Prosperous soul, mortgage neutrality & creativity Year 2

savingholmes · 24 November 2022 at 12:06AM

A year ago I'd just got divorced and was about to take on my biggest mortgage ever at £202K over 22 years. I was terrified I wouldn't make it. I'd had a long history of repeated debt cycles the worst peaking at £70K at the end of 2016 which I'd got down to £1,479 in November 2021 but feared I'd never be free. Thanks to some wider family help I had an EF for £2K. I hoped if I was lucky that I could be CC debt free in a year and OP £20 a month and if I was really lucky add £50 a month to my non-workplace pension and perhaps get to an EF of £3K. I was in debt on my water bill of around £150.

Mortgage neutrality: I am hoping to develop a tax free lump sum that is big enough to pay a lump sum off my mortgage if I choose to. I have a number of pensions - which I plan to use as part of my C0ast FI journey. I also want to reduce my hours and work more flexibly as I near retirement age.

Financial Progress over the last year:

Increased my income
Mortgage down from £201,999 to £194,266 a reduction of £7,733
CC was £1479 now debt neutral a reduction of £1,479 - I mostly just use CCs for points and clear in full each month
My EF was £2,000 now £4,657 a difference of £2,657
Cleared water bill debt - now in credit so difference of £150
In credit on energy by at least £450

A difference of £12,469 in net worth change excluding pensions

PENSIONS
DB1 was £3,850 per year - no formal update but should have risen by at least 5% due to inflation. If that is the case it should now be worth £4,042+ equivalent to an increase of £192 per year. If that was multiplied by 25 like they do with FI - then that would be the equivalent of a DC pot growing £4,800.
DB2 was £9,551 per year - at 1/4/22 it was worth £10,657. This is my current pension - and this is an increase of £1,106 per year. If that was multiplied by 25 that is equivalent to an increase of £27,650 in a DC pot.
DC Pot £3,643 - despite adding £312.50 to this gross - it's now worth £100 less than this time last year at £3,543. So in real terms -£412 in relative value in the last year given I'd topped it up. Hoping it will recover by the time I come to draw it. I need to investigate whether to switch funds and if there is anyway to make my annual charge lower
NEW AVCs I have put £750 in gross so far - and this has grown £7 in just over a month. So starting value £757. This sits alongside my main DB2 pension and can't be drawn independently but would be able to be converted to a tax free lump sum in its entirety if it's not valued at more than 25% of my main pension. This is what I hope to use towards the mortgage at a future date.

A difference of £1,955 on actuals in a year. If however FI multiples using 25x are used then this equates to an improvement of £33,107.

This means that providing I live long enough to draw my pensions - then my net worth increased by between £14,442 or if the 25x rate applies then £45,576.

In addition, my SP entitlement will have a grown by a year meaning I am on target to hit full entitlement by around age of 55. I was contracted out at some point so this my not be as clear cut as that.

Non-Financial Progress

Prioritised health and wellbeing
Undone years of neglect - and invested in help in the home and garden and in new clothes for me
Had several UK holidays etc
Decluttered
Lost some weight
Written some more of Young Adult fantasy book 2
Made new friends

savingholmes · 24 November 2022 at 12:28AM

Goals

Clear CC in full each month or immediately after spend (to get points)
Reduce mortgage by £7,898 a year. This includes an OP of £20+ a month (which over the term will knock 6 months off the mortgage).
Invest in AVCs £4,500 a year = at least £375 per month, preferably £400 per month from April latest
Grow EF by at least £3,000 a year = £250 average per month. Interim target get to £6K then aim for £9K
Have at least 2 holidays a year - typically cottage holidays
Buy 10 days annual leave each year
Continue to declutter, maintain and pay for help with the home and garden
Try to lose another stone in the next year
Continue art and writing
Increase income

DancingInTheRain · 24 November 2022 at 8:04AM

Happy new diary and just look at how far you've come in a year, so ins[irational! Great goals and I'm sure you'll achieve them, looking forward to continuing to cheer you on x

lucielle · 24 November 2022 at 8:19AM

You’ve come so far. Happy shiny new diary. Please remind me what AVC stands for.

L

IAAM · 24 November 2022 at 8:45AM

Lucielle - AVC stands for additional voluntary contributions.

Saving Holmes - I’ve seen you around the forum but I didn’t know your story. What an inspirational example you are to have achieved so much, and over a long period. And divorce is always a tough thing to go through.

I really love the balance of your goals where they aren’t just FI focused but, even more importantly, looking after yourself and your well-being.

Wishing you continued success with your fantastic journey

savingholmes · 24 November 2022 at 8:50AM

Additional Voluntary Contribution. I have my normal pension that I pay around 8.5% into and then I am opting to pay extra which I get tax relief on through payroll.

Next month I'm fortunate in that I am due a back dated pay rise so should get a big lump sum just before xmas. I am hoping to send a good chunk of that into a 5%+ savings account.

I have dropped DD off at the station so up early for me. I just put a coat on over my PJs! Still need a shower and to get ready as I'm going into work today. Need to plan what to take for lunch. Ideally I need to take my toothbrush and toothpaste as I need to get to the hygienist late afternoon. Shortly after that I'll need to pick DD up again.

We need to check if H have sorted her bike out yet - last time we rang they hadn't yet started despite having it at that point 10 days. Seriously unimpressed. They were supposed to ring us back but didn't. It's probably been at least a week since then...

EssexHebridean · 24 November 2022 at 5:48PM

Happy new diary SH - the little pink flag in the corner has been clicked and I'll be following along!

By "H" re the bike - please tell me not the "H" that ends in "fords"? If it's not too late I'd really consider looking elsewhere for any work to be done on a push-bike - I say this after they several times sent me away with one which was in fact a danger to ride! I genuinely wouldn't touch them with someone elses barge-pole, now.

I posted on your other diary re your savings goal concerns by the way - won't copy it over here as you may have new goals now.

jwil · 24 November 2022 at 7:13PM

Happy new diary! I really love your progress report, look how far you've come in a year!

savingholmes · 24 November 2022 at 9:22PM

Thanks Dancing, Lucielle, Jwil and EH. Welcome @IIAM

I am thrilled at my progress in a year.

EH - unfortunately we are talking about that H. Said bike wasn't yet roadworthy - so they've agreed to do some more work for free and halved the overall cost. Unfortunately that's added more time as they need to order a part. I appreciate there are likely to be better providers out there but unfortunately neither DD or I had the energy to pursue those. I will try and plan ahead better another time... I replied to you on the other thread. Basically some lifestyle creep possibly - but there's an element of undoing past underspend while getting out of debt - and trying to understand the right balance...

In better news - DD needed to go to the B00ts so I've bought my sis her gift so that's another thing ticked off the list. I also bought a new half price toothbrush as Am**** refunded me as the parcel went missing. I therefore got 450 points - so I'm at close to £14 in points now that I can spend at some point.

I also managed to use a £5.25 gift voucher from £co for Mr T so tea cost nothing. We also managed to pick up some YS goodies so reduced price kievs, dauphinoise and something else... It all helps. About to have a curry with jacket spud and rice.

The hygienist said my gums had improved since my last visit which was also positive.

I'm thinking I may cancel the gym as I'm rarely going - that would give me £24 back a month. Ideally I'd put that towards savings and try to walk more - or occasionally go to the gym on PAYG.