Reader Case Study: Londoners Wonder About Buying A Property

We’re headed across the pond for this month’s Reader Case Study as we delve into university lecturers Betty and David’s query on whether or not to buy a home in an expensive area near London, England. Case Studies are financial and life dilemmas that a reader of Frugalwoods sends to me requesting that Frugalwoods nation weigh in. Then, Frugalwoods nation (that’s you!), reads through their situation and provides advice, encouragement, insight, and feedback in the comments section. For an example, check out last month’s case study.

I also provide updates from our Case Study subjects at the bottom of each Case Study several weeks/months after their story is featured. To see what past Case Study participants have decided to do, check out the Case Study section and scroll to the bottom of the individual posts.

P.S. Another way to get support on your financial journey is to participate in my free Uber Frugal Month Challenge, which we’re taking as a group in January 2018! Sign-up to join the over 22,000 fellow frugal sojourners who’ve taken the Challenge and saved thousands of dollars.

I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but, please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not to condemn.

With that I’ll let Betty, this month’s case study subject, take it from here!

Betty’s Story

Betty & David hiking in Zion National Park

Hello, Frugalwoods nation! I’m Betty, age 30, and my husband David, age 29, and I are both British university lecturers in psychology, although in different fields. I work in developmental psychology, while David is in cognitive neuropsychology. We met in 2010 when we were studying for our PhDs at the age of 22 and got married in 2015. We’re both outdoorsy types who love hiking, biking and anything active. David is also a keen squash player.

Both of us are vegetarians and we have a shared interest in ethical issues more broadly. We spend our weekends getting out and about, visiting friends and family, going down to the pub, participating in various outdoor activities, taking trips and failing to keep up with the housework. We are always busy doing something or other and we are often guilty of ‘burning the candle at both ends,’ so to speak.

Betty and David’s Travels

After finishing graduate school, we caught the travel bug and enjoyed lots of trips around Europe as well as an epic four-week USA road trip in 2014, which included a marriage proposal at sunrise at the Grand Canyon! Our wedding was in the spring of 2015 (frugal but fun), after which we embarked on a two-year adventure of living and working in Asia. During those two years, we managed to build up our savings significantly, despite not being very high earners, and we saved around 50% of our salaries.

We could have saved even more but our main priority was travel, and we managed to do A LOT of it on a modest budget – we spent next to nothing on clothes, books, tech and other luxuries during this time. From 2015 to 2017, we took over a dozen trips around Asia and beyond and were fortunate to enjoy numerous amazing experiences such as visiting temples in Japan, hiking in the Blue Mountains of Sydney, climbing a volcano in Indonesia and traveling by sleeper train through Malaysia, Thailand and Vietnam. We don’t regret any of the money we spent as it gave us priceless memories and was a wonderful way to begin married life together. Our friends often refer to it as our “two-year honeymoon,” although I promise we did do some work!

Betty and David’s Careers

Betty & David’s engagement at the Grand Canyon

In July 2017 we returned to the UK as we managed to secure permanent (i.e. tenured) faculty positions at the same university. This was a huge relief for us because those positions are increasingly difficult to come by for junior academics (as anyone familiar with the ‘two body problem’ will understand). Now that we’re home, we’d like to continue to travel but will focus on areas close by, such as Scotland where David has yet to visit despite living only a few hours away!

The downside of our relocation is that we’ve moved to a very expensive area near London, because this is where our work is located. We want to purchase our first home, but the average property costs around £350k and houses are very small, especially by US standards!

The area is highly urbanized, which we are not keen on–we are outdoor folk at heart–but living in rural areas is even more expensive as it’s mostly highly desirable country villages. Where we live, the traffic is horrendous, public transport is eye-wateringly expensive, and the roads are not kind to cyclists (we know several people who’ve been seriously injured while bike commuting). Additionally, in our current roles, working from home regularly is not an option. Therefore, we think we can make the most of our situation by living somewhere within 2-3 miles of our workplace so that we can walk each day. However, it’s difficult to resist the idea of living in the countryside, even though that would entail a hellish commute.

What Kind Of House To Buy?

Betty & David on a walk around town

Added to this, we are unsure of what type of property to buy. There are some cheaper urban areas in our town, but these are quite sketchy (by UK standards) and I’m not sure I’d be 100% comfortable raising a family there, which we hope to do in future. However, they do offer more affordable properties and some areas are becoming improved with time.

The more desirable areas are fairly suburban–which we aren’t sure we are ready for yet–but they offer larger properties with bigger gardens. The house prices there are mostly driven by the good schools, which are currently irrelevant for us, but which we might care about more in the future if we do have kids!

Finally, I’ve struggled with a few health issues over this past year and was diagnosed with celiac disease. I’m also having further tests and investigations done for a potentially more serious illness, which makes me worry about our longterm financial security. We currently have a good amount in savings, but if we were to buy a house we’d need to use much of that for a downpayment in order to get a good mortgage rate. Our jobs are contractually secure (assuming Brexit doesn’t destroy higher education in the UK!) but I worry about where my health might be in the future. It would be very difficult for us to live on one salary in this part of the country.

Where Betty and David Want To Be In 10 Years:

  • Finances: We’d like to be financially stable enough that we could afford to work part-time if we had kids, or if my health conditions necessitated. At the moment neither of us are motivated by early retirement, as we both enjoy our work, but it would be nice to be less financially dependent on our 9-to-5 jobs.
  • Lifestyle: We would like to own a property of our own, somewhere that enables us to spend lots of time outside, but also very little time in traffic. We’d like to have children if my health condition allows, but I am conscious that I don’t want to plan my future around hypothetical children that we may or may not have. We would both like to continue to travel with some regularity, and one of the perks of our jobs is a lot of vacation time (8 weeks paid per year!) so we’d like to make the most of this within a sensible budget. Our parents live about 3.5 hours apart from each other, and we currently live right in the middle. We’d ideally like to remain no more than a 2-3 hour drive from both of them, but this would limit our movement in future. We would be open to more flexibility if needed, however. I think that while our parents are still around we will stay in the UK. We plan to stay in the same city for at least the next 5 years, as we have a lot of development opportunities in our current jobs. Ultimately I think we’d love to live somewhere more rural, with easier access to hiking and mountains and countryside. However I don’t think either of us would like to live very remotely, as we really like being able to have everything we need nearby without needing to drive everywhere.
  • Careers: Neither of us are 100% sure that we see ourselves continuing in our current fields for the foreseeable future. I am quite motivated to move into a management position, but I’m not sure how this would fit with my other goal of being able to work part-time. David would consider doing some further training to enable him to move into a slightly more specialized field, but this would require taking a significant pay cut for three years while completing the training.

Betty and David’s Finances

Income

Net Income Amount  Notes
Betty £28,446.72 After taxes, national insurance, pension contribution (optional, 8% before tax) and student loan repayment
David £27,249.00 After taxes, national insurance, pension contribution (optional, 8% before tax) and student loan repayment
Annual total: £55,695.72  
Monthly total: £4,641.31

Monthly Expenses

Item Amount  Notes
Rent £1,050.00 This is average for the type of property we have (2+1 bed terrace with a small garden) in the area where we live. A 2+1 bed means that technically there are three bedrooms, but you walk through the second bedroom to get to the third as they’re adjoined.
Fun money £340.00 This is our money (£170 each) to do what we want with. We could probably cut back! It includes most hobbies and entertainment/leisure (cinema, drinks out) as well as occasional stuff like gigs. David spends more at the pub and on events like rugby matches and I spend more on dinner with friends and non-essential clothes or make-up. It also supplements special events (see below) as well as some of David’s other squash costs (rackets, shoes, strings).
Vacations £250.00 I save each month towards our travel fund to enable us to take one or two trips each year.
Groceries and household £185.00 We save money by being vegetarian, but due to my celiac disease I have to buy some special (read: expensive) products. I try to limit these and we cook from scratch.
Council tax £112.00 This is like property tax (the amount depends on the size/value of your house) and it pays for local services such as trash collection and the fire service.
Car costs (including insurance) £95.00 We have one car between us. I budget this towards the annual costs of running a car (insurance, vehicle tax, service, parts) as well as saving towards replacing our car around every 8 years if/when needed.
Petrol (gas) for car £75.00 We live fairly close to our workplace, so try to walk as much as possible. Cycling is not really safe where we live. We spend ~ £25 per month on gas to get to work and the rest is on travelling to visit our families.
Gas and electric £59.00  We recently switched our supplier to renewable energy, which is cheaper than the standard supplier in the UK.
Charity £50.00 We give monthly to three charities.
Gifts £45.00 I budget a monthly amount to spend on birthday and Christmas gifts (I have a large family including 12 nieces and nephews).
Gym membership £44.00 David has a gym membership for their unlimited squash court bookings. He plays 4-5 times per week, and courts would cost £7 each time, so this is the most economical option.
Squash club/match fees £40.00 This is the cost of participating in individual and team leagues. It also covers dinner after each team match.
Personal care (including haircuts and contact lenses) £40.00 David gets his hair cut once per month, I don’t cut mine often enough. We experimented with me cutting David’s hair but he likes it a certain way and it takes me FOREVER. Contact lenses are £20/month.
Eating out £35.00 We typically eat out once per month together as a couple, but always using discounts or coupons. We might also eat out again with friends or family, but this comes out of our separate ‘fun budget.’
Essential clothing £30.00 This is for stuff like new underwear or a raincoat. Basics only, no luxuries.
Special occasions £30.00 We are in a phase where lots of our friends are getting married and the weddings are all over the country, which means travel, hotel stays and wedding gifts. We try to save money by using AirBnb and sharing with friends. The bachelor/bachelorette parties can also be expensive, as well as baby showers! We like to attend because we want to support our friends but the costs can spiral. This isn’t enough to cover the costs so we supplement with our monthly fun money.
Water £28.00 This is a fixed tarrif, regardless of how much water you actually use.
Household £20.00 Exciting stuff like laundry detergent and basic toiletries such as toothpaste.
Miscellaneous house expenses £20.00 If anything major breaks (shower, roof, boiler) it is paid for by the landlord.
Internet £20.00 Cheapest available plan, includes line rental.
Medical and dental £20.00 Prescription charges and routine dental work (government subsidised).
David cell phone £17.99 David has a monthly plan. He is tied in for another 20 months.
TV License £12.25
House insurance £10.00 Basic buildings and contents insurance
Betty cell phone £10.00 I recently bought a (cheap) used phone from a friend after having my iPhone 4S for 5 years! I now have a £10 per month pay as you go deal.
Total: £2,625.99

Assets

Item Amount  Notes
Joint Savings £89,451.58 This is split across two different ISAs that are making insultingly small interest rates (0.5%) but the interest is tax-free.
Monthly Savings £3,000.00 This is kept separately because it is earmarked for travel and car expenses.
Pension and Life Insurance ? We both pay into an employer’s pension, the USS, (8% pre-tax salary, which they match) but it is almost impossible to know how much is in this and I am ashamed to admit I don’t understand how it works. I have tried but failed! It also includes life insurance.
Total £92,451.58

Car

Item Amount Notes
Car £7,000 2014 Ford Focus, bought (second hand) with cash, own outright

Debt

Item Amount Notes
David’s student loan £17,500 The amounts on our loans are approximate as we only get a balance update at the start of each financial year. They are at 1.5% interest and we pay them down directly from our employer via our salaries. Everything I’ve read says we should not pay these back at a faster rate.
Betty’s student loan £6,000
Total: £23,500

Betty and David’s Questions For You

  1. Should we even try to buy a house in such an expensive, and arguably unpredictable, market?! Prices are still increasing, so we don’t want to miss the boat, but we’re worried about purchasing at the peak of the market. Mortgage interest rates are currently low (1.5 – 2%), but Brexit is causing a lot of uncertainty. There are also my health problems to consider.
  2. If we buy a property, should we buy urban or rural? In a sketchy area that’s cheap? Or a safe, suburban spot that’s expensive? Should we buy small (we only need two bedrooms right now) or bigger to prepare for if/when we have children? Somewhere that needs renovations, or shiny and new? It feels like such a big decision and there are so many factors to consider. Realistically, we are going to be living in our current town for a minimum of 5 years, but likely longer.
  3. How can we move towards being more financially independent while living and working in such an expensive area?
  4. If we don’t buy a home now, what should we do with the money we have saved? Interest rates in the UK are very low but I’m reluctant to tie our money up in accounts or bonds that are difficult to extract from in case of emergency. I am generally very risk-averse, and I would only want to make ethical investments (i.e. no tobacco or armaments). An option would be to stay living in a rented property in our expensive town, but then purchase a place in a cheaper area of the country (perhaps near my parents) to rent out. This could allow us to get on the housing ladder without committing to high mortgage rates and also provide some security for the future.

