Looking for a Savings MOT
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NewShadow
Posts: 6,858 Forumite
2019 savings health check update in post 9 - https://forums.moneysavingexpert.com/showpost.php?p=75370314&postcount=9
Original 2018 post below
Hi All.
It's coming up to the end of the FY and this feels like the first year I've ever really considered savings and investments. Being a grownup is hard!
I've learnt a lot from reading these boards - with thanks to the clever people that respond - but wonder if you wouldn't mind checking what I've done to see if next year needs tweaking?
Current circumstances
Female, 1985, single + no dependents/cat... and no real debt - I have a catalogue account with a £250 limit and the balance tends to float around £100.
Civil Service on c.£28k
Current Savings/ Investments
State pension - 12 years NI conts and NRA of 68... currently
Work pension - Paying into Alpha - 5 years conts so far - and paying EPA3 1 year conts so far
Credit union - £400 payroll deduction monthly. £4000 gets taken out to go into my LISA at the end of the year. The extra £800 pays towards a holiday/christmas/birthdays. This is purely so I don't have to think about allocating money from my bank account - reduces the risk of me spending it.
LISA - £4k in AJ Bell LISA. Currently in cash only just paid in for end of FY. Intended to buy shares as soon as it cleared but now debating if I should invest it as I'm starting to think about buying a house in the next c.3 years and am worried about the chance of losing money in the short term.
Bank - Santander regular saver 3%. Between £100/200 a month - wash up from current account. This is my 'the boiler broke' money. Currently empty... the boiler broke in February... Just paid in £100 and should pay in another £100 if no emergencies between now and payday. Was £2k before the boiler broke.
Goal/ Rationale
So... what I want, in an ideal world, is to have the choice to retire at 60ish AND to buy a house - have a mortgage of around £120k paid off by 60.
I was thinking my LISA would allow me to retire at 60 - but now I'm thinking about buying a house and therefore might need to use the next 2/3 years LISA money for a deposit c.15k.
I'm paying around the same in rent as forecast for mortgage payments so once a house is bought - assuming it doesn't need renovation and is around the same running costs - I should be able to start saving for early retirement again.
Excluding pensions, I'm currently saving around £600 a month in cash, around 1/3 take-home and I could, relatively easily, save another £100 a month by cutting back on meals out and frippery.
I also don't need to spend £800 per annum on christmas/holiday - but I also don't want to be miserable so would appreciate an idea of the difference any extra money could make and where it could go.
I'm also aware that money might be needed to renovate/maintain a house so I'm reluctant to lock it away in something that needs long term regular investment so ideally it would need to be a product that would at least maintain it's value if I stopped contributions.
Questions
Hopefully not asking for the moon on a plate...
Do my current savings levels look reasonable to achieve my goals - is both a house and early retirement doable? Would you recommend a few years of 'austerity' or can I do this while still having fun sometimes?
Should I be investing this years LISA money as I had planned or am I better keeping it as cash - and if cash, should I switch providers or leave it with AJ Bell?
Are there any changes/other products I should be considering and/or is anything I'm doing a waste of time?
If I'm looking at buying a house in a couple of years, should I be considering credit building, and if so, how, given I've never had a credit card or similar and so understand my credit score is low? Or will mortgage companies be okay with the idea of no real credit but also no real debt?
Thanks for reading and thanks in advance for any suggestions,
NS
Original 2018 post below
Hi All.
It's coming up to the end of the FY and this feels like the first year I've ever really considered savings and investments. Being a grownup is hard!
I've learnt a lot from reading these boards - with thanks to the clever people that respond - but wonder if you wouldn't mind checking what I've done to see if next year needs tweaking?
Current circumstances
Female, 1985, single + no dependents/cat... and no real debt - I have a catalogue account with a £250 limit and the balance tends to float around £100.
