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Entries for label: repaying

Found 5 entries.

Paying off my Mortgage in the Current Economic Climate

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At the moment, the economy doesn't seem to be too great. Of course, many people are saying that they haven't felt any impact at all ... but these are the lucky ones who's jobs are relatively stable.

So far, I'd say that I was one of the lucky ones. To me all of four things has happened in the past year:

1. I got a pay-rise
2. I cut my spending
3. there has been tax cuts
4. there has been interest rate cuts

Therefore, with all these things going on, I am able to pay off more of my mortgage since I am currently on a floating rate.

The Plan

Since I have split my mortgage into a revolving and a repayment mortgage, I am able to pay a little more on both at the present moment. There will be no penalties since they are both on floating rates.

The overall plan is to eventually fix the larger of the two amounts (the repayment part) and keep paying a little extra on that. I shall also keep adding as much as I can afford to my revolving mortgage since that also acts as my emergency fund.

Attacking on Both Counts on Both Mortgages

By attacking both mortgages I am able to start bringing down the principal a lot faster than I ever have and because some of it is my revolving mortgage, I don't have to worry about having it disappear since that acts as my emergency fund.

I'm also attacking the larger of my mortgages on two counts too, since my interest has come down and I've upped my repayments.

All in all, I'm currently on track to repay my home loan in just less than 8 years. That would take me to a total of 11 years since the mortgage started.

Not a bad saving on all that extra interest I'd otherwise have to pay.

Labels: planning, repaying

Inserted: 2009-06-16 21:22 (9 months ago)

Credit Cards are another Tool in your Financial Toolbox

Firstly, welcome to all the Master Your Card readers wandering over here to take a look round. And to all my readers, go and take a look at Jonathan and Kristy's blog, it's a great read.

Today, as a lovely Christmas present I suspect, I've been featured as a guest blogger over there with a post entitled 10 Tips on Using your Credit Card Wisely so have a read of that article there before coming back here.

As a follow up post, I'd like to just take a few words to discuss a topic I alluded to in my guest post over there, a topic I fear is usually put into the "that's bad" basket without much further thought than that.

All Credit Card Usage is Evil (or is it)?

I asked in my guest post whether I was a bad person for using a credit card. In fact, what I really said was:

I’ll admit it. I’m a credit card user. I use it a lot, not everyday, but a lot. Am I wrong? Am I a bad person? Should I be slapped with a wet haddock for my sins?

There has been some discussion as to whether credit cards are evil or just dangerous and there are definitely people sitting on the fence too. But I'd like to make an argument that your credit card is actually a valid piece of equipment in your financial life and something which has quite specific and advantageous uses.

Another Tool in your Financial Toolbox

In reality, credit cards are just another tool in your financial toolbox. They can be used just as much or as little as you like and like any tool, must be used with care and precision. When was the last time you just blindly hit a hammer against a piece of wood to knock a nail in? That's right, you never did! Instead, you position the nail carefully with one hand and precisely strike it with a blow from the hammer in the other hand. It's all lined up, you know exactly what you're doing and you know the consequences of hitting the nail with the hammer.

And that's how a credit card should be used. You should know exactly how much you're spending, what you're spending it on, when that interest-free period stops and the date by which you need to pay your balance.

By using this particular tool in the right way and knowing exactly how it should be used, then you can actually maximise many of the advantages of using a credit card.

Using the Right Tool for the Job

Sometimes you need to do something for which you don't actually have the right tool. In woodwork, this is prevalent and in a lot of cases the job can be improvised by using other tools. In your financial toolbox, you also have other options if you don't have or won't have a credit card.

However I believe that there are certain benefits you can gain by using a credit card which you can't get from any other tool in your financial toolbox. For example, that interest free period on your spending is something you don't get elsewhere, nor do you find 1% cash-back offers from your debit purchases. (P.S. I don't use interest free periods when buying large items, instead I save up for them and pay it off in full right there and then.)

You really do have to weigh up the pros and cons of getting and using a credit card and like all decisions in your (financial) life, your own investigation into this area is extremely important.

And Finally ... It's Not For Everyone

Friends of mine point-blank refuse to own - let alone use - a credit card. That's okay with me since I think it is everyone's own personal choice. I also know of friends who have used credit cards before, gotten into debt and now never touch the damn things! Again, that's fine since obviously it wasn't for them.

From my own personal experience, I have had times in the dim and distant past when I carried a balance on my credit card for almost a year! Up to £4,000 in some cases. Pretty crazy stuff when I think about it now.

However, the advantages I gain by using a credit card nowadays far outweigh the risk that I would again carry a balance for so long (if at all). I have learned from my mistakes and now use the card to my advantage and in a sensible and very restricted and restrained way. I know exactly what is going on the card and I know exactly when it needs to be paid. It is completely and utterly 100% under my control.

So for me, I'd never do without my trusty credit card and in fact my life, and my personal finance life, is better for it too.

What's your take on the matter? Do you or do you not use a credit card?