Mrs. Frugalwoods’ Recommendations

Let’s start off by pointing out the obvious: Betty and David are doing FANTASTICALLY well with their finances! I am so happy to see their robust savings account and thrilled that they’re so mindful with their spending. A huge and hearty round of applause for a job very well done up to this point!

It’s Not About The Money

Now that we’ve gotten the money thing out of the way, I’ve got to break it to Betty and David that most of their questions–and their Case Study in general–is not about money. And that is perfectly OK! We tackle all kinds of quandaries here on Frugalwoods and I just so happen to LOVE the question of “what do I want to do with my life?” Because that’s what I think Betty and David are asking here. In reading through Betty’s description of their lives and her questions on home buying, the sense I get is that they’re unsure about exactly where they want to be in the future. Given that, I think the most significant piece of advice I can offer Betty and David is to spend time doing a serious, thorough soul-search. They should ask one another the following questions and truly meditate on each answer:

  1. What are your longterm life goals?
  2. Where do you want to be in 10 years? In 20 years? In 40?
  3. What about your current lifestyle might prevent those goals from coming to fruition and what can you do about it?

If you recognize these questions, it’s because I ripped them directly from the first step in my Uber Frugal Month Challenge (which, by the way, we’re taking as a group during the month of January 2018 and which you can sign-up to join here). In this Challenge and in life, what to do with your money must be calibrated based on what your longterm goals are. Not the other way around. Money is what can enable your goals to come to fruition, but money cannot tell you what your goals are.

Another set of exercises I recommend for Betty and David are the prompts I have for creating your dream bio and envisioning your lifelong accomplishments in this post: How I Figured Out What I Want To Do With My Life (And How You Can Too!). I encourage Betty and David to do these exercises together and talk through what they’re hoping to do in the long run.

And now for some more good news for our Case Study couple….

Betty & David Are In A WONDERFUL Position

Betty’s lovely–and second-hand–wedding dress!

Betty and David are in an optimal situation from which to figure out their longterm goals. Let me tell you what, people, nothing is better than saving a bunch of money while working to determine what you want to do with your life. It’s pretty much the best position you can be in. Scrooge McDuck aside, NO ONE has EVER regretted having money saved up–even if they’re not exactly sure what they’re going to do with that money.

Working from a place of financial security provides Betty and David with the opportunity to think broadly and truly consider the type of life they’d like to construct. I can tell you from personal experience that NOTHING is more liberating that realizing one day (it was March 29, 2014 for me) that you want to pursue an unusual dream and realizing that you have the financial ability to do so. Trust me, it’s the best. From this standpoint, I want Betty and David to feel really good about the opportunity they have to consider their longterm plans. Saving up a bunch of money is an excellent plan no matter what you want to do with your life.

And, as Betty noted, the unpredictability of her health problems is yet another reason why the couple is extremely wise to have saved up so much money. Betty and David are creating a financially stable platform from which they can figure out what’s going to be best–and most feasible–for their future. If Betty needs, or wants, to stop working for health concerns (or any other reason), they’re well on their way to making that a very real possibility. Having that option will alleviate stress and will hopefully make them feel confident about whatever decisions they need or want to make in relation to their jobs.

Betty’s Specific Questions

I want to tackle Betty’s specific queries on house buying, so let’s take each of her questions in turn.

#1: Should we even try to buy a house in such an expensive, and arguably unpredictable, market?! 

I have no idea. Honestly, there’s no way for me (or anyone else) to predict what the market is going to do and I agree with Betty wholeheartedly that the looming Brexit makes the entire situation even more unpredictable. Unfortunately, there’s no way of knowing how Brexit will impact the UK’s economy and housing prices and I’d be lying if I said I knew what will happen in the wake of the UK leaving the European Union. Interest rates are never guaranteed to remain static–nor are they guaranteed to increase or decrease. It’s a challenging thing to accept that you’ve got to either dive in or hold off and that there’s no amount of prognostication that can tell you if it’s “the right” time to buy or not.

I am much more concerned with Betty and David’s own uncertainty about where they want to live than with the economy since we cannot control world markets, but we can help Betty and David control for the variables of their longterm goals. I’m all about isolating and controlling the variables I can control and letting go of the things I can’t.

#2: If we buy a property, should we buy urban or rural? In a sketchy area that’s cheap? Or a safe, suburban spot that’s expensive? Should we buy small (we only need two bedrooms right now) or bigger to prepare for if/when we have children? Somewhere that needs renovations, or shiny and new?

Betty & David enjoying a hot chocolate during a winter trip to Poland

This question really gets at the heart of Betty and David’s conundrum. They are unsure of where they want to live and what type of home they want and there’s no way that I can answer these questions for them. There’s very likely no one right–or wrong–answer here. It’s all about how they want to structure their lives.

The advice I will give is that if Betty and David are this unsure about what type of property they want to buy, then they are not ready to buy.

Ideally, when you decide to buy a home, you have a set budget, a list of criteria that you’re hoping for, a list of factors you’re willing to negotiate on, and a clearly articulated list of potential neighborhoods. For example, when Mr. Frugalwoods and I bought our city home (which is now a rental property), we knew we wanted something within walking distance of public transit, in an up-and-coming highly urbanized neighborhood, with a solid school district, and a single family home with a low price per square foot. Having all of these decisions made ahead of time made our choice of home much smoother and easier.

To get to this place of knowing where and what they want in a home, I encourage Betty and David to do the following:

  1. Start going to open houses. I confess I am not familiar with how open houses work in the UK (UK readers please advise in the comments section!!!), but attending open houses is how Mr. FW and I taught ourselves about real estate and ultimately were able to purchase our two homes. Here’s my post on how to open house: Our 12 Tips For Visiting Open Houses: We’ve Been To Over 270.
  2. Make a list of what they value in urban areas and rural areas. Compare pros and cons.
  3. Perform a “test commute” from a more suburban/rural area into work. I find the test commute to be incredibly illuminating. Betty and David should find a suburban/rural property they like and then drive from there into their university at rush hour on a weekday to see how it feels. Is it awful? Not as bad as they expected? The test commute is how Mr. FW and I ruled out every single suburb we’d ever considered living in–we just couldn’t stomach the daily drive. This could solve their dilemma quite quickly and help them refine and hone their house search.
  4. Familiarize themselves with crime stats. Betty mentioned that some of the urban areas they’re interested in are “sketchy” and so I recommend reading police reports and crime statistics to get a true sense of the type of crime the neighborhood is experiencing. Cold, hard data was very helpful to Mr. FW and me in selecting our neighborhoods.
  5. Spend vacations visiting places they might want to live. If they’re interested in moving farther afield, they should utilize their ample vacation time to explore other parts of the country and investigate the local real estate options. This type of in-the-field research could help them realize that they want to live exactly where they currently are! Or, they might find the country town of their dreams.

Cherry blossom season in Japan, as documented by Betty & David

To Betty’s question on purchasing a home that needs a lot of work–here are a few factors to consider: Do they enjoy doing renovation work themselves? Would it be a fun project to rehab a home together? Or an epically stressful, hated experience?

If they’re not going to do the work themselves, they should price out contractors and renovations and tack those expenses on top of a home’s price. Buying a fixer-upper can certainly be cheaper at the outset, but might end up costing more in terms of renovation work in the long run. However, if they do much of the labor themselves, it could be a financial goldmine.

At this stage, I’d say there’s no point in buying a home quite yet. But there’s a lot of legwork Betty and David can do to determine what type of home they ultimately want to own.

I’ll also add that buying a home is not the end-all, be-all of financial security. In fact, it’s often not a great financial decision at all! So I don’t want Betty and David to feel like they’re missing the financial boat by not buying a place right now. It is but one option of how your can allocate your capital, but it is by no means the only (or even necessarily the best). Plus, their rent is so very inexpensive that I’m not concerned they’re losing out on a cheaper mortgage–to the contrary, I imagine their mortgage would be quite a bit more every month. We’ll get to other options for their money shortly.

#3: How can we move towards being more financially independent while living and working in such an expensive area?

Betty and David are already doing an excellent job at this! Mr. FW and I reached financial independence while living in the astronomically expensive Cambridge, MA and so I can tell you it’s very possible to do so in an ultra-urban, ultra-expensive part of the world. In fact, in some ways, living in a city facilitates frugality quite well. Here’s why:

  • Public transit and walking options. Betty and David are already availing themselves of the public transit/walking conveniences of city life. Mr. FW and I used to walk or bike most places in the city and owned one car between the two of us, just as Betty and David do. Now that we live rurally with no public transit or walking/biking options, we spend a lot more on gasoline!
  • Free entertainment. Cities are notorious for their amazing free entertainment options. From free-to-the-public days at museums to street festivals to complimentary beer and wine tastings, cities are rife with excellent free things to do. Plus, just walking around people-watching is fabulous! Having a $0 entertainment budget was not a hardship for us at all back in our urban days.
  • More competition = better prices. We spent far less on our groceries and other necessities in the city for the simple fact that there were more stores to choose from. We found the dirt cheapest grocery store and only shopped there. Based on how little Betty and David spend on their groceries, I’d say they’ve already figured this one out!
  • The used market is on point. I can’t lie, I miss my used market in Cambridge. People sold/gave away/threw out the BEST stuff!!! Since cities are often transient and since residents often live in small apartments, people give away their used stuff like nobody’s business. We rarely had to buy anything new back in the city for the simple fact that Craigslist, our Buy Nothing group, thrift stores, and the side of the road were glutted with excellent second-hand items.

In my experience, one of the only things that’s more expensive–and unavoidably so–in a city is housing and Betty and David have done a great job of finding very affordable rent! I’m actually shocked at how little they pay–they’ve found a great deal! For a reference point, our mortgage in the city was $2,238.50. I could go on and on and on about how great it is to be frugal in the city, but instead I’ll just refer you to these two posts on the topic: How We Live Frugally In The City and The Ultimate Guide To Frugal Boston Living (works for other big cities too, I promise!).

#4: Part 1: An option would be to stay living in a rented property in our expensive town, but then purchase a place in a cheaper area of the country (perhaps near my parents) to rent out.

Betty on a beach holiday

I’m breaking question #4 up into two parts. First let’s address Betty’s question on buying a rental property. This might be a great decision or it might be an absolutely terrible one because not all rental properties make money. Not all rental properties break even. Some rental properties are literal money sucks. Others are fantastic revenue-generating opportunities. It all depends upon the property itself and–even more importantly–the rental market in question. Some areas offer fantastic real estate investment opportunities–and support a well-qualified, responsible pool of tenants. Others, not so much.

