My no / low buy progress is well …… progressing!
Money doesn’t make you happy, but a severe lack of it because of debt or a high mortgage can negatively impact on how you live your life, now and in the future. The number 1 thing we should all be taught is financial freedom or financial comfort at the very least. After 52 years, I have finally discovered (because of my dire financial circumstances) it should be an absolute priority.
I have continued to severely restrict my spending, yes it’s not much of a life at the moment, but then it never was with my financial situation anyway and my motivation is to turn this around. I may ease up on this a little in 2021, but for now I have to take drastic action.
Everyone’s circumstances, goals, needs and attitudes towards finances are different. So whilst financial gurus such as Dave Ramsey’s 7 Baby Steps and Robert Kyosaki’s Cash Quadrant may well work for most, I am only applying certain aspects to my own circumstances. However, if you are young, you can more easily apply these principles and you will reap the rewards as you age. Trust me, if you do, you won’t have regrets like me.
After reading Robert Kyosaki’s ‘Rich Dad, Poor Dad’ I have panicked a little on how at 52 years old, I have not invested, have acquired out of control debt and have nothing to fall back on. However, it’s never too late to get your finances in order. And with my new found attitude to finances, I believe I can turn my financial situation around, admittedly with some sacrifices and determination.
I now have £429 saved in my account, this is on target for my Emergency Fund of £1000 by December 2020. Although I will continue to add to this, but at a much slower pace once I reach the £1000 mark. As I want an emergency fund of at least 6 months salary, but preferably 2 years, once the £1000 is reached, I plan to continue to put 10% of my income into this.
However, this month, due to the storms in the U.K. I have to purchase a new gate as mine blew clean off and is broken, at a cost of £175, this means money that should have gone into my emergency fund is being used to supply and fit a new gate, then again this is an emergency!
I have about £17,000 worth of personal debt. At the moment I am paying a minimal amount into this because I am prioritising my emergency fund, to prevent future borrowing. After a recent job scare, I am also putting any spare money into overpaying my £46,000 mortgage (see below). I do plan on increasing my debt payments by at least 10% each year.
As mentioned above, my job was recently threatened, as it stands now I will be employed for a further 12 months, then I may lose my job. As a single person with no car, debts, and a mortgage, this obviously really concerns me. So, any spare money I have will go towards overpaying my mortgage to reduce the debt. So far I have only overpaid it by a total of £60, but it’s money I may well have squandered. Some financial advisors recommend getting rid of your unsecured debt first as mortgage interest is low. However, my priority is to keep a roof over my head and with an uncertain future and the real possibility of having to take a much lower paid job or having to buy a car to get to a new job, I need my mortgage to be much lower than it currently is.
As recommended in ‘Rich Dad, Poor Dad’, I have started to educate myself in the financial world, so far I have:
- Read ‘Rich Dad, Poor Dad’ by Robert Kyosaki (obviously)
- The Money Handbook (will be returning as missing pages and mixed up pages)
- Acquired but not yet read ‘The Richest Man in Babylon’ by George S Clason
- Ordered ‘The Intelligent Investor’ by Benjamin Graham
- Watched: numerous videos on You Tube on people’s journey’s to financial freedom (favourites are Nate O’Brien and Marko – WhiteBoard Finance)
- Completed an Excel Budget spreadsheet
- Completed a ‘Net Worth’ spreadsheet
- Completed a free online course with Open Learn called ‘Managing My Money’
- Enrolled for a free online course with Future Learn called ‘Financial Fundamentals: Investment Theory and Practice’ starting 30th March 2020
I did go to the local library and could not find any financial books. When I enquired, they did a search and shocking as this is, they did not have one book of any type of financial nature. Hence I have to purchase books, but I view these as an investment in my personal ‘financial’ growth.
Investing in my personal development particularly around finances is key to my financial freedom. There are lots of free online courses, granted many of them are beginner level, but that’s exactly where I am at the moment. As things develop, I will probably pay for courses in the future, not only in finances but learning and developing skills that may bring me additional income or add to my life.
I am not yet ready to invest, I am still in the research stage, I have downloaded some information guides on investing and will continue to read. I will only start by investing very small amounts e.g. £25 per month. I plan to do this in 2021, I know this won’t make me rich, but it is more getting into a habit of investing, whilst I learn and improve the health of other financial areas in my life.
I have an occupational pension and a private pension, both of which look pretty low. I will be exploring the option of increasing my voluntary contributions into my occupational pension in 2021.
Right now I need to understand, the actual values of my pensions, so will be exploring this. I will then use Age UK’s online pension calculator to make sure I am investing enough into my pension for a reasonably comfortable retirement.
One of my biggest financial mistakes has been not investing in my pension when I was younger. When you’re young, retirement seems so far away that you resent using your hard earned money for retirement. I have always said I will retire at 55, however, I did nothing to make this a realistic goal and at 52 and my current financial situation, this simply won’t happen. This is a real shame, because I have had enough of the ‘rat race’ but have no escape route at the moment.
Increasing my Income
I have explored options to increase my income and was looking for a work at home job one day a week, but unfortunately my employers have decided they want me to work 5 days a week as oppose to the 4 days (condensed hours) I currently work. With other things on the go, I don’t see how I can do a second job, but haven’t completely ruled this out, so I will keep looking. I would use the extra cash to progress one of my above financial goals.
I am still exploring the idea of passive incomes, and plan by the end of this year to start saving for a business start-up.
Top Tips for Financial Freedom
Have an emergency fund
If you don’t have an emergency fund, you have to borrow in an emergency, that means debt. If you are made redundant or some other crisis shows up in your life, you will have peace of mind if you know your expenses are covered for a period of time. My current situation means that I would fall into mortgage arrears within one month of unemployment. This is a scary thought, especially once you fall behind it can take much longer to catch up.
Avoid debt like the plague, once you are in it, it’s difficult to get out. If you are in debt, work out how much you can overpay the minimum, then you will know how long it will take you to get out of it.
Never borrow to fund clothes, holidays, a new phone or the likes, this is a sure fire way to get into the mindset of wanting things ‘now’ instead of budgeting and saving for them. This is the mindset most people struggling with debt started with, don’t be like them, it is a downward spiral, I know because I was that person.
If you have future financial goals, whether that’s for clothing, a piece of furniture, a holiday, your first home, planning a family or education, set a deadline and work out how much you need to put in monthly. If you can’t afford the amount you need to save, put something away, anything, just make a start, savings have a funny way of gaining momentum and motivating you. Having savings for items or life events prevents or at least reduces the amount of debt you get into.
Overpay your mortgage
A mortgage is a liability and as long as you have a mortgage (unless it is extremely low), you are vulnerable in a crisis such as ill health, unemployment or other crisis that would affect your earning potential. No matter how small the amount, even £10 extra a month can help reduce the interest and term of your mortgage. Do check if there are fees to pay with your mortgage company or a percentage allowed for overpayments. My bank allows me to pay 30% overpayments on my mortgage. The Money Saving Expert has a mortgage overpayment calculator which shows how much you would save and how many years / months you can reduce on the term of your mortgage.
If you can afford it, I do recommend you have long term investments, only you can decide how you want to invest and the level of risk you want to take.
Finally, if you are overwhelmed, choose one thing to focus on, mine at the moment is my Emergency Fund, yours may be debt or your mortgage.
What do you plan doing differently to reach your financial goal/s in 2020 ?