The right thing to do?

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CornishOptimist
CornishOptimist Posts: 44 Forumite
in Savings & investments
Morning all,

Wanted some clarification that what I'm doing is the right idea, or some thoughts on what different to do with my money.

Fairly frugal as a person and I like to save about £400 a month, but rather than just lump it into a 1% ISA I like to diversify my savings.

£200 in T*sco current account at 3% interest (staff so no fee for account)
£100 mortgage overpayments
£50 in investment fund (long term plan, maybe 20 years before I cash out on it)
£50 in premium bonds

I'm 29 and my savings/investments are things I want to cash in on in decades, not months time. Want to retire at 55 ideally. Pay in maximum I can to my pension as well.

Thanks
CO

Comments

  • Linton
    Linton Posts: 17,162 Forumite
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    Suggest you forget PBs and put the £50 into investment. The average return on PBs is 1.4% and with a small holding you may well not get that.

    Be careful how you put your drip feeding into investments. £50 or £100 is a very small amount to buy so you need to use a platform which doesnt charge a fixed fee for fund purchases.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    Putting £50 monthly into Premium Bonds is not a good investment. If your mortgage interest rate is low a lot of people would say you shouldn't overpay it and that money would be better invested. However on the other hand I know it is a good feeling to get the mortgage paid off sooner rather than later.

    I would suggest after you have say, 6 months wages emergency cash fund saved, most of the £400 would be better invested in a low cost global diversified multi asset fund of passive indexes, with your preferred percentage of equity to bonds. If you are paying in monthly over 20 years or more you don't need to concern yourself with equity crashes as when they occur you will be buying the fund at a cheaper price.
  • misja
    misja Posts: 8 Forumite
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    Savings being as they are, I would probably pay off your mortgage, and over pay as much as you can. The interest rate on that loan is higher than it is for saving, so by trying to keep money in savings you're losing out to the higher interest rate of the mortgage loan.

    If you can overpay by the usual 10% per year, I'd do that. That's what I'm doing anyway!
  • atush
    atush Posts: 18,726 Forumite
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    S&S isas.

    And more into your pension.
  • jimjames
    jimjames Posts: 17,619 Forumite
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    misja wrote: »
    Savings being as they are, I would probably pay off your mortgage, and over pay as much as you can. The interest rate on that loan is higher than it is for saving, so by trying to keep money in savings you're losing out to the higher interest rate of the mortgage loan.

    If you can overpay by the usual 10% per year, I'd do that. That's what I'm doing anyway!

    I disagree. Obviously it depends on your attitude risk but when interest rates are so low it makes far more sense to invest than to pay down your mortgage. I now have a pot that could pay my mortgage off several times over but there is no point using it when I can borrow at 2% and my investments increased by 15% or so last year.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • capital0ne
    capital0ne Posts: 872 Forumite
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    Linton wrote: »
    Suggest you forget PBs and put the £50 into investment. The average return on PBs is 1.4% and with a small holding you may well not get that.
    I agree that £50 into PBs is probably a waste of time, it will pay out 1.4% but it may take an awfully long time, in the order of thousands of years before you could actually calculate it.
  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
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    CornishOptimist wrote: »
    Fairly frugal as a person and I like to save about £400 a month, but rather than just lump it into a 1% ISA I like to diversify my savings.
    A cash ISA is good for almost no-one, so congratulations on avoiding it.
    CornishOptimist wrote: »
    £200 in T*sco current account at 3% interest (staff so no fee for account)
    You don't say how much you've got right now, but that's only going to be worthwhile for 30 months maximum
    CornishOptimist wrote: »
    £100 mortgage overpayments
    Depends on what rate you're getting, and if overpayments will lower your rate
    CornishOptimist wrote: »
    £50 in investment fund (long term plan, maybe 20 years before I cash out on it)
    Good idea. Your mortgge ovepaymens and PBs might be better going here as well.
    CornishOptimist wrote: »
    £50 in premium bonds
    You might win a million, but more likely you will win nothing. 3% guaranteed is a better bet.
    CornishOptimist wrote: »
    I'm 29 and my savings/investments are things I want to cash in on in decades, not months time. Want to retire at 55 ideally.
    Sensible goals.
    CornishOptimist wrote: »
    Pay in maximum I can to my pension as well.
    What do you mean by this?
    • What your employer will match?
    • The smaller of £40,000 or 100% of gross salary?
    • All your realisable assets?
    • What you can afford after other savings?
    Eco Miser
    Saving money for well over half a century
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    CornishOptimist wrote: »

    I'm 29 and my savings/investments are things I want to cash in on in decades, not months time. Want to retire at 55 ideally. Pay in maximum I can to my pension as well.

    Thanks
    CO

    No, you dont.
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