There’s no way for me to advise on whether this would be a good decision or not without having in-depth knowledge of the area and market in question. However, Betty and David can totally figure this out! They can begin researching other rentals located in the area in question, the amount they rent for, what the tenant population is like (for example: is there a university nearby and hence lots of students needing rentals? Is it a popular vacation destination, etc?). What is the percentage of homes that are rented vs. owned in the region? If most homes are owned, who is going to rent this house out? Are there qualified property managers operating in the area? If not, would Betty and David manage the property themselves? What are the local laws/ordinances governing landlord/tenant relations? What are the prerequisites for obtaining a mortgage on a non-owner-occupied home?

All of these questions and more should be thoroughly researched before making a decision to purchase a rental property. I wish it were an easier process, but unfortunately, no two real estate markets are the same and there’s no one right answer on whether its’ a wise investment to become a landlord. I always recommend that US readers reference the real estate investing site Bigger Pockets and I’m hoping my UK readers can recommend a similar resource in the UK (hint, hint)!

All this to say, real estate can be a wise and revenue-generating investment, but it is by NO means a risk-free or guaranteed rate of return proposition. It’s essentially as uncertain and risky as any other form of investment.

#4: Part 2: If we don’t buy a home now, what should we do with the money we have saved?

Great question! First of all, Betty and David should set aside an emergency fund. An emergency fund is a cash reserve that’s held in an easily accessible checking or savings account that totals anywhere from three to six months worth of living expenses. There’s no substitute for an emergency fund and nothing but cash will suffice for this purpose. A car, a paid-off house, investments, fine china–none of these things are an emergency fund.

Lucky for Betty and David, they have ample cash to siphon off into an emergency fund. At their current rate of spending, I recommend they set aside anywhere from £7,877 (which would be three months’ worth of living expenses) to £15,755 (which is six months’ worth of living expenses).

After they’ve identified how much they want to have in their emergency fund, I see several options for their remaining money:

  1. Buy a house now. I think we’ve ruled this option out for the present as I don’t think Betty and David know what type of home or in what area they want to buy. No reason to jump into home ownership without being absolutely certain of these factors.
  2. Invest in the stock market. Their savings–which total an impressive chuck of change (well done!) isn’t doing anything for them right now. You want your money to be working for you as this is how you grow wealth. Money does not grow if left to sit on its own in a low-interest savings or checking account. Frugality and savings will only take you so far. In order to build wealth, you need to invest, either in real estate, or the stock market or some other venture. What I invest in, and recommend, are low-fee index funds, which I outline in detail in this post: For the Love of Frugal Hound, Manage Your Money Yourself! (by following The Simple Path to Wealth). UK readers, please chime in with your favorite low-fee brokerages! I recommend Fidelity and Vanguard, but I’m not sure if they operate in the UK.
  3. Pay off their low-interest rate student loans.

Whoa, whoa, whoa Mrs. Frugalwoods, did you just say “pay off their low-interest rate student loans”?!? I sure did and I’ll tell you why.

Why They Might Consider Paying Off Their Student Loans

Betty & David hiking Mount Rinjani in Indonesia

While I have zero quibbles with low-interest rate debt (such as these uber low 1.5% student loans or a low, fixed rate mortgage), the only circumstance under which I have zero quibbles is if your money is doing something better. If, for example, Betty and David choose to invest their excess cash in the stock market, then there’s no reason for them to pay off these super-duper low interest rate student loans because it’s highly likely their money will generate a higher rate return on their investment in the market.

However, Betty noted that they are risk-averse and THERE IS RISK involved in investing. It’s very much a ‘nothing ventured, nothing gained’ proposition that is, ultimately, risky. For me, historical stock market trends make me feel confident in my decision to invest in low-fee index funds, but, it’s still a risk. And so, if Betty and David would prefer not to assume that risk, then a great, low-risk option is for them is to pay off their loans in their entirety. Otherwise, they’re paying interest (even though it’s only 1.5%) and not getting anything in return. Leaving their money in a savings account and paying interest on their debt isn’t what they want to be doing. In sum, I advise that Betty and David either invest in the market or pay off their loans. 

Betty and David’s Expenses

Betty & David’s wedding buffet

No Frugalwoods Case Study would be complete without a stroll through everyone’s favorite… Betty and David’s monthly expenses! I want to preface my advice with the caveat that Betty and David are already doing an excellent job of saving every month. Much of my advice is predicated upon a question of whether or not they want to reach financial independence. Betty mentioned that they’re interested in potentially reducing their work hours to part-time or less, and if that is an earnest goal, then they will need to increase their savings rate.

However, if Betty and David decide they’re both comfortable with working full-time in their careers until a traditional retirement age, they really don’t need to change much about their spending and savings habits. It’s all a question of what they want to do with their lives, which is why I opened up my recommendations section with that prompt. As I’m fond of saying, you do not need to have financial independence as a goal in order to live a financially secure, stable lifestyle. It is but one option in the pantheon of ways you can manage your money and your life. So with that, let’s go through their expenses:

  • Fun Money. At £340 per month, this is a fairly hefty sum for discretionary fun money. That being said, this is where knowing what their longterm goals are is crucial. If Betty and David are serious in their desire to reach financial independence and/or significantly reduce their incomes, this is a line item that’s ripe for removal. On the other hand, if they are content in their careers and happy with the prospect of working until age 65+, there’s really no reason to eliminate this. If they did decide to save this amount, it’d equal a whopping £4,080 per year saved.
  • Vacations. Everything I just said about the Fun Money category also applies here. Travel is a wonderful thing (I spend quite a bit on it myself and treasure every trip!) and Betty and David may decide that this is definitely a priority for them. If it is a priority, keep it! If it turns out that it’s not, this would be another £3,000 per year saved.
  • Groceries and household items. I include this here just to commend Betty and David for how incredibly low this line item is!!!! £185 per month qualifies as extremely frugal and I am impressed. Well done!
  • Gifts. £540 per year on gifts is a tad high in my estimation, but it’s also a question of what Betty and David’s family traditions and priorities are. It’s not a bad thing, but it is perhaps an opportunity to consider more frugal alternatives for gifting, if interested. If they were able to trim this category to, say, £240 per year, they’d stand to save £340 per year. Here are a few posts to that effect:
  • Gym Membership and Squash Club Fees. I am all for spending on priorities and it sounds like squash is a priority for David. So, I’m not suggesting he eliminate these expenses, but, I wonder if he’s looked into opportunities to barter and trade in exchange for free or reduced fees and memberships? I used to volunteer at the front desk of my yoga studio–and take out the studio trash (glamorous!)–in exchange for free classes. This saved me a gigantic amount of money every month and still enabled me to participate in my very favorite sport (yes, yoga is a sport! why not!). I’ve since heard from readers across the globe who’ve worked out a similar arrangement at their gyms/studios/exercise clubs and are now reaping the benefits of free exercise. I know next to nothing about squash, but perhaps David could volunteer as the team coordinator or something in exchange for his fees? Something to explore at the very least. This would save the couple £1,008 per year. Two posts for inspiration and guidance:
  • Eating out. This line item is super duper cheap at a mere £35 per month, but it is an option for elimination if Betty and David decide they are super duper serious about becoming financially independent. Eliminating this would yield £420 saved per year. Inspiration for eliminating eating out:
  • Special occasions. On top of the fun money, eating out, and gift categories, this is yet another area where the couple could decide to save more if they so desired. Again, it’s all a question of longterm goals. Trimming this expense would equal £360 saved per year.

If Betty and David decided to make all of these cuts, they would be on track to save an additional £9,208 in a year.

In summary, I advise Betty and David to do the following:

  1. Identify their longterm goals. Go through the exercises I mentioned and do other long-range projections to consider where they’d like to be in 10 years, in 20 years, and so on. By deciding first what they want out of life, they’ll next be able to craft a financial plan to match that picture. Set your goals first and your money will follow.
  2. Begin researching real estate. Betty and David should start frequenting open houses, browsing listings online, and researching potential neighborhoods to purchase a home in.
  3. Decide if they want to invest their money, pay off their student loans, or save for a downpayment. Or, all three! Betty and David are tremendously fortunate to have a nice nest egg saved up. Now, they need to decide how best to deploy that capital as it’s underutilized at the moment.

Ok Frugalwoods nation, what advice would you give to Betty? She and I will both reply to comments, so please feel free to ask any clarifying questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.

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86 Responses

  1. I’m never a fan of buying something due to FOMO. So if you’re afraid of the market going up and feel like you have to jump in, that’s when I normally see people make compromises that they normally wouldn’t make. Years later, I have seen a ton of people that were upset with their decision in hindsight.

    Whether buying is right for them or not is a hard decision.

    They sound like outdoors is where they want to be at. I wonder if they can rent something towards a rural part and commute in and then contrast that by renting in an urban area and then commuting out to the outdoors.

    I wonder if that could potentially help envision what works best. The best part is they have options now. Why give those up and lock yourself if you’re unsure 🙂

    • Betty says:

      Hi! Thanks for your comments. I get what you mean with the FOMO, and I suppose that part of it is that – we don’t want to miss the boat. But at the same time, we are currently paying £1000+ per month off someone else’s mortgage… so unless we are going to do something else awesome with our cash (which we haven’t figured out just yet!) then we thought that spending that money paying off our own property would be the financially sensible thing to do. We also definitely love the countryside… but so much of our current day to day activity (work, socialising, hobbies) are in urban locations, and I hate spending precious time and money stuck in traffic. So perhaps commuting to the outdoors is where it’s at….

      So much to think about! Thanks again 🙂

      • Kristine says:

        Betty – don’t think of it as paying off someone else’s mortgage. Think of it as buying freedom to move, freedom to disregard the housing market, freedom to change your house size at any time, freedom to travel, and freedom to budget total cost for the year in just one line because you aren’t worried about all the extra things that pop up. Your rent is only £1,050.00 per month, and I can guarantee there is NO WAY it is all going into a mortgage! Houses have so many extra expenses like maintenance, wear and tear, and general replacement costs when things break that you may not even realize. That roof doesn’t just replace itself every 20 years. That kitchen doesn’t just upgrade itself once it starts to look dated. To Mrs. FW’s point, you’d probably spend way more on a house/mortgage per month, in addition to the unexpected expenses that pop up. (Appliances breaking, water leaking, all sorts of things!) Even owning a house outright (I have before) has extra unexpected costs. Renting allows you much better cost control. If your rent is too high, you can move or cut back in other areas.

        The other knock against a house is all the travel you want to do. If you’re busy traveling, who will be taking care of the house? Will your empty house be a target for thieves and need a house sitter? A house is a different lifestyle. Being a landlord is a different lifestyle. I do AirBnB with my house, which makes a ton of money, but there’s never a guarantee that money will come in and there’s a lot more wear and tear from renters since it’s not their property to worry about. If your idea of fun is spending an entire weekend working on a house project (mine is!) then a house is the way to go. If not, you’re far better off continuing to rent. Keep saving 50% of your income, and you could probably buy a house outright in cash later if you want to go that route. Then you won’t even have to worry about paying off your OWN mortgage! (but you’ll still have plenty of house costs…) 🙂

        I’m also in agreement with Mrs. FW on paying off the student loans. If you aren’t willing to take market risk in case you need the cash, what do you need the cash for? To pay off the loans and pay your debts. In this case, you’re better off not paying the interest. It’s only worth saving the cash if you’re busy doing something productive with it, like investing. You’d probably be a lot more comfortable investing if you weren’t worried about “losing it all” in a downturn and not having it to pay off the loans (although realistically, it would likely only go down 50% and then eventually bounce back). Paying them off will increase your cash flow, leaving more cash for investments that it’s now okay to be riskier with, so it’s probably a win if it gets more of your money into the market faster. Cash on the sidelines isn’t working for you.

        • Kristine says:

          One last thought regarding holding the cash vs. paying off the loan. By having a loan at 1.5% but still holding the cash at .5%, you’re effectively paying 1% interest for the *luxury* of holding cash. If you were investing long term in the market and averaging 7%, you’d instead be gaining 5.5% per year, which is why people suggest not paying down loans with such low rates and investing instead.

