How I paid off my bond in 5 years and how you can too – part 2

If you missed part 1, you can catch up on reading it here.

Don’t worry; we’ll wait for you to finish reading that first part.

paying off bond 2

  1. Keep your living standards small

Usually, when people get salary increases and/ or bonuses, the immediate reaction is to spend spend spend. We don’t. We do celebrate a little bit (after we tithe, of course!) usually by going out to a nice lunch. Last year I bought my gorgeous brown leather handbag.

But then, after adjusting the tithe in our budget, we increase our bond payment.

Bonuses are dealt with in exactly the same manner. Tithe and usually a good chunk is put into the bond. These days, now that I’m a bit older, I put a good chunk into my unit trusts too. But let’s ignore that for now because it’s a recent thing since I turned 40, and we’ve been paying off houses for years before that.

We have discretionary income in our budgets and for years and years we didn’t give ourselves increases because the money was enough for the odds and ends. Currently, I’m on the same “allowance” for about 2 – 3 years. Basically, we don’t increase our living standards unless absolutely necessary.

Everything goes into the bond. You were living on the smaller amount before the increase; continue living on that same amount.

paying off bond 2-002

  1. Have a single-minded mindset

There’s nothing wrong with upgrading cars and such, but not if your goal is to pay off your bond early. Dion drives a 2008 car (that we bought in 2009) and my one is 11 years old this year (also bought when it was one year old).

Occasionally I have twitches when I think I might want a newer car but then I think of how lovely it is to not have a car payment 🙂

When we bought our cars, we took shorter payment plans – mine was just two years.

paying off bond 2-001

  1. Don’t buy too expensive a house

Estate agents will always try to sell you on the biggest house possible. I am a person who likes to eat well and go on holidays so we really don’t like to buy on the upper end of the range we qualify for. That also helps when the Reserve Bank increases the lending rate because then you can still afford your home comfortably, and you’re not panicking.

Ask yourself questions like this while you’re house-hunting:

  • is it worth that extra R10 000 or R20 000 a month in the bond payment for an extra room? I asked and answered this question no many times when I’d have an inkling to “upgrade”.
  • is a pool/ bigger entertainment area worth the extra R____________? Maybe/ maybe not.
  • is it really worth paying for an extra room/ garage to store things I don’t even care about? Often people tell me we have too many things so we need a bigger house. Hypothetically, if you were to sell all the kids’ toys/ your junk, would you even get R5000 for it? I’m saying probably not. So why go into more debt to pay for that stuff on a continual basis (20 – 30 years)?

Only you can answer that. But be brutally honest about your reasons for buying that house.

(I know thinking like this is not popular but then again, your different mindset is going to get your house paid off sooner than other people!)

Our newest house is only worth the extra R_______ because it answers yes to all but 1 question (which was easily fixable) on our Dream House list. Of course I had a list 🙂 One day I’ll write a post about that.

Another reason to not buy at the very top of what you qualify for is transfer and bond costs. Also, your insurance, water and electricity will definitely increase. These are expenses we sometimes forget to take into account.

By the way, it is cheaper to take out underwritten life cover (through a proper insurer) than to take the bank’s credit life offering. The bank offered us credit life at 70% more expensive than the life cover we took through a traditional life insurer. Yes, it was a big schlep to phone around (I hate call centres!) but all that money saved is going into our bond!

What was the most surprising thing you learnt in today’s post?

Did I ruffle your feathers a bit? Be honest.

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Comments

  1. We are very good at keeping our living standards small. But we tend to blow our bonuses. Usually on things we need for the home i.e. appliances and electronics. Because the alternative (for us) is to make debt which we are loathe to do. I am working on a different strategy this year where I’m saving money for those things, so I don’t have to use bonus money for that.

    • Marcia Francois says:

      Definitely don’t go into debt for that.

      I might write a post on IG or similar to find out what people do with bonuses. I think everyone’s plans are so interesting.

      Mine is the most boring, of course.

  2. MamaCat says:

    This is very sensible. These are things we do already. However, what about ensuring you have available cash already saved? For emergency situations? Our biggest spend item is school fees and the associated costs of school. I feel the bond is impossible. It is the only debt we have and even with the extra every month, there are still many years. Please will you explain more about tithes.

    • Marcia Francois says:

      I will answer the emergency situations in a post next week, but the tithing question is here.

      http://www.marciafrancois.com/blog/2016/09/08/how-i-paid-off-my-bond-in-5-years-and-how-you-can-too-part-1/

      We believe that the Bible is the complete Word of God and therefore, we tithe 10% of all of our income. See Malachi 3:10.

      In a nutshell, I think of it like this – God gives me everything I have anyway; I’m a good steward of my money by tithing and He blesses the rest and stretches it to more than provide for my needs and wants.

      I know non-Christians who also tithe and who are abundantly blessed financially. Tithing is a spiritual law and God blesses the act of tithing.

  3. Jacqueline van der Weide says:

    How do you handle the ever escalating food/petrol/utilities prices? I feel I need my annual increase to fund all these unavoidable increases in daily expenses.

  4. I definitely think we live within our means however we have had so many unexpected expenses of late that we’ve eaten all of our savings away. I know there are things I can cut down – like my kids parties (i host them too lavishly) and I also want to use my bonus to prepay some monthly stuff like levies etc so I can pump that money into getting my debt smaller.

    • Marcia Francois says:

      What I’ve found very enlightening is to ask your colleagues or friends what they spend on x and y. It’s useful to see where people are saving and how.

      The key with expenses is to look at the big things that occur monthly, not the once-off annual events like a party. Of course every bit counts but there might be some things in your current budget that could be altered.

      When I’ve coached people, I question every line expense and sometimes things you thought that could not be any less can actually be done 🙂

      E.g. cell phones/ insurance/ etc.

  5. We definitely live too lavishly. There are a million ways I could cut down right now when I think about it. We eat out too much, we entertain too much. I’m very much an instant gratification type of person, if I see something I like, I want to buy it immediately. We’ve gotten better but there’s still a long way to go! Thought provoking post, thank you

  6. No ruffled feathers… it is hitting the nail on the head. I get little to nothing bonus really so I don’t even consider it when I make plans. Because seriously it is more a 13th Cheque than a real Bonus 🙁 but even with that I usually use it towards paying off debts and for savings

    But I have always believed in living at the same level even
    When I get a salary increase .

    I actually commented on the car thing in the previous post. I have colleagues who can’t believe Hubby drives such an old car or that my car is so small but I am happy there is no debt on the cars.

Trackbacks

  1. […] Here’s part 1 which lays the foundation and mindset stuff, and here’s part 2 which is the start of all the practical steps. […]

  2. […] 3. I don’t know why I hate packing my lunch bag so much. It’s got to get done though because we don’t have a canteen at work and no way am I walking to the mall to spend unnecessary money on food. […]

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