The house is a mess!! – Part 1

Do normal people neglect their finances as much as I’ve been doing? In this mini series I’ll share my bad practices and my (hopefully effective) remedial actions.

In Part 1, I’m going to take a look at my single biggest investment, my mortgage.

Am I getting the best rate? / Is it bad that I fixed at 3.69% for 5 years?

I’ve made some pretty bad decisions in my life but it doesn’t usually take me this long to realise!

Mortgage Value -£96,996
Rate 3.69%
Monthly Repayment £590.64
Type 5 year fixed
Remaining Fixed Period 3 years
Mortgage Period 20 years

Now I’ve been meaning to do this for months but I finally looked into the exit fee for my fixed mortgage. I read it was £65 on my particular mortgage product. That’s it? 65 quid is all it costs to exit from the fixed interest loan agreement and find a more favourable rate elsewhere?? I wasn’t even expecting exiting to be viable…

I did a few calculations to see what moving to a more favourable rate would look like. Here are my findings in the 2 year fixed interest + repayment market.

Fixed

I compared 20 providers but shortened the list a bit so there’s not too much going on. Even when you factor in booking*, valuation*, admin fees* AND multiply the exit fee* by 10… I’m still so much better off by switching.

* divided by 24 months

fixed2

That’s a saving of £117.01 per month by switching. Or, £1,400 a YEAR!

To make matters worse – I’m overpaying by £109.64 per month on my 3.69% mortgage, which means I’m exaggerating my poor interest rate and paying the lender a hefty return.

I’m sorting this tomorrow.

Edit: massively underestimated the exit cost. It’s actually £3800 to exit which means it’s not worthwhile. Spreading the cost monthly brings the cost above the £590 I’m currently paying. I’ll have to sit tight for 2 years and think about what I’ve done!!!

– The Payslip Pauper

Positivity for the win?

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My wife and I are cruising home at 35,000ft in a double business class upgrade; a top result compared with what might have become of today.

Lana, the check-in assistant had the slightly awkward matter of telling us that our flight had been overbooked so we had been placed on standby. The next flight is tomorrow afternoon but there’s no guarantee you’re on that either. This is more than just a P.I.T.A to us, but I won’t go into that. The only way we were getting on that plane was if there were any no-shows today.

Where my wife was standing a minute before, there was now a simmering pot of outrage. Her mood was changing fast, she’s quite feisty and I love that about her but I didn’t like the way this was going. Poor Lana on the check-in desk didn’t deserve what was about happen if I let this play out. Not to mention a check-in ruckus was never going to work in our favour.

“Alright we understand” was my interjection.

Positive thoughts – there’s still a chance we’re getting on this flight, so no need to stress about it. Let’s hope for the best.

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We got to the gate just in time to hear our names over the tannoy.

There were two spaces up in business class; and they were ours!

The (somewhat un-airport-like) Biro amendments on our boarding cards confirmed it.

I bet that’s quite common since the people who can afford to miss their flights are the same ones who always fly in business class…

 

– The Payslip Pauper

Catching FIRE

I wonder if you know you’ve ‘made it’ when your income from personal assets funds your luxurious lifestyle and supports your future investments?

They call it FIRE – Financial Independence / Retiring Early.

juggler-195309_960_720

Achieving FIRE is about re-investing returns, calculated risks, diversification and delayed gratification.

When your income flows from a range of sources your lifestyle becomes less exposed to the volatility of any single asset. A steady cashflow during hard times also puts you in prime position to snap up opportunities when others are cutting their losses.

FIRE is what I want, now I need to work out how to get it. So as I have creatively indicated with the use of this stock photograph of a chessboard – it is time to think of a strategy.chess-316658_960_720

I mentioned in my last post that I feel like I’m already behind the curve and wish I’d started doing this 5 years ago, but that’s no reason for me to rush things now.

To kick things off I maxed out my company pension contributions and have opened an Investment ISA (Stocks & Shares ISA). I dropped a cheeky £1,000 into a portfolio of three managed funds which are targeted at medium risk growth. The plan is to top up £200/£250 per month for at least 5 years.

Right now I’ve got another £2,000 to work with, I’m thinking of this as my shorter term investment capital. Hopefully I’ll be able to keep topping this up as well as the ISA, but I think the ISA is the priority – certainly at the moment.

I came across a fascinating blog post the other day. I’d never delved so far into my ESTJ personality type as I did when I read this, it felt like the writer knew me! If you’re not familiar with Myers Briggs personality types then you probably don’t know what I’m going on about; but I’m an ESTJ and we ESTJ’s don’t half love a good list… the lack of a plan makes us seriously uncomfortable!

Here are the projects I want to start in the next few weeks:

  1. Outgoings review (that includes you too Mrs Payslip Pauper)
  2. Goal setting – how will I know I’ve caught FIRE?
  3. Goal progress, current/projected net worth on an Excel dashboard (the J in ESTJ tells you I’m partial to a nice graph)
  4. Re-balance finances – we’re overpaying £150 a month on the mortgage, just because… is it worth it or can I be smarter with that £150?
  5. Research other investments – ETF’s, P2P Lending, Real Estate, etc(?)
  6. Compile a reading list (just finished Rich Dad, Poor Dad)

I’m a terrible overthinker and there’s loads more going on in my head but for now I’m going to leave it there and focus on these six. I’ve just started a ~6 month PRINCE2 online course and I’m taking a big career step up starting a new job at a different company in September. That’s going to take a lot of my focus so I’m really going to try and make some headway into this list over the next seven weeks.