          Either way, your 50% savings rate is your biggest asset that will take you to financial freedom! Kudos 🙂

        • Betty says:

          Ah, ‘freedom’ is a great way to think about it! That is definitely worth paying for! I get that there are lifestyle things to consider here, around flexibility and travel especially. So much to think about!!

          We will definitely pay off the student loans if we aren’t going to purchase a property, as like you say we are actually paying for the privilege right now as our savings are making next to nothing. If we got a mortgage then it is better to pay down cash rather than take a bigger mortgage, but if not then it seems to make sense to get rid of the loans.

          Thank you 🙂

        • Beth says:

          This is such wonderful advice!

          • Linda says:

            Just a small point but houses in the UK don’t require a new roof every 20 years. On the whole home maintenance is cheaper for the landlord in the UK ( I am one), and the current rent could actually be the mortgage payment.

      • I’m not sure if it’s FOMO, but I understand the desire to own a house since I was one in Betty’s shoe. I wanted to own my own home and wasn’t trying to catch up with friends or anything.

        At the same time, however, I agree with Mr. MSM that Betty and her husband might postpone their house purchase plan until they are more sure about having kids, their careers, and future plans.

        I’d suggest Betty and her husband do the following:
        – Move to a smaller apartment to cut housing costs (i.e. a one-bedroom)
        – Cut back on fun money and other expenses as you feel comfortable with

        I’m super impressed with your grocery and eating out budgets. The market is doing well, so I image housing is now expensive. I’d give it one more year so that you buys are more sure about your career paths, health, and financial plans. Best of luck with everything!

        • Same here. It wasn’t FOMO for us. We wanted our own house, and it had to be a house where we could see ourselves living in for a long time. So whether the real estate market went up or down after, was irrelevant.
          So we went with a suburban 4 bedroom in anticipation of kids. We have 1 kid now, and hope for 1 more. And we are glad we really bought then, because our house has more than double in value in value from $600k to $1.3M. If we hadn’t had bought then, we would have been priced out like so many of our friends.

  2. Excellent job saving and thinking through this, Betty and David!

    I am not sure if this advice works (I am unfamiliar with rental laws and property owner tax breaks in the UK), but I know many people who have taken advantage of “house hacking” to live in an urban or higher cost of living area. Essentially, they find a duplex (or bigger… sometimes 3 or 4 units), live in one unit and rent out the other(s) to generate income.

    This would not satisfy your desire to have a country property of your own right now, but I wonder if this could be a “stepping-stone” on the way to that country home. Potentially, by living in a house that is partially rented, you could start to generate another income stream, save the money and be able to buy your country home in a few years (plus still have a rental property to generate income going forward).

    I know going the route of house hacking and being a property manager or rental real estate investor is not for everyone, but I thought I would throw the idea out there 🙂

    Good luck over the next few years with your decisions! Your adventures over the past few years sound amazing and I wish you many more to come!

  3. I think you guys should rent for sure. Since you are both uncertain of your current jobs as long-term gigs, renting will give you the ability to ‘taste-test’ things with your jobs with an easier exit if needed. While you’re renting you can work on finding the best jobs that will give you the rural/outdoorsy setting with the short commute.

    Congrats and good luck!

    • Betty says:

      Thanks for the advice. I do have mixed feelings about renting (see above!) but I get that it’s advantageous in terms of testing where we’d like to be. In terms of our jobs though, unless we wanted to completely change fields – which isn’t in our plans right now – we will always have to work in an urban setting, since that’s where most universities are! So it’s really a question of whether we are willing to do the long commute thing. It’s a puzzle for sure! Thanks again 🙂

  4. This was such a great read with excellent details on all their thoughts and financial considerations! Great job Betty and David!

    I agree that buying a house at this point doesn’t sound like a great idea. If they aren’t sure their careers in a high-cost area are around for the long haul, are concerned about health and economic uncertainties, and know they prefer the outdoors I would wait until they are more ready to be settled in a home for the long term.

    As for investing today, being a landlord isn’t for everyone. I would carefully consider what that could entail and what they would really expect in terms of returns. Would they be able to do their own repair work? Are they available to run out at the drop of a hat if there is an emergency? If not, or if they simply don’t want to be tied down, then I would agree with Frugalwoods. Determine their priorities and use some savings to invest and some to pay down low-rate student loan debt, in whatever ratio makes them most comfortable for the future. The benefit of investing is obviously the potential for higher long-term growth and the ability to access that capital if and when they do choose to buy a house, but being debt free would also make securing a mortgage easier and be mentally freeing in the near term.

    Good luck!

    • Holding back was my thought too because that would have been the advice I taken if I could talk to my former self. Being a landlord especially when most of your background is in academics is a world of flips. I didn’t think it would be much work and I hated it. So take Ms. FW and Mamafish’s advice.

      If you’re feeling like you’re going to miss something and need to jump in – don’t. When the time is right, you will know because there would be no question there that will pester you to ask online strangers!! 😆

      Because the interest rates are so low (1.5%?! Wow!) I definitely think you should invest your money first and foremost. Make a nice cushion and then start pouring it in. I mean your interest rate now doesn’t even PACE with inflation. I thought my interests at 4.5% was low!

  5. My two cents from abroad. I bought a home before I was ready to settle down. It worked out okay but I’d much rather have waited. If you have kids, it sounds like you would want to be in the expensive suburbs. Since you don’t have children yet, why pay a premium to be there?

    I’d also look into investing in a low coast index fund that meets your moral standards. I’m not familiar with what is available in the UK but I’m sure you can find one.

    Good luck. And keep up the good work. Just focusing your energy in these decisions will help you accomplish your goals.

  6. Emma says:

    Something you may want to do today is open a LISA (lifetime ISA) so that if you do decide to purchase property you get some free money towards your deposit (or you can keep the bonus for retirement). Details are here: http://www.gov.uk/lifetime-isa

    • ivy says:

      However, there are very few providers at the moment… and none were doing a “stocks and shares” version. I looked into it (40 in March, so don’t have much time) and finally decided I was better off sticking with my stocks and shares ISA.

      • Laura says:

        I was going to suggest a LISA. As of a couple of moths ago, tere’s only one cash one (at 5%, which even with the bonus I estimated to have a poor rate of return as a pension. However, as a first property deposit in the near ish future, it may look better.).

        However, I discovered Nutmeg (https://www.nutmeg.com/) do stocks and shares LISAs. There were a couple of others, but I can’t remember them of the top of my head. I’ve invested some money with Nutmeg and so far I don’t have any issues with them.

    • Faith A. says:

      There are still limited providers of LISAs, but Hargreaves Lansdown, AJ Bell and Nutmeg do all offers stocks and shares versions now.

      • Kathryn says:

        Skipton Building Society was (is?) the only place offering a cash LISA. It is well worth taking one out if you are risk averse and likely to be a first time buyer during the next few years, or even the next few months. You can invest £4000 maximum per year, but you get a £1000 bonus quite quickly (at the end of the tax year I think), so you could get a 25% no-risk return for just a few months investment. My uni student daughter is using one to invest some money she inherited from her grandmother – she is aiming put in £16,000 over four years and will then have £20,000 for a deposit on a property.

  7. Caroline Bowman says:

    If they are both lecturers or researchers at the same university, then it may well be a good idea to buy a 2 or even 3 bed place (not their ultimate family home I might add!) that can later be turned into student housing. This is always in very short supply, and as they have discovered, property prices are high… so that drives up rents too, and keeps the market buoyant. Of course, none of this is easy-breezy, but if they focus on where they want to live NOW (and realistically for the first 3-5 years, maybe more), then rental potential could be a longer-term consideration. Let’s pretend for a moment that they do this, get a cute little (very little!) 2 bed, maybe with a postage stamp garden or something like a nice park very close by, within easy commute of work, they could quite happily live there for a good 2-3 years, or more if they have their first child there. The end goal would always be, should children eventuate, to move elsewhere at a later juncture, but given their current situation, that’s what I’d do, were I really wanting to get on the property ladder.

    And that’s a big question. But I do understand the impetus to buy a little place of ones own. It’s a very English thing I think. I lived in and around London for over a decade and the drive to buy a place was always there!

  8. I agree with MSM, that if wanting to buy now is mainly due to fear of missing out, then it is not the right reason. And £1050 for a two bedroom?? We paid that for a small, 30 m2 single bedroom apartment when we lived in London, that sounds like a pretty sweet deal.

    Also, if you rent or when you go on holidays, you have the opportunity to “test live” several different places in addition to going to open houses. I’ve also found that just visualising your dream future and figuring out what the essentials of your dreams are to be really helpful. It took us a couple of years, but now we’ve identified a handful of key points that we are steering towards, making us much more goal oriented in the process, bonus!

    I too, found that the bike safety in London varied enormously. My commute from south west to central was along one of the biking super highways and was blessedly safe, while my partner’s trip from south west to north west was a Much riskier affair, so be safe!

  9. Great to see a feature on a London couple. I’m in a similar situation and have pretty much concluded that buying a property in London isn’t best for our situation. I’m also holding off paying off student loan debt so that I can keep feeding my stocks & shares ISA to build wealth. I have invested in Vanguard funds through Charles Stanley Direct who currently offer the most competitive platform fees. The user interface still needs work but everything does what it needs to do. I’ve even written an article on how to do so: http://thelifelifebalance.com/how-to-set-up-a-stocks-and-shares-isa/

    I think we’re bogged down with the idea that buying a house = financial security. Like this couple my rent is more competitive at this time and I don’t have everything tied up in one asset. In London, the property prices feel inflated and what you get for your money just doesn’t seem worth it anymore.

  10. Beth says:

    When it comes to buying a home what actually ends up being important isn’t always what you think. Home ownership commits you to the community which you buy which might mean in the future the areas governing bodies may dictate to you things about your property. Like taxes and aesthetics or renovations. Make sure you buy in a place where you typically agree with local decisions about property. Two, stay a night in the neighborhood you want to buy in. Find out if noise and people traffic changes at night and whether you can tolerate it. Trees are nice until you have to pay to have them cut down or trimmed because they are hitting wires. Check out the age of and materials used for water and sewer before you buy. Parking is huge when you own. Think about how much snow you might have to shovel to get out during winter months. Make sure you don’t buy where you have to move your vehicle during the day or at night. Bathrooms are key. Make sure there is one on every floor. Make sure you buy with doors wide enough for furnishings you will bring in. And make sure stairways will accommodate furnishings. Think about how long you plan to live in your home and whether it will work with aging knees. While a home is a nice idea get mercenary about the practical things before you commit to one.

  11. Mr. Tako says:

    Well, Mrs. FrugalWoods had lots of great advice, but I would definitely defer purchasing. If you truly want to reach financial independence you don’t want to burden yourself with a huge mortgage. Wait until you’ve saved enough to buy that property for cash, then go get a mortgage (while keeping all that money invested in the market).

    Typically the stock market will outperform the housing market over a long period of time. The important part to remember is to keep your money in the highest return assets.

  12. Ex-Londoner says:

    We faced a similar predicament 7-8 years ago. We were renting a two-bed flat in north London and thinking about whether to buy. Looking back here’s what we learned.

    Kids tend to change everything. There is a sudden step change at 30 from no one having kids to seeming like everyone has kids at 35. This shifts your perspective quite a lot (and your needs change exponentially with each child). Some of our friends have stayed in London. Some have moved out. One issue with staying is that you become trapped in the London-centric children treadmill of school worry, crime, finding a nursery, finding part time jobs etc.. This will be more expensive than you think (unless parents live nearby and are retired, your childcare bill could be up to £1500-£2000). Even out of London this will still be about the same as your rent. Many who have moved out do not regret it, especially as their kids get older. Based on that I’d recommend renting to free up your choices when/if those upheavals come. London can work for one kid but any more and you will struggle unless you have a spare million pounds.

