The only things you should go into debt for is a house and if required a vehicle.
- House max 6 times YNE, 25% deposit before purchasing (repay in 15years)
- Car max 1/2 times YNE earnings, 50% deposit before purchasing (repay max 3 years)
YNE: Yearly Nett Earnings.
Think about where you live if house prices are too high then look elsewhere, there are many places where the house prices are favourable and work is available, don't let emotions cloud your good decision making.
Car, A vehicle is never a necessity even if you work a distance from home or live too far from a shop or your children's schools. Planning comes into this when buying your house, you need to decide the best location to reduce your need for transport. If you spend most of your time commuting to work then you are losing quality time with your family. A vehicle is a true expense and although it is more convenient to own then use taxis and public transport it is very rarely cheaper. Finance is the main expense when owning a car, save to pay cash for your vehicles. Keep it and look after it until it becomes uneconomical to keep on the road. Remember even if it cost a £1000 a year in maintenance is still less than financing a new car.
Example
My family runs two cars, my wife works 13miles away around 20min by car, our oldest child attends a local school 2.6miles away but and our youngest is still at home.
Unfortunately, we are not able to run our household with just the one car as my wife works long hours. I do the school runs and shopping duties before work. If we had planned better we could have bought a house closer to my wife's work and had a similar commute to our children's school we would have saved potentially £419.3 PCM, but we would not have a granny to look after our youngest and we would spend 12k PA on childcare. So currently we live with the additional costs of transport as it saves us because of child care.
Household and Living expenditure, This is an area where it is easy to spend television subscriptions, mobile phone contracts, magazine subscriptions and excessive electronics to name the top expenses. We take stock of what's important every month by creating charts to see where we are spending the most money and then decide if we want to change it or leave as a justified expense.
Below is one of my monthly spending charts general living expenses. I use this table to assess where my money goes, it allows me to focus on areas of improvement.
Every month we review where our money has gone and we adjust our spending habits to suit our targets. This was December so our alcohol, luxuries and fuel are higher than normal.
By controlling what you spend your money on you can save for the future, investing is not an area I want to tackle at this stage as I don't have sufficient spare cash, due to bad decisions I am currently 2 years behind my target of being free from debt at 40. Currently projected to be debt free and own all my assets at the end of March 2024. I will be 42!
The road to financial freedom is a difficult path filled with temptation and external pressure to conform to the norm, but we are going to achieve it one month at a time. Over the last 6 months, we have streamlined our finances and created a full proof system that constantly gets audited and adjusted as we progress with our own personal stages of the transition from our old way to the more sustainable way of life
Other financially motivated blog posts in my history are
- Living on less the road to minimalism
- Things parents should teach their children
- How I control my spending
- Money stop wasting it
Thanks for taking the time to read my blog
