Thursday, 8 August 2013

Not a bean left

Why howdy, sorry for that blip. Yesterday I was in and out like a fiddlers elbow, people wanting a slice of my time, me being unable to say no, trying to please everybody, getting my knickers in a twist trying to fit everything in. This morning I've been out, so now I'm in, for a while. Mustn't complain, I'd rather be busy than have nothing to do.

In between jobs I managed to watch a programme on the bbc iplayer, while eating my dinner last night. 'Make me a German', (link) is a documentary about a British family with young children going to live in Germany for a week, to learn about how their lifestyles differ from ours. Germany is supposed to be doing a lot better than us regarding economic growth, their manufacturing industry is not suffering the same downturn as ours is. The Germans work shorter ours than we do, yet take home more pay, and have a better work life balance.

Owning your own home in this country is something to strive for, not so in Germany. They are happy to rent long term, often for life. Whereas we see rent as dead money, they don't, possibly because their rents are cheaper and more affordable than ours. They are able to spend more of their income on leisure because they don't have any of the bills associated with home ownership.

Some of you might remember that I have a German brother. He has spent many years in rented accommodation yet seems to have a more comfortable lifestyle than me. I think he planned very carefully for retirement, and I didn't. It's interesting to compare how our two lives have panned out, being brought up in two different countries.

So, is it better to buy, or is it better to rent? I've been trying to work this one out. I was brought up in a Council house, my parents hadn't a hope in hell of ever buying a property. My mum was in charge of the family finances, my dad handed a sum of money over to her every week for housekeeping, it was barely enough due to my dad keeping a good chunk for himself to spend in the pub. Most people rented in those days, only the very well paid could afford to buy. Our village had large Council estates, and a few posh bought houses.

I rented when I first left home, bedsits, flats, and a shared house. I couldn't see me ever being able to afford to buy, I wasn't from a posh family, we didn't buy houses. Fast forward to the age of 27 when I started to earn a decent wage truck driving, and I had a part time job bus driving. My bank balance began to look quite healthy, I wondered what I was going to do with all the money which was accumulating in my account. I had a word with my boss about it, and his immediate response was buy a house, you can't go wrong with property.

I mulled it over, but the thought of being tied into a mortgage for the next 30odd years terrified me. I was a free spirit, how would I cope being shackled to a frightening debt. What would I do if I wanted to take off on a whim, up sticks and go. I wouldn't be able to, I would be stuck. Eventually the fear subsided, the more I thought about it, the more sense it made. I could sell up and move, and besides I couldn't think of anything else to do with my money. I took the plunge, and found a two bedroomed terraced house on the edge of the town, halfway up a hill, in a nice area.

From then on I never had any spare money. It all went into the house, and the next house, and the third house. Each time I moved I stretched myself to the limit, putting down as much as I could for a deposit, leaving me skint again. Luckily I bought at the right time, and the value of my houses have increased. I wonder what position I would be in now if I hadn't bought, if I had paid rent all my life. Maybe I would be where my German brother is, with a nice nest egg saved up, brand new car, foreign holidays, and a good pension.

I wonder if I did the right thing in buying, because now all my money is in the house. It's an ex Council house, and needs work doing to it. I could afford to do some small jobs, but I would have to skint myself yet again and save up to pay for the big jobs. At this stage in my life I am not prepared to do that. When my house is eventually sold the price will reflect the condition it's in.

Saying that, I have no plans to dispose of it at the present. I have worked bloomin hard to get in the position I am in. I am going to enjoy a good few years living in relative cheapness. At the moment I couldn't afford to downsize to a smaller property in a village location, because there isn't enough equity in my house, so as long as the walls are standing, and the roof doesn't fall in, it will do me just fine. When I am ready, in my own time, God willing that I have got some more time on this planet, I will get the money out of the house and spend the chuffin lot. I am a firm believer that we all come into this world with nothing, I aim to go out with nothing. A new born baby does not own a bean when it is born, I hope to get rid of all the beans I have saved, and that will be a job well done.
So, to rent, or to buy, that is the question.
Toodle pip      

37 comments:

  1. Yes, good thinking, "There's no pockets in shrouds" as the saying goes.

    Like probably most people in our generation I was brought up in a council house and property ownership seemed out of sight. After 10 years renting, both private and council, I bought my first house, a Victorian terraced in town, and moved up the property ladder, finishing up in a 4-bed detached bungalow complete with all mod cons, which I extended and improved over about 17 years.
    Also bought my mother her council house and improved it, another mortgage to pay.

