The Lemon Fool

Hi All, or perhaps hello no one, this board doesn't seem to be used so much any more.

It felt like a good time to post an update, so I've returned to where it all began.

I got into what felt like massive credit card debt back in the mid nineties whilst at uni. My first debt free date was around July 2004, just before I gave up on the North and moved down to London. I happen to have the URL of the post, but sadly it doesn't seem to have been archived following the destruction of the Fool boards.

http://boards.fool.co.uk/Message.asp?mid=8762989

Ahh well.

So, what's this all about then? Having taken out a mortgage 2 years ago, I've just this week managed to get my net debt back to zero again. I'm quite surprised I've managed it so quickly with regards Covid, but fortunately I kept my job, and my expenses plummeted as you can't really spend much when you don't leave the house.

I've absolutely hated being in debt again, debt really makes my skin crawl, so I've basically lived like a pauper to push my SIPP higher than my mortgage. Sure, I can't touch the SIPP for another 15 years or so, but if push comes to shove I can settle the debt then.

Perhaps they'll be a third debt free post in 5 or 10 years when I actually extinguish the mortgage, but I can't say I'm in any rush to do so when it would be so costly in tax terms to achieve it.

All the best - fool on.

Paul

paulnumbers wrote:Hi All, or perhaps hello no one, this board doesn't seem to be used so much any more.

It felt like a good time to post an update, so I've returned to where it all began.

I got into what felt like massive credit card debt back in the mid nineties whilst at uni. My first debt free date was around July 2004, just before I gave up on the North and moved down to London. I happen to have the URL of the post, but sadly it doesn't seem to have been archived following the destruction of the Fool boards.

http://boards.fool.co.uk/Message.asp?mid=8762989

Ahh well.

So, what's this all about then? Having taken out a mortgage 2 years ago, I've just this week managed to get my net debt back to zero again. I'm quite surprised I've managed it so quickly with regards Covid, but fortunately I kept my job, and my expenses plummeted as you can't really spend much when you don't leave the house.

I've absolutely hated being in debt again, debt really makes my skin crawl, so I've basically lived like a pauper to push my SIPP higher than my mortgage. Sure, I can't touch the SIPP for another 15 years or so, but if push comes to shove I can settle the debt then.

Perhaps they'll be a third debt free post in 5 or 10 years when I actually extinguish the mortgage, but I can't say I'm in any rush to do so when it would be so costly in tax terms to achieve it.

All the best - fool on.

Paul

Hi Paul

You're so right. I didn't read this board. So I can't say well done

Happy New Year

AiY

You mean that your mortgage debt is fully covered by the assets in the SIPP? Good for you. In any case I guess your mortgage interest will be fairly low and if it is a repayment mortgage its balance will be reducing whilst with a bit of luck your SIPP should be appreciating. That is a healthy balance so it would seem you have nothing now to worry about except keeping it that way!

I have what most I guess would call plenty of liquid assets but I too hate debt, and do not even use a credit card very much, even although I pay it off each month. I also pay any bills such as plumbers, painting and decorators and so on virtually by return.

Dod

Yes that’s right. Perhaps that’s not what most people call debt free, but it’s debt free to me

I did consider just investing in cash funds within the SIPP to try and mirror the mortgage, but figured if it’s out of reach for 15 years, I might as well keep it in equities and most likely end up with a little more. Leverage certainly not being my ideal situation, but one that seems to make sense when the tax savings are so huge.

Hi PaulNumbers.

It strikes me that your mortgage scenario resembles quite a few retirement ones - that you need to match assets and liabilities for the right (future) time.

Maybe a good plan would be to develop a cash or cash-like component within your SIPP and steadily contribute/divert to it over the next 15 years so that it is oven-baked on maturity (and therefore a late fall in the stock-market would only harm you for the difference, e.g. in year 13, you would only be circa* 2/15 exposed).

You could use dividends to achieve this as far as possible and if not enough, take the opportunity to cash out (i.e. sell capital) if you do an annual re-balance or whatever.

Anyway, good luck with whichever way you go!

Regards, Newroad

* I say circa, as in calculating, you would need to assume an interest rate, which might even be negative. I would advise recalibrating that each year if you went with something like my suggestion.

Newroad wrote:Hi PaulNumbers.

It strikes me that your mortgage scenario resembles quite a few retirement ones - that you need to match assets and liabilities for the right (future) time.

Maybe a good plan would be to develop a cash or cash-like component within your SIPP and steadily contribute/divert to it over the next 15 years so that it is oven-baked on maturity (and therefore a late fall in the stock-market would only harm you for the difference, e.g. in year 13, you would only be circa* 2/15 exposed).

You could use dividends to achieve this as far as possible and if not enough, take the opportunity to cash out (i.e. sell capital) if you do an annual re-balance or whatever.

Anyway, good luck with whichever way you go!

Regards, Newroad

* I say circa, as in calculating, you would need to assume an interest rate, which might even be negative. I would advise recalibrating that each year if you went with something like my suggestion.

Hi Newroad,

Thanks for the suggestion.

Regards,
Paul

Hello Paul,

Many congratulations on your second Happy Dance! How I remember those being celebrated by the regulars on the DwD board back in the TMF days. I remember you well and with great fondness from those days.

How times have changed since then, even before the current government restrictions in response to Covid19 came into force.

I celebrated my own Happy Dance back in March 2012 - goodness, how time flies - and with a lot of saving and frugality which I learnt whilst clearing debt was able to take early retirement at the end of August 2020 at the age of 57.

I wish you every success for the future Paul. Life has its ups and downs. Grind through the downs and make the most of the ups. None of us know what is around the corner.

Very best wishes,

Gostevie

Gostevie wrote:Hello Paul,

Many congratulations on your second Happy Dance! How I remember those being celebrated by the regulars on the DwD board back in the TMF days. I remember you well and with great fondness from those days.

How times have changed since then, even before the current government restrictions in response to Covid19 came into force.

I celebrated my own Happy Dance back in March 2012 - goodness, how time flies - and with a lot of saving and frugality which I learnt whilst clearing debt was able to take early retirement at the end of August 2020 at the age of 57.

I wish you every success for the future Paul. Life has its ups and downs. Grind through the downs and make the most of the ups. None of us know what is around the corner.

Very best wishes,

Gostevie

Hi Gostevie!

Yes I remember you too, in particular your loud fridge that kept you awake

I'm astonished that you managed to get from debt free in 2012 to retired in 2020, tell me all your tricks! That really is quite incredible.

Hope you're enjoying your new found freedom.

All the best,

Paul

Came late to this. The good old DWD board: yes, I remember it well!

We began overpaying our mortgage almost from the start, religiously chucking extra money at it every month, and supplementing those payments with ad hoc sums when possible.

It's very similar to snowballing, and progress is very rapid at the end.

Ours vanished for good in 2009.

I'm mentoring some young friends through their PhDs at the moment, and our conversations occasionally turn to money matters. To illustrate mortgage overpayment in action, I actually wrote a program for them, so that they could see the effect. They're now converts.

MDW1954