Author Topic: Case study - Stubble in South London  (Read 3150 times)

Mercer

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Case study - Stubble in South London
« on: April 05, 2014, 10:21:54 AM »
Hello all! Two British would-be-Mustachians in our late 20s here: discovered the site about a month ago. We want to get our costs down and move towards financial independence, although we’re still working out the exact goal: we might want to go for very rapid independence, but it could be slowed down if we travel (we were planning a big year off in 2016, perhaps to travel around America) or depending on how we approach having kids (timing, whether one of us stops work full-time etc.).

In March we paid off the credit card with high interest, meaning our mortgage is our only debt with interest (though it’s a big mortgage: living in London!). We currently have a car that we only pay the insurance for, plus fuel: it’s used for specific weekends camping etc. We commute by bus.

We’re looking to save mostly by
- Finding more efficient energy providers etc.
- Being more careful with taking cheap public transport.
- Spending less on groceries.
- More socialising ‘in’ rather than ‘out’.
- Buying less shit.

Commuting is fairly cheap for us, and moving to walking distance of one of our workplaces would likely cost more (central London) plus would only save 60 or so a month on commuting. We’re looking at other ways to make our commute cheaper (walking/running back from work sometimes, for starters!)

Mortgage interest is cheaper than renting. We could move to somewhere smaller, but it’s hard to get stuff for under 250k in London and above that you pay 8k+ tax for the privilege of moving. I also don’t know how significant penalties would be for paying off the whole mortgage suddenly like that: one of the things on my list to check out.

We can pay an extra 500 a month into the mortgage without any penalties, and intend to do so. Otherwise, the plan is for savings to go in ISAs - up to 30k between us of tax free saving/investing, which is good as we’re both taxed at the 40% rate.

Really grateful for any suggestions/observations/punches to the face. Particularly anyone with a UK perspective to share on things: any tricks with cashback credit cards, energy suppliers, things you need to bear in mind before retirement, tips on swiftly paying off mortgage etc. Apologies for the formatting: I can't find a way to get things to line up neatly...

Current situation:
Assets
House:                       300k (likely to rise quite quickly until any dramatic crash!)
Savings                      6k
                                 306k
Liabilities
Mortgage:                  245k (4% interest, fixed payment of 1300 a month)
Parental debt:            44k (no interest, pay 360 a month)
Credit card:                800 (no interest, pay 100 a month)
                                 290k
 
Net worth:                 16k (nominally, but massively dependent on house prices)

Earning and saving

                                 Current            Target            Change

Income                      4850              4850         

Paying off debt/savings
Mortgage capital:        500                1000       
Parents                      360                360
Credit card                 100                100      
Savings                      1485             1675      
Increase net worth  2445             3235             790

Kissing goodbye to money forever

1. ‘Fixed’ costs (try to reduce in long term, but can’t choose to pay or not)
Interest                   800                  800      
Bills                         120                  80      
Tax                          70                    70
Commuting             150                   120      
Phones                    65                   45      
Union/donation         40                   40      

Total fixed             1245                1155           90

Discretionary costs
Social/fun                 575                 250
Buying stuff             125                  25      
Misc                         150                 25
General                 850                 300              550
Groceries               330                 180              150

Total discretionary 1180              480              700

Total fixed+disc    2425              1635            790
      


Annual Increase net worth                38820
Less annual ‘large costs’                    1000
Total annual increase net cost       37820

Other stuff
Pensions: I have a small public sector pension: need to check out the details!
Student loans: in the UK, you pay these as a small slice of your income if you’re earning over certain levels. They’re therefore netted off the income above. They could mean we paid very marginal costs on our retirement income, or if we worked for a long time we could pay them off and get a bit more per month. 

stevewisc

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Re: Case study - Stubble in South London
« Reply #1 on: April 05, 2014, 01:25:42 PM »
It looks like you soon will be living off 30% of your income.  Just getting to that point will be a big deal!  Congrats! 