Civil Service on c.£28k
Current Savings/ Investments
State pension - 12 years NI conts and NRA of 68... currently
Work pension - Paying into Alpha - 5 years conts so far - and paying EPA3 1 year conts so far
Credit union - £400 payroll deduction monthly. £4000 gets taken out to go into my LISA at the end of the year. The extra £800 pays towards a holiday/christmas/birthdays. This is purely so I don't have to think about allocating money from my bank account - reduces the risk of me spending it.
LISA - £4k in AJ Bell LISA. Currently in cash only just paid in for end of FY. Intended to buy shares as soon as it cleared but now debating if I should invest it as I'm starting to think about buying a house in the next c.3 years and am worried about the chance of losing money in the short term.
Bank - Santander regular saver 3%. Between £100/200 a month - wash up from current account. This is my 'the boiler broke' money. Currently empty... the boiler broke in February... Just paid in £100 and should pay in another £100 if no emergencies between now and payday. Was £2k before the boiler broke.
Goal/ Rationale
So... what I want, in an ideal world, is to have the choice to retire at 60ish AND to buy a house - have a mortgage of around £120k paid off by 60.
I was thinking my LISA would allow me to retire at 60 - but now I'm thinking about buying a house and therefore might need to use the next 2/3 years LISA money for a deposit c.15k.
I'm paying around the same in rent as forecast for mortgage payments so once a house is bought - assuming it doesn't need renovation and is around the same running costs - I should be able to start saving for early retirement again.
Excluding pensions, I'm currently saving around £600 a month in cash, around 1/3 take-home and I could, relatively easily, save another £100 a month by cutting back on meals out and frippery.
I also don't need to spend £800 per annum on christmas/holiday - but I also don't want to be miserable so would appreciate an idea of the difference any extra money could make and where it could go.
I'm also aware that money might be needed to renovate/maintain a house so I'm reluctant to lock it away in something that needs long term regular investment so ideally it would need to be a product that would at least maintain it's value if I stopped contributions.
Questions
Hopefully not asking for the moon on a plate...
Do my current savings levels look reasonable to achieve my goals - is both a house and early retirement doable? Would you recommend a few years of 'austerity' or can I do this while still having fun sometimes?
Should I be investing this years LISA money as I had planned or am I better keeping it as cash - and if cash, should I switch providers or leave it with AJ Bell?
Are there any changes/other products I should be considering and/or is anything I'm doing a waste of time?
If I'm looking at buying a house in a couple of years, should I be considering credit building, and if so, how, given I've never had a credit card or similar and so understand my credit score is low? Or will mortgage companies be okay with the idea of no real credit but also no real debt?
Thanks for reading and thanks in advance for any suggestions,
NS
That sounds like a classic case of premature extrapolation.
House Bought July 2020 - 19 years 0 months remaining on term
Next Step: Bathroom renovation booked for January 2021
Goal: Keep the bigger picture in mind...
House Bought July 2020 - 19 years 0 months remaining on term
Next Step: Bathroom renovation booked for January 2021
Goal: Keep the bigger picture in mind...
0
Comments
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first and foremost, the fact that you are asking the question, and articulating it so well, explains a lot..
interesting use of Credit Union > LISA. you could save directly into you LISA i'd have thought, but i understand the 'holiday fund' idea alongside.
buying your own home and increasing Investment as opposed to Saving are areas to focus on, in my view. having a mortgage would raise the inevitable 'do i allocate funds to clear debt or to invest further?' dilemma.0 -
LISA - £4k in AJ Bell LISA. Currently in cash (only just paid in for end of FY). Intended to buy shares as soon as it cleared but now debating if I should invest it as I'm starting to think about buying a house in the next c.3 years and am worried about the chance of losing money in the short term.
Investing in shares for only 3 years carries a nearly 20% chance of a loss at the end. Even with a mixed portfolio there are times when nearly all assets drop at once as we saw in the recent market correction.Bank - Santander regular saver (3%). Between £100/200 a month (wash up from current account).
Have you considered upgrading to the 123 Lite account for £1 per month to get cashback from your bills and 5% on your regular saver?Currently empty... the boiler broke in February... Just paid in £100 and should pay in another £100 if no emergencies between now and payday. Was £2k before the boiler broke.
