reassessing my finances
Aren't you all so interested in my finances? For me it's kind of like a game. I have a text file on my desktop that outlines all my student-loan scheming--my repayment plan has become progressively more aggressive this year, with the most aggressive jump happening a couple weeks ago, when I was finally able to conclude that I did not need to have a savings account (apart from a bit to get me through a month at the current standard of living and to buy a plane ticket) and that I should pump everything into my American debt, regardless the exchange rate. As a result, I have paid off my college debt and am now happily back into the land of five-digit debt, a place I have not been since 2006. Conservatively, I figure I'll be in five-digit territory for another few years (here's to hoping I get some kind of bonus this year and that 2010 is the year of the return to fat bonuses, which could potentially put a nail in the coffin of debt very early in 2011), and by that point I will have hacked at this albatross of debt so much that it will be bloodied and deformed beyond recognition and will simply fall from my neck, and I will be free. Of course, I will be bereft of savings. Enough death metaphors for debt--I'm fine with debt in principle (pun absolutely intended).
The basic idea is that it makes sense to save and only service (i.e., not prepay, but pay down on a standard amortisation schedule (assuming a fixed rate of interest, the same payments each month until there is no more interest and principal is eliminated)) debt if the interest rate on the savings account is higher than the interest rate on the debt, and never in my life has that been the case for me. So, paying down debt is the mainly sensible thing to do in my case.
The only thing is, for the longest time, house prices in London were increasing 25% a year, so that if I was saving for a house, even at a crap interest rate, eventually I'd have enough so that my mortgage payments would be equal to my rent payments and I would be generating equity in an investment with a potentially gigantic interest rate. In three years I would have been in a position to buy a place at least as nice as my current rented place, and then I could just watch the money roll in.
The problem is that the prospect of owning a house doesn't really appeal to me that much, because it just means I'd have one more thing to tie me down to my job, and I'd feel even more trapped than I do right now (which feeling of being trapped is already substantial, such that the psychic costs clearly outweigh any potential benefit from owning property in a market where value usually always increases).
This weekend I've saved myself a bit of fun, which will be to assess approximately how much I spend a month (I could never live on a budget, which is part of the reason I went to law school, so that I would never have to live on one) and determine if maybe I can save just a tiny bit of money every month, so that my life does not seem completely to be about debt repayment, because the longer I can stick with this life (i.e., paycheck), the better I'll be doing for myself. The other thing I need to look into is dumping more money into my pension--potentially as much as 20% of my salary (apparently from 2011 dumping 40% in will not yield the tax benefits it currently does (i.e., getting 40% tax relief)).
One lesson which I am still capable of learning, before it's too late, is that it's typically always better to marry rich than to marry poor--a lesson an older colleague today lamented never having learned, after he told me to stick 20% of my salary into my pension. At the very least, I think a lesson I've certainly learned from having debt and having it consume sort of a large portion of my waking thoughts (I never really dream of debt, but I do dream of Chuck E. Cheese and Chuck E. Cheese coupons, as recently as last night, in fact) is that there is no way in hell I would ever assume someone else's debt--any nuptial arrangement will be prefaced with a pre-nuptial arrangement, if only to show the counterparty that my love can never exceed my dislike of the bonds of debt (only a pun if redundant, and I try to avoid redundancy). The approach is more nuanced and less tongue-in-cheek than the conclusion I present here, but I don't offend people nearly as often as I should, and I welcome everyone please to take it the wrong way and to remember: I would never marry you anyway. Stay ever vigilant-- /B/
The basic idea is that it makes sense to save and only service (i.e., not prepay, but pay down on a standard amortisation schedule (assuming a fixed rate of interest, the same payments each month until there is no more interest and principal is eliminated)) debt if the interest rate on the savings account is higher than the interest rate on the debt, and never in my life has that been the case for me. So, paying down debt is the mainly sensible thing to do in my case.
The only thing is, for the longest time, house prices in London were increasing 25% a year, so that if I was saving for a house, even at a crap interest rate, eventually I'd have enough so that my mortgage payments would be equal to my rent payments and I would be generating equity in an investment with a potentially gigantic interest rate. In three years I would have been in a position to buy a place at least as nice as my current rented place, and then I could just watch the money roll in.
The problem is that the prospect of owning a house doesn't really appeal to me that much, because it just means I'd have one more thing to tie me down to my job, and I'd feel even more trapped than I do right now (which feeling of being trapped is already substantial, such that the psychic costs clearly outweigh any potential benefit from owning property in a market where value usually always increases).
This weekend I've saved myself a bit of fun, which will be to assess approximately how much I spend a month (I could never live on a budget, which is part of the reason I went to law school, so that I would never have to live on one) and determine if maybe I can save just a tiny bit of money every month, so that my life does not seem completely to be about debt repayment, because the longer I can stick with this life (i.e., paycheck), the better I'll be doing for myself. The other thing I need to look into is dumping more money into my pension--potentially as much as 20% of my salary (apparently from 2011 dumping 40% in will not yield the tax benefits it currently does (i.e., getting 40% tax relief)).
One lesson which I am still capable of learning, before it's too late, is that it's typically always better to marry rich than to marry poor--a lesson an older colleague today lamented never having learned, after he told me to stick 20% of my salary into my pension. At the very least, I think a lesson I've certainly learned from having debt and having it consume sort of a large portion of my waking thoughts (I never really dream of debt, but I do dream of Chuck E. Cheese and Chuck E. Cheese coupons, as recently as last night, in fact) is that there is no way in hell I would ever assume someone else's debt--any nuptial arrangement will be prefaced with a pre-nuptial arrangement, if only to show the counterparty that my love can never exceed my dislike of the bonds of debt (only a pun if redundant, and I try to avoid redundancy). The approach is more nuanced and less tongue-in-cheek than the conclusion I present here, but I don't offend people nearly as often as I should, and I welcome everyone please to take it the wrong way and to remember: I would never marry you anyway. Stay ever vigilant-- /B/