Questions from the paying off your house posts – food, savings and utilities

I promised I’d address some questions I had from the paying off your bond posts.

From MamaCat

What about ensuring you have available cash already saved? For emergency situations?

The way we do it is to have a set amount that you automate to go into normal savings, in addition to the increased amount to pay off your house quicker.

The trick with savings is to do it first. For me, it’s the second thing I pay – first, my tithe and then my savings. I tried for a month or two in 1998 when I got serious about money to see what was left at the end of the month, and that just never worked.

The best is to decide which amount you want to save and move it out of your main bank account immediately – you will somehow make the rest of the money work if that’s all you see.

Your savings will then be used for true emergencies (not “we need new furniture”, but insurance excesses and such) and infrequent expenses, like TV licences, car services and so on.

The financial gurus recommend that you save at least 10% of your income; my aim is much higher 🙂

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From Jacqui

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.

I feel your pain. Really I do.

Electricity – we had “open” electricity at the old house which I do not recommend. At the new house we have a prepaid meter and we’ve not spent more than R1000 per month. At the other house our bill was in excess of R5500 for rates, water, electricity, sewerage and refuse removal.

Water – I almost don’t want to speak about this because it is my current cause. I’ve already investigated prepaid water meters and will be installing one of those soon. I’m afraid I’m suspicious of the metering system because I can’t see how it can be accurate….

Food – I feel like a broken record but the more I am intentional and menu plan, and then shop accordingly, we actually are okay. Cook two meals at a time and put one in the freezer. If you have leftovers, don’t throw them out. Put them in the freezer. Some nights I take out 3 – 4 different things, lay them out on the counter and it’s a buffet for everyone to help themselves 🙂

Things that throw out the budget are all the junk food and convenience food. If you need to buy a box of something, then choose whatever is on special that week. I haven’t bought boxed fish for months because it’s just too expensive. So chicken it is.

The very obvious one is also if you shop for food at the W store, you’re going to blow your budget immediately. I would much rather put that extra money in my bond…

Also, write the date you start using an item on the container in permanent marker. It’s psychological…. when I forget, we fly through margerine, butter, etc. but when I write the date, somehow it lasts for the full 3 weeks…. Do the same with cleaning agents so you know how long things last.

I also don’t believe in stockpiling. When I stockpile, I’m poorer, and that’s a fact. I buy what we need for the month because the shops are just down the road if you need something and also, you could just make do 🙂

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Weigh-Less has been a big help here too because I’m aware of what actual portion sizes should be. It’s a strange thing; because produce is so expensive, I’m very aware that we have to eat all the apples/ oranges, etc. because I don’t want to waste a bag that cost R25 – R35.

If we’re not going to get through things, I toss them into the freezer (broccoli, etc.) or cook up the fruit (granted, only apples!) so they don’t go to waste. In winter, I make soups.

Evaluate what portion sizes actually cost. My kids liked a particular brand of muesli but a 500g box cost about R40 and they’d finish it in two days. Not okay. So now they can get that once a month but the rest of the month, they eat more economical cereals like oats, Weetbix, or they have toast.

Petrol – there’s nothing much you can do except to drive properly so you don’t use up too much petrol, take your car to be serviced and don’t speed. Other than that, I always tell myself, at least I don’t live in Ireland (which has been the most expensive petrol I ever saw – R22 per L in 2009…). Funny story, when I saw the price of their petrol, I vowed there and then to never moan about the price of petrol ever again, and I don’t.

If you travel for work, explore whether Uber might be cheaper for you. I have many Pretoria clients and about a year ago, I took an hour to do some homework. I found that in all those cases, it’s cheaper to Gautrain + Uber rather than drive my car, so that’s what I’ve been doing for the last year.

Hope this helped, ladies.

Readers, please share your tips in the comments below.

PS If you’d like a fresh eye to look over your situation, send me a mail. We often can’t see things objectively because we’re too close to the action; I’m happy to help. And it’s my passion 🙂

How I paid off my bond in 5 years and how you can too – part 4

Here’s part 1 which lays the foundation and mindset stuff, here’s part 2 which is the start of all the practical steps, and here’s part 3 with some more steps and one which may be too woo-woo for you 🙂

And now for the numbers. I’ll promise to keep this short just in case you feel like stabbing yourself in the eyes round about now 🙂

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  1. Paying the bond

If you look at amortisation calculators on any of the banks’ or mortgage originators’ sites, you’ll be able to see that you’re basically paying off interest for much of those 20 years. Only a tiny amount of each of your repayments goes toward the capital while most of it pays interest.

