Author Topic: New Mustachian - How can I improve?  (Read 3869 times)

Zola.

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New Mustachian - How can I improve?
« on: November 08, 2017, 09:18:59 AM »
Hello everybody,

I am new around here. I am from the UK and long to improve my financial discipline and push closer to financial freedom! I am 32, newly married with a 25 year mortgage, which we are 2.5 years into.

I like to think of myself as frugal at times, but I also have a sillier side that can be prone to impulse buying! For example, I drive an old VW with 237,000 miles on the clock. My wifes car died recently and we replaced it with a BMW 1 Series. Beautiful car, but not the most frugal of choices. However, we hope it will serve us well and last as long as my VW... its a considerable upgrade to what we both are/were driving.

I put 9% pay into my pension a month, my employers put in 6%, taking it up to 15%.  We also invest in a Vanguard fund called Life Strategy, a UK offering. Its a global multi asset fund. We plan to build this up over the long haul and hopefully it provides a good nest egg down the road...

Our Mortgage is at 3.09% and we have started to overpay £350 a month into a separate account and pay it to the mortgage provider every quarter, this would slice the mortgage time in half. I want to have it paid off by the time I am 40/41 (ideally sooner, but this is probably a realistic target if we have kids etc).

Here are my monthly costs averaged out - I would appreciate any tips or thoughts on how I can improve this.

Investments - - - - - - - - - - - - - - - -£250
Mortgage Payments - - - - - - - - - - - £627
Car Loan - - - - - - - - - - - - - - - - - - £219
Mortgage Overpayment Fund  - - - - - £350
Life Assurance - - - - - - - - - - - - - - --£76
House Insurance - - - - - - - - - - - - - --£30
Electricity - - - - - - - - - - - - - - - - - - -£32
Sofas - - - - - - - - - - - - - - - - - - - - - £60
Internet- - - - - - - - - - - - - - - - - - - --£33
Gym- - - - - - - - - - - - - - - - - - - - - --£50
Rates/Council Tax- - - - - - - - - - - -- - -£80
Socialising/Eating Out/Takeaways - - - £100
Groceries - - - - - - - - - - - - - - - - - - £240
Stove Logs - - - - - - - - - - - - - - - - - -£20
Car Fuel- - - - - - - - - - - - - - - - - - - £160
Oil- - - - - - - - - - - - - - - - - - - - - - - £30
Cars Bills Averaged Monthly- - - - - - -£200

Total   £2562

After pension contributions and some saving, household income is circa £3200.


Any thoughts or tips are appreciated.  :)
« Last Edit: November 08, 2017, 09:22:23 AM by Zola. »

LadyDividend

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Re: New Mustachian - How can I improve?
« Reply #1 on: November 08, 2017, 09:38:48 AM »
Welcome!

I see a lot of line items related to cars, so I would question whether two cars are necessary and how much can be saved by getting rid of one. The biggest question concerns commuting to work.

I got rid of my car 5 years ago and I bike to work or take transit. Either way is about an hour. In the evenings and on weekends I use my fiancť's car or we travel together. Start with a big win like that and let us know how it goes!

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Re: New Mustachian - How can I improve?
« Reply #2 on: November 08, 2017, 09:52:50 AM »
Housing and cars are generally peopleís two largest expenses so are always the priority. Is there any reason/restriction for only overpaying the mortgage every quarter? You are effectively every month losing the difference between your mortgage rate and whatever the mortgage overpay account is earning. Not a fortune, but every little helps. I was a mortgage over payer and did this each month as soon as my monthly salary was paid.

If itís possible to go to one car then definitely do it. For me I would sell the new car but appreciate you may not want to do this.

If you can work out as part of your lifestyle rather than at a gym then that would save a bit too.

Zola.

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Re: New Mustachian - How can I improve?
« Reply #3 on: November 08, 2017, 11:59:24 AM »
Thank you for the replies!

Sadly we need two cars for work and our families live in opposite directions. I also have a busy mid week where I am out a lot and my wife can be the same with her work, lots of meetings which require her to drive.

My VW is so old that the yearly insurance cost will soon be the cost of what the car is worth! It is running great so I have to hang on for another year. Maybe when I replace the car I will buy something 5/6/7 years old and not buy as extravagant as the BMW. I do love driving so the new car is a bit of luxury which I also enjoy, with a practical side too of course.

