At a crossroads

Philliggi

Hi all. Ive been an avid reader and sometimes contributer to the debt free wannabe pages for some time although not so much in the past year. 

Ive got to the point in life where excluding the mortgage, ive managed to pay off all debt. No loans, credit cards, student debt, hire purchase. Nothing. Its all gone and i must say it feels wonderful. Its weird being at a point in life where i have circa £900 a month to dispose of as i wish. Its a feeling ive never had before. 

However...

While i may be debt free, my finances aint in a great position. Until my mid-late 30's (for clarity im now 41) i was in low paid work and so was never in a position to accumilate savings, add to a pension pot, or make any great in roads to the mortgage. I simply scraped by and spent most months in the overdraft. 

However, being autistic, i became obsessed with paying off debt once my income improved, and its now time to start the upwards trend , having stopped the rot. 

So where do i go? Do i throw all excess at the mortgage, with the long term goal of saving another £500 a month? Or do i add to my pension pot, having worked out im going to need to work until im 68 to come away with a mere £16000 a year? Do i save for the kids future? invest? Look at property (long term pipe dream), or simply put some aside for an emergency fund?

I basically need to do all the above and more...ok maybe the property isnt a necessity, but i obviously dont have the funds to do everything. 

So how did you go about setting your savings goals? Ive never been in a position to consider savings. Its always been about debt, so im kind of new to all this. 

Thanks in advance.

Emmia

Philliggi said:

Hi all. Ive been an avid reader and sometimes contributer to the debt free wannabe pages for some time although not so much in the past year. 

Ive got to the point in life where excluding the mortgage, ive managed to pay off all debt. No loans, credit cards, student debt, hire purchase. Nothing. Its all gone and i must say it feels wonderful. Its weird being at a point in life where i have circa £900 a month to dispose of as i wish. Its a feeling ive never had before. 

However...

While i may be debt free, my finances aint in a great position. Until my mid-late 30's (for clarity im now 41) i was in low paid work and so was never in a position to accumilate savings, add to a pension pot, or make any great in roads to the mortgage. I simply scraped by and spent most months in the overdraft. 

However, being autistic, i became obsessed with paying off debt once my income improved, and its now time to start the upwards trend , having stopped the rot. 

So where do i go? Do i throw all excess at the mortgage, with the long term goal of saving another £500 a month? Or do i add to my pension pot, having worked out im going to need to work until im 68 to come away with a mere £16000 a year? Do i save for the kids future? invest? Look at property (long term pipe dream), or simply put some aside for an emergency fund?

I basically need to do all the above and more...ok maybe the property isnt a necessity, but i obviously dont have the funds to do everything. 

So how did you go about setting your savings goals? Ive never been in a position to consider savings. Its always been about debt, so im kind of new to all this. 

Thanks in advance.

Firstly congratulations on paying off the debt.

I would at this point focus on boosting your pension and saving for a home over providing specifically for your kids - does your employer offer a pension? I would consider salary sacrificing a couple of hundred extra each month into that pension over what you're currently putting in. 

Do you have an emergency fund in easy access savings accounts or premium bonds?  If not I'd save that first. Then I'd focus on getting a deposit together for that property - an ISA would be a good route, cash if you want certainly, S&S if you're willing to take (a bit of) risk 

Best of luck

South_coast

I read it that you already have a home, but the property referred to as the long-term pipe dream was for an investment property? I would echo sorting out an EF first, then maybe get used to having a bit in savings and take some time to think over what your next target(s) should be. A couple of months to mull it over isn't going to be a big difference in the grand scheme of things. There's also no shame in working towards a few different targets at once. Whatever you do, it's going to make a positive impact for your future 👍

And very well done on clearing the debts 🥳!

Kat78MFW

Congratulations on becoming debt-free! Are your kids likely to want to go to uni? If they might, I'd suggest using this calculator to see how much additional support you might need to give them, over and above the maintenance loan they can take out. It can be a shock when you see the amounts involved but better to know about it years in advance if possible. 

We also put as much money extra into the mortgage as our fixed rate allowed to get it paid off early. 

Philliggi

Yes sorry. Just to clarify, i own my own house and have hit the minimum payment every month without overpayments.the property i refer too would be an investment property, with the long term goal of my kids moving in there as a stepping stone to owning their own place.

I have toyed with the idea of using overpayments as a sort of savings account and using borrow back should i need access to that money. Seems like a good idea theoretically to me, although i get that that money wouldnt be instantly accessible. 

I do however have a perfect credit score so debt doesnt fear me shoul the need arise in an emergency. Also it should be said id also have an emergency fund in place as well.

Speaking of which how much is advisory to hold in an emergency fund?

Emmia

Philliggi said:

Yes sorry. Just to clarify, i own my own house and have hit the minimum payment every month without overpayments.the property i refer too would be an investment property, with the long term goal of my kids moving in there as a stepping stone to owning their own place.

I have toyed with the idea of using overpayments as a sort of savings account and using borrow back should i need access to that money. Seems like a good idea theoretically to me, although i get that that money wouldnt be instantly accessible. 

I do however have a perfect credit score so debt doesnt fear me shoul the need arise in an emergency. Also it should be said id also have an emergency fund in place as well.

Speaking of which how much is advisory to hold in an emergency fund?

I'd say 3 - 6 months expenditure for an emergency fund.

*As is often repeated in these parts, your credit score is a made up fairy number. What matters is the contents of your file, that lie behind the score.

Philliggi

Ha ha, i grt that about the credit score, but was just basically saying im used to handling debt well, even if ive probably had too much of it in the past. 

Think ive got the basics of an action plan together. Im not going to save in any area in particular, and not going to put towards the kids future either just yet. I figure if i can get my own house in order first they will benefit like a ripple effect. If ive got more money in my back pocket, then they will naturally benefit. 

Going to update my footnote later with a few aims and targets. Try to keep myself in check. Not quite sure how realistic getting 6 months expenditure together is though. Might have to conpromise there. 

Thanks for the tips

Philliggi

So ive looked at this long and hard last night and decided to keep things simple. Im not going to attempt to fill multiple pots and get nowhere fast. Im better when ive got just the one aim and can see myself making rapid progress down that one track. Once thats complete ill move onto the next. 

So im not going to save for the kids future, or a big diy task or a property investment. Im going to put £1000 in an emergency fund and then pile high on the mortgage. I figure with the interest i save there ill be better off down the line. 

Ive found this amazing mortgage tracker that keeps track of overpayments and interest savings as well as expected completion dates and i think that will be a great motivation tool to keep me going. Its amazed me how a £1000 overpayment is enough to knock circa 7 months off the mortgage at this stage. 

Philliggi

Ok, so i might have initially got over excited and overpaid WAY too much. Currently £1020 overpaid for the month but then realised my house insurance and season ticket for the football is due, and so am round about flatlining for the month, even though theres still 25 days to go.

Oops. 

Philliggi

Quick question, although i want to overpay and get an EF together, i need ti reign itvin a little and not get carried away.

Are there any challenges on here, or plans i could jump on to bring a bit more structure to my world? Im finding myself randomly transferring small amounts with nobreal plan

Viking_mfw

Given your circumstances, I would recommend you look at Rebel Finance School - it's a free 10 week course, starts in June I think. It could give you a plan to get set up for the future. 

There's also grocery challenges on the Old School board in this forum.