23 and a 31k grad salary. My retirement plan.

Jonathon365 · 16 February 2018 at 2:29PM

Hello all,

I'm a 23 year old working a 9-5(6) graduate job at a large UK telecommunications provider and I earn £31,000 per year. Yep that's my salary and I'm going to share with you my plan for retirement and would love to receive input on some questions I have set out below.

Alongside my graduate job, I run and manage 3 online businesses involved in the supply and retail of ground coffee, own a local rewards company in South Manchester and involved in global cosmetics distribution.

After tax and a generous 10% pension contribution my after tax salary works out at £1800 per month, whilst my businesses net me an extra £1500-£2000 per month before any taxes.

I'm currently investing £500 per month into a Vanguard lifetime ISA from my salary and allowing the profits in the PLC to build up until I pay myself a dividend in March. I expect my salary to increase in March to around £40,000 as I role off the graduate programme into a higher paid position and I'm planning to direct the extra earnings in full to the Vanguard fund. Is this wise?

I'm also looking at investing my business profits into a 'Buy-To-Share' property, where I'll use AirBnB and an AirBnB management company to build some income from short term lets. What's your opinion on this? I'm looking at putting £40,000 down and mortgaging another £100k.

In summary, after July I'd like to be maximising the ISA through Vanguard investments of £1666.66 per month (through a combination of my salary and business profits), earning at least £300.00 per month in profit (after mortgage has been paid) from the AirBnB rental and continuing to run and expand my businesses. Where do you recommend putting the extra earnings from AirBnB and future profits once I've used up the ISA allowance?

[Text removed]

Thanks!!

Prism · 16 February 2018 at 3:22PM

You will be paying a fair bit of tax on those dividends once your salary hits 40K. My general rule, as also someone who runs a limited company is never pay yourself more than the high tax limit unless for you need that amount to live right now. Basically, live on 45K. Keep something in the business in cash for emergencies (I keep about 1 years pay), and then everything else gets put into a pension fund (up to 40K a year). This is by far the most tax efficient way of saving for retirement.

Benefits of a pension rather than an ISA when paid from your own business are that you don't pay corporation tax or dividend tax. Downside is you can't change your mind and get the money before you are 55.

Zola. · 16 February 2018 at 3:30PM

Can you send me a link to the ground coffee shop please

DrEskimo · 16 February 2018 at 3:48PM

Cant help you with your specific questions, but just an observation. I notice there is no mention of a plan to buy a home, either outright or using a mortgage?

Or perhaps this is already in place?

Jonathon365 · 16 February 2018 at 3:56PM

Great question on owning my own home to live in and it's something i'd be interested in your input on.

My thought process is that I need to be based in London for work right now and can't afford a house in the Capital that i'd actually want to live in. If I did buy here, it would likely be in an outer zone, in an area I don't like and significantly push up my commuting costs (I currently cycle to work to save).

Second, I aim to work overseas within the next 18 months and therefore don't want the hassle, especially when I'm already looking to buy an investment property up north.

So in summary, I'm happy to rent in London for the short term and at the same time get on the property ladder up north. Do you think this is sensible?

Thanks!

Jonathon365 · 16 February 2018 at 4:00PM

Prism thanks for your response and it's definitely something for me to consider. Perhaps I'm being overly ambitious, but I'd like to retire much sooner and potentially before I'm 40. Hence why I'm initially inclined to take the tax hit on the dividend and put the money into the Vanguard ISA.

LABMAN · 16 February 2018 at 4:02PM

What's a 31k grad salary?

NoMore · 16 February 2018 at 4:02PM

I would remove your links before the mods do!

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Jonathon365 · 16 February 2018 at 4:05PM

Yes more than happy and I'm planning on writing a blog post about it.

Theres's two parts and the second is the more interesting in my opinion:

At high level I have agreements in place with several coffee retailers who I supply with coffee. This provides me a steady revenue stream, albeit not that profitable and it's something I'm looking to build on.

The second part is the consumer sales which I complete through Amazon FBA (Fulfilment By Amazon). I basically outsource the order fulfilment, customer service and inventory management to Amazon and just supply a central warehouse with the stock. This stock is then sold pan European from the Amazon warehouse without me doing anything.

I also outsource a ton of the admin, sales tracking and marketing to the far east using UpWork. It's all something I'll be going into detail on in my blog.

Jonathon365 · 16 February 2018 at 4:06PM

Labman 31K grad salary = £31,000 annual salary from a graduate level job

Jonathon365 · 16 February 2018 at 4:08PM

Thanks NoMore. I've removed the link to my blog, which isn't a business but just somewhere I'd like to point people to who would like more detail and info.

23 and a 31k grad salary. My retirement plan.

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