Paying off the mortgage, one brick at a time

[Oldun]

https://www.ageuk.org.uk/information-advice/money-legal/pensions/state-pension/new-state-pension/

[vand]

11 minutes ago, Oldun said:

Don’t forget, the government can change anything anytime it wants. It can even backdate. Stay light and always pay your bills. You voted for em, you got em (democratic majority, so let’s not open up that can of worms otherwise go sit in a field or start your own country - cf start your own revolution/ political party)  

I'm aware they can change the rules, but you can only work with what you have. They can change the rules on other investments too, like they are doing with property taxes.

And always remember they can also make the rules more favourable, as well as less favourable

 

[AuricGoldfinger]

2 hours ago, vand said:

Nursery fees are budgeted for, but damn, are they making a dent in our savings rate lol. At least its only for a couple of years 

Tax efficiency drives my thinking right now. So the priority shifts to both wife & I to max our pension contributions and run our pensions to at least ~£250k. This will likely take 4-5 years. We should be able to shield about £20k a year from the taxman if we do this. This is a quite staggering - I would go as far as to say life-changing - amount if you just do it steadily and allow it to accumulate and compound over the years. I implore people who say pensions as not worth it or too much unknowable to reconsider their position - you are dismissing your single best opportunity for efficient accumulation of wealth. 

Why £250k target? That should be roughly the amount that its possible to get back out easily without having to consider paying any tax on the way out, if the pension is your only source of income. After that it gets more complicated, especially if you have other sources of income as we hopefully will, but that should be a good target to aim for as a baseline.

After the retirement accounts any excess funds will be split between stockpiling cash for the deposit for eventually buying a bigger house in 2-3 years, and filling up an SS-ISA, but these are much lower priority.  I'll continue to buy PMs but this is also much lower priority.

When baby is out of nursery we will also likely start J-ISA and L-ISA nestegg for them

Nice! Ive just had planning approved to add 2 bedrooms and an orangery to my house (the money i put in should double in value added to the house) once this is done im going to hammer the mortgage and try to pay it off over in about 5/6 years. 

Ive always chose to invest in more properties rather than over pay on the mortgage, but i can now use the returns on those investments to pay off my house.  I see both sides of the argument for investing vs paying off mortgage so feel il be getting the best of both worlds by doing this. Investing for me has given me a far better return compared to what i would save by being mortgage free, however i dont want to push my luck and i dont think paying your mortgage off can ever be a bad financial decision, especially since no one knows what the future holds.

[vand]

16 hours ago, Martlet said:

The £1700/mth childcare sounds like an outlier, multiples above typical childcare costs (which are high, because we have quite high ratio of carers to children). 

 

£1700 may be above average but it is far from an outlier.  You can easily expect a nursery place to cost between £1000-£2000/month, and towards the upper end of that range in London. Childcare is one area that has completely outstripped general inflation by 2-3 times in the last decade, much like fees for private school. 

[caloundracats]

Lots of discussion re child care fees. But what is the hourly rate being paid to look after these little ones at such a tender age? Does it make financial sense, that is a question you have to ask yourself. 

I have a relative who expressed her disgust that the government doesn't pay for childcare. I was outraged. Why should they? It is your choice to have kids, and your choice to place them in childcare.  Is making money more important than spending time looking after your own children rather than a childcare institution taking care of them in order that parents can make money? 

I have no problem with the government funding kindergarten as that is the beginning of education. I know childcare fees are a bone of contention for many. But maybe it is more important to spend time with your kids than earning a buck.

[Mcgrimes]

23 hours ago, caloundracats said:

Lots of discussion re child care fees. But what is the hourly rate being paid to look after these little ones at such a tender age? Does it make financial sense, that is a question you have to ask yourself. 

I have a relative who expressed her disgust that the government doesn't pay for childcare. I was outraged. Why should they? It is your choice to have kids, and your choice to place them in childcare.  Is making money more important than spending time looking after your own children rather than a childcare institution taking care of them in order that parents can make money? 

I have no problem with the government funding kindergarten as that is the beginning of education. I know childcare fees are a bone of contention for many. But maybe it is more important to spend time with your kids than earning a buck.

I would say putting children in nursery is efficient with a career to child ratio of 4 (I think?). This means more people working and therefore a better economy. Therefore, I could see why a government would want to incentivise working parents.

Nursery is also good for children in the sense it promotes early social interactions and learning, and in many places in this bad country, a necessary to offset bad parenting!

Im not disgusted that I have to pay for nursery, it is financially beneficial for me to do so. 

[caloundracats]

Career or carer ratio of 4 to 1? Lucky kids if it's 4 to 1 carers. 