Labels: budgeting, repaying, spending

Inserted: 2008-12-25 23:20 (1 year, 2 months ago)

The Power of Snowflaking

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Let me tell you the story about a snowflake. Jimmy was it's name and it was very small. One day it decided to snow and Jimmy came into existence along with many other snowflakes formed around the same time. They looked at one another and thought "My, aren't you a nice snowflake" however some of them looked at each other and thought "Wow, you're bigger than I am". Jimmy looked at everyone and thought that they were all bigger than him.

The larger snowflakes tended to keep to themselves, since they were bigger than the others. They weren't very nice either. So in the end, the smaller snowflakes - including Jimmy - decided to gather together so they could become larger and more powerful than the bigger ones.

After a short while, they all fell to the floor only to be gathered up together by the children playing. Jimmy got swept off his feet by a young child with huge mittens. Firstly, they were gathered into a snowball, then rolled into a head and finally into a huge torso. Right in the middle, next to the middle button, Jimmy lay looking out and feeling safe. This snowman was eventually so big, the relative size of all the individual snowflakes didn't matter and the snowman itself was greater than it's individual parts. Jimmy knew that those bigger snowflakes wouldn't worry him now., safe in the knowledge of being with all the other snowflakes.

And that is what the power of snowflaking is.

So, yes, thanks, but what is it?

Snowflaking is a term used in the personal finance field. It is pretty easy to understand and also very powerful. It's also very easy to do.

It is a technique to help you pay down debt or increase your savings. Essentially what you do is, at every opportunity you have for scraping aside money into a separate savings account or a current debt, you do it. It doesn't matter how big or small the snowflake is, it all adds up to that snowball effect and before you know it, you're looking at a whole heap of snowflakes. Once these start adding up, these snowflakes become snowballs and by then the momentum has started.

You can start in a variety of ways but as always, the most important thing is to start. That's the hardest step. Once you've started you'll find more reasons to snowflake.

Many people clip coupons to save money at the supermarket. If they receive $1 off a tube of toothpaste, then they will snowflake that dollar into whichever debt or fund they choose. Others will see that cycling to work one day a week is a bus fare saving which also gets siphoned off somewhere else (not into other expenses of course). If you manage to get a bonus from work, that gets scraped elsewhere and yet others see a pay-rise as a permanent snowflake (but then you're more into savings schemes).

Any Excuse Will Do

I have noticed something about snowflaking and it is this. If you practice the technique then no matter what you do throughout each month, you'll find any excuse to snowflake that money off elsewhere. Take these examples as interesting reasons to snowflake rather than as a guide. Yes, I have actually seen people use these so you can see, it really is for whatever reason you decide:

• shift over the cost of that coffee you didn't have
• move aside what you saved in the supermarket
• was your lunch ultimately frugal, siphon off what you didn't spend
• did you find a dollar in the street, put it in your savings
• pay off some more debt with that money you were given in your garage sale
• transfer the extra you received in your paycheck this month
• cast aside what you used to spend before you gave up your bad habits!

My example this month is that I have been online selling some of my old DVDs that I no longer watch. Every time I get a sale, I've been shifting that money over into my emergency fund. The thing is, instead of moving the sale amount minus the commission, I have moved the whole thing and considered the commission an expense for the month.

And I have another confession. Over the years I have gathered a number of booklets of stamps which I always lose and then end up buying another booklet, only to lose that and never use the all. Whilst simplifying my life I have found all of these booklets again and stashed them in an envelope near to where my jiffy bags are. So instead of taking off the cost of postage (which is added on at each auction) I have also been moving that over to my Emergency Fund.

And finally, just so it didn't feel left out, I have done the same for the jiffy bags I had to buy and consider that a monthly expense too.

It turns out that within a month, I am now about $118 richer in my Emergency Fund due to the addition of those four things (DVD, commission, stamp, packaging) all being siphoned off. If I had only shifted the profit, I'd be looking at a much lower $90 (but still better than just spending it).

Compound Interest Strikes Again

And that is when the magic happens. Okay, that $118 isn't going to make a big difference now but in the future, with all the other snowflakes I cast aside from my expenses, that'll start to begin growing exponentially making my money work even harder for me. Once you start, you won't be able to stop and your debt or savings will move in the right directions faster than you thought possible.

So come on. Help Jimmy out and make sure he finds his rightful home amongst all the other snowflakes. After all, if you don't, he'll just end up melting and then you won't know where he's gone. Put him aside safely and watch as he helps build your snowflakes into your snowballs.

Why not give it a go and let me know how you get on. What other things will you snowflake?

Labels: banking, saving, repaying, selling

Inserted: 2008-10-27 23:28 (1 year, 4 months ago)

The Satisfaction of Paying off Debt

Everyone has had debts at one time or other in their lives. Some more than others, others less so. Whether it was for a high interest credit card, a low interest student loan, a friend lending you some change or the bank lending you enough to buy a house.

No matter what the amount, what the interest charge and however long it took to pay back, there's nothing better to put a smile on your face than finally repaying that last amount back.

