LL's Frugal February 2016

[lancashire lass]

I weren't sure if we were starting up our own threads or just carrying on with the announcement, but anyway, here's my post.

By late 2014 my finances were not good (through no fault of my own) but after arranging a manageable loan, things definitely turned in my favour and although there's still a debt, at least I'm coping better and gradually paying it off (and still £0 on the credit card ) Before Christmas the life assurance on my 'interest only' mortgage matured and the shortfall was not as bad as I thought it might be - yesterday I paid off the capital on that mortgage , and now just have 7 years of the repayment mortgage left. As I'm about 3/4 of the way to paying that off, what is owing is so much smaller ... which means I can really start thinking about trying to pay that (and hopefully the loan too) off earlier. I've been inspired by spudley's "This is the year" thread so my objective in February is to put things into place such as savings or increasing payments on the loan (I won't be penalised for paying off earlier - one of the attractions of that loan) from the money saved from the monthly life assurance/interest payments I no longer have to pay

On Monday I received a letter to say the payments for the capital on the interest only mortgage had been received and been fully paid off On Tuesday I arranged a fixed rate for the repayment mortgage for the next 2 years - this will only shave £15 pm off the standard variable rate that I would have paid without the new deal, but that is still a saving of £180 a year. The advantage of the fixed rate option is that I can pay 10% off the existing capital per year without incurring charges. I've been putting my thinking cap on - each month my payments will shave off some of the capital so by the end of the year, the amount I could pay off would be less than now. So I wondered if it was worth delving into my rapidly dwindling savings and as soon as I've signed the paperwork and the new deal is official, perhaps I should do a one off payment .... Now that I've discovered how to use internet banking to set up the payment, it might be worth considering.

As well as the £15 pm saving, I no longer pay the life assurance which was £38 pm, and the interest I would have paid on the old deal was £54 pm, so that totals £107. Having saying that, I did notice that the new repayment amount was £10 more than when it used to be with a 2 mortgage payment (and interest rates are supposedly better than when I set the old one up 2 years ago, and less capital too ....) I haven't worked that one out yet

My next step is what to do with the £100 a month saving - I'm going to try and live without it otherwise I can see it being squandered without any real benefit from it. My instinct is to put it into a monthly savings plan - perhaps a cash ISA - and start building up my savings again (either to build up a pot to pay off next year's 10% capital or, at some point in the next couple of years I'm going to need a new car) Or, put some of it towards the loan repayments (if I increase my monthly payments to the bank, the amount I owe will be unchanged but I'll pay it off sooner and like the mortgage, won't incur any charges) Hmmm, decisions, decisions LOL I'm leaning towards a 50:50 split between loan and mortgage because paying off both earlier is the real goal I'm aiming for.

[Mo]

LL, my instinct would be keep some savings if you will need a car. Sometimes that is a decision you have to make in a hurry. But OTOH interest on savings is pitiful at the moment.

[KarenE]

50/50 is a good idea. You just never know when you'll need some cash in the hand.

Interest rates on savers accounts are shocking, especially on ISAs. Have you got a 1-2-3 type account, where you get better interest on savings (at a certain level) plus cashback on bills? Might be worth looking into. Some of the banks are offering better rates on their accounts than ISAs at the moment, if you're careful and diarise dates when the good rates end.
moneysavingexpert.com is a good one to check - I'm sure you have already though!

[lancashire lass]

OTOH interest on savings is pitiful at the moment

If you sign up for a regular savings or investment plan for a couple of years or more (with no withdrawals), then you can get a better interest rate but yes, gone are days when you used to get 5-10% rates on a basic savings account. I remember one year when the Tescos Christmas club (you bought £1 stamps and filled a card) paid 5% and was a better return than most banks LOL They have since switched to using the club card system and vouchers. Actually, going off on a tangent, maybe I should start topping up my Christmas savers card - it's nice to have a little extra spending money put aside for those treats you wouldn't buy during the rest of the year ....

Anyway, back to savings interest - 5 years ago when they crashed, the income from my cash ISA was less than peanuts. So I enquired about a higher interest and the answer was to lock it up for 4 years (I knew I would never spend on it because it was the money put aside for the shortfall on the endowment mortgage) - the interest paid shot up from £18 to £400+ a year. It does mean you can't put your hands on it until the term ends.

Interest rates on savers accounts are shocking, especially on ISAs. Have you got a 1-2-3 type account, where you get better interest on savings (at a certain level) plus cashback on bills?