Regarding mortgage overpayments - there is small print in the terms of the mortgage that says any overpayments have to be over £1000. I used an overpayment calculator and worked out that each £350 payment would knock off a month from the mortgage, so I have been bundling it together and plan to send it off each time it gets to £1400 (every 4 months).  Should I be doing it every 3 months when it hits (£1050)? I know the interest is calculated daily, would it save me money?


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Re: New Mustachian - How can I improve?
« Reply #4 on: November 08, 2017, 12:08:34 PM »
It wonít be worth a fortune but if the money is designated to overpay the mortgage then it may as well be put to work as soon as it can. That way you are being as efficient as you can here. So yes I would do this after 3 months rather than 4. What is the interest rate of the account the mortgage overpay cash is kept in? The lower this is the more advantage it is to overpay earlier.

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Re: New Mustachian - How can I improve?
« Reply #5 on: November 08, 2017, 12:11:59 PM »
Thats a great point - the interest is dreadful on that account, but I do have it setup purely for the overpayment purpose, so that it is siloed from all other funds and dedicated to overpayments only.

I will definitely need to look at another account that will provide better interest, but in the UK rates are generally terrible at the moment!

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Re: New Mustachian - How can I improve?
« Reply #6 on: November 08, 2017, 12:27:01 PM »
Yes. I only had a brief look at a mortgage payment calculator. I didnít find one that let me put a 4 month overpayment in. However overpaying £350 a month versus £1050 every quarter came out a couple of hundred pounds cheaper for a 100,000 mortgage.

So small fry in the grand scheme of things but overpaying every 3 months rather than 4 helps a little bit. There are current accounts that pay decent interest up to £3000-£5000. They may be perfect for this use although may need to set up a couple of ddís from them and move money about to qualify.

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Re: New Mustachian - How can I improve?
« Reply #7 on: November 08, 2017, 01:31:08 PM »
I'll do it every 3 months as the minimum payment is £1000 each time. Also I suppose that way its sent off quicker and will shave just a little bit more time.

dreams_and_discoveries

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Re: New Mustachian - How can I improve?
« Reply #8 on: November 08, 2017, 02:47:51 PM »
Hey, welcome, looks like you've got the frugal lifestyle down there.

What is you plan for life? Do you enjoy work, want to work forever? Want the freedom to quit in x years?

I'd say your mortgage rate is high for the UK, are there redemption penalties to remortgage?  What's the interest rate on the car loan?

Is there a particular reason you are focused on paying off the mortgage rather than investing? What's your risk tolerance?

Is the Vanguard in ISA's?

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Re: New Mustachian - How can I improve?
« Reply #9 on: November 08, 2017, 03:03:57 PM »
Yep dreams_and_discoveries raises some really good points here. If your car payment is a much higher interest rate than your mortgage then tackle this first.

One of my biggest regrets is overpaying my mortgage quite so aggressively. Iím very cautious and really wanted the mortgage gone but if I could go back I probably would split my mortgage overpayments 50:50 and invested half instead.

Zola.

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Re: New Mustachian - How can I improve?
« Reply #10 on: November 09, 2017, 02:07:51 AM »
Car payment rate is 3.44%. I looked at overpaying this, but the money saved would be small (e.g. overpaying £100 a month would only save me £128 in total). That money may be better thrown at the mortgage?

The mortgage rate (3.09%) that we took is a fixed rate for 5 years. It's a little on the high side by todays standards, but at the time it seemed good value. We are 2.5 years into. We wanted a fixed rate so we knew for sure what the bill would be every month. We arranged this through a broker, so in another 2 years or so we will go back to him and he will show us all the options.

I quite enjoy work at the moment, my wife doesn't like her job, but together we bring in a reasonable amount to live comfortably. She would leave her job tomorrow if she could. I know once the mortgage is cleared it would be a huge weight off the shoulders and maybe it would allow her to consider something else, if she hasn't moved on by then.

In terms of investing, my wife also puts £150 a month into a Vanguard fund (S&S ISA). So in effect we have £400 going into S&S ISAs each month as well as £400 into my personal pension, and she puts in 5% into her work pension.

I am not against investing more, but I know for sure the money chipping away at the mortgage is a guaranteed result.





