Week 9 : Moving House ? Add it up !

With the pending launch of our Upside Down Property Developing Manual approaching next week, we have got houses on the brain. During my own Pay Off Challenge we were midway on a renovation project so moving was not an option. If you are a home owner at present, if you need to move house in this current climate, then do you really know the costs?

Stamp Duty has given the government revenue of 31 billion pounds in the past ten years according to some analysts, and that has come from people just like you and me.

London stamp duty alone has gone up by 807% in the last ten years, so think about how much money you would save if you didn’t move.

If you are going to move, I would guess that the vast majority of people are looking to move up the housing ladder, and will probably be entering the next Stamp Duty bracket of £250,000 to £500,000 given the cost of house prices at this moment in time.

So on top of all the money you will be spending getting your house ready for selling, paint, soft furnishings, plants, even a new kitchen or bathroom if you are really serious about selling your house these days, so that’s an average of around £ 7000 to start the ball rolling.

Then you have your Estate Agents fees to pay when they sell your house,

£ 2450.00 plus VAT ( £ 2878 ) for say 1% of £245,000

then stamp duty on your new house £ 8250.00 3% now of say £ 275,000

Plus solicitors fee, say around £ 600 ( unless there are complications ) plus moving costs to your new location , a further £ 600 – £ 800

All in all if you are thinking about moving house ( bear in mind this does not include the money you are going to be spending on your new home ) you are committing yourself to expenditure of at least : £ 12428.00 PLUS the £ 7000 spent sprucing up your house to sell and you would be looking to spend £ 19428.00 just to move house.

If my goal was to Pay Off My Mortgage as quickly as possible, I would be using the money that I would have been spending on moving to pay down my mortgage.

The double edge sword to the process is that even if most people said to themselves, we’ll stay where we are, in most cases they were intending to move because they have outgrown their current property, so the temptation is to make some sort of home improvement instead. ( Average cost per year is likely to be in the region of £5000 )

There really is no right or wrong in any of these everyday choices in life, but I was contacted just last week by a family from the USA who had spent the last 5 years paying off their mortgage and were celebrating this week.

To them, as it was to me at the time, paying off your mortgage early is a matter of choice, but it is only important when it is part of your overall plans, ambitions and goals in life.

This week is one of those BIG weeks, these figures are big enough to make anyone sit up and take notice.

For the purpose of the Challenge, I will be using £15,000 saved in one year by NOT moving house. If you made that decision 3 years in a row, you would be looking at saving £45,000. If you are serious about this Challenge then you will have no problem in coming to terms with that, as you will know that the bigger picture will catapult you past the finishing post at warp speed.

For the Pay Off Challenge I have used HALF these figures to represent commitment to the Challenge. ( £ 7500 saved per year x 3 )

Any savings that you make should be added to your Freedom Payment each month and used to Pay Off Your Mortgage in 3 Years or Less. Anything else & it simply will not work.

The Challenge is to Challenge What You Think You Know

I am currently editing the Upside Down Property Manual to accompany the Pay Off Your Mortgage Challenge and as part of the Manual I recount on certain aspects of my own Pay Off Your Mortgage Challenge with some surprising consequences.

When you read stories about people being in debt, becoming debt free, or indeed people who have been overweight and found a successful way to be slim, fit and healthy images immediately spring to mind about those people, where they live, what they do for a living and ultimately what they did to put the wrong right again.

Without wishing to spoil the story for anyone who chooses to read the manual, you may be a little bit surprised where my “starting point was starting from.” In the original Press Release of my story, you will find a photo me “cutting up credit cards” with a backdrop of a conservatory over looking a large driveway and countryside. The credit cards were not mine, they were the journalists (cash cards actually because he had given up credit cards too), and just to show appearances can be deceiving and you should never judge anyone, the journalist spends the winter in California with his daughter and family every year.

The reason I mention this at this point is because I am sending a warning salvo to the people often referred to as “the middle classes.” We are currently seeing huge rises in the “middle classes” seeking debt help for the first time and I know exactly how they got there, because my “starting point” was as a “middle class” home owner.

When I began to challenge what is commonly perceived to be “the right way” in society, i.e. You go to school, get good grades, get a job with prospects, work your way up the housing ladder ( with a mortgage ), drive a nice car ( on finance ) and take holidays ( on credit cards ), I was already leading the lifestyle that most people aspire to have.

The biggest challenge about the Pay Off Your Mortgage Challenge is to be able to “empty your cup” and clear your mind of everything you think you know, and start raising your financial IQ by reading great advice from people like Robert Kiyosaki, Donald Trump and Harv Eker to name just a few.

If you ever get the chance to play the Robert Kiyosaki game, Cashflow 101 then you will realise quite quickly that it is FAR easier to get out the Rat Race as a janitor than it is as an airline pilot.

Week 8 You and Your Credit Cards

 If you listened to the Prime Minister, Gordon Brown yesterday as I write, you will have heard how the world economy is the reason the UK are experiencing the economic crisis at the moment.  I happen to think the problem lies nearer to home and it has been disguised by the increased uses of the humble flexible “friend” the credit card.