Why was that your problem if you are renting?Do my current savings levels look reasonable to achieve my goals - is both a house and early retirement doable? Would you recommend a few years of 'austerity' or can I do this while still having fun sometimes?
No idea depends what value of house you are going to buy. I don't see any harm in a bit of austerity for a few years to earn your way onto the property ladder. The best things in life go to those that go the extra mile.If I'm looking at buying a house in a couple of years, should I be considering credit building (and if so, how) given I've never had a credit card or similar and so understand my (made up) credit score is low? Or will mortgage companies be okay with the idea of no real credit but also no real debt?
They might be, but there's no harm getting a good reward credit card via TopCashBack and setting it up to pay off in full each month by direct debit. I find the Clubcard and Nectar points very useful at helping cover the cost of Christmas.
Alex0 -
interesting use of Credit Union > LISA. you could save directly into you LISA i'd have thought, but i understand the 'holiday fund' idea alongside.
Combination of transaction fees on AJ Bell, it being the first year I've done this and me knowing that if the money isn't taken via payroll deduction there's a fair chance I'll pop into the Apple store on payday and lose my mind...
useful debt (like a mortgage) doesn't scare me. I'm also intending to buy a house then stay there (potentially until they carry me out). I'm not one for chopping and changing every few years and don't consider a home 'an investment'.buying your own home and increasing Investment as opposed to Saving are areas to focus on, in my view. having a mortgage would raise the inevitable 'do i allocate funds to clear debt or to invest further?' dilemma.
As long as I know I can pay it by my deadline (60ish) then I'm in no real rush to pay it earlier - plus I understand the longer you can leave money invested the better the returns so starting increasing investments early would be more logical to me than rushing building assets in something I never intend to sell.
But that's me...Investing in shares for only 3 years carries a nearly 20% chance of a loss at the end. Even with a mixed portfolio there are times when nearly all assets drop at once as we saw in the recent market correction.
This is my key dilemma - given leaving cash uninvested in a S&S ISA is (according to the internets) stoopid - transfer it to Skipton? Or invest this £4k and put my next £4k in Skipton and push everything back by a year to give myself time to bed these habits in...?
If you open the regular saver at 3% can you upgrade? I read the blurb and it seemed to say you had to have the 123 when you first applied.Have you considered upgrading to the 123 Lite account for £1 per month to get cashback from your bills and 5% on your regular saver?
Because I wanted an efficient reliable boiler with a working thermostat going into the coldest week in the past decade and the landlord wanted the boiler from the 70s repairing (yet again) by his gas safe mate who could be around some time after work in the next couple of weeks... it was a thing...Why was that your problem if you are renting?
Possibly made the wrong choice - but at least now I'm warm.
Likely house cost around £120k for a two/three bed with a decent garden (out of a major city in Wales is fairly cheap).No idea depends what value of house you are going to buy. I don't see any harm in a bit of austerity for a few years to earn your way onto the property ladder. The best things in life go to those that go the extra mile.
First time buyer so I'm not hugely familiar with the costs but allowing around £10k for surveys/fees/etc so I'm guessing £15k from LISA and mortgage of around £115k (which should be doable on around £30k).They might be, but there's no harm getting a good reward credit card via TopCashBack and setting it up to pay off in full each month by direct debit. I find the Clubcard and Nectar points very useful at helping cover the cost of Christmas.
I shall investigate now...
Thank you both
That sounds like a classic case of premature extrapolation.
House Bought July 2020 - 19 years 0 months remaining on term
Next Step: Bathroom renovation booked for January 2021
Goal: Keep the bigger picture in mind...0 -
If you open the regular saver at 3% can you upgrade? I read the blurb and it seemed to say you had to have the 123 when you first applied.
