Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will discuss our progress in looking for a BTL property, and talk briefly about long-term financial planning for major purchases.
Weekly Update
Last week I wrote a little about the tough week I’d had. Sadly, it’s not improved. I’ve been in a state of constant stress now for almost two-weeks. I’m finding it difficult to concentrate and I’ve been prescribed sleeping tablets. I feel as though I’m in a permanent state of fight or flight. It sucks. I’ve been stressed before, but I don’t remember feeling this level of stress for this long with hardly any respite.
The thing is, I don’t know what the answer is. It’s human nature to try and fix things through action. Some things can’t be fixed. Some things can heal, but never return to how they were. Some things need time, and nothing else. There isn’t always a right answer; sometimes there are just wrong answers you can learn to live with.
I will be ok though. I know that I will get through this stressful time, and that in time it will not seem as though it was that bad. That’s the nature of time. One quote that has stuck in my mind recently; “If you’re going through hell, keep going.” The man attributed with this quote is a divisive figure, and I’m in no way promoting him through this quote. I do feel it’s a motivational quote though, and one that has offered me some support over the last couple of weeks.
One step at a time. One minute at a time. One breath at a time.
BTL Update
A few days ago we viewed our first potential BTL property. It was not what we expected. I know that agents will make properties look good, but what I don’t understand is when the pictures and description bear absolutely zero resemblance to reality. I doubt anyone has ever turned up at a horrible property and thought “well, the advert was good”. All it does, in my eyes at least, is make the property seem even worse. If I knew a property was going to be an absolute hovel before viewing, I am prepared. Also, from the vendors’ perspective it means that any person viewing the property is aware of what they’re dealing with.
Within ten seconds of setting foot in the property, I knew it was a non-starter. The vendor seemed like a nice lady; friendly and welcoming. The house was a small, compact, three-bed mid-terrace. The construction was old-school and it would not pass a safety inspection as a new build. I think I described it as a “death trap”. There was also the smell. The property would have needed every carpet, curtain and all wallpaper ripping out. Some places smell, but a quick clean and some fresh air resolves the issue. This property had a smell that was embedded deeply in the property. During the viewing, we saw several dogs and smaller pets kept in the property. I love pets, and my cat is a source of support and friendship to me. Those who have pets will know how much joy they bring to life. I didn’t want to buy a property that had arguably been used as a kennel though.
As I said before, the vendor was friendly and pleasant to speak with. I sincerely hope she finds a buyer. I do think that the agent perhaps needs to provide a reality check because I can’t see anyone paying close to the current asking price.
Health Update
Current Weight: 114.3kg (down 0.8kg from last update).
Current Body Fat: 39.3% (no change from last update).
BMI: 34.5 (down 0.3 from last update).
Weekly Goal: lose 0.75kg
Ultimate Goal: 90kg
Total Weekly Steps: 46,123 (50,000 weekly target).
Another week with weight loss which has been a small positive for me. Normally when I’m stressed, I comfort eat. The fact I’ve managed to keep a decent diet and continued to exercise gives me increased confidence that I will push through this difficult time.
I’ve introduced a weekly step target to try and motivate me to walk more. I like walking. Being in the fresh air, and preferably the sun, whilst listening to a good audiobook or podcast is a simple pleasure. It’s also a low-impact form of exercise and the last thing I need is another injury.
Financial Update
Premium Bonds: £16,500 (up £800.00 from last update).
Stocks and Shares ISA: £11,864.02 (up £3,278.66 from last update).
Fuck It Fund: £1,754.94 (down £3,295.55 from last update).
Property Value: £185,248 (up £3,622.00 from last update).
Total Assets: £215,366.96 (up £4,405.11 from last update).
Residential Mortgage: £143,886.47 (down £485.63 from last update).
Total Debts: £143,886.47 (down £485.63 from last update).
Total Wealth Figure: £71,480.49 (up £4,890.74 from last update).
Investment Income in 2020: £56.44 (up £25 from last update) (target £2,000).