« Last Edit: November 09, 2017, 02:09:43 AM by Zola. »

marty998

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Re: New Mustachian - How can I improve?
« Reply #11 on: November 09, 2017, 03:39:08 AM »
Are you renting a sofa? 60 quid a month?

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Re: New Mustachian - How can I improve?
« Reply #12 on: November 09, 2017, 04:36:35 AM »
So if you overpay £100 on any debt regardless of size itís reduced the debt by £100 and saved you paying interest on this £100. There isnít much between them in your case but you will always save more money overpaying the most expensive debt first.

This is why one of MMMís big no noís is borrowing money to pay for a car. The car payment is effectively blocking you from tackling one of your goals I.e paying off your mortgage.

At those interest rates a lot on here would suggest letting the debts go and using all free funds to invest. If you donít like debt then tackle the most expensive debt first to save the most money.

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Re: New Mustachian - How can I improve?
« Reply #13 on: November 09, 2017, 04:50:11 AM »
Are you renting a sofa? 60 quid a month?

We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all. It will be paid off next summer thankfully. That £60 will then be used for additional investing / overpayment money as we are so used to it now.

-


Re: the car, it is a bit of a luxury I know, I feel mild guilt about it, but what can you do... its done now and we will be paying for it for the next 3 years.  I just have to work harder to squirrel away more money into the overpayment funds! I am a white belt in the world of MMM, but I am here to learn and be influenced. :)
« Last Edit: November 09, 2017, 04:52:19 AM by Zola. »

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Re: New Mustachian - How can I improve?
« Reply #14 on: November 09, 2017, 09:57:43 AM »
:-) Yes I'm new myself. There is an interesting MMM article called "Reader Case Study: Young Man Saved from Jeep Suicide" if you want to read more about vehicle choice. Hopefully your BMW has reasonably good full efficiency. I appreciate you may be happy to keep the car and accept the payments.

If you have the ability to overpay on the car without facing some kind of penalty then it will be worth doing. You have to find your own balance between investing and debt repayment depending on how you feel comfortable. There is certainly an emotional element to this. My mortgage at one point was less than 1.8%. I still aggressively overpaid on it as I saw that as an opportunity to pay it down and get rid of it and this at the time meant more to me than any gains I could make investing. With hindsight though I wouldn't have been quite as risk averse as this if I could go back 10 years.

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Re: New Mustachian - How can I improve?
« Reply #15 on: November 09, 2017, 03:43:45 PM »
Are you renting a sofa? 60 quid a month?

We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all. It will be paid off next summer thankfully. That £60 will then be used for additional investing / overpayment money as we are so used to it now.

Is there a penalty for early repayment? If not, why not just pay them off now?

Yes, they are 0% interest but why fuck around with £60 a month? I'd pay them off and be done with it.


Re: the car, it is a bit of a luxury I know, I feel mild guilt about it, but what can you do... its done now and we will be paying for it for the next 3 years.  I just have to work harder to squirrel away more money into the overpayment funds! I am a white belt in the world of MMM, but I am here to learn and be influenced. :)

You could sell it, pay out the loan and buy a car you can afford.

I'm not necessarily recommending that as a course of action but don't pretend your hands are tied. You made the decision to buy a car you can't afford - you can also make the decision to clean up the mess.

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Re: New Mustachian - How can I improve?
« Reply #16 on: November 09, 2017, 04:08:39 PM »
Are you renting a sofa? 60 quid a month?
We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all.

You might want to look at how other posters have found furniture for very good deals when they had no furniture at all. Craigslist, Kijiji, freecycle, local Facebook places all have people looking to unload furniture for free, or for dirt cheap.  It may be ugly, but if you don't have the money, it will tide you over until you do.

I was speaking with a newcomer to my city, and she snagged a couch, chairs, coffee table and a bookcase for like $400 + an uber ride because a person was expecting baby furniture to be delivered in two days. A couch isn't an item that you can't live without for a few weeks before you find the right opportunity.

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Re: New Mustachian - How can I improve?
« Reply #17 on: November 12, 2017, 01:24:45 PM »
Are you renting a sofa? 60 quid a month?

We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all. It will be paid off next summer thankfully. That £60 will then be used for additional investing / overpayment money as we are so used to it now.

Is there a penalty for early repayment? If not, why not just pay them off now?

Yes, they are 0% interest but why fuck around with £60 a month? I'd pay them off and be done with it.


Kid you not for the first couple of months in my place I had 2 small fold out beach/park picnic chairs as my living room furniture.