    My divorce (ex-wifes idea) cost me my house (19 years 11 months of a 20 year mortgage paid) because the judge decide she could have it, I became homeless.
    My mother had to go into a care home, and when she died they demanded I sold her house (my home) to pay their fees built up over 4 years, so we (new wife) became homeless.
    So despite paying out for about 30 years, I finished up with very little.

    We now live in a privately rented bungalow, and determined to spend whatever we have, after a lifetime of paying mortgages and all the other property-related costs I seem to have ended up with nothing.

    You can rest assured if you don't spend it, somebody else surely will.

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  2. Hi Ilona, Well, that is the question, isn't it? Whether to rent or buy? When we bought our house, we scraped together enough to put a down payment on it and then my grandfather gave us the money for the closing costs. This left us with nothing in the bank but we were quite young and we managed alright. On the other hand, my daughter and her husband bought a condo about 6 years ago and when the economy went bust, the condo lost a lot of value and now they can't sell it because they won't get enough money to pay off the mortgage. They are now renting it out and not getting enough rent to cover the costs. They have moved into a house owned by son in law's mom because they need more room (expecting a baby). So sometimes when you buy property you really don't know what's going to happen in the future. It usually works out ok and it's usually a good investment but I guess not always. I'm glad you have a nice house to live in. Rents over here are so high and sometimes it's not worth paying rent. It's very tricky, isn't it?

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  3. Danneke looking in ## Hi Ilona, like you I had my own property for many years and rented some property out also but about 17 years ago when I thought about retirement I thought long and hard about things in the future especially about building jobs that might want doing or a new boiler system replacing etc and decided I would sell up and rent for my remaining years, that way I would have no real worrys and I could live comfortably off my money , that is my state pension and interest on my money etc, this has given me peace of mind, My 3 children are well provided for and have made it clear they want me to use my money on myself . I can now go off if the fancy takes me, have wheels , can travel etc and no big bills coming in for repairs I have been lucky having a very good housing association landlord who I started out with in a brand new apartment then 18months ago I moved into the bungalow, same landlord and they foot all the bills if anything goes wrong, the rent monthly is ok and I have peace of mind without scrimping all the time. OK I still budget and watch my pennies as old habits die hard as they say.

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  4. Ilona, my family never had any money but always owned a house. My father was a farmer (raised in N. Ireland and England) and could never stand the thought of apartment living. He had a 5-acre farm when he and my mother got married, and it had cold water, barely functioning electricity, and an outhouse and was way out in the country. We moved (to civilization, I called it) later but still had 500 chickens, couple of sheep, etc. When I was married I made sure we bought a house. I love having a garden and privacy. The house was very old and we worked on it when we could. I got divorced and stayed in the house for many years, but 2 years ago sold it and bought a condo. I miss the garden, but we can plant a bit outdoors, and now I have money from the house sale to do some traveling. Planning on England and Paris this fall. Maybe I can meet you! I guess there are apartment people and house people. I didn't look at a house for resale value; I just couldn't see spending years renting. Maggie from US

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  5. Hi Ilona, like you i started off with nothing and i've still got most of it left.
    I think we're part of Europe but we want to be like America and greed has taken over and everyone wants to be rich. I'd prefer Europe especially if German efficiency is true.
    House ownership is a good thing in the long run and rents have shot up, greed again, but the obsession with house prices isn't a good thing.
    Once the house its paid for it becomes an asset.
    Dave

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  6. Hi Ilona,
    This is something I have been thinking a lot about recently. We were going to buy a house when we realised that every house we saw that was in our price range was either not quite in the right area, or had quite a lot of work that needed doing. These were houses that were worth 5 times my annual salary plus my life savings as a deposit. This seemed very scary, and although mortgage payments would be cheaper than renting round this way the thought of being tied down that much put us off. I think we are going to look for other ways to invest our money and plan for retirement.

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    1. Hi Anna, I think choosing the area you want to live in is more important than the house itself. I would rather live in a dilapidated old barn in the countryside, than a smart modern flat in a concrete jungle.

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    2. Couldn't agree more.
      Ruth x

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  7. Would love to know how you're going to spend the chuffin' lot! That made me giggle. x

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    1. Don't know yet, depends on how my health holds out. If it looks like I might last a long time I will extract chunks of money over a period of time and enjoy lots of treats as I slowly go downhill. Or if I am not so lucky and get some warning signals that my body is fighting a losing battle, I will sell, and blow the chuffin lot.