    We looked for a time at commuter towns around London. The only things we could afford were rather soulless new build commuter estates with an hour train trip each way (and prices have kept rising since then!). Train season ticket prices were around £7000 a year.

    In the end we moved out with our first kid (we now have 3) to a typical non-London university city. Property was a lot more affordable and everything was a lot less manic. Both my wife and I work part time and we probably couldn’t have that in London. I have friends who live in Edinburgh, Leeds, York, Liverpool, Bristol etc and they do not regret their decision (but still remember with fondness their young adult London lives). Looking around these kind of locations also makes it easier to get closer to the outdoors – you need to drive for 3 hours to do that in London, in some parts of the North, Wales or Southwest it can be a 30 minute cycle.

    The suggestions in the comments about testing things out is a good one – you like travelling as well – maybe now is time to explore more of the UK options? You have a fair bit of time but could take AirBnB trips away to different UK cities, have a relaxing weekend (you don’t get that post kids!), check out estate agents and just wonder around. This could provide helpful context for your decision.

  13. I agree wholeheartedly that the uncertainty component permeates through all of these questions. There is nothing that says you HAVE to own a home – GoCurryCracker writes a lot about why they don’t. I love being a homeowner, but it is a huge commitment and it really ties you to an area. For now, I would just stash cash and wait until you really know where you want to stay for at least 10+ years.

  14. Mrs. Frugalwoods covered it very well. If I were Betty, I would wait a little bit to figure out the following:

    1) Health issue: get more time to understand and process it, and see what the next step is going to be to tackle it.
    2) where I want to settle down in the long run. This may take a longer time. Don’t rush. Use your time to travel, try and taste which place you like the best.
    3) There are always houses on the market. You won’t miss the boat. Making a better and informed decision may take a while, but it’s worth the research effort.

    Overall, trust your guts. If you are not very sure about the change, stay put. Regarding the money, it sounds like you may want to keep it liquid, in case you need it any time. I would recommend you put it into the bank, somewhere save and sound. Shop around to get a better rate in terms of CDs or money market/savings account. Investing into stock market is good for the long run, but I won’t do it if I may need the money 6 months down the road. Good luck, Betty and David!

  15. Ann says:

    Just a note on your discussion of if you need to plan on a bigger place for kids… as a Mother of young children, I can tell you that you won’t need to worry so much about a big house or the best schools until they’re a bit older (3-5 depending on what age school starts). So if you might have children 2+ years from now, you are really looking at 5-7 years until you need a big place. That may make more sense to get a small place near work.

  16. KaLynn says:

    Betty and David,
    I enjoyed reading your story and would like to add on a personal anecdote about deciding where to buy a house. My husband and I lived in an urban area and knew we wanted to move to the suburbs. We would look at real estate listings every week and plan our “free-date-Sundays” and attend open houses. He likes to joke this was all fine and good until we found our house and it got expensive haha. It really got us talking to each other about what we liked and didn’t like in a house…sometimes you think you’re on the same page and then realize you’re not! My husband actually tried to talk me into an aluminum sided, yellow house (my least favorite colour). We also identified neighborhoods we liked and would go for walks in them with our dog; luckily no neighborhood watch groups ever reported us strange, dog-totting people who don’t actually live here!
    Good luck in your journey!

  17. Aliya says:

    I’m glad to read comments on British case study. Although I live in London suburbs and more familiar with British reality, I wasn’t sure what advice to give but having read above, I completely agree – wait until you make up your mind and prices go down (I have a strong feeling prices will go down even without Brexit).

    I advise you contact your HR department to get contact details of your pension provider, its simple and straightforward from there.

    I’m very impressed with your Groceries and household expenses, there are two of us as well and considering myself frugal I can’t make it below even £300. I admit we eat meat and fish but at weekends only and its steaks once a year only. But I also realise that I need to go through our expenses because without gym, TV license, car and hair expenses our total monthly outgoings are the same.

  18. Love your suggestion Mrs. Frugalwoods! I think if you’re unsure of what you want, it may be wiser to wait to buy, especially in a grueling market. Wouldn’t it suck to buy an urban home and decide you’d like to relocate to the country after a few years?

    You guys are great at saving on living costs! I’d suggest trying to cut fun expenses to build savings. We started brewing beer and wine at home in lieu of going out to pubs (or we’ll just invite people over to BYOB).

  19. Hey,

    I live in a town in the Home Counties, about 22 mins from a main London overground, in a (tiny) house worth approx £350k

    We bought because:
    1) We have a child and were sick of negligent landlords, extortionate letting agents fees and constantly feared our home being sold from under our feet
    2) We found a house that, should we want to move abroad and rent it out, would give a fairly decent 8% return and keep our foot in the housing ladder
    3) We knew exactly where we wanted to live and were worried that if we didn’t buy, we would be priced out of market. Our house has risen by about £60k in 2 years (this was confirmed by the usually conservative valuation done for our remortgage)

    I would not buy, in your case because:
    1) You don’t seem to have a deep set desire to invest in an area. Moving is EXPENSIVE (though less so now with scrappage of Stamp Duty for FTBs), so I wouldn’t move unless you can see yourself there for 5 years and are confident in your choice.
    2) Investing, once you consider Brexit instability, maintenance costs and mortgage interest, is highly likely to net you more growth, even in the short term.

    I would also not overpay your student loan given the way it works in the UK.

    TL:DR – My vote would be to continue doing everything you’re doing, exactly as you’re doing it, but maybe start investing instead of stockpiling all that cash 😉

  20. Kurt Curtly says:

    The discussion around the finances of buying a house is worth much more thought. Betty: by my math, using the numbers provided, buying comes out far ahead. I used https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html and plugged in your current rent, a 350k purchase price and a 2.00% mortgage. How long you plan to be there is a big factor, and you must also try to tangibly price the benefit of good schools for a future family.

    Next point: time to stop being risk averse. You guys are cash flow positive and have very few responsibilities right now. It’s time to invest some of that money. You’ve missed out on tens of thousands by keeping your money in cash. Even if you have invested everything on the eve of Brexit, you would have made money by now. If you lack the nerve to do it, do some research beforehand. I recommend John Bogle’s The Intelligent Investor:.

    To your point about firearms and tobacco stocks: even if you put all of your savings into a broad market fund, your investments in things you found morally objectionable would amount to less money than you probably have in your wallet right now. If that makes you feel guilty, give a little more to charity. If that’s not enough of a consolation, there are “Socially Responsible” investment funds which seeks to match your precepts, although they have much higher fees.

  21. I completely empathize with your situation: I, too, live in a very expensive area where the average house price is between $350 and $400K. Yeesh! Although I try hard to talk myself down, it’s easy to get wrapped up in housing market FOMO.

    Echoing what Mrs. FW said, you could start looking at houses in different areas just for the sake of research. See what you can get for your money in the different areas you’re considering (country vs. city, sketchy but up-and-coming vs. suburban but expensive). A little investigating can’t hurt.

    Your savings is amazing, by the way. Great job.

    • I don’t recommend them shooting for a home that they have to compromise the location on. Location isn’t something you can change like a kitchen. It’s all about location, location, location. A fixer upper can be a good option though IF they needed to get on the mortgage train. I’m not sure the data in UK but US home appreciation is 2% average and stocks return 7-8% average.

  22. In my opinion, I would not buy a house and risk tying up all of the savings you have. Because you are currently awaiting an answer on a potential health issue, I would put off the house purchase until that is resolved. If there is a major health crisis, your money is liquid and you can use it to may for any medical bills necessary. If the health issue is a false alarm, then you can buy a house and hunker down.

    In the mean time, I would do some soul-searching and determine exactly what you want your future to look like (with some flexibility, of course) and work toward that goal. It could be that your desire to travel and move into different jobs trumps your desire to buy a house. Without buying a house, you have the freedom to move around and pursue different careers or job opportunities.

    As for David going more specialized, if that Is his goal/dream, I would not thwart it, but I would caution you to wait until you determine how your future might look health-wise. It may make more since for him to put off additional training for a couple of years if you go down to one paycheck.

  23. tess says:

    Historically, in my city, sketchy areas that are located near downtown or near universities, gentrify for better (for the “pioneers”) or worse (for the “natives” people who get pushed out because they can’t afford higher taxes). You are young, childfree so investing in an affordable property in a convenient, not-yet-posh area is a good bet. We could never afford to buy the home we live in, purchased some 25 years ago.

    Landlording is good income after a while–possibly a long while.
    Contrary to popular belief it is not easy money that easily pays for a mortgage, Updating/renovating each unit is like redoing a individual little house. It is a second job and a labor of love to fix stuff and get it ready for each new tenant.
    It took us 7 years before we started breaking even.
    Besides mortgage consider insurance, water, gas, and electric utilities and spending evenings, weekend, vacations fixing and maintaining a comfortable habitat for your tenants.

    • Ale says:

      Unfortunately part of the process of gentrification is that the pioneers often end up getting pushed out by subsequent gentrifying waves; think artists/students/middle-class professionals (yes, like university lecturers) being pushed out by investment bankers once the area becomes desirable enough. It is tempting to buy in an up-and-coming area and ride the gentrifying wave, but it’s important to be aware that we may not always be the winners… Not to mention the ethical implications of contributing to the displacement of the original community. (I say this with zero judgment, by the way, as I myself could be considered a gentrifier, albeit reluctant, in our lower- income neighbourhood. I think a lot about the dynamics of gentrification and how most of us end up trapped in them whether we want it or not, and it’s an endless source of frustration).

  24. Geoff says:

    Just a quick comment on investment options from a UK reader – Vanguard do indeed operate in the UK and have recently started offering a Stocks and Shares ISA which has the joint benefits of being low cost and also tax-free returns.

  25. ivy_ says:

    I may have already posted this but it doesn’t seem to have come up…

    This one was really interesting for me as we’re in a very similar part of the world (a very old & unaffordable university town) and are in a very similar financial situation (albeit 10 years older) and are both employed by universities. I don’t understand USS pensions either but they are apparently among the best managed in the country.

    I would avoid leaving London while your jobs are there. My partner commutes to London — two people commuting into London would be horrendously expensive or time-consuming, I would avoid it at all costs!!! Since you mention you drive to work, I think you must be in one of the outer suburbs rather than the centre (which is where my partner is). For non-UK readers, we’re talking £4800 for annual train ticket.

    We’ve chosen to put our £80K primarily into stocks and shares ISAs. We discussed ethical ones with our financial advisor and ultimately chose not to go down that route (varied complicated reasons). In two years, we’re 10% up whereas cash ISAs are getting ~1% so my advice would be to change your type of ISA (I have no idea how to do this though!). Someone above suggested a lifetime ISA — I struggled to find a provider I’d be happy with when I looked a few months ago but I’m almost at the age limit for them. I don’t think it’s too hard to extract £££ from ISAs — would be something to discuss with whoever you get to set them up. Ours are with Old Mutual and we can cash them out at anytime. Once we’re a bit more settled, we’re likely to cash out £10K from each of ours to go towards a deposit.

    I’m also not sure about paying down the student loans — when will yours disappear? (Most UK loans will be wiped off after a set amount of time usually around 30 years after you graduate).

    Hope that helps — not trying to tell you what to do, more what we have decided to do in a fairly similar situation…

  26. SHERRY JOHNSON says:

    I’d like to address the question of new vs remodel when the time comes that you do want to buy a house. Remodeling is not fun. Living in a messy house drives me crazy. So I would always choose the “turn key” over the rehab house. I enjoy watching HGTV, but I KNOW that to be a harmless form of voyourism. You’ll avoid a lot of stress between spouses if you can buy a house ready to move into. If you need to do more than change the paint colors…..pass it by.

