Starting the mortgage snowball to pay off the home early

Starting with Dave Ramsey

Can I pay off the 23 year mortgage in 5 years? All £221,000 of it? Can I start a private pension, paying in 15% of my income AND then put some aside for investing? And write it all down to be accountable? There is part of me that thinks a resounding "NO!" But there is little part of me that is every so slightly excited. And nervous as hell that nasty internet trolls will spam my inbox. But hey - I'm made of stern stuff. And the thought of being mortgage-free is enough to get the old creative juices flowing.

So, back to #daveramsey and his baby steps. I read his #totalmoneymakeover on holiday and then subscribed to his podcasts. Getting my ducks in a row was the first port of call.  Luckily (or unluckily), I'd recently been made redundant and so had some money to put aside to start the steps. Here they are, if you haven't read the books:

£1,000 to start an Emergency Fund – An emergency fund is for those unexpected events in life. Cool - I could luckily do that. Look at me - this was easy (or so I thought). Baby step 1 done. 

Pay off all debt using the Debt Snowball – List my debts, excluding the house, in order. The smallest balance should be the number one priority. Our only debt was the car payment and I could pay that one off, using some of the redundancy money. Job done. Oh yes, I was flying.

3 to 6 months of expenses in savings – Once you complete the first two baby steps, you will have built serious momentum - says Dave. Oh gosh. This one was HARD. I did my income and expenditure budget and came up with the monthly figure that would meet my NEEDS, not my WANTS. And then I put it into Premium Bonds. I am so grateful that I was able to do this quickly. And I fully appreciate that others can't and therefore have to save up.

That was all of my redundancy money gone  and I must admit that I felt a little panicky. Even though the money was sitting in the NSI account, I felt a bit exposed and...ever so slightly poor. But... I also felt a certain amount of relief knowing that 6 months of money was in the bank - just in case the world went belly up and I had to go job hunting again.

I'd planned on using some of the money for a lovely holiday to California but what does Mr Ramsey say "live life like no one else now, so you can live like no one else later."

Invest 15% of household income into pre-tax retirement funds – When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. 

There was a little devil on my shoulder saying "really, 15% - that's A LOT of my income - what if I die before I can take that money?" Which then made me think - "um - maybe you should start living a little healthier". So, I called up #HargreavesLansdown and asked them to set me up with a private pension, at £X per month. I asked for flexibility in the payments (as I'm now self-employed) and I wanted a pension that transferred to my spouse (or others) upon my death. 

College funding for children – this one doesn't apply to me as I don't have children. 

Pay off home early – Now it’s time to begin chunking all of my extra money toward the mortgage and getting closer to realising the dream of a life with no house payments.

Build wealth and give! – It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live! Dave's words, not mine.

Pay off the home early

Paying off the home early is where my main focus is now and there are such good Twitter feeds from lots of great people who are focusing their energy on doing exactly what I'm doing. Type in #paymortgageoffearly and you'll come up with hundreds of results. I am also an avid user of Martin's (MSE) Overpayment Calculator that shows how regular payments make all the difference to the end date of your mortgage.

So, here's how I am trying to get extra payments into my mortgage account. Every month, the day after pay day, I have a budget meeting - with myself  which might seem a bit weird. Every pound that I earn is allocated a name e.g. monthly food, entertainment, Sarah's wants, etc. Dave Ramsey advocates putting some money aside for yourself as all work and no play certainly does make Sarah a dull girl.  You can click on this link to go to a basic budget calculator. I like to use my own excel spreadsheet. 

I tried to explain to my lovely husband that "every pound has a name" and he said he does this as well: "Paul's money, Paul's money and Paul's money". Bless his little cotton socks. 

I look at everything I am spending money on and try to trim what I am spending & cut back out superfluous items:

• Coffee at the station every morning and my newspaper. £2.85 per day @ 22 days per month = £62.70. Just that staggered me. I had a perfectly useable IPad that I could read the news on FOR FREE. What was I doing buying a newspaper? I also had a travel mug in my cupboard and therefore PDQ starting making my coffee every morning.

• Smoking - yep - oh god - when I added this up, I was spending nearly £200 on fags. I was literally burning my money away so am now puffing away on a vape at a cost of £6 per month. That figure made me feel a little bit nauseous as I could have saved that money over the last 20 years and had...well...had a lot of money. Woulda, coulda, shoulda.