I'm not switching current accounts especially to Santander (I used to have a good savings account with Abbey National until it was taken over ) - and I'm happy with the one I've got. It doesn't pay interest but then I'm not charged for having a bank account or being offered endless perks on travel insurance and other rubbish I'll never use.

my instinct would be keep some savings if you will need a car

the other day as I drove by a local dealer, I glanced and saw 0% finance - so I thought I'd have a peek online. When did new (or nearly new) cars get so expensive? We are not even talking about deluxe models - you need to take a mortgage out to buy one! Currently my old car is perfectly fine but I know eventually parts will get more expensive as it gets older, not to mention I have to pay a lot more road tax than newer cars which really annoys me (my little car probably emits less CO2 than the big new ones, and a hell of a lot less fumes than diesel cars)

[Freeranger]

LL - HSBC's website and MoneySavingSupermarket both have easy to use mortgage overpayment calculators on them. One of them lets you assess a one-off repayment, regular over-payments or a mixture of both. That will help you decide what to do with your savings for the best, because I think the results may surprise you.

I added a thread before I read yours, and most of what I've been doing is faffing around with bank accounts and interest rates. There are much better rates (5&6%) available than any of the ISAs a re offering, so suggest you read the thread for details. SavingsChampion is an excellent site that I'd recommend.

[lancashire lass]

Not doing well with the frugal shopping - I went to the supermarket with a shopping list and it cost £55 . To be fair they had the coffee I like on special offer so bought a couple extra and so was the butter spread so 4 packs went into the trolley and now in the freezer. I also filled the car - it was starting to run on fumes so not something I could put off. Incredibly it only cost £32 due to petrol prices below a £1 a litre. Still, so much for saving money this month.

I'm currently having a clear out - I'm a terrible hoarder of things that might come in useful. However, the clutter has been embarrasingly immense and although I'll probably regret it, a lot of stuff has been binned (trust me, it was rubbish and not something others would want) It's amazing what you do find in places that have been buried for a long while - a bottle of sloe gin and a blackcurrant vodka I made in 2005 (a tentative sip and wow, it tastes even nicer), plus 3 bottles of cheap vodka I'd bought to make other fruit vodkas and a bottle of cheap gin as well as Cassia, Cointreau, unopened bottles of Clayva (whisky liqueur), ginger wine and a small bottle of rum ... I guess I won't need to buy any for a long while LOL

I also found the mortgage deal I did in 2014 (which has just ended) and realised that my sums are out. I had based my savings on the mortgage statement issued at the end of 2015 and the letter I had received reminding me that the deal was ending. But I should have looked at my bank statement to remind me that in actual fact the repayment payments are much less too, so on top of the £107 pm from the paid off "interest only" mortgage, there is actually another £60 pm less to pay. The paper work for the new deal arrived on Friday so I read it carefully and the 10% off the existing capital per year can only be a one off payment and has to be over £500 - in the past I've never been in the position to ever consider paying extra so had not really read that properly. So paying a lump sum early in the new deal seems the way to go. I signed the document and posted it on Saturday morning.

I have to confess that I did have a look at new cars online - I'm still thrown by how much they cost now but someone suggested looking at decommissioned dealer cars that have been in the showroom (same very low mileage but a good £2000 off the price of a new car) I've only ever owned 4 cars, 3 of which were from brand new. Apart from the wow feeling of driving off in a new car, you know the history of the car from day one - when I bought the second hand car, it was okay but missing bits (cosmetic) as well as having to replace parts sooner, plus the MOT. Currently my old car runs fine so I won't be posting about a replacement any time soon, but something that might bring it forward is getting in and out of the car ... a combination of an old injury, my age and model of car (seat is low), sometimes I struggle getting out. I think saving for a new car is worth thinking about but the goal for now is to pay the mortgage and loan off early.

[spudley]

Its always good to get the capital down on your mortgage if you can. When the interest rates were really high we were paying a ridiculous amount. When this dropped with the interest rates we set up a standing order to pay the capital each month and some to a savings account we did a 90 10 split in favour of the mortgage
Nearly every penny of our earnings were taken into account, but some months we did really well. The extra we saved each month we transferred to our savings account.

It was surprising how fast the savings increased, so even if you only do a 50 50 split, you will be hitting your capital amount plus sorting out back up savings.

Budget yourself for the month shopping. In the first year I would take out in cash the amount that I was going to spend each month on food and sundries and tried to stick to it. Any money left would then go in the savings account. Its funny how cash is harder to spend that the card.

Buying multiples of things that you do use when they are half price or less it the way to go
especially cleaning products my one top tip is NEVER PAY FULL PRICE FOR ANY CLEANING PRODUCTS EVER!

Sorry I didn't mean to hijack your thread but you can do this, you will be able to save more than you think. At the end of the year you can make the decision to pay your savings off the mortgage or hold out. When your savings reach the remaining capital amount it makes more sense to pay off your mortgage but you need to take into account the amount of interest saved verses any early completion fee. Go for it.

(oh and I did edit to make it shorter.........)

