money makeover
PETER’S ADVICE
The good news is that if Haz and Steve can maintain their loan payments,
and as each loan finishes put the monthly payment towards repaying their mortgage, they could feasibly achieve their objective of being debt free in six years time.
The bad news is that I don’t think this is realistic. They are paying over half of their net income in mortgage and loan repayments, plus they have a tracker mortgage and the chances of interest rates remaining at 0.5% is very unlikely, which means payments will increase at some point.
However, there are always options, and Haz and Steve have two. Option one is for them to earn more money. Option two is to spend less money. I’m guessing that earning more money is not a short-term solution, so we’ve got to look at option two and how they can spend less.
What Haz will do now
“Peter’s advice has spurred us into action. It’s crazy to be paying all that interest on our loans – one of them is 6.8% – when we don’t have to. We’re going to temporarily stop overpaying our mortgage and use that money to begin paying off each loan. Of course, if there are penalties involved we will take these into consideration. Once the loans are cleared we’ll concentrate on the mortgage. It is a wake-up call to realise the interest rate might go up this year, so we need to have contingency plans. Downsizing really isn’t an option for us as not only do we love our house, we’ve invested quite a lot of money
to get it how we want it, which we probably wouldn’t get back in today’s market. Instead, we’re going to monitor our finances as he suggests and spend less money by being more frugal, particularly on food. I’m confident we can cut back by almost half if we plan our meals in advance, shop less often to stop impulsive purchases and cut out takeaways, which cost us an absolute fortune!”
PLEASE NOTE that this is general information only and should not be relied upon. Please take advice from a suitably authorised Independent Financial Adviser.
1 Could they consider downsizing? Their two older children have left home so perhaps they don’t really need a four-bedroom house? Moving to a smaller property with a smaller mortgage (and presumably smaller bills) might allow them to repay the outstanding loans much quicker.
2 If they do not want to downsize, they should take a look at the interest rate they are paying on all their loans. If these are high rates of interest, it could be better to focus on repaying these earlier and paying less off their mortgage, which currently has a very low rate of interest.
3 It would also be worth finding out whether they can extend their mortgage. By overpaying £200 per month they could have built up a ‘fund’ to draw down further on their mortgage and repay these loans early, although there may well be penalties that make this unattractive.
4 Finally, I would recommend they keep a detailed record of everything they spend each month and go through the list, looking for areas that can clearly be cut back. By doing this it is possible to set a realistic budget – and to stick to it. A successful financial plan is more often than not about having a disciplined approach to spending and saving.
Thinkstockphotos.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164