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  8. This was such an interesting aubject Ilona.
    We are interested in how you will get your money out of your house. There are a lot of companies who will buy your house and let you live there rent free and get some capital too. I expect you will be doing lots of research when the time comes.
    Wendy (Wales)

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    1. Hi Wendy. Releasing capital from my house will be a daunting task, as there are so many sharks out there waiting to rip an old lady off. I will do my best to find the right deal.

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  9. I would say if you can afford it, always buy your own house. That way you become master of your own destiny and don't have to keep moving from rented property to rented property whenever the landlord decides he wants to move back in / sell for a huge profit etc etc (I speak from bitter experience here.) The days of lifetime-tenancy council houses are well and truly over and renting in the private sector is not fun at all. We have just bought a house and it is wonderful to be able to put pictures up where we want, decorate how we like and make any alterations that suit us - and to be certain that no-one is going to force us to move because they, and not us, own the house.

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  10. You have to pay mortgage or you have to pay rent, hopefully the mortgage ends one day! I think there was an article in the Mail and/or Guardian online saying that it cost an extra £100,000 to rent over a person's lifetime. Landlords expect rent to pay off the mortgage, cover expenses and give them an income these days in this country. In most areas of the country renting costs more than mortgage payments (although that might change if interest rates go up although I suspect that rents will go up too though as the Landlord will want to cover their mortgage increase). When you're young or if you are retired you might not want security of tenure, most renters get 6 months and then can be kicked out with two months notice afterwards, hard if you have ties to an area like family (elderly or young) or a job. Handy if you are young or don't mind being flexible where you live. Renting has its advantages but in our country I would rather own. Sou

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  11. We bought our house on a 20 year mortgage. We've never got round to upgrading so we're still in a 3 bed terraced but it seems like most people upgrade and eventually downsize and just end up with a 45 year mortgage.
    We had the endowment problem to sort out though.
    It needs doing up now though, so thats a project for the future.
    Dave.

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    1. Hi Dave, long mortgages are scarey, when I took out my present one it was to run till I am 73. Luckily I have been able to save and get it right down. I am technically mortgage free, with the little bit of emergency fund I have in the bank. Good luck with your 'doing up'.

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  12. This is a really good subject, and one close to my heart. My husband and I bought a house (ex council) and then subsequently moved, increased mortgage etc (all well within our income multiples) and ended up for 8 years in a nice 3 bed semi in a nice area. We had only lived there for 6 months when my youngest left to live with her dad, so we had a nice house which was very much underused, and once we were largely 'child free' we made a new life for ourselves. We were able to start to get out and about, travelling a little more and having more regular days/weekends out. We found neither of us were that interested in the house itself, and even though we were both working quite hard we did not like spending our spare time and money decorating, or even cleaning the house. We decided to sell the house and whilst initially we were going to downsize, we ended up thinking that with the equity released from the sale we could really indulge ourselves and travel to the places we had always wanted to go. It was not an easy decision, especially for me, but one I have not regretted. We did rent for a year with the money invested so that we could be sure we were doing the right thing for us, and still have enough money to use as a deposit for a very small, cheap property if we feel it is the right thing to do. One thing I realised from experience is that although you think if you own property you have more security and choice, we found that in reality we did not have that much choice. We did try to relocate in the UK but found that places where the property was cheap enough to buy there was less work and where there was (possibly) some work the property was not affordable. For example, I used to travel to London for work a few times a month, so it would not have been that difficult for me to find work in London; I would never have been able to afford to buy property even on the outskirts, but with an enhanced London wage I would have been able to rent property. Like so much in life, it is a matter of personal preference - I truly do understand the people who like the security of owning their own property, but for me my feet are far too itchy to be planning to spend up to 25 years in the same area/property.

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    1. Hi Alison, I know what you mean about itchy feet, I have always had them. I am sticking with my house for the time being, it isn't in an ideal location, too close to the coast so a long way to travel to get anywhere, but it is in a cheap place to live. I have to have a base somewhere, so it might as well somewhere where I can afford to have a reasonable quality of life.

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  13. Having rented in the past and had some truly sh*t landlords/ladies I am glad we have our own house albeit on a mortgage. But we have always tried to go for houses we could afford and not stretched ourselves too much because we realised that with a growing family we also needed enough money to feed and clothe the kids. Luckily we bought this house 14 years ago and it has increased in value despite being in need of some work doing, unlike my poor daughter who is in negative equity, plus we changed our mortgage just before the crash to a tracker and we are currently benefitting from the low interest rate and overpaying each month to bring down the years left until its paid off. Because our basic mortgage payment is so low we would have to pay at least double or even treble what we pay now if we were to rent a similar sized house. And frankly I would hate to go back to living in someone else's house.