  27. Jenni says:

    Another UK lecturer here 🙂

    A couple of things I wanted to contribute…

    * Yes, universities are based in cities – but many of those cities have countryside MUCH closer than London does. I’m in Sheffield, and right on the edge of the Peak District national park (we’re just in the process of moving from the edge of the city into the national park itself). At the minute I walk to work, and can still be in the national park within 10 minutes drive. It doesn’t have to be one or the other.

    * You might have good opportunities where you are now, but there may be even better ones somewhere else in the future! The good thing about the UK is that cities tend to be relatively close to each other – I lived in Sheffield and commuted by train to York for 6 years for example. No traffic, morning bike ride along the river etc.

    * Student loans… general advice here is to not pay them off early, but I did just that a few weeks ago because the amount I was paying each month affected the affordability rating on our mortgage application…

    * I agree to spend good bit of holiday time exploring other places to live. Plenty of people live in those ‘sketchy’ areas you describe and aren’t mugged or killed each day, so they may well not be quite as bad as you think… Go and wander round, stay overnight, eat in the local cafes, and hang out for a while. You never know what gems you might find. Make RightMove your friend too.

    * Open houses are probably slightly different here in the UK. I had to register with every single estate agent we wanted to view a house with (over 20 in the end) and they ALL wanted ALL my details, even for an open house event, and some wouldn’t even let us view a house until our own was on the market and we were ready to move. But you can still play around with RightMove, google earth, visiting places. Turn it into an adventure!

    Good luck!

    • Betty says:

      Thanks so much for your comment. I just wanted to add that I was not trying to be disrespectful in any way when I was referring to ‘sketchy’ areas. I’m aware that many people live their lives quite happily and safely there – and we actually did used to live in two of these such areas before we moved abroad! I didn’t make clear in my case study that we have returned to the town that we lived in before we moved away. Therefore, we have a pretty good understanding of the different areas in our town.

      In particular, the less desirable areas we lived do have problems with a) repeated break-ins and b) drugs. The former can probably be prevented to some extent by having good security and being vigilant, but the latter is more difficult. There is one particular area which would be a good location for us but there is well-known house right in the middle where drug dealing and use goes on fairly openly (no idea why the police haven’t been able to do anything about it!). It has been there for years, leads to a lot of problems in those streets and I don’t feel safe walking past by myself when it is dark, which I would do a lot of in the winter as I often work late and would be commuting on foot. So we have ruled out that one particular area for now.

      • Bex says:

        We do open houses in Scotland! most of the property for sale is avaiable to view on Sunday afternoons.

        We also have a lot of universites, and the BEST out door fun to be had.

        Come and visit north of the border… You may never leave!

  28. Kirsty says:

    Firstly, with regard to renting vs buying, we own a home in the UK that we rent out (as we were moved abroad with work) and it has definitely not been a huge money maker – by the time we cover the agent fees (we feel much happier having an agent manage it as the UK / EU laws are very specific re tenants), the maintenance, and tax on rental income we are not making much at all. If we hadn’t already owned it and converted it to a rental property, there is no way I would buy one for income purposes – we would have done much better having the money invested instead. In our area (just to the west of London), you definitely get more house for your rental budget than you do buying. Definitely look at the actual cost of a 350K mortgage vs what the rental for that size of house would be.

    As a renter for the past 14 years on and off, I love living in a rental home – the maintenance issues are someone elses, if I need to move for work or because our circumstances change, and I like being fickle and trying different properties – we have had a number and what worked for us when our kids were tiny definitely would not be what we would choose now with teenagers, or what we think we would like in 5 years time, when both kids will be gone to Uni. I wold hate to be put into the position where you buy somewhere, find that you have to drop to part time as a result of medical issues and then sell your home (with all the extra stress and time that that takes) when you could very simply hand in a months notice and plan your next move with much more control.

    If you are worried about investing and the up / down nature of the stock market, would you at least consider locking some money away in longer term fixed saving accounts – you would at least hopefully get more than 0.5%!

  29. K. McGarrett says:

    I would buy a smallish home within an easy commute to work. The UK is not that large; plan to get away to the country on weekends/school holidays/vacations. Don’t buy a large space. Even with 1 or 2 small children you can get buy with 2 bedrooms. People in the UK/Europe are used to that I believe. Small children just want you around. London will always be a good real estate investment in my opinion. Try to reduce some of your expenses. Frugalwoods has some good suggestions.

  30. ilene says:

    Your story was so well written, Betty that it was as entertaining as a book. But you asked for advice from the frugal community and I tried to think of how I might help. The only thing that struck me is that you folks have a “Perhaps we aught to…” feeling about life and it seemed to me that you are doing well right now. I’d suggest you enjoy each other and focus on your health. When that stabilizes there will be a next step to take. Maybe blowing out one end of the candle would help. All the best to you!

  31. Sarah Langley says:

    Hello Betty. I agree with most of the Frugalwoods advice EXCEPT paying off the student loans. Student loans in the UK are best regarded as an additional tax rather than a loan as in all likelihood you will not pay all the amount back and the amount of payment is so low per month. For really great advice about student loans I recommend the http://www.moneysavingexpert.com website section on paying back your student loan. For A young couple in the UK you are doing amazingly well and I take my hat off to you!!

  32. Ben says:

    Looks like Betty is on her way to financial freedom. There are three ways to make a good return on an investment with some of your savings dollars.
    1. Transfer savings money into a high interest rate bank savings account. Ex: I personally use Ally bank (1.25% interest rate per year)
    2. Use Mrs. frugalwoods strategy and invest the money in a low fee and risk mutual fund like vanguard or fidelity. I personally like VTSAX. You can make at least $10 for every unit share you purchase a year.
    Last but not least and bear with me…
    3. Invest in cryptocurrency- put 500 dollars each into bitcoin, ethereum, litecoin, and iota. This is by far THE RISKEST INVESTMENT TO MAKE but has the chance for the HIGHEST RETURNS. I thought it was all a sham but I invested a little at the start and it has been well worth it. You can buy these coins on coinbase.com.

  33. Andrew says:

    Hi Betty and David

    This was an excellent read and the comments have provided some great advice. For what it’s worth, here are my views:

    – not sure where you guys are living, but I would be targeting buying a 1-2 bed flat. Try to keep it relatively modest but in the city centre, which will make it a liquid investment and a good potential rental if you ever become perma-travellers.

    – for potential first-time buyers, the Lifetime ISA (‘LISA’) really is the absolute best vehicle. You can each put in £4,000 and the Govt will top up with £1,000 each – £2,000 in free money, or a 25% first year tax-free return (depending on how you look at it). It is on any view a fantastic deal. I would begin putting money into LISAs in this tax year (if you still have an ISA allowance) and max them out. You can effectively set aside £10k a year each between you for a deposit. It will quickly start to add up. In the meantime you can explore the housing market in more detail. If you don’t end up buying a property, the LISA is a great supplementary retirement income vehicle.

    – With the remainder of your savings, I would agree with Mrs FW that an emergency fund is a good idea. I would aim for £10k and would hold outside of your ISA (you have a £1,000 tax free savings allowance each and so you can get tax free interest outside of the ISA).

    – With your current ISA cash, I would strongly consider moving this into a Stocks & Shares ISA and buying into index funds, and (after you’ve maxed out your LISAs) topping this up as and when you can – even more so on the dips! I would think of these savings as being my perpetual yielding assets i.e. not for emergencies, not for house deposit, but a permanent endowment for future income. My ISA is held through Hargreaves Lansdown in a Vanguard ETF – this keeps the costs to a pleasant 0.09% + £45 per annum platform fee.

    Best of luck and I hope your journey to financial independence is a successful one!

  34. af says:

    If you’re having lots of doubts & hesitation, listen to them and just say no! If you’re uncertain about buying or renting, it means you’re really not ready to buy. It’s either that or make a commitment to your trade-offs and make your decision – and get behind it by emphasizing its positive aspects. That sketchy neighborhood will likely be gentrified and you may not be able to afford its future version – have you researched that area’s potential future re-zoning/development?

  35. WantNotToWantNot says:

    As usual the Frugalwood Community, led by MrsFW, has given great advice. Never make a financial decision based on fear (in this case, the fear of “missing out”)—knowledge and strategic thinking are better options. Given your indecision about a lot of your future, this is the soundest advice: Continue to Rent; Continue to Save; Pay off Loans; Invest your Capital; and Soul-Search about what will make you happy in the long run. Where you want to be will become clear. Set some goals and you’ll be less motivated by fear. In the meantime, research how to invest your savings wisely; it may make you less risk-averse when you understand the downside of keeping money on the sidelines. Good luck to you!

  36. El says:

    Hey Betty, it looks really suspiciously like you live in the same town as I do!! Yay, I got way too excited about this 😀. I only have two comments really:
    In terms of buy to let (my partner has a buy to let property in said town) I would say you need to consider the market very very carefully. The UK does not have many of the tax breaks the US does and the new rules which are going to kick in over the next couple of years are going to bring returns down even further. I don’t think we would get into the buy let market now tbh.
    Student loans over payments – aaagghhh… that company is a nightmare! Trying to overpay can come with a major headache… including the company losing your overpayments!! I have found trying to talk to them is a kafkeresque nightmare only equalled by HMRC 😀, I personally have given up and instead simply use the 1.5 percent as a benchmark to motivate me to chase interest. Like you I am very risk averse so I always have 12 months of living expenses in my emergency fund. These are spread across many banks and building society accounts including: Tesco Bank (3 percent on up to £3000 you can have two accounts) TSB (3 percent on £1500) Nationwide (5 percent first year only) along with several monthly saver accounts which are usually around the 5 percent mark. You can beat the 1.5 percent you’re paying but you need to shop around and move your money every year. I note from your case study that ethical products are important to you, Nationwide/TSB/Coop all have good rates and generally score well on ethical standards. Its also way easier than you think to set the accounts up I promise.
    Good luck fellow frugal Brit

  37. Betty says:

    Thanks everyone so much for the advice so far! I will try to go through and reply to individual comments.

    However I should probably add something which is that we are not thinking about purchasing a property purely out of fear or FOMO. Our plan was always to live abroad for a couple of years, save up a deposit for a house and then move back and buy somewhere. I’m naturally a very risk-averse person and so my wondering whether it is the right thing to do is not so much an indication of not being sure (“you’ll know when it’s the right time and you won’t have any doubts”) but more a reflection of my very cautious personality type! It’s only really my health worries that have thrown a spanner into the works. Especially because I’m not sure if I will definitely be able to have kids, which was always in our plan.

    But I guess this really does mean that we need to reevaluate things, and figure out what we want! I have always had a plan, so it feels weird to not really have one, but my health issue might mean that it’s not really possible for us to have a plan in the same way as before. Argh, so many decisions!

    Thanks again for all your help. I really appreciate it 🙂

  38. Alexa says:

    I agree, it sounds like they’re not quite ready to buy.

    They should definitely do their research, following your suggestions, but I’d add another to-do to that property research list in investigating those less than desirable, but currently lower price neighborhoods:
    1. capital investments- where are major road, transportation, infrastructure improvements being planned in your area, that’s a signal to major real estate investors that a place is good one for development and a sign that your local government is planning for growth in a specific neighborhood, this can even included expanding hospital services, refurbishing or building new schools, etc.
    2. major real estate projects planned in your area, again a sign of either current need or projected need- those real estate people did a LOT of research about the prospective earnings on projects and will know about any deals made with the local government- a really big company moving in to build or purchase property is a really good sign of the health or potential future health of a neighborhood
    3. changes in zoning- a sign that either the local government recognizes an approaching need or that a major investor wants to buy/build in that location.

    All of these things are signals that a few years down the road, a specific area will be either revitalized, gentrified, expanding, etc.