[lancashire lass]

LOL spudley - don't worry about hijacking the thread, all good advice Yes, I had looked at the early completion fee and so long as it is outside the mortgage deal (as I did with the interest only mortgage - I waited until the last deal finished and before setting up the new one), the fee is do-able. I agree about bringing the capital down - even if for some reason I don't reach my goal to pay the mortgage off earlier, the payments will get smaller. So using the 10% one off payments per year seems like the way to go, with a savings pot to put towards the following year. Paying off the loan early is also high on the agenda.

As for shopping, up until 18 months ago I was in dire financial difficulties so I did learn a few tricks hence the stock up of things I use when they are on special offer, and having a shopping list (I do find it helps to get what you need rather than you'd like) My biggest problem has been the more expensive things that are wearing out that need replacing, and after many years of going without (such as decorating the house, or new clothes), some things will have to be done but on a budget. I'm definitely living within my means now and the credit card is only there for emergencies.

[Mo]

Well done LL.

There are some snags to stocking up on special offers. Ts send (or used to send) little booklets of coupons with discounts or extra points if you bought certain things. And they were tailored to what you'd bought before so tempting. If I was doing a shop I might make a point of using the coupons before they expired - after all I knew I'd use it even if I didn't need it right now. I had 3 big tubs of Bisto before I realised that they kept sending me vouchers for the same thing (well, I kept buying it, didn't I).

[lancashire lass]

I just read Freerangers thread FR having a go! again to get my head round the banking thing (I'm probably duplicating what has been said but getting an understanding now)

It's MS Expert website NOT supermarket.

I had a look at their savings suggestions - a 12 month regular / monthly savers with banks where you already hold a current account, are being primed for having higher interest than having an ISA or fixed bond type savings, especially after the 6th April when earnings from savings under £1000 (that is, the interest paid per year which the vast majority of people come under that category) will not be taxed. I think they were suggesting First Direct as the best choice with 6% but I had a look at my bank TSB (I really do not want to switch my current account - I like how I've got my accounts set up), and their regular saver is 5% gross. And no need for identification (passport or drivers licence) and can be set up at the bank, over the phone or online. But it is important to note it is fixed for just the 12 months as quoted from my bank, then it is converted to a variable rate;

Get an interest rate of 5.00% Gross/AER* fixed for a year.
Interest rates are fixed for the term of the account, which is 12 months from the date of account opening.
Carry on saving - at the end of your term your account will convert to a variable rate Easy Saver Account, currently paying 1.00% Gross/AER variable including a fixed bonus of 0.80% for the first 12 months. View our Easy Saver interest rates

I think I'll open a regular monthly saver ....

[Mo]

If you are already with TSB is your account a Classic Plus. That will pay 5% on balances up to £2,000 as well as what's in the regular saver. Worth swapping to that.
Their regular saver is new, so I'm not sure what happens at the end of the year, but some banks will let you start a new one, though not get the high interest on the amount you saved the previous year.

[Freeranger]

That's the type of thing I meant, LL. If yours isn't a Plus account, you can just ask for it to be changed. NW also do an equivalent current account and linked saver.

If you do want to take advantage of other banks' accounts, you don't have to actually switch. You can open them AS WELL. Say you have a little bit of money aside for savings - £5000. Your TSB offers the 5% on £2000 only, so that's £3000 'wasted'. Option 1 - You can open the linked account that Mo mentions and move some of your money each month to that, at say £250/month. After 12 months, you've moved your £3000 into that regular saver account and get 5% on all your savings - but you take 12 months to do it, wasting some earning power.

Another alternative (the option 2 I was talking about) is to open another account like yours with another bank (Whatever Bank) as well and put £2500 your 'spare' £3000 in there. You're earning 5% on £4,500 straight away.

There's a rule that you have to put an amount in each month - some are £500. Say you have all your DD's with TSB and get an income of say £150/week. As soon as your weekly £150 goes into TSB, send it (£150)straight to Whatever Bank, and then straight back (£150) to TSB again. You can still pay all your DDs from TSB, AND you've met the conditions for both the interest-earning current accounts.

You've still got £500 of your savings left over, and you can divert a bit of that each month into linked savers. You can have as many accounts as you like, so you can keep doing this until you've 'used up' your savings.

Does that make sense?

[Mo]

Not quite that simple, they want it to be your 'main' bank account so have various rules (hoops to jump through). Halifax (who reward you with £5/ month instead of interest if you pay in £750 and stay in the black - but if you OD there's a penalty) say 2 Direct debits / month. Lloyds also want 2 DDs / month and £1500 in. And if your council tax is 10 instalments then watch out or no interest in 2 months. Nationwide only pay 5% for a year, 1% after that.
If you actually switch using their switching service there is sometimes a £100 or £150 reward. (And if anyone wants to switch to Nationwide pm me and let me recommend you, then we both get a reward).

I can understand you staying with TSB, much simpler if you are happy with them.

[Freeranger]

It IS that simple - I've just done it.

[Mo]

But as I say (and I have several accounts too) - some only give you the extra interest if you have direct debits going out. You have to read the small print.