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  14. It seems like somewhere along the line houses were supposed to become a money making investment instead of a home. People counted on this profit and prices increased beyond the real value of a home but people bought anyway because it was an investment. It does make renting look good now that the game has been rigged by mortgage lenders and the governments.

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  15. This is certainly an interesting subject. I own a small flat, which I am responsible for inside; the outside belongs to the community association. I pay a monthly maintenance fee of $285 USD and at this point, have long since paid off the mortgage. Since I now use a wheelchair, I've had the flexibility to adapt the bathroom and widen doors, which makes life a bit more comfortable for me. I "retired" as the result of circumstances, not by my own choice, and now must make do with limited income and rising prices for nearly everything. I have no car, no telly, no cable bill for the telly, my credit card is free of any balance and everything in my home is paid off as well as being in good condition. Unfortunately, I have no garden, either and must rely on the supermarket...The torn wheelchair cushion cover was sent to a tailor who saved me $50 in costs over a new one.

    Your message os simple living is a good one. You are lucky to live where you do.

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  16. Like you Ilona I was brought up in a council house and though it was my parents dearest dream they too never had a hope in hell of buying ... until... their late 50's early 60's when they began giving mortgages away and my parents were persuaded to buy (by a doorstep salesman!!)their council house on an interest only mortgage that would run for the rest of their lives!!! A couple of years later and mobility issues led to first my dad and later my mum needing stairlift/ wetroom etc. Unable to afford these in their now owned by them home they had to sell up and accept a smaller adapted council home in the same street. They were lucky - they were able to go back to a council owned property in the same street and they even benefited by a couple of thousand pounds. I on the other hand had a shotgun wedding at the age of 17 (5 months pregnant) and moved in with my nana. I consider that we too were fortunate in a way - it was mid 70's and our council were wanting to encourage property buying and therefore offered mortgages to those who wouldn't otherwise get them - at the ripe old age of 18 I took out a 100% mortgage over 25 years on a run down terraced cottage costing £2900 - no it's not a typo I needed a 25 year 100% mortgage on two thousand nine hundred pounds. Two marriages and another three children later (now a dear granddaughter too) we own a modest terraced house in a lovely rural village, but are caught in the "endowment mortgage trap" We pay interest only on the mortgage due to finish in 5 years time, and also into an endowment policy that was supposed to not only cover the mortgage but also give a little nest egg for retirement. Upshot is we now need to do this property up and downsize in the next couple of years. Still the positives are that we have good equity in this property so hopefully a downsize should in theory leave us mortgage free. What a minefield this property ownership can be!!!

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    1. Hi simplyvintage, i had a £9000 shortfall on my endowment and 8 years before my mortgage was due to end i changed my mortgage to two thirds interest and one third repayment but kept the endowment going. So in the end i just managed to pay the capital back. I also had a tracker (they charge more on fixed deals) but you need to be prepared for intetest rate rises in the next year or two. Your endowment statement gives you a projected shortfall. Hopefully it would work for you but get some proper advice.
      Dave

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  17. Isnt anyone here concerned about providing for their old age or do they expect the state to pay for nursing home care etc. because if they do they are in for a rude awakening.
    Also the idea that people who own houses are somehow "posh" is ridiculous.

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    1. Actually, yes, I do expect the state to keep me in my old age considering DH and I have paid taxes and National Insurance for years, although I know it won't. NI was supposed to go towards things like care in a person's old age, although the corrupt system doesn't work that way nowadays. Anyways in 2017 the law is set to change so that a person's home shouldn't need to be sold to fund care. I think its disgusting that my MIL had to sell her home and use the proceeds to fund her care when my FIL had fought for his country, been a prisoner of war and then worked in the mines for years to provide that home for his family!

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    2. In the 1960's people who were buying their house were thought of as posh, not now of course. I won't mind paying towards some help when I am older, but after the government has helped themselves to income tax and national insurance from my wage packet every week for 45 years, I think I am entitled to some back.

