Monday, 17 March 2014

Plugging the Leaks

When I reduced my working hours this year I was determined that, as a household, we would not be any "worse-off" for my having done so. This objective was given a large boost by the fact that my husband had just taken his pension (in part, he is currently in flexible retirement working 20 hours per week) and so we were able to pay off the remaining mortgage we had from his lump sum. Although I know that paying off a mortgage is not always the best plan in our case I think it was the right thing to do as we were tied into a fixed-rate of 5.99%.

Two hundred pounds a month of the £600 that used to go into the mortgage now goes into AVCs. The rest was meant to just take up the slack from the decrease in my salary. However, by going through our accounts carefully and making a conscious effort to stop spending money without being sure of the value of what it is buying, I am finding that, despite the fact my income has dropped by about £600 per month (including the AVCs), we still seem to be several hundred pounds a month in the clear. It's early days yet and I'm pretty sure there won't be extra around every month but the effect of simply introducing "mindful" spending is quite incredible and very empowering.

Waste is a big block to the process of growing savings because it means that, over time, you only grow a proportion of what you could have done and so only end up with a fraction of what was possible. That £6 a month which I spend on a nail varnish that I then use just once and leave to languish in the drawer with dozens of others, could instead have been earning me interest.

Saving £506 per month instead of £500 (along with my £40,000 pre-existing savings) for the planned 6 years gives me £91,756 instead of the £91,268 in my original calculation. £488 extra (£56 of it in interest). The possibilities for increasing my chances of success seem immense, for very little pain, just by adding small ammounts that won't really be missed. This deserves careful thought. Every penny I save from our monthly budget I intend to add to our existing regular S&S ISA contributions. My account at iii allows me to transfer funds from our current account and change regular payments as and when I choose, so adding what's left in at the end of my accounting period should be simple.

Not spending without thinking is an important part of my strategy which is supported by my determination to keep a very close eye on what we actually do spend. I feel quite ashamed that I haven't done this before. Up until now there has always been "enough" so I didn't take any notice of where the money was going. Now I need to be sure because I want to steer our future, not just drift into it.

Keeping a tight ship, not dozing on-board a leaky vessel is very much part of the plan.

(Thanks to for the picture)

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