Help with My Mortgage

A few years ago when I bought my house, my Mum lent me just over 5% of the total house price. I had just over 5% myself so I topped over 10% for the deposit. Luckily for me, she said I didn't have to pay interest on it. Even though I got it at what was probably the worst GBP->NZD exchange rate there had been for years and ever since then I've been paying it back on a pretty bad NZD->GBP rate too (today being the worst since I first visited here in 1998) it still means that I have come out on top by not having to pay 7.85% on it for the duration of the home loan.

Over 25 years, that would work out at a lot of money, so even though I lost out in the exchange rates, I'm still up at the end of the day.

The Facts and Figures vs the Emotion

Many people say that you should pay back the highest interest debt first. Others say that you should pay back the smallest. Of course, it's never as black and white as either of those tactics and you have to choose which one (or a combination of both) is right for you.

For example, if I paid back the highest interest loan first, it means my Mum would be waiting a very long time before she sees that money back. Of course, I don't want her to wait that long so in the end, even though it's interest free, I wanted to pay her back first. Not only does she need it more than my bank does but I never like being in debt to people I know (hehe, yes, the bank is a faceless company).

I know a few people with 4 or 5 different loans and in each of those cases, there are reasons for picking neither the highest interest debt nor the smallest loan as the one to pay back first. Everybody's situation is different and you need to figure out what tactic is right for you.

The Emotional Tactic

There is another way you can pay back debt which isn't as technical as either of the above two but gleans you the most satisfaction. It's all about goals and what makes you happy. Yes, by employing one technique over another you may pay back a loan one month quicker but there's nothing better than a happy state of mind to help pay things back faster and create an even happier outlook.

Now that I've paid my Mum back, one chunk per year for the past three years, I can now get a real start on my revolving mortgage. Once that's done, the fixed-term mortgage will be in my sights.

It makes me so happy to have now removed that additional debt (no matter how small or how low the interest rate) that I'm on something of a natural high at the moment. And if you bump into me in the next few days and see that I'm grinning like a Cheshire Cat, you'll understand why.

Tell us about your debt repayment stories below.

Labels: repaying

Inserted: 2008-10-21 23:06 (1 year, 4 months ago)

Credit Cards

I'd like to tackle the subject of credit cards and tell you why I think they are a good thing. I read a lot of articles which say things like "You don't need credit cards at all". Whilst I agree that a lot of people don't want credit cards, I also tend to believe that they can be used to your advantage.

Let me give you the example of how I use my credit card. Please note, I'm not saying everyone should use theirs this way, I'm not even saying that everyone should have one, I'm just relating how I use mine. But first, here's a little background information.

Part of my mortgage is in one of those 'revolving' type mortgages, the ones where you have a fairly large negative balance on which you pay interest. This can put some people off, but it means you get the chance of paying off more of your mortgage each month and you're not locked in to any particular amount. You pay back what you can afford. It's good for those of us who are on top of our spending.

When my income goes into my revolving account my balance goes up (as is normal) and every time I spend money from my current account, the balance (as usual) goes down. However since the account is largely in the negative, it seems slightly strange. As is usual on a debt, I am of course paying interest on it for the privilege. The aim of the game is that the longer you keep your paycheck in there the less interest you pay which is definitely is a good move. And, like all the other savers out there, the less I spend from this account the better off I am. To put it another way the more and longer I can keep money in my account the less interest I'll have to pay on it.

This is where my credit card comes into play.

Each month I use my card for a number of purchases. Purchases that I shall be doing anyway and also purchases for which I know I will be able to pay off - in full - next month. Examples of these standard purchases are: my electricity bill, my phone bill and my mobile bill. No matter what I do every month, I shall be living in a house and I shall need to pay these things. Therefore I choose to get them automatically deducted from my credit card. This helps in three ways:

1) I need to do nothing to pay the bills. No matter what I do, they'll be paid. I never forget to pay, therefore I get a prompt payment discount for paying on time and I'll never have late fees.

2) The money I would anyway have given to the utility bills stays in my revolving account for around about an extra 4-6 weeks. This means that I pay less interest in my revolving account since my balance is less in the negative.

3) Each and every year I manage to rack up around $120 on my 'Reward Points' which I can spend, as cash, in a number of shops. For the privilege of owning the card, I pay around $44 a year. That seems like a good bargain to me. In the past I have bought myself pairs of trainers with the balance but since my current ones are still going I haven't needed another pair. Currently I have $192.29 dollars sitting on it (if only I could exchange it for cash). My last pair of trainers lasted me four years so that could be almost twelve years where I don't have to purchase any footware. (I did have a pair of Doc Martens once which lasted me 9 years.)

So the upshot of all this is that my credit card is not only saving me money but actually giving me money too. I never pay interest and I don't have to lift a finger to do any of it. The balance comes out of my revolving account automatically too.

That's what I call a bargain and you can see why I think Credit Cards can have their place.

Final note: I appreciate that Credit Cards aren't for everyone, either because they'll overspend or they don't believe in going into debt. This is just how I use mine. You should decide for yourself what the best way to use them (or not use them) is.

Labels: repaying

Inserted: 2008-09-15 22:32 (1 year, 6 months ago)