    Following the Frugalwoods slow approach to deciding about homes and doing this extra leg of research to see if those lower price homes in less desirable areas might be worth the risk will take several months, if not a year. This allows time for Brexit to occur and any market shifts to become evident.

    Frankly, I’d hold off to buy, unless you come across your dream home, until after Brexit.

  39. Susan says:

    DO NOT PAY DOWN YOUR STUDENT LOAN. IT IS A TAX, NOT A REAL LOAN. Sorry for the over-emphatic caps, but it really isn’t a normal loan! Repayment is always income-dependent and it will be forgiven after 25 years. No one will EVER come after you to make you pay it all back at once. Would you pre-pay your council tax from now until age 100? No, of course not, you might die or move in between. And especially if Betty might stop working or really cut down, she might never pay another penny. That’s how you should think of your UK student loan. Please disregard all advice from people across the pond on this issue.

    Also, I cannot believe you are holding that much in a cash ISA! Vanguard has now come to the UK. The easiest option is to put it all in a Lifestrategy 80 fund. That’s 80% stocks, 20% bonds, and isn’t the best for everyone but is a really excellent default option and you can always change it later. Don’t forget to TRANSFER your ISA, though, through the provider you’re moving to, not open a new one and take the money out of the old one. I transferred to Vanguard recently and found it pretty easy – the whole process took a month, but only about half an hour of ‘hands on’ time. The rest is just waiting for your providers to talk to each other. You should read the JL Collins stock series to understand why the stock market is not risky in the way people think, and also search for “Bob the world’s worst investor” for a big confidence boost in investing!

  40. Ale says:

    Re: researching sketchy areas in terms of actual crime stats: many supposedly sketchy neighbourhoods are just lower income areas that have been stigmatised as undesirable in the collective imagination. Very often, the adjective becomes a self-fulfilling prophecy as areas labelled as undesirable become exactly that when the label discourages people from moving/investing/spending time there. As somebody else said above, thousands of people live, work, buy property and raise children in neighbourhoods that are perceived as sketchy from the outside. Not to say you should move to an area where you feel decidedly unsafe, but I think it’s wise to question where that sense of unsafety comes from.

    • Betty says:

      Hi Ale, thanks for your comment. As I have written above, I really wasn’t trying to be disrespectful about those areas or the people who live there, and we used to live in such areas ourselves before we moved abroad. I think you’re right in that some areas do just get a reputation, rightly or wrongly, and that is then difficult to shift and it becomes cyclical. One of the areas we lived previously did have a bad reputation (we were grad students and couldn’t afford to live in the more ‘desirable’ areas) but it turned out to be okay to live in. So I agree it’s always worth doing more research 🙂 Thanks again.

      • Ale says:

        Oh I totally get that, I didn’t think you were being disrespectful at all 🙂 I was just trying to offer a different angle on “sketchiness”, but if you’ve lived in this type of area you know exactly what I’m talking about… We have personally decided to buy property in one of these areas because our priotity was affordability (we have a 5-year mortgage which for many people is unheard of!) But yeah, it’s not for everybody. Good luck with your search, I’ll watch out for future updates!

  41. Sis says:

    Sorry I have not read all the replies, but my 2 pence from the Netherlands.
    Here you will NOT get a mortgage if you have a serious diagnosis.
    Celiac disease is not a life threatening condition and will not make a difference. But any form of cancer (sorry for being blunt) will rule it out. No difference if you were succesfully operated (testical cancer like a friend of mine or a tumor in your belly) and cleared by the docter. They will not grand you a mortgage…

    So you either apply quickly and hope for the best, or not and you will have to buy a house on one income.

    I wish you all the best and hope this info turns out totally unnecessary!!

  42. Anne says:

    Hi

    Uni HR person here!!

    Sounds like you are in the USS pension scheme. It’s all very easy to find out how much your pension benefits are worth. Get your member number from your uni pension team and register to view your records online. There is a really useful modelling tool there to help you work out the benefits you would get retiring at different ages. There is also an optional cash builder option whereby you can make additional regular contributions and your uni will match the first additional 1%…….so free money! X 2

    Also check out your contract of employment. You may not need as big an emergency fund as you think. I’d imagine your employer is required to give you at least 3 month’s notice to say cheerio, so that gives you a chance to plan accordingly if you need to release money from not so liquid investments held elsewhere (but this only works if you are not planning to get sacked for gross misconduct though)!

    Same goes for sick pay……depending on your length of service you’ll receive up to six months full pay and six months half pay (with a bit of Statutory Sick Pay in there too).

    Not sure if hubby is using Uni sports facilities……….ours are much cheaper than elsewhere .

    And, have a root about on your uni intranet for staff discount/savings schemes. You’d be surprised what gems you can find on big and wee purchases.

    Hope this helps!

    • Betty says:

      Hi Anne, thanks for your comment! I did do as you suggest, and got my USS number and logged in… but all I could find is the area to manage your stocks and shares if you are making additional contributions and/or earning over £55k (neither of which currently apply to us). I can’t figure out how to use the modelling tool since the online system changed as again it seems to be based on stocks and shares. I really just want to see something that tells me a) how much I have paid in to date, b) how much I would get if I stopped paying in now and didn’t work ever again – I know there are cash lump sum options or regular pension monthly payments – and c) how much I would get when I retire if I keep paying in at the current rate until I’m 65. I might be able to do b) and c) with the modelling tool – I’m probably not doing it properly! But I really can’t seem to find anything about a) which is why I’m so uncertain about how much I’ve paid into the pot so far. My HR department can’t offer any help and just tell me to look online. I suppose I could try calling USS directly! Sigh. I will keep trying 🙂

      David is indeed using the uni sports centre… it’s the cheapest around and it’s still pretty expensive!

      Thanks for the advice re: savings schemes… I’ll look into it!

      • taka says:

        I think the bit you are looking for is the USS benefit illustrator. You need your USS member no and it is (unhelpfully) separate to the bit you’ve logged into! It is one of the links on this page: https://www.uss.co.uk/members/members-home/resources/modelling-and-illustration-tools. The bit you logged into would give you info if you decided to take “the match” or earn £55k+.

        I decided to take “the match” ie add 1% of my salary (over and above the normal scheme 8%) to the investment builder part of the scheme despite being really risk adverse. I did this as this 1% of my salary is matched by the same amount from my employer so it would have to do REALLY badly to lose what I put into it. I looked at it as being about the same amount as my salary increment increase last year when it started so I didn’t miss it. There are a couple of ethical options too.

        Personally I would ignore your student loan for the reasons already mentioned above by others.

        As to whether to buy or not… It is a hard one! I made the decision to buy. I ended up buying a flat that needed a bit of work long term but was livable in (functional but ugly kitchen and horrible coloured bathroom suite) but as a result could afford more floor space than some of my friends who bought places needing no work. It has worked for me as now more than a decade down the line the work is done (saved up for over time!) and I still live there and size wise it still works. My friends have all moved to gain more space even if they’ve not had kids. Neighbours do have kids in the same size place as mine so I figured it was a flexible space. If I’d not bought a do-er upper (then saved to do the work) and just continued to save I couldn’t afford to buy my flat now even after the credit crunch. Uni salaries are not keeping up with inflation let alone house prices. I’d do your research based on what you need for the next 5 years but research options too for what you could do if your possible health issues do have an impact. It is hard to plan for much longer than that realistically anyway! Whether you decide to buy or not (and there is no right answer) you’ll be making an informed decision.

        Good luck!

  43. East London Girl says:

    Hi Betty,

    Londonder here – aged 29 – I bought in East London (zone 2) earlier this year and also work in financial planning, so feel like I am in a good situation to give some ideas/advice.

    *** Whether to buy in London? ***
    Yes – I would buy for the following reasons ..

    At £1,000 a month you are paying some one else’s mortgage.
    Stamp duty is expensive BUT based on a £400k property it is c. £5,000 – this is equivalent to renting for 5 months – so as you can see, after this time you effectively ‘break even’ on the stamp duty.
    Property prices in London may be flat over the next 5 years or so – but you are still paying into an asset – currently you are paying cash into a black hole.
    You do not have to look at it as a ‘forever’ home. Perhaps you live there for 3 years – you pay off £36,000 of the mortgage (assuming £1,000 a month) and even if the asset does not appreciate you still have effectively ‘banked’£30,000 (£36k less the stamp duty and legal fees) – which is yours when the property is sold.
    You can rent out your property if you want to move abroad – yes it is a bit of hassle – but owning a property does not tie you down – in fact it gives you freedom, especially longer term.
    Have a look at the Help to Buy scheme – I bought using this earlier in the year and enabled me to buy in a location which I would not have been able to without it. The government loan is interest free for 5 years and is effectively ‘free’ money towards your deposit – lowering your monthly mortgage payments so you can save up (and invest!) more money over that time and gradually increase your property ownership – may be a good thing if you are worried about prices as you pay a % of the market valuation.
    In my opinion you can’t go wrong buying a property in London – we have such a shortage of affordable apartments and houses within commuting distance. Crossrail will open up even more parts of London – which will boost prices even more.
    Furthermore, give some consideration to the emotional reasons for owning a property – it brings a lot of happiness – being able to decorate to your own taste – having something you can call ‘yours’ and no longer having to rely on a landlord to dictate your living standards.

    If you choose not to buy and still have the lump sum in cash….

    *** DO NOT PAY OFF STUDENT LOAN***
    You can make much higher returns by investing your money
    This is not a ‘debt’ – no one will come and get this from you even if you lose your job – but I am sure both of you know this working in academia.

    ***INVEST YOUR CASH***
    DO NOT SIT IN A CASH ACCOUNT – with UK inflation running at c. 3% a cash isa rate of 1.5% is not good – you need to be beating inflation otherwise you are becoming poorer.
    Educate yourself with some basic financial knowledge of the markets
    Use Nutmeg (or similar) to find a risk profile that is suitable for your attitude to risk and your time horizon and stick it in there and leave it to accumulate.
    If you want to do it yourselves use other investing platforms such as Fidelity or Hargreaves Landsdown and pick some tracker funds (iShares and Vanguard are both super cheap)…

    Good luck with the health issues and hope this helped somewhat!

    L

    • Stephen says:

      With respect, your maths is not quite correct here, East London Girl. While it is not quite such a howler as what Mrs FW did above in the gifts expenses analysis – £540 – £240 surely equals £300? – I think you may have forgotten how interest is frontloaded on mortgages, so a £1000 monthly mortgage payment, made for three years, does not equal £36,000 in equity.

      I just ran a simulation for a 25-year, £250,000 mortgage (this is assuming that Betty and David find a house slightly below the average price and plunk down all their savings into the down payment) at a 2% interest rate in MS Excel’s trusty loan amortization template. The monthly payment would be £1059, i.e. equal their rent, but after 36 months, they would have paid off only £23,835 in principal. Whilst I think this is still very good, it is still over £12,000 than what you suggest, i.e. a full year of payments. Just something to keep in mind.

  44. MissSaraBee says:

    I’m surprised you didn’t bring this up, Mrs. Frugalwoods, but Betty and David could consider buying a duplex if they want to live in the city. They could live in one side and rent out the other, which could offset their mortgage payments. This would depend on whether or not Betty and David want to be landlords, but it is an option if they want to live in a more urbanized environment. Once the mortgage is paid off, they could use the rent as an additional income stream to facilitate part time work.

  45. Abigail says:

    Regarding #4 Familiarize themselves with crime stats–this may go without saying, but when we were buying a house I found it really helpful to compare crime stats from neighborhoods I was unsure about to familiar neighborhoods , rather than just look at the numbers for potential neighborhoods on their own (which look scarier without a basis of comparison!)

  46. I am still renting despite being pretty committed to staying where I am for a very long time (10 years or more). People tell me often that I am “throwing my money away”, but I have used various rent-vs-own calculators that indicate that I’m actually doing a bit better financially by renting than owning. Most people don’t pay enough attention to the hidden costs of ownership (loss of returns on money that could have been invested, maintenance costs, etc.) when trying to decide whether it is better to rent or to own.