No idea but you could ask (in writing via secure message), or just close and reopen the regular saver and it would start the 12 month clock again. The cashback on the bills alone are likely to cover 123 Lite monthly fee regardless of the regular saver balance. We also get cashback on our Santander mortgage.Because I wanted an efficient reliable boiler with a working thermostat going into the coldest week in the past decade and the landlord wanted the boiler from the 70s repairing (yet again) by his gas safe mate who could be around some time after work in the next couple of weeks... it was a thing...
Wow never heard of a tenant replacing the boiler - your landlord must be very pleased with their improved asset.Likely house cost around £120k for a two/three bed with a decent garden (out of a major city in Wales is fairly cheap).
First time buyer so I'm not hugely familiar with the costs but allowing around £10k for surveys/fees/etc so I'm guessing £15k from LISA and mortgage of around £115k (which should be doable on around £30k).
£10k on fees sounds 10x too high. Assuming its a freehold the solicitors and searches are about £1k and you won't pay any stamp duty. The seller pays the estate agent. You might need some help with the move but otherwise your plan all looks very possible.
Alex0 -
This is my key dilemma - given leaving cash uninvested in a S&S ISA is (according to the internets) stoopid - transfer it to Skipton? Or invest this £4k and put my next £4k in Skipton and push everything back by a year to give myself time to bed these habits in...?
Personally I would focus on the house purchase for now and not invest the money. Saving for retirement is always good but you will be better informed to make retirement plans once you are in your own home and therefore know key information like the size of your mortgage debt, value of your house, cost of maintenance etc. Also I don't see the point of delaying the purchase and paying rent for longer than needed given that you have firmly decided you are buying a house. That rent could be paying down your mortgage.
Also, don't underestimate the costs of things you will need after the house purchase. Things like decorating, carpets, furniture, renovations etc. You might struggle to save much after these expenses for the first year or so. Having a good "broken boiler" fund before you move in is a good idea if you can afford it.0 -
EJS_Superted wrote: »Having a good "broken boiler" fund before you move in is a good idea if you can afford it.
When we bought our current house the survey said the boiler would need replacing but then on move day my wife discovered it had since been condemned as unsafe.0 -
Saving 1/3 income is good. Buying your own place might alter your outgoings, but if you can maintain anything like that momentum retiring at 60-ish should be doable.
Couple of things to add:
- Assuming you are already, but are you getting maximum matched contributions from pensions?
- Consider taking out Amex credit card - can get a small amount of cash back (we get around £100/year from £5-600 monthly spend) - and will help you build your credit history. Having a credit card - always paid off in full - and having "unused" credit is good from a future potential mortgage lender's perspective. As Martin says.... ALWAYS pay off in full!!0 -
Okay... quick review of 2018 and plans for 2019 - any and all opinions welcomed.
Current circumstances
As before - Female, 1985, single + no dependents, other than the cats...
Goals
All in todays money, so excluding any interest or inflation:
- Get mortgage @ 35 with 20yr term or 25yr with option to overpay
- Retire @ 55 with mortgage paid off and £50k in Sipp - drawdown £10k per year tax free
- @ 60 have min £50k in LISA - drawdown £10k per year tax free
- Alpha pension @ 65 - c.22k per year. Pay tax
- State pension @ 68 - c.8k per year. Pay tax
2018 recap
I got a new job - promotion - still with the CS so decided to focus on that for a while and push back the idea of buying a house.
The job I was going to transfer to in my target area is on pause due to Brexit. Given the no dependents, there's no real urgency, there is a real luxury in having someone else on call to repair things when they go wrong and I just didn't feel 'ready' to buy... feel free to think I'm an idiot
I decided I would buy a house when my savings hit around £30k-£35k - and my goal is for that to happen when I'm 35; so, in 2020 or earlier. Not fixed on the date, I just wanted a date to focus on.
I've had an initial conversation with a broker - based on my current salary and having £25k to put down - He reports I should be able to get £140k and I was quite impressed with how he responded to my 'first time buyer' questions so intend to go with him when I'm ready to commit.
Houses in the area I intend to move to are around £120k-£160k so definitely doable.