It’s all changed this week with my finances. I cashed in £3,300 from my Fuck It Fund and used £800 to add to my BTL deposit, with the remaining £2,500 going into my ISA. It looks like I got my timings bang on as my ISA increased by £3,278 since the last update. Of the £2,500 I invested in the ISA, £2,000 went on a single stock which I believed to be extremely undervalued. Since I bought the stock, the price has increased by roughly 25% and I still think it’s trading low. Although I expected the stock to bounce back following Covid, I didn’t think we would see such a sudden recovery. This could be a false dawn though, as I suspect we will see another stock market blip before the end of the year. Even so, I’m in the stock market for the long-term and I believe this stock is a long-term winner.
Another change to my financial position is the value of my residence. I made some minor changes to my mortgage this week, and I was told the estimated value of my property has increased slightly. Property value is all hypothetical because it’s only worth what someone is willing to pay. However, it’s still useful to know that lenders think property values in my area are increasing.
There is a small element of risk involved in taking money out of my Fuck It Fund. On balance, I felt the reward was worth the risk. I can always draw money back out of the ISA in an emergency if it comes to that. Part of the reason I withdrew the money from the Fuck It Fund was because the rate of interest had been slashed for the second time in just a few weeks. I was earning 1.1% at first, which then dropped to 0.8% and in the last few days to less than half a percent. Earning interest was not the primary reason for the Fuck It Fund; ease of access is a major part of why I had a pot of cash on one side. There comes a point at which the interest is so low that the cash is losing value the longer it sits there. Despite all that, I will resume building my Fuck It Fund back up to the £5,000 level because there is a great deal to be said for the peace of mind of having a decent emergency fund.
Budgeting
A lot of people know what budgeting is but I don’t think a lot of people understand what budgeting is. There is a difference between knowing about it, and understanding it.
As a mortgage advisor I see a lot of people who want to borrow extra money on their mortgage. Often this is to consolidate debts that were built up as people paid for weddings, dream holidays, expensive cars and other luxury purchases. Sometimes, people just cut to the chase and apply to borrow money to pay for a wedding. Now, it’s important for you to understand that I just don’t get the concept of marriage. Do people actually want to be married, or do they just want a wedding? I don’t know. I’ve just never really felt the urge. I find the idea of marriage to be a bit bizarre, but I’m not going to judge anyone who wants to get married. What I am going to judge, however, is how people pay for their wedding.
The average UK wedding costs approximately £15,000. According to the ONS, the average age of opposite-sex couples getting married is roughly 32. (Note: I could make this point with same-sex couples as well. I have no issue with same-sex marriage. It’s just simply that there is more data on opposite-sex weddings. The principle behind my point is identical for same or opposite sex weddings though).
Assuming that the people getting married both start saving for the wedding as soon as they turn 18, and save for 14 years, they will each have to save around £40 per month, every month, for those 14 years to be able to pay for a £15,000 wedding when they are 32. I challenge you to find me an 18 year old who starts saving for their wedding at that age.
What most people do is get their parents to pay, or get into debt, or their parents get into debt to pay, or even a selection of all these. £15,000 paid back at 4% interest over ten-years means you will pay back just over £18,000 in interest and capital. I’m talking about a wedding, but the principle applies to a car, or holiday. Very few people, in my experience, think about budgeting as a long-term exercise for things they really want.
Another example is someone who wants to save money for their child to have a deposit for a house when they finish university. If you want to have £50,000 saved to give your child a head start, then you need to be saving roughly £200 a month, every month, for twenty-years.
Thinking about large purchases in this way, and breaking them down into monthly saving commitments can help make the figures a reality, and help avoid debt in the future. This is almost like a reverse opportunity cost. If you work out what you need to have saved by a specific point in the future, it helps avoid the need for you to take out debt to fund your goal.
Final Notes
Thank you for reading this week, and I hope you have a great week ahead. If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.
Mortgage Advisor on FIRE. 