Big sofas are totally not necessary. Even a beanbag on the floor is an option.

dreams_and_discoveries

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Re: New Mustachian - How can I improve?
« Reply #18 on: November 12, 2017, 02:14:46 PM »
What? Doesn't everyone start out with garden furniture in the lounge? Usually your parents *old* garden furniture. That's certainly what I did, before upgrading to an IKEA sofa in my first place.

In my second place I was on my own, and had to buy my own garden furniture for the lounge,  I stupidly bought (or not, I still have and love them 15 years and 2 houses later) an expensive sofa set which had a ridiculous lead time, like 3 months.

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Re: New Mustachian - How can I improve?
« Reply #19 on: November 12, 2017, 02:52:54 PM »
Are you renting a sofa? 60 quid a month?
We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all.

You might want to look at how other posters have found furniture for very good deals when they had no furniture at all. Craigslist, Kijiji, freecycle, local Facebook places all have people looking to unload furniture for free, or for dirt cheap.  It may be ugly, but if you don't have the money, it will tide you over until you do.

I was speaking with a newcomer to my city, and she snagged a couch, chairs, coffee table and a bookcase for like $400 + an uber ride because a person was expecting baby furniture to be delivered in two days. A couch isn't an item that you can't live without for a few weeks before you find the right opportunity.
My house has roughly this as far as furniture goes:
Couch inherited from my mom that she gave us when she sold her house.  Originally from my grandpa, given to and not wanted by my mom (and who used selling her house as an excuse to dump it on us.  I don't mind it.  It's a decent couch.).
Fancy looking glass coffee table inherited from my last roommate situation.  We split the cost back in 2013 but it was from a thrift store and I think no more than $20 for my portion.
New entertainment center TV stand thingy.  $90 from Amazon.  Had to put it together myself and it's really just cheap particle board crap, but it does the job and looks nice.
Piece of crap kitchen table from Target.  I think it was $100 or something.  Cheap crap, but whatever.
Metal folding chairs as kitchen chairs.  Dogs can't chew these up. $20 each I think (two).
Thrift store solid wood desk.  $30 from a thrift store in 2012.
Office chair purchased new for ~70 from Amazon.
Bookshelf from my parents' old house.
Filing cabinet, ~$25 from Walmart.
Bed.  Used mattress and box spring, purchased in 2013 ($150 I think?). $80 bed frame from Amazon.  Mattress topper stolen from former tenant in my rental house.
Floor lamps inherited from my dad when he left his last apartment.

Total of about $550 I have into all the furniture in our house, and the only thing that really sucks is the kitchen table.  Not too bad I'd say.  Accumulated over about two and a half years.  Slept on the floor for the first few weeks (before we moved our bed in), had no couch for about a year, no TV for about a year and a half, fugly old lamps until my dad upgraded us, etc.  That's life.  Quality used furniture is the best.  Cheap new furniture sucks.

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Re: New Mustachian - How can I improve?
« Reply #20 on: November 12, 2017, 03:11:14 PM »
Are you renting a sofa? 60 quid a month?

We bought sofas on 0% interest when we bought our house 2 years ago. They were a necessary purchase as we had no furniture at all. It will be paid off next summer thankfully. That £60 will then be used for additional investing / overpayment money as we are so used to it now.

Is there a penalty for early repayment? If not, why not just pay them off now?

Yes, they are 0% interest but why fuck around with £60 a month? I'd pay them off and be done with it.


Kid you not for the first couple of months in my place I had 2 small fold out beach/park picnic chairs as my living room furniture.

Big sofas are totally not necessary. Even a beanbag on the floor is an option.

I didn't know that! :D Your couch is kind of awesome though.

I started out with a free second-hand couch from my parents'. Then upgraded to a nicer free second-hand couch from my parents'. Then upgraded to a nicer floor stock couch.

Zola.

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Re: New Mustachian - How can I improve?
« Reply #21 on: November 13, 2017, 02:09:09 AM »
Our house was previously owned by an old guy and we had to fully rework everything. For 5 months we were living out of the bedroom while we knocked walls down, and fully decorated every room.

The sofas were definitely a relief for the hard work when it was all finished, but they will be paid off come June time so its not too bad really. When that's done I will use the £60 either as an investment top up each month, or else filter into the monthly overpayment fund.