Current Savings/ Investments
I decided to take the risk - against advice - to invest my savings in an AJ Bell S&S LISA (fundsmith) and a Vanguard S&S ISA (lifestrategy) - returns have been great at the start of the year but currently on a dip. I invested an extra £2k into my ISA in October to bring my average unit cost down and the value is starting to pick back up [/optimism]
My totals have been as follows:
01 April 2018 - £18,000(ish)
28 May 2018 - £22,479
23 June 2018 - £23,419
30 July 2018 - £24,420
29 Aug 2018 - £25,594
26 Sept 2018 - £25,630 (holiday)
27 Oct 2018 - £24,494 (investments correct)
30 Nov 2018 - £25,301
29 Dec 2018 - £24,089 (Christmas dip)
24 Jan 2019 - £24,824
Additionally, I've now got
SIPP - AJ Bell - £4,800
Alpha (EPA-3) - £2,909 pa accrued
State Pension - £54.70 pw/ £2,844.40 pa accrued
I've also got a credit card which is paid off in full each month - tends to run at around £250 and has a limit of £1k
Calculations - here's where it can go horribly wrong...
If I assume I'm using all my available funds buying/setting up a house in roughly 2 years @ 35
SIPP - 20 years until 55 so: 20yrs*12 monthly payments of £150 (plus the 20% tax relief) = £45k +£4800 already in SIPP the to make c.£50k
LISA - At 35 I'll have 15 years - until 50 - of LISA bonus left for retirement: 15yrs*12 monthly payments of £333 + 15*1k bonuses = £75k to take at 60
Alpha EPA-3 - accrues at 2.32% of gross salary so, yearly projections based on salary forecast:
£29,100 - £675.12 (Oct 2018)
£31,000 - £719.20 (July 2019)
£32,900 - £763.28 (July 2020)
£35,750 - £829.40 (July 2021)
Ignoring any pay awards, by July 2021 I'll have in the region of £5,896 pa pension.
If we then assume I don't get another promotion or pay rise until I retire at 55 then that's £829.40*19 = £15,758.60
Add the £5,896 and we end up with £21,654 to be frozen until I take it at 65
State pension - If I'm working until 55 then that's another 21 years... I might have to pay additional contributions for a couple of years as I think I need to pay 23 for the full state pension - of course, assuming that they don't faff with it again between now and then :rotfl:
Conclusion
IF I keep paying a bit less than £500 into my SIPP and LISA accounts
AND IF I keep my current job/keep paying the EPA
AND IF I get a mortgage to pay of by the time I'm 55
AND IF the Governemnt don't mess things up between now and 2040...
THEN it should all work out...
:rotfl::rotfl:
Opinions?That sounds like a classic case of premature extrapolation.
House Bought July 2020 - 19 years 0 months remaining on term
Next Step: Bathroom renovation booked for January 2021
Goal: Keep the bigger picture in mind...0 -
Given the no dependents, there's no real urgency, there is a real luxury in having someone else on call to repair things when they go wrong and I just didn't feel 'ready' to buy... feel free to think I'm an idiot
That's not idiotic: "know thyself" is good advice. No flies on the ancient Greeks (except literally, I suppose).Free the dunston one next time too.0 -
- Get mortgage @ 35 with 20yr term or 25yr with option to overpay
Why not take out a 30 year term with overpay option? If you chose to make the same payments as you would have under the 25 year deal then you would pay the same interest (as it is calulated each period on the balance) but have lower monhtly commitment if you hit upon hard times? If you used your overpayments to reduce future payments (rather than shortern the term) then it puts you in a very strong position reducing the size of your required emergency fund.I decided to take the risk - against advice - to invest my savings in an AJ Bell S&S LISA (fundsmith) and a Vanguard S&S ISA (lifestrategy)
If you need that money for the property purchase in 2 years that's a proper gamble.Calculations
I haven't checked your maths but you don't seem to be assuming any growth above inflation and fees? For money that can be tied up long term 15 years+ most people should take a sufficiently adventurous asset allocation to generate a real return.
Alex0
This discussion has been closed.
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