I did a quick calculation. On R1 million, your monthly repayment is R9983 (at 10.5% interest). The majority of that payment only swings towards your capital in month 162 (13 and a half years into paying off your bond of 20 years).

Scary stuff.

So the quicker you can start paying off that interest, the better.

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How to do this

The minute your bond is registered, make a payment. Preferably the entire bond amount but any amount will do.

Our bond was registered on 5 July. I had some problems with them linking the new account to my profile but it was finally linked a week later and we paid the entire bond payment immediately even though the bank only required the first payment on 1 August. Those two weeks meant that the payment was applied mostly to interest.

If you’re paying off your existing bond, do your best to put aside as much money as you can and pay it on the 14th of every month. Right now things are a bit…. tight…. but we could afford a small extra payment (due to rounding up) so I put a scheduled transfer on my bank account for the 14th of every month for that amount.

If we do nothing else but this tiny extra payment, we cut 4 years off our bond.

Did you get that?

If we do nothing else but this tiny extra payment, we cut 4 years off our bond.

If we get to the point where we have half a bond payment extra every month, we reduce the term to 8 years, and if we work up to doubling our payment, we pay it off in 5 years.

I can’t wait for my next salary increase to increase that payment 🙂 🙂

This is the slow and steady way but that’s not really my style. I’m believing for much bigger results, like I shared in the last point of this post.

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If you’ve been paying only exactly what your bank requires, then here’s what you need to do:

Diarise to get a statement at least every 3 months.

If you do your main banking with the same bank who granted your loan, then make sure your profile is linked, and actually look at your statement at least every 3 months, and if you’re now obsessed because of my posts, then make it a part of your monthly review.

Here’s something else that is small but practical to do.

If your bond is R5678 (random number), make a quality decision to find R322 in your budget so that your total payment to X Bank is now R6000 per month. All I did was round up.

Now go to your bank’s website and set up a scheduled transfer/ payment to your bond for that amount on the 14th of every month (or 14 days from your scheduled debit order).

If you’re thinking, “how is this possibly going to make a difference?” let me tell you it will.

You’re developing the right mindset of single-minded focus.

You’re taking action in small steps now but those steps will grow soon.

These days we’re so fortunate to have technology (all the heart eye emojis); when I was obsessed with paying off our first home in the late 90’s, I’d walk to the bank in the CBD every 3 months and get an actual paper bank statement to encourage me in my efforts. Now I just log into the app and I can easily see the reducing balance.

How is all of this resonating with you? Does it feel like too much hard work? Do you feel overwhelmed? Let’s talk.

This is the final of the official posts. I so hope this was valuable to some of you out there. Please let me know to encourage me too.

Next time up I’m answering questions so let me have them.

How I paid off my bond in 5 years and how you can too – part 3

Are you enjoying this series so far? Remember to let me know if you have any questions in the comments and if they require long answers, I will write a separate post at the end of the series.

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.

Let’s move onto the next couple of steps:

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  1. Don’t subscribe to “I deserve it” thinking

I hear this so often – I work hard and I deserve to have a nice car, or whatever.

Let’s be honest – there are many people who work much harder than some of us but due to circumstances they were born into don’t have as much in the way of material possessions.

So I’m of the opinion that while we all deserve things, that doesn’t actually fly with justifying your desires for all the latest material possessions – cars, gadgets, clothes, etc. you want.

I like to say, “I deserve to have my bond paid off quickly because I’m working hard on that goal” 🙂

Yes, by all means, treat yourself, but make it an appropriate treat. You can’t spend such a lot and still want to pay off a bond quickly. Unless you earn a fortune. In which case, this post won’t interest you at all.

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  1. Have no sacred cows

Dr Phil used to say (he might still say this – I haven’t watched his show since the twins were born), “you can’t have any sacred cows”. What that means is that nothing in your budget is untouchable.