    • Mrs. Frugalwoods says:

      So very true!! Thank you for pointing this out. It’s a common misconception that home ownership is always a smart financial decision–it can, in fact, be better to rent in some circumstances.

  47. Kitty says:

    Lots of good advice here. However, I don’t believe a person or couple or family can begin a frugal lifestyle when in debt. I was 55 when I realized that retirement would be here in the wink of an eye and I hadn’t saved a thing. I had always been a spender as I grew up dirt poor and was negatively zoned in on that fact. When I began, I had about $26,000 in debt, including the house (read on about the house), had never made much money and was losing sleep about what was going to happen to me. I had been happily married until the death of my husband. We had not thought about that possibility, let alone planned that one of us would be gone. Buy some life insurance on both your lives; not fun to face, but face it you must. After being on my own for a while, I purchased a small bungalow in a nice part of town. It had been built in 1940 and needed some work. It turned out to be a money pit. THEN, just a few short months after paying off the house, the neighborhood started to turn — and not in a good way. Neighborhoods change in the blink of an eye these days and I would never look on home ownership as an investment. I had no mortgage, very low taxes, but high maintenance. I now live in an apartment that costs me about 1/3 of my income, but if the population changes or the landlord stops fixing things, I have choices…which do not include waiting a couple of years for the house to sell. Back to the debt thing. Even though the student loans stand at only 1.5%, get rid of it, pay it off and enhance your freedom. I used the Dave Ramsey method of debt elimination and paid off $26,000 in a little over 18 months. It was beans and rice then and I still love beans and rice now. It is the taste of success, discipline and choice. I gave up quite a bit to be financially liquid, but it was worth it.

    • Bex says:

      The student loans are cancelled after 25 years, you pay 9 % of your earnings over £18k towards it and if after 25 years there is some of it left it simply dissapears. This is why we do not pay off our student loans.

  48. Sarah D says:

    I love this case study, as my husband and I also had a two-body problem—though it took us longer to land TT jobs at the same uni than it seems you did. It’s amazing that you landed those after being on long trips for a few years, rather than fighting through lower-level positions! I suspect this means you’re both rockstars in your fields (and maybe even have opportunities to increase your income a bit through speakers fees, royalties on publishing, or something like that).

    But here’s what I hear in your description of your goals: the desire to be outside more often (also like my husband and me! We got lucky and live in a university town that is only a 20 min drive from mountains with great hiking). So I feel like you answered your own question at the end of option #4 – keep renting in town for now, buy a country house in your ideal location, use it for weekend getaways for now, rent it out when possible, and hold onto it for such future time as you either reach FI or have kids or some other reason (like health) you’d want to stop working full time. That way you have a place to go when you decide to leave town and you’ve gotten a foothold in the property market, but you don’t saddle yourself with a property in the city where you clearly don’t want to be, long-term.

    Good luck!

  49. This is a great case study, with a lot of wonderful advice. I particularly agree with the fact that until the Reader has a clearer idea of where and how they want to live, they aren’t yet ready to buy, and they need to try out lots of options (via open houses, trying the actual commute from a further away place) in order to settle on what works best.

    The piece of advice that has really been bothering at me is that this couple could or should cut their travel budget. Now, I know that it was within a certain context of a view toward financial independence, but I think that it pulls the goalpost too far… It creates a guilty feeling of “we could be saving 9,000 quid per year!!!” rather than something that keeps a margin for something that this couple really loves.

    Respectfully and with much admiration, I think that this suggestion forgets the authority that the author has; when it is said something _could_ be done, the reader will often read it as it _should_ be done, because the author is someone who is successful and admired.

    So, my suggestion is to keep the travel budget (or perhaps even increase it a bit if you make some of the other cuts)! Financial independence isn’t worth depriving yourself of things you love for years (and I know that the Frugalwoods would likely agree.)

    • Mrs. Frugalwoods says:

      I agree! And that’s why I provide so many caveats and context around my suggestions on trimming expenses 🙂

  50. Kris says:

    I think that if your unsure of what type of property to buy, you guys should check out some open houses and the areas your interested in to get a better idea of what type of home you two want to live. You two will feel more confident once you have a clear picture of your ‘dream home’.
    Good luck guys and keep us updated!

  51. Nancy says:

    I too am impressed with the details in this case study. There is already a lot of great advice in this forum! I wanted to just add my 2 cents worth in the discussion as it pertains to the rent vs buy option. It didn’t sound to me as Betty and David have convinced themselves that buying property is for them beyond the idea of real estate as an investment for the future. Because buying is such a huge step, get in to the research phase and decide what it is you’d want for the next 5-7 years when it comes to a home. (there is no right/wrong choice) There is already a work commitment in place for 5 years, so find a living solution that focuses on that. If it’s renting-great! More opportunities to save (and invest) for the future. If it’s buying-fabulous! You have a great start financially which can help set you up for future success. But don’t just jump in to the market because you think it might be a good idea. If looking 10, 15 or 20 years out is too far then narrow the focus. Wishing you all the best!

  52. RG says:

    If you are ethically inclined, please do not buy a property near your parents and rent it out – the proliferation of buy-to-let is a major factor in the rise of house prices in the UK and you would only be contributing to it.

    As another university sector worker, I would be careful to develop a cushion for if one of you needed to go part-time or if you had children. Childcare is pricey in your area, and you would need to cover that as well as the space (although a 2-bed is enough space, I think!). If you go part-time you will need to consider the impact on your research career as it is that, not the teaching, that would suffer. It is very doable and I wouldn’t discourage you, but if you do plan to move into university management or administration it is something to consider. You would also need time for additional qualifications to support certain moves. Finally, while psychology is a booming degree program, that could change, and you should be prepared for layoffs. And as a lecturer myself – in principle we get lots of time off, (although I have never managed to take it all between timetables and marking and research trips and and and) and you should take as much as you can, but you are now more fixed to the term timetable and that will drive up the price of your national and international travel as you’re going when everyone else is!

    All that said, I don’t think buying is sensible when you have a relatively cheap rent and no commute. Rent, go through a whole year in the job to understand what it entails and what your goals are, and set aside a very healthy emergency fund

  53. Cindy in the South says:

    I “get” that most readers are talking about the maintenance costs of a house ,but, I have not had many issues in that regards with my personal residence….usually. I did put a new metal roof on my personal residence for $2,000 two months after I purchased it, and that was planned. I should add, I rented the house for two years first. I have bought (for only $248) kitchen cabinets that are still sitting there because I cannot decide what color I want to paint them, and I am not in any hurry to do so…lol. The house came without a kitchen, so that was one reason it was so cheap. My mom’s house I inherited had been maintenance free until this week….lol. Long story short, I will have to put in new sewer lines for $5,000….ouch. However, that is first expense since I inherited it in 2014. So, my advice, is to buy as small, cheap, and in good condition, as possible (both of my homes are in “sketchy” neighborhoods), if the school is ok. A two bedroom one bath in an up and coming neighborhood, with ok schools, stands to rise drastically in price. I never overbuy. I raised four kids in 912 sq ft. I also drove a Ford Focus with four kids. I try to have an early 1950’s mindset regarding housing. Most folks back then just piled kids in rooms. in bunk beds and had one bathroom. It was a luxury back then, to have an indoor bathroom, in the part of the rural south I live in. I know you live in London, and it may be different there, so if my advice is “off” to you, then feel free to disregard it…lol.

  54. Carla says:

    I love Mrs. Frugalwoods’ suggestion of a practice commute. It really has an out-size impact, and should be a major consideration for wherever you choose to live. It was our #1 criteria when looking for an apartment last year.

    Secondly, as a fellow risk averse person, reminding myself that it doesn’t have to be all or nothing is helpful. If you are worried about the stock market dropping, just put a smaller portion of your savings there. You can add more when/if you feel more comfortable.

  55. Laura Marconi-Cox says:

    I’m in the UK and bought a house in Bradford recently. I nearly didn’t look at it because of the reputation of the next door area but when I checked out the area personally I found it to be quiet and clean. I love living there and do really recommend getting to know a supposedly sketchy area for yourself as other people’s opinions could lead you to miss out on something good.

  56. Joanna says:

    My advice is to buy where you want to live, and ensure the maths compute to rent it out if you choose to somewhere down the line. Most BTL mortgages require 25% equity. Don’t buy somewhere you wouldn’t 100% live yourselves, so spend weekends exploring neighbourhoods near and far, sketchy and up and coming. As pointed out above, paying £1k/month mortgage for 3 years on a £250k mortgage gives you 24k in capital so use that number when considering the cost of renting v buying.

    Lastly, don’t wait for the ‘perfect’ place. In my experience it was the place you want at a price from 3 years ago, and it’s not going to come down. Even in the last property slump good places held their value, they just failed to rise in line with previous expectations.

    Good luck!

  57. This is an interesting case study as I live in London. My girlfriend and I also roughly earn the same as Betty and David. From my experience, living in London can be very expensive depending on things like eating out, travel and where you choose to live. By looking at their budget, I think the couple have a relatively high budget – about £1,312 each a month. I manage to get by on £800 a month and don’t feel like I am missing out. Here are some savings tips:
    Rent – they could move to a cheaper 1 bedroom flat. I don’t see why a couple would need 2+1 bedrooms.
    Vacations – £3,000 seems really high for a couple of trips a year. This can be reduced by researching more affordable options/ destinations.
    Fun money & meals out – Seems high again. Can be improved by having a weekend or two a month where you do free things or spend little.
    Car costs – I don’t know how handy the couple are but you can do the majority of car servicing yourself like oil changes, filters and brake replacement etc. Garages in London can be expensive (labour) and sometimes charge for unnecessary work.
    Gym/ squash – I am sure there are alternative less costly ways to get fit. This depends on how you value this, but at nearly £100 a month I think this needs to be looked at.
    Internet – The best thing to do is to find the cheapest deal (total cost for a year or 18 months) and pay up front. I manage to get broadband for under £10 a month average.
    David cell phone – Buy a phone SIM free and it is possible to get a good SIM only call/data plan for less than £10 a month.

    Regarding the buy or rent issue, I see no problem with renting if you have a good savings rate and invest wisely. Renting is not simply paying of someone else mortgage or throwing money away as a lot of people say; there are many costs involved which come with home ownership. Renting can also give you freedom to relocate to a lower cost area or for better pay. Commuting to London may be tricky due to trains strikes, delays and eye-watering costs.

    Finally, I know that you are risk averse but I recommend investing savings in the stock market. I have been investing since 2010 and haven’t regretted it since. I currently hold low cost global index funds through Vanguard and Fidelity UK. I wouldn’t stand having any cash sitting in a 0.5% cash account. For an emergency fund I use a Tesco current account (3% interest on the first £3K and you can open 2 accounts each).

    I hope this helps. Good luck!

  58. Tina says:

    I think that you need to decide where you want to live before you can buy. If you commute every day but you only benefit from the countryside at weekends, I would suggest being close to work or a good train link in. Your rent isn’t bad but I presume that you’d pay less in mortgage costs for the same type of house.

    Would it be worth moving to a smaller place until you buy (once your lease ends) as that should save money and you don’t *really* need a second bedroom as far as I can tell.

    I definitely would put some of your savings into a Lifetime ISA so you get the government bonus when you buy/retire.

    I would strongly suggest that you don’t pay off your student loans – if they were set up like US ones, it would be different but I think that the fact that you don’t pay them back when unemployed and that they can be written off makes up for the below inflationary interest.

    I’d be wary of buying to let as you’d lose out on incentives for first time buyers and need a bigger deposit if you borrow at all – lots of lenders don’t do BTL for first time buyers.

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