• Lunches - oh, and the occasional bacon butty at the canteen. They were setting me back at £5 - £8 per day (Total = c. £200). I used to say - "but I haven't got time to make my sandwiches / soups in the morning". Now, I do a batch cook every Saturday or Sunday morning and have lost weight during the process. OK - you've got to shell out for the ingredients - but the savings are tremendous. I now put £100 into an envelope and that's my lunch money to go to the supermarket with. I'll get to one of my recipes at the bottom of this blog post. 

• The car payments are now paid off so I take the £182 that I was paying per month and asked my bank to automatically put that into the mortgage account. I didn't miss it, and making it automatic means that I didn't feel aggrieved when I had to hand it over.

• The gym - £50 per month. I went twice a month (ok - once a month). What a waste. Now, if I want to do a yoga or pilates class, I go onto Meet Up and look up where there is a free class. That site is amazing - from yoga classes, to wine appreciation, to dog walking companions - fantastic!

The total that I could, and do, now overpay is £594.70. Using the MSE calculator, that works out at a whopping 10 years taken off the mortgage. The aim is to take 18 years off the mortgage. I called up the bank and asked whether I could be put onto a better deal, as my initial 2-year fixed rate was expiring, and the lovely people that they are have reduced the interest rate on a 5-year fixed by 1.2% meaning that I am paying a whopping £216 less per month. 

Applying the £216 saving to the mortgage snowball of £594.70 now gives me an overpayment of £810.70. Applying that to the MSE calculator means that the mortgage is paid off in 11 years and 9 months. 

Now I just need to find a way to overpay that by more to bring the term down. If you have any ideas, then I'd love to hear them. 

Butternut Squash Soup (makes for 4 - 6 portions)

Here's one of my recipes for my lunches this week. This is a really delicious and warming soup that has an added kick of ginger loveliness.

The ingredients sound a bit "meh" but when added together and blended lead to one of those meals that are the food of the Gods.

2 carrots (10p)

2 sticks of celery (40p)

25g butter (25p)

knob of ginger (I love ginger - the amount is up to you - about 5cm square should do) (40p)

1 butternut squash (£1)

A splash of olive oil (20p)

1 sprig of rosemary (from the garden)

Salt & pepper (store cupboard item)

1 onion (20p)

500ml Home made chicken stock (I make this myself - dead simple to make)

 

Total = £2.55 - that's about 50p per portion. Prices found on My Supermarket. 

How to make it:

1. Cut the butternut squash up into chunks - making sure to take off the outer layer. You'll need a sharp knife as they are quite difficult to cut. The seeds can be taken out by using a spoon so that you don't waste any of the squash. 
2. Put a little olive oil into a oven proof dish and then whack the squash in. Give it a liberal amount of ground pepper on top, and a touch of salt. Pop into the oven at 180C for about 20 minutes. Take the squash out when it is really soft.
3. Meanwhile, cut up the carrots, celery and onion and grate the ginger.
4. In a large pan (frying pan, saucepan, wok - whatever you've got), put the butter and melt it. Don't burn it as burnt butter tastes rancid.
5. When that's melted, put your carrot, ginger, celery and onion in and leave to soften for about 8 minutes. 
6. Then pour your chicken stock in and your rosemary.
7. Bring up to a simmer and then pop a lid on it for 20 minutes. We want the vegetables to be nice and soft.
8. When your butternut squash is done, and your veg are soft, put all of these into a blender and blend. If you don't have a blender, because the ingredients are so soft, you can use a potato masher and that'll do the trick.

This recipe is so good, you can even see my fingerprints in the soup where I kept on dipping and tasting. 

I freeze these in containers bought from the pound shop. You can get 9 plastic containers for....you guessed it....£1.

If you want to make your own chicken stock, it's really simple. Put the carcass of a chicken into a casserole dish (or slow cooker) with an onion, some celery, a chopped up carrot, bay leaves and pepper. Cover the chicken with water and leave to simmer for a couple of hours - more if it is in the slow cooker.

Well, that's my first blog post - please do let me know if you've got any great recipes that don't cost the earth or what you're doing to pay the mortgage off as quickly as possible. I'd love to hear from you.