“You can trim the grocery bill but I’m not giving up my big car”

The truth is if you want to make a big impact, then look at big expenses like cars, schooling (in some instances), holidays, and so on.

Sadly, one of our biggest line items on our budget in the last 6 months was water and electricity. How crazy is that?!

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  1. Step out in faith

With the last house we paid off, I remember going to work in the first week of January after about three weeks off from work. My boss, who knows all about my goal-setting behaviour, asked me if I’d set any interesting/ fun goals for the year ahead.

I took a deep breath because it was a big, scary goal, and said, “well, funny you should ask, but this year I plan to pay off that bond”.

It was way out of reach by normal standards but I had a sense that this was a stretch goal we could do.

Long story short but that’s exactly what happened.

Some hard saving from us, some unexpected monies here, a bonus there, a tax refund from SARS and it was done. In other words, a lot of smaller things helping us towards our goal.

It’s not magic, but there is something special with putting your intention out there, and believing (and receiving) answers from God as to how these big dreams will come to fruition. And let’s face it – had we not had this big goal we were working towards, those extra monies could very easily have been frittered away, or paid for holidays, furniture upgrades, newer cars, etc.

I have more to say on this subject but someone asked a great question which is now going into part 5 and will address a little bit more here.

Did point 7 feel too woo-woo for you?

What are your sacred cows? We all have them so don’t feel shy to share. Maybe it’s food, eating out, cars, gadgets, clothes…

If you’d like some coaching around these issues or for me to give you some customised ideas for your situation, email me for a confidential 30/ 60-minute session.

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.

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  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.

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  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.

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  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.

How I paid off my bond in 5 years and how you can too – part 1

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I’ve been promising to write this post for a few months, so if you’ve been waiting, thanks for your patience.

None of the things I’m about to share is so-called “rocket science” but I do believe that all of it added together is bond magic.

A little bit of background:

D and I have been married for 21 years. During that time we’ve lived in 5 places, 4 of them owned.

It’s also worth mentioning that we went house-hunting after two years of married life, discovered to our shock and horror that you needed a lot more money than we had saved, so we continued renting for another year to save up some more money and eventually bought after 3.5 years.

Interesting aside – that first move was done with the help of friends and D said then that in future we need to pay for professional movers because if we can’t afford to do that, we can’t afford to move 🙂 So that’s what we’ve done ever since.

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On debt

Supposedly there’s good debt and bad debt. I say no debt is good debt but some debt is a tiny bit better than others.

In a nutshell, I hate having debt. I even hate owing a colleague R6 if they bought me a packet of chips at the vending machine. So when I see lots of zeros on a bank statement, I go into action and devise a plan to pay that off as quickly as possible.

Our plan is always to pay off a home comfortably in 8 years (we take bonds of 20 years), but my not-so-secret stretch plan is 5 years. We’ve done it twice, and we will do it again with this house.

Let’s get to it, shall we?

41 things

  1. Tithe on every bit of income

We are tithers and tithe 10% off the gross of every single bit of income. Salaries, bonuses, gifts from family for birthdays, proceeds from house sales, when I sell stuff around the house, everything. We’ve tithed for nearly 23 years and we will never not tithe.

I believe that when you give God the firstfruits of all your income, He blesses the rest and stretches it.

As with almost everything else, I like to be very intentional about my tithe. Once my salary hits my bank account, I don’t spend any money until I’ve paid my tithe (except for my one retirement annuity that takes their premium even before I’ve been paid some months…). I’ve automated payments to the nanny, the kids’ school, etc. but not my tithe because I want to physically go into my bank account, see my “abundance”, feel grateful to God, and consciously and intentionally tithe. Most months I tithe from the banking app on my phone so this doesn’t take much time at all but it is still very intentional and conscious.

I’m a big tithing enthusiast because I’ve firsthand seen the benefits over the years and there is nobody who can convince me otherwise.

Coaching challenge for the comments

Do you tithe?

On a scale of 1 – 10, how badly do you “hate” debt? 1 is “not much”; 10 is “I hate it as much as you do, Marcia”

I’m not intentionally making you wait for the whole series, but the whole thing was over 2000 words long, so I’m breaking it up into 4 posts, one on each Thursday for the rest of the month.

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