdraft facility on the bank account and so I have to stick to the budget that I transferred into this account.

I now have just £56.25 left for the rest of the month, which is an interesting position. Like I said in my previous post, the budget I set myself for November was more than reasonable and, actually the only tangible expenditure I need to use the £56.25 for is diesel. Other than that, I have free choice on what I use that money for so it's clear that I need to make much better spending decisions than I've done for the last 11 days.

I think I've got enough diesel in the car to last me about 10 days but, when I filled up earlier this week, I did a calculation to work out how much it costs me to drive anywhere. I based this calculation just on the cost of diesel (and not taking into account wear & tear etc) and it costs approx. £1 to drive 5.5 miles. That was a really helpful exercise and it meant that, when I had to go out earlier this week, I made sure to use my journey to do 3 different things in the one trip. (Normally I would dash out and do one thing, forget to do another and then do a repeat journey on another occasion). I also considered the route I took and whether there was a shorter route I could consider and/or whether I could go somewhere else and save car parking charges. This has been a really valuable exercise. 

South_coast

Have you kept a record of where you have been spending the money, so you can look back over it and see whether that spending actually brought you "value"?

IAAM

That’s a great point S-c. 

The expenditure is all clearly shown on the banking app of my new account -  and I have looked at it to see where the money “has gone”. But what I haven’t done is looked at the purchases and considered their value. 

I’ll do that now. Thank you for the suggestion. That’s really helpful 😊