The reason this challenge is being shown is to hi-light the need to re-think everything you think you know about your own financial education.  When I first wrote Control Freak a Recipe for Debt Freedom I thought I’d invented the wheel! I was completely elated, enlightened, enriched with this new knowledge, it literally changed my life and I hope you can see how it can change yours.

 As I further developed my own financial education I realised that my formula was the most basic level of money management and I realised pretty quickly that I had a long way to go before I could consider myself Financially Astute. Imagine how difficult you are making things for yourself if you do not even take the time and trouble to look at your finances in detail every week and ask yourself how you can improve them?

 

Whilst I agree with the Prime Minister, Gordon Brown that there are economic influences outside of our own control, such as rising oil prices, I would argue that the entire last ten years or so in the UK has been a FALSE economic “boom” because of the amount of easy credit available.  The rise and rise of not only the number of credit cards people have per person, but the amounts of money they can borrow on them on top of a mortgage, a consolidation loan, a car loan and an overdraft is staggering. You even hear stories every week on the Property Ladder programmes of people funding tens of thousands of pounds they haven’t budgeted for to finish their property developing project on credit cards.

 

If there was one thing I would urge you to do today it would be to cut up your credit cards ( keep one for emergencies, hotels, online protection and travelling ) but for too long those plastic things that make you feel a little richer are actually making you poorer by the day. The first thing you should realise if you do not clear the balance on your credit cards every month is you are absolutely hopeless with them, GIVE THEM UP, get in good financial shape and move on.

 

When I get to a cash till and the Sales Assistant offers me a discount if I sign up for their store card, I simply say ” No thanks I gave them up years ago!” It always raises a smile, and it reminds me how far I have come.

 

At a seminar recently I had the whole room nodding about credit cards except for one lady at the back of the room who was shaking her head from side to side. I met up with her at lunch and asked why she was not nodding like the rest of the guests, and she simply said ” If I do not have a credit card, I can’t go shopping anymore!”

 

This subject is going to be returned to many, many times on this challenge, all a credit card actually does is to give you a pay rise for a while.

 

For this part of the Pay Off Your Mortgage Challenge we are suggesting switching one or two, preferably all of your cards to a 0% 12-month credit card deal, this will save you around £237 a year on a £1500 balance on a high rate card.

 

For the purpose of the challenge we would estimate most people have at least two cards they could switch saving just over £ 9.00 per week.

 

It Depends On Your What Your Goal Is

Some experts will tell you that there are all sorts of sound mathematical or tax reasons why you should never pay off your mortgage. Some people have multiple mortgages on multiple properties and obtain a positive cash flow for investment purposes. The reason why you choose to pay off your mortgage or not is quite simple, YOUR WHY FACTOR.

If your goal was to simply Pay Off Your Mortgage, then selling your house and downsizing to become mortgage free is the easiest way to achieve mortgage freedom. However if your goal to become mortgage free is to be able to spend more time with your family and less time working all that overtime then taking up the Pay Off Your Mortgage Challenge becomes more appealing. It’s all about the WHY.

Perhaps you have played the property market to perfection, sold your house within the last few years getting a maximum return on your investment and are poised ready for when the house prices fall to snap up your next investment. All of things are perfect examples of a well thought out, well executed plan that plays a part in your personal goals and ambitions.

For as many people there are that say there is a mortgage crisis, there are people who say there isn’t. You only have to look at places like Motley Fool to see how opinions differ. Peoples opinions differ all the time, based on their personal circumstances. Whatever you choose to do over the coming weeks, months and years, ask yourself one simple question WHY? When you can find your WHY, everything follows, the motivation, the focus, the action … the how to bit you find out along the way.

Why did I Pay Off my Mortgage? It was part of the bigger picture, the one that I am able to work on every day that will end in achieving my personal ambitions. For more on finding out about setting goals, motivation and action check out www.i-believe.co.uk

Are Credit Cards Drugs?

The amazing thing about revisiting this Pay Off Your Mortgage Challenge is that I can reflect on things that were not obvious to me at the time. I knew how annoying credit cards were to get rid of and I knew the system was designed that way to ensure the banks received a maximum ROI ( Return on investment ) on every card they dished out.

My question is, WHY is it so impossible to entertain the thought of life without a credit card to reach for every time you feel like buying something new, booking a holiday, having something you want now and paying for it later?

I have never smoked, I would never take drugs of any kind but I am partial to a glass of fine wine. However I would suggest that impulsive purchases on a Credit Card are in a very similar category to drugs and addiction:-

1. People have a NEED for them, a dependency to make themselves feel richer.
2. People tend to overlook, forget or do not want to add up how much they spend on Credit Cards in a year
3. If you try and go without them in your life, even for a week you will experience some kinds of “withdrawal symptoms.”
4. They are notoriously difficult to give up once you start.
5. If left alone over a long period of time, they can lead to ill health, stress, worry and depression.

Now I am not sure about you, but if there is a warning placed on a cigarette packet that “Smoking Kills” I would ask why there is not a similar amount of caution attached to borrowing on credit cards.

I Wonder Why There Are Less Books on Personal Finance in the UK?

