A new strategy
As you may know, I started writing this review last weekend, but it turned into a post about my future self . Let’s see if I have more luck this week. October only finished two weeks ago, but it feels like another world as we have made the decision to stop overpaying the mortgage. As is the case with many of the choices I have been making recently it came about as part of the work I was doing for Natalie Bacon’s life coaching program – Grow You .
October was about succeeding with money. Whilst quite a few people in the program are looking to start their own online business and although that’s a great way to build wealth, at the moment it’s not my priority. I had some face to face coaching with Natalie. which is offered as part of the program. There are several calls each week, which you join by Zoom. Some of them are question and answer calls, where you submit your questions in writing and Natalie will answer them live. For other calls you can ‘raise your hand’ and come on live with Natalie and get coaching. It’s a bit scary at first, no in fact, I’ve done it three times now and I’ve been really nervous every time, but it’s so worth it.
In October I talked to her about the FIRE movement and how I felt I’d ‘missed the boat’. As a former certified financial planner, Natalie is very familiar with FIRE and used to have a blog called ‘The Finance Girl’. Whilst I got some inspiration for how to move forward, I’ve spent time procrastinating, as we all do, about starting a side hustle or earning money in another way.
What I did do though, was to look at two future scenarios; one where we continued overpaying the mortgage and one where we didn’t. I’ve always liked the idea of being mortgage-free. Even before I discovered FIRE I used to make extra payments each month. That was also before I’d even thought about investing. At that time I believed that it was a very risky practice and just for those people who had money they were prepared to lose. How far I’ve come!
When you overpay your mortgage you know exactly where you’re going to be financially in the future, certainly at the moment when the Bank of England base rate is very low and has been under 1% for the last decade. There is something psychologically comforting about that. A feeling of security and predictability. Along with this I think that there’s also the idea that you can’t retire early if you still have a mortgage, or at least that’s what I thought. In fact there are a lot of people who are still paying a mortgage long after they’ve said goodbye to their 9-5. They’ve just made sure that their income, however it’s generated, covers those payments.
The trouble with paying off your mortgage is that all that money that you’re using to make those extra payments could be invested in index funds creating an income for you for the future. At fifty-one I haven’t got a lot of time for the magic of compound interest to work, so the more that I invest the better. My new plan is therefore to add an extra £600 per month to my ISA (tax-free savings account), along with the usual £500 that I am putting in. I will continue to do this for the next four years, until I am 55.
What happens at that point may depend on how my investments have performed, but at the moment I hope to then reduce my working hours to three days a week, which would cover my monthly expenses, including the mortgage, but will mean an end to my savings contributions. I will just leave the money to hopefully grow until I am 60, by which time I should be able to retire completely. I will have two defined benefit pensions to draw on, as well as interest from my investments. The mortgage will have four more years to run, but I should easily be able to afford it.
So there we go, the grand plan for the next nine years. Now, back to my spending and saving in October…
There were the usual mortgage payments: £497.11 plus an overpayment (the last one) of £625.00. The balance is now £61,408.10.
I put £650 into my ISA, which stood at £24,651.57 by the end of the month, having decreased by £434.38 due to another downturn in the market. My total savings stood at £38,328.00 as of 31st October, along with the additional £8,000 I have saved for a new car.
Food was overspent again at £156.85 (the budget is £140.00) and I spent £56.12 on toiletries, which will hopefully keep me going for a few months. There were a few miscellaneous items, some of which are just for my half, as the costs were shared with Mr Simple:
New door mat £4.49
Rose bushes £20.47
Electric toothbrush £19.98
Toothbrush heads £5.09
My very simple life
As to activities, as the nights draw in and the weather becomes wetter and windier, I am spending more and more time in the house. My morning routine continues with time for journaling, exercise, meditation and breakfast. I don’t know how I’m going to cope if we ever return to having to leave the house before 9am on a regular basis.
Despite the bad weather I am still walking on an almost daily basis. Most of the time I go out about 5pm, on my own, listening to a podcast, for 30-60 minutes. About once a week I go out with a couple of neighbours, one of whom is the owner of the lovely black Labrador that Mr Simple and I sometimes take for a walk. An opportunity to catch up with friends whilst also doing some exercise.
And that’s it. How was your October? Did you make any major decisions about your finances? I’d love to know.