I have no issue with children being in nursery from the age government sees fit to subsides them, this is usually at the age they can start learning. And I agree, there are plenty of children who would wholeheartedly benefit from the social interaction and gain a sense of normality as it appears many parents in the UK leave a great deal to be desired.

But there are many who choose to send babies and toddlers to nursery when one parent could stay at home during these tender years. (of course there are exceptions such as completing a medical internship or the like within a given time otherwise no qualification is gained.) It is the aforementioned people I disagree with. Why bother having kids if they are to be off-loaded to someone else to look after for up to 10 hours a day. 

This said extended family member's toddler is fed all her meals at nursery, all provided, including breakfast. Mother drops her off at 7 am and picks her up by 6 pm, sometimes after going to the gym, hairdresser etc. to utilise the time away from her daughter.  She says she only bathes her daughter before putting her to bed. She doesn't have to work financially but chooses to then moans that she thinks the government should pay for this care. Then tells me she has made sacrifices to buy their home - like who doesn't make sacrifices in order to get onto the property ladder. Manages to have a couple of trips away and an overseas holiday every year. What sacrifices I ask?

I believe that the very early years of a child's life are the most important and it is beneficial in the long term if one of the parents can be with them during this time.

 

[vand]

I'm not moaning about nursery fees; they are what they are, and having children is a choice.

But is it worth discussing why they are so high, and more importantly imo why they are continually increasing at a rate wayyyy above inflation. 

Clearly a society that increasingly makes it less and less financially viable to raise children is not a society that is destined to prosper in the long run.

[KDave]

People reliant on the state are paid to have kids through benefits and the rest are being made to sacrifice. Productive people are still having kids, they are just having fewer. How this will affect society we will have to wait and see. Not good I think. 

Childcare prices, it could be many factors. Costs of property and rent, cost of insurance, cost of training, regulations. We have high requirements through regulations and low child number to carer, rightly so maybe, but it comes at a cost. If it's inefficiency or high profit margin, competition will come in eventually. Wages will have to rise. If it's neither inefficiency or profiteering, then look to regulation. Government will have to change that. They will only do that when unemployment rises, tax take falls, and there is enough pressure to change regulations. It will take a lot for government to reduce protections of people's kids.

If I had to pick one, I would say it's mostly real estate/property cost related in the case of London. QE related no doubt, the rich who benefited bought a lot of property, resulting now in this inflation effect being felt. Nursery costs up here are no where near as high, but neither are wages or property costs. 

[Bullionbilly]

2 minutes ago, KDave said:

People reliant on the state are paid to have kids through benefits and the rest are being made to sacrifice.

Productive people are still having kids, they are just having fewer. 

 

So true !

[Martlet]

2 hours ago, vand said:

I'm not moaning about nursery fees; they are what they are, and having children is a choice.

But is it worth discussing why they are so high, and more importantly imo why they are continually increasing at a rate wayyyy above inflation. 

Clearly a society that increasingly makes it less and less financially viable to raise children is not a society that is destined to prosper in the long run.

I would suggest its because more people are going back to work rather than have one parent remain at home.  It used to be something thought about, now it seems everyone does it, and while children younger. 

 

[Oldun]

https://www.familyandchildcaretrust.org/childcare-survey-2017

re state funded education, there were 560,000 more (primary, I believe) students in 2017 than in 2010 and the gov has expanded the number of school places overal by about 825,000 in primary and secondary schools.

[KDave]

Sounds like another market we know. How much faster has property risen in London compared to the rest of the UK? Quite a bit faster I think. 

Interesting date selection. 2008 to 2016. The time of global QE.

Now we have inflation coming home to roost relative to aforementioned asset inflation.

Must all be a coincidence. 

[KDave]

https://fullfact.org/education/have-childcare-costs-risen-seven-times-faster-wages/?utm_source=content_page&utm_medium=related_content

 

[vand]

On 08/03/2019 at 23:34, KDave said:

https://fullfact.org/education/have-childcare-costs-risen-seven-times-faster-wages/?utm_source=content_page&utm_medium=related_content

 

That is x7 faster that pay increases.. that's utterly horrific. Just shows that the typically quoted CPI figures are a load of nonsense.

Anything that comes off a production line in another country becomes more affordable over time, but anything that requires human input more than makes up for it!

[KDave]

I reckon the cost of human capital has gone up as the cost of the things required to satisfy their needs have gone up. Housing being the biggest cost. Business premises are the same, one of the overheads of a nursery. Many things have come down, but the borrowing that funds house prices has clawed it all back over time, now with qe on top. Hence why real term wages have gone nowhere over the last twenty years but we can afford more stuff. The stuff is cheaper. Except for houses of course.

Printed money has to go somewhere. Everyone not benefiting from it, is paying for it. That's the childcare bill. 

[Oldun]

Best case scenario is that you end up with 2 decades or more of stagflation and get let down gently....