With what's left, unless you change the mortgage, there isn't much left.  At that point enjoying the ride or poking the income side will be the only way to speed that up a bunch (unless you move)  In my experience the small tricks to get the extra spending reduction sometimes are a fun challenge but aren't much of an impact in the full project.


House

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Re: Case study - Stubble in South London
« Reply #2 on: April 05, 2014, 03:47:24 PM »
Hi,

Another south Londoner here!

We rent so I don't have any advice on paying off mortgages however I've been tracking our expenses for about a year now and gradually reducing them. If you don't currently track your expenses I recommend doing it. I found the gap between what I thought we spent and what we actually spend to be very revealing! It's also motivating to see the costs going down over time.

A couple of questions about your 'fixed' costs..

- is the 70 tax for council tax?
- what bills does the 120 cover and how much are each of these, e.g. utilities, water, internet, tv licence, home phone etc.?

I found moneysavingexpert's Cheap Energy Club very useful in reducing gas and electric bills. You tell them how much energy you use per month or quarter and they find the best deal for you. They will also send you an email in the future if you can save a certain amount by switching to a different provider.

From your phone costs it sounds like you might be on contract? If so, you could check if you'd save money by buying your phones outright and moving to a sim-only deal. I pay 7.50 a month for a sim-only deal on GiffGaff which runs on the o2 network. For that I get 200 minutes, unlimited texts and 250mb data. If you want more data they have a 12.50 deal which has unlimited data, texts and 250 minutes.

It's definitely possible to lower your grocery costs. We spend 50 a week (2 adults) and feel that we eat very well. We shop at local markets for fruit and veg and choose cheaper cuts of meat and fish (e.g. whole chicken instead of chicken breasts, mackerel instead of sea bass). I find south London is a great place for food shopping on a budget because there's such a variety of shops here so it's easy to get really interesting ingredients cheaply. I'm happy to share meal ideas or recipes if you're interested.

Look forward to hearing how you get on with the changes!

Mercer

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Re: Case study - Stubble in South London
« Reply #3 on: April 06, 2014, 09:30:18 AM »
Stevewisc: thanks a lot: though congratulations should probably wait until we've actually reached that point...


Hi,

Another south Londoner here!

We rent so I don't have any advice on paying off mortgages however I've been tracking our expenses for about a year now and gradually reducing them. If you don't currently track your expenses I recommend doing it. I found the gap between what I thought we spent and what we actually spend to be very revealing! It's also motivating to see the costs going down over time.
Yeah, expense-tracking is a big part of this. It's all made a bit complex because we've recently moved to this house so we have some current costs that shouldn't be ongoing

A couple of questions about your 'fixed' costs..

- is the 70 tax for council tax?
- what bills does the 120 cover and how much are each of these, e.g. utilities, water, internet, tv licence, home phone etc.?
70 is council tax, yes. 120 is quite vague, partially because of the aforementioned just-moved-in and various companies getting confused about if/how much we owe them. I recently paid 230 or so for about eight months of gas/electric. We don't pay TV license or home phone, internet and water will be in there somewhere. Getting a firmer grip on those is one of the aims!

I found moneysavingexpert's Cheap Energy Club very useful in reducing gas and electric bills. You tell them how much energy you use per month or quarter and they find the best deal for you. They will also send you an email in the future if you can save a certain amount by switching to a different provider.
Cool, will check it out.

From your phone costs it sounds like you might be on contract? If so, you could check if you'd save money by buying your phones outright and moving to a sim-only deal. I pay 7.50 a month for a sim-only deal on GiffGaff which runs on the o2 network. For that I get 200 minutes, unlimited texts and 250mb data. If you want more data they have a 12.50 deal which has unlimited data, texts and 250 minutes.
I have an ancient phone which doesn't even have a camera facility, so no-data works for me: will check it out. Cheers, that's probably just saved us 15+ a week!