 

What other investment methods should I research?

What’s your Myers Briggs personality type?

Can you recommend any books for my reading list?

 

– The Payslip Pauper

“Payslip Slavery”

Before I look at ways to reach this subjective state we call financial independence, I want to explain why I’ve given my present state such a derogatory label.

What I’m calling payslip slavery is a personal economic state which the majority of us naturally reach and where we spend the majority of our lives, from moving out of the family home through our working years up until we retire (you know – that part where the best stuff in our life tends to happen)

Best Case Scenario for a Payslip Slave

It’s an economic state where the largest asset owned is the personal residence, career progression is steady, debts are manageable and material goods which impress our friends (and subordinates) are reasonably achievable.

Tax is deducted on a Pay As You Earn basis so we can get through life without the need for any real financial aptitude – Key Facts are the only financial advice we can be bothered to consult. Our savings are sitting dormant in a 0.25% interest savings account and the interest means nothing to us, other than perhaps a few cold ones in The Dog & Duck.

As we advance our careers and increase our take-home pay, the money we spend on our lifestyle increases too. The majority of us see that extra cash each month as a good reason to buy more expensive clothes that we had previously desired, eat at more expensive restaurants as previously desired, buy a new car, stay in more expensive hotels – and why the heck not? After all we worked so hard to earn it, and “hey you’re a big shot manager now – you deserve better than you did before!”

I have no overdraft, my only debt is a shared mortgage, I’ve got couple of month’s income worth of savings and a clear financial past. I know so many people who would love to be in my position, but I just feel like I’ve been foolish. All my working life I’ve already known what I would buy with the extra cash before I could even smell a pay rise. This is the rat race and it’s fucking addictive.

When it comes to retirement age, we’ve probably got a decent pension and we’ve paid off our mortgage thanks to an inheritance or two. We consider downsizing to free up some more of that cash to help our kids, spend the remaining healthy years of our life scared of technology and thinking “if only I had…”

Isn’t There Something Else?

This to me is the best case scenario for a payslip slave – somebody oblivious to the potential gains managing their money can bring, how much investing it could change their situation, what a difference compounding can make to their future. But blessed with good health, simple circumstances and simple expectations for their life.

This has been my situation for all 8 working years of my life.

I refuse to accept that my future looks like that.

I will not waste my life working for an employer until I’m 70.

I’m nearly 27 years old and I feel like I’m already many years too late. Like I’m starting later than I really needed to be. But I am where I am and I hear a lot of advice from people who are now in their 40’s and wish they did this at my age.

In the next post I’ll explain the Day 1 changes I made after realising how badly I’ve neglected the (yet to be proved!) earning power of my very own money.

– The Payslip Pauper

 

Please remember that none of my material should be taken as advice, points are my own personal opinion and you should always be aware of the risks when investing your money because your investments can go down as well as up.

Blog Post #1 – Hello!

About The Author

Hi there, welcome to my first ever blog post!

In my teens and early twenties I was a really sociable guy. Always out with friends, meeting girls, experimenting with substances like everyone else was doing. But in the last few years I’ve become more reclusive, feeling more satisfied being an anonymous face in the crowd than the one in the spotlight.

I have always ended up slightly better than the average. In school I was a slightly above average student, now I’m 26 years old and earn slightly more than the UK average salary – albeit without a university degree since I got bored with education during my A-Levels, which was crystallised in my unusually below average results!

I got married last year – my wife is definitely not average, she’s the most driven, inspirational person I have ever met. She’s changed my life and really helped me become a better person… and together we try never to give up on anything.

We secured a mortgage on a slightly better than average first home, we drive slightly better than average cars and we make enough cash to go on slightly above average holidays every year.

I have never known true hardship and I’ve also never known true affluence.

I woke up to my alarm one morning last week screaming in a cold sweat after a horrible zombie-apocalypse nightmare (yeah, zombies – seriously) and somehow realised my current position amounts to consensual enslavement and if I keep sleepwalking along this path, one morning I’ll wake up to the real nightmare to see that the fruits of my labour have perished and rotted into a big pile of useless mush.

The Payslip Pauper

This is the (currently unwritten) story of my journey to improve my personal finances through saving and investing with the end-game being a dream I want to make mine and my wife’s reality.

To put it bluntly, the dream is to be free from what I call payslip slavery. I’ll explore payslip slavery in another post, but to me ‘freedom’ looks like this:

  • Receive a reliable income from assets that don’t demand much of my time, so don’t need a ‘job’ working for someone else to cover our outgoings (+ luxuries)
  • Have enough time, cash and head-space to focus on my next investment.
  • More spare cash or ‘free money’ to experiment with more risky investments or support friends and family.
  • Use my portfolio effectively to gain an advantage in purchasing power, bulk buying, tax savings and returns on investment.
  • Most important: in achieving all this not to destroy the things that matter most to me: my relationships with my wife, family and small circle of friends.

 

I invite you to pull up a chair and follow along as I share my investment choices, thought process and emotions experienced throughout my journey; and I hope that by each passing year I’ll reflect on older posts and feel slightly embarrassed about how naive I was at the time of writing.

That embarrassment, to me, is a good measure of intellectual progress.

 

– The Payslip Pauper