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  18. Great post Ilona. I have owned a few properties and now, after divorce, rent a lovely cottage in East Anglia (which, incidentally, i could never afford to buy)
    I treat this property exactly the same as those i have owned-i.e i put up pictures, decorate etc and my landlord doesnt mind at all as he knows i am a good tenant.
    I have several friends who are retired and they can't afford to maintain their (owned) homes and some of them live in quite poor conditions.
    Yes i might have to move if my landlord wants the property back, but i find that an opportunity rather than a worry and there are lots of really lovely properties in East Anglia.
    So for me, as a woman in her 50s, renting is perfect.
    Ruth

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    1. Ruth, this is a great reply. I was very wary when my husband suggested that we sell our house to allow us to enjoy our life. I had all sorts of concerns about rented property, but having spent one year in rented property a lot of my concerns have been alieviated, although I am realise that not all landlords are as good as ours. We had a real problem getting our (huge) deposit back from the estate agents, and our landlady was very helpful with this. I am glad you are happy living in East Anglia, we are working in North Norfolk for the summer, and the house prices here are definitely outside our budget but it really is a lovely, peaceful place to live. I also like the fact that you would consider having to move as an opportunity rather than a worry - not many people like change, but we have found that change can provide good opportunities (we would not have our current lifestyle without things not going to plan over the last couple of years).

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  19. Here in Norway renting is something you only do when you are very young and until you get a steady income; then you buy something. We had to rent something three years ago while we were building, but we both disliked the feeling of not owning our own home. We have gone from a huge house to a smaller one and are very pleased to live with less. I am very grateful to own my own home and wouldn't have it any other way. "My home is my castle" ;-). All the best, Pam

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  20. To those who advocate renting for life, can you explain how you propose to be able to pay market rate rents in your old age?

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    1. I will get my state pension in about 15 years and will draw my occupational pension at the same time. I, like Ilona, live frugally and have no fears that i will have enough for my old age-including paying rent.
      I have always saved and have no worries.
      I imagine that people who have not saved and/or do not have occupational pensions will have to rely on what is left of the state.

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  21. Lots of interesting ideas and opinions, there's positives and negatives on both sides, all very sensible from the writers point of view.

    I think it comes down to individual situations and personal preferences.

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  22. Hi Ilona,
    What a great topic and enjoyed reading your post as well as all the comments. Do you have in the UK reverse mortgages? You qualify once everyone on the house deed is 62 or older. It's a way to live in your home but tap the equity for living expenses. There are pros and cons and the guidelines seem to change often but I am hearing of baby boomers in the States doing this. I noticed some comments mentioned endowments...can you explain how that works? I've never heard of this over here.
    Thanks....
    Nancy from Northern California

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    1. Hi Nancy, yes I think we do have reverse mortgages, that will be something I will look into at a later date. An endowment mortgage is where the monthly payments are split in to two parts. Half goes to pay off the mortgage and the other half goes into an investment scheme which is supposed to grow into a sizeable sum to pay off what's left in full, and have a bit left over, several years down the line. It is widely reported that a lot of investments are not performing very well and there isn't enough money in the pot. Then the home owner has to put extra money into the investment, making up the shortfall.

      I never had a mortgage like this, preferring to take an ordinary repayment mortgage.

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    2. Thanks Ilona for explaining the endowment scheme in the UK.
      Nancy from Northern California

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  23. Like Pam in Norway, here in Canada, most people who rent are young and just starting out, or live in an area where home prices may be too high to get into the market (Toronto, Vancouver, Calgary, Montreal). In most communities, you can buy at fairly reasonable costs. We bought our first house at 20 and currently only have a small bit of a mortgage left. Our mortgage payment plus our taxes and insurance have always been lower than what a rental payment would be as rents are very high here. We're now building in the country and if all goes well, we'll be in our new house next summer, without a mortgage. At 51, we'll be mortgage free for the rest of our lives and our hope is that we'll be able to stay in our home until we die vs. renting or going into a senior's home, where the monthly costs are incredibly high!

    Great post. Thanks for sharing!

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  24. It wasn't just "posh" people on "very good income" that bought their own houses whilst I was a child. My parents bought their first house in the late 1950s (though my mothers mother before her had owned her own house - when that was unusual). Though I had a very ordinary set of friends and acquaintances as I was brought up I wasn't aware of anyone who didn't own their own place - so I guess things vary.

    Re the reverse mortgage idea on the house - the one thing I have noticed is that (unless they've changed things since) that women get paid less than men still in this sort of scheme. I was planning on doing that myself in later life until I found out I would be discriminated against for being a woman. I suspect this would still be the case for a few years yet. Hence I decided that, as I have always been on too poor an income to be able to give much to charity at all, that I will just leave my house to charities of my choice when I die. At least that way I'll know that I have been able to give a decent size sum to charity at some point (even if I wont be around to see the giving of it).

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