I count myself very lucky that I have been able to travel frequently and extensively to many places in the world. They say travel broadens the mind and I know from experience that it has certainly played a part in broadening mine.

Two of my favorite destinations are Florida and Toronto, vastly different from each other, but immensely enjoyable for many reasons. I have on every occasion to either destination spent at least 2-3 hours inside book stores gathering books on personal finance, goal setting, business development, planning and organisation, motivation and mindset development. The staggering thing was the amount of reading material available on ALL of those subjects. I know they say everything is bigger in America, so I thought I would test the same scenario in Toronto. The answer was quickly found by passing a store named “The World’s Biggest Book Store” right next to the main shopping centre and crammed with every book, Audio Book, DVD and magazine you could think of.

The Secret, by Rhonda Byrne was everywhere you could look, available in all formats right off the shelf, next to several others on the same subject, written by Personal Wealth Coaches, Philosophers and Motivational Speakers that are household names in the America’s and round the world. This mindset is developed at a young age and is significantly different it would appear in the UK.

If I were to ask myself as a business person Why There Are Less Books on Personal Finance in The UK, I would have to reason that market research would show there is simply less demand.
With the current market conditions showing that you can’t simply rely on rising house prices to increase your Net Worth, I wonder how long it will take before people realise that self education in Personal Finance is the starting point in building long term stability and wealth.

Britains Greatest Product is Debt!

I am currently working on the Money 4 Life project Ebook, Upside Down Property Developing, and I have to report that my research is uncovering some horrible facts about Britain at the moment and in the future.

The Upside Down Property Developing manual is all about a positive angle on the diminishing property ladder in the UK. What my research has unveiled is rather more sinister and the problem for the UK could be altogether more problematic than people realise.

The multiple problems that the UK face in the next few months, and years is headed by it’s main problem being the LARGEST product we collectively as a country have produced is DEBT. That is correct the official statistics tell us that our debt levels exceeded our profit from other activities, so as a Nation on the face of it we are bankrupt.

If you think for one minute that Britain’s greatest efforts combined to be the worst debt statistics then we top the World. It is very unfortunate that as a Nation we think we are “great with money” yet clearly we are not.

If you have not yet been inspired to embark on the subject of Personal Finance Education then I would suggest that you read as much as possible in the coming months because if you just scraped by in the past, you are about to find yourself in serious jeopardy. I am not into melodramatics, I am researching what “The City” have to predict and it is not all good reading, if you are unprepared for an economic downturn then batten down the hatches, you are in for a rough ride

Week 7 Beers, Wine & Spirits

Here comes the killer blow ladies & gents, we are undoubtedly a nation of boozers! We are the Brits Abroad, we drink wine like cocktails ( as the French will tell you ), we have shots bars, we have two drinks for the price of one, happy hours, anti-social drinking behaviour problems, underage drinking problems, drugs and alcohol problems …. I’m sure you get the picture!

There are many psychological reasons why excessive drinking figures in people’s day to day lives and apart from the health risks, I’m here to remind you that as part of the challenge, you need a sizeable calculator to work out what percentage of spare income these day is spent on booze. I would estimate that it has gone up in percentage terms by at least 50% or more in the last 2-3 years and like clothes, it seems comparatively cheaper today than years ago, we are drinking more and spending more than ever on something that used to be an occasional sociable pastime.

Alcohol and weight loss

Many alcoholic drinks contain lots of energy. Calories from alcohol are also added to energy from the food eaten during the day. An interesting point to note is alcohol cannot be stored so its energy is metabolized until all alcohol is cleared from the body. It also means the body is limited to burning stored fat when drinking alcohol. People who drink frequently may have increased potential for weight gain because;

1. A higher percentage of the energy from food eaten during the day may be converted and stored as fat.

2. Less energy from body fat stores can be used when alcohol is on the body.

It is possible to lose weight and still enjoy a drink the key is moderation. Do not eat less food so you can drink regularly and lose weight. Alcohol metabolism uses up essential nutrients which are obtained in sufficient amounts from food!

So apart from wasted calories and an expanding waistline, by reducing your booze intake by half per week, I would expect to see quite a saving per month.

It is reported that students alone spend around £ 1 billion pounds on alcohol per year, add to that the multi millions of pounds per year spent dealing with the effects of alcohol abuse, missed workdays, accidents and vandalism and you would think someone would want to be doing something about it?

Not wishing to sound like a party pooper, everything I believe is fine in moderation so it’s up to you to determine what is moderation. For the purpose of the Pay Off Your Mortgage Challenge, I would expect most people to look to cut down their current expenditure by half for the purpose of the challenge.

I will be conservative on my savings, as of course not everybody drinks, so for the purpose of the Challenge I would estimate savings in the region of £12.00 per week
were feasible for most people. That is one bottle of spirits, or a 3 for £10 deal at the supermarket.

* All you Coffee Shop enthusiasts should also think clearly about the amount of money you spend each week at the local Starbucks, Costa Coffee or other favourite haunt. Those £ 2.50 cups of coffee can soon mount up, just two coffees equals the equivalent expenditure of an average bottle of wine!