It's definitely possible to lower your grocery costs. We spend 50 a week (2 adults) and feel that we eat very well. We shop at local markets for fruit and veg and choose cheaper cuts of meat and fish (e.g. whole chicken instead of chicken breasts, mackerel instead of sea bass). I find south London is a great place for food shopping on a budget because there's such a variety of shops here so it's easy to get really interesting ingredients cheaply. I'm happy to share meal ideas or recipes if you're interested.
Certainly interested in recipes or ideas for interesting shops for different kinds of food. We still are mostly reliant on supermarkets or if we're feeling flush the farmers-market type expenseive options. I do occasionally use cheaper shops that sell loads of veg in a bowl for 1, but haven't really identified the good shops for different sorts of Asian cuisine etc.

Look forward to hearing how you get on with the changes!
Cheers: we'll probably start a journal soon. Lots of stuff going on at the moment: making improvements/fixes to the house, saving money....

Qwerty

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Re: Case study - Stubble in South London
« Reply #4 on: May 05, 2014, 12:31:05 PM »
Hello

Another South Londoner. Have a look at one of my few postings to get a sense of our budget and some of the exacting figures there. Happy to answer questions about how some of the lines are so low

In particular your entertainment is a bit spendy looking, we manage at 115 each per month which includes beauty products, hair cuts, lunches out etc

It sounds like you have a debt 'emergency' with parental loan. That thing is a millstone even with 0% interest. I'd pause any savings and mortgage repayments until this debt and credit card is cleared. Everything gets sped up once you aren't making any debt repayments. Recommend Dave Ramseys plan for getting out of debt.

Hope this is some help

former player

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Re: Case study - Stubble in South London
« Reply #5 on: May 05, 2014, 01:29:13 PM »
Where are the savings being kept?  Interest on cash deposits at the moment is lower than inflation, so once past an emergency fund you need to be investing.  But personally, I would be tempted to pay back those generous parents first - they helped you with a lump sum when you needed it, but given that you have the incomes to pay them sizeable instalments in repayment, I'd go for it.  After all, every deposit into your accounts paying interest/being invested is money they could have paying interest/invested but don't.  You will feel more like the independent adults you are when you have paid them back.  (Also, your current repayment schedule to your parents looks like taking about 10 years, which takes you into the middle of possible child-rearing.  You really want to pay down your debts before you start having kids in London.  If you go for it, 3 or 4 years should clear this one.)

You don't mention pensions, other than the small public sector pension.  If you are in employment, there should be something coming off your incomes to be paid into a pension - which counts as an asset.  Public sector pensions are still worth having, even after the changes in the past few years.  It might be difficult to give it a precise capital value while you are still so young, though.

Commuting costs: bus is as cheap as it gets for public transport in London, as long as you have done the maths on the costs of various lengths of season ticket over Oyster pay as you go.  Biking is reasonably safe as long as you don't mess with lorries at junctions and traffic lights.  Running works well too, although for running good running shoes well fitted are essential (Run and Become did a good job on sorting me out with properly fitted shoes, which saves injuries.  London pavements are hard).

Agree with Steve and House on everything else.

mveill1

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Re: Case study - Stubble in South London
« Reply #6 on: May 09, 2014, 12:01:32 PM »
Hi -

North London here. I don't have advice on spending rate, as I am doing horribly, but I think I can suggest a couple of things:

You mention that tracking expenses has been complicated for you. Have you tried moneydashboard? I find it's a godsend. I only use it to record all my outgoings from both our accounts (wife and me), but for "analytics" I export the transactions into a spreadsheet every month and slice/dice. I then sum up the expenses by categories that make sense to me, and budget against them. Then, I overspend the budget by a factor of 2 - but don't do that last part!

Second, I feel your pain about how hard it is to track the bills, with the utilities that set up direct debits that bear no relationship with reality, the water bill that comes once a year, etc. Here, moneydashboard will help, but I would also invest in a two-drawer hanging file folder, and start putting all bills in it. Even if you go electronic (in which case you could save the PDFs to a dropbox folder), you'll always have paperwork. It's so nice to know exactly where to find the information you need (for instance you'd easily be able to find out the early repayment charge if you had your papers handy, it wouldn't turn into a project!).

Good luck!