Spend or save for future?

djwolf

I'm approaching 30 and just trying to review my finances for the future. I feel that I'm doing okay but could maybe do better with saving. I earn a reasonable wage which I guess is around the UK average. I have a few thousand in an ISA account but at the same time I have some minor debts which are higher than what I have saved (one car loan and one credit card). I feel that the debts are manageable although the car loan still has 4 years to run which feels like a long time. Fortunately the car is worth slightly more than what is owed currently.

I will probably be looking at buying my own place in the next few years if I can get a mortgage so that's something to bear in mind. Over the last few years I've tended to spend most of my spare money with the philosophy of 'I've worked for it so I may as well treat myself'.

I know I still have plenty of time but just interested to know whether other people around my age have started saving yet or do you mostly spend?

ThrowingStonesAtYou

I've always saved, but thats just me. I am 25 and save about half my wage. I only use a small proportion of my wage as spending money the rest goes on bills. I've got just over £20k in savings and my only debt is a student loan of £5500, but I tend to just treat it as tax so don't consider it a 'real' debt as such.

My partner is a year older than me and has never saved and owes just over £10k, so I guess we're just all different. My plan is to save £30k then buy a house with a £25k deposit. Once I'm at that stage I don't plan to save as intensely as I am now - after all what the point of money if you don't use it to make you happy? Owning my home will make me happy and then I want to use my money to make my family happy which is why I have taken the course I have.

jon3001

Here is the yardstick you need:
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

The formula for someone's average wealth based on age and income is:
0.1 * age * income.

E.g. for a 30 yr-old on £25K/yr the average wealth would be:
01 * 30 * 25 = £75K.

I'll brace for howls of incredulity again... :rolleyes:. But I've quoted examples of young people pushing far beyond these meagre number before (e.g. http://en.wikipedia.org/wiki/Mark_Zuckerberg for a 25-year old worth $2 billion).

Aegis

jon3001 wrote: »

Here is the yardstick you need:
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

The formula for someone's average wealth based on age and income is:
0.1 * age * income.

E.g. for a 30 yr-old on £25K/yr the average wealth would be:
01 * 30 * 25 = £75K.

I'll brace for howls of incredulity again... :rolleyes:. But I've quoted examples of young people pushing far beyond these meagre number before (e.g. http://en.wikipedia.org/wiki/Mark_Zuckerberg for a 25-year old worth $2 billion).

Using the outliers on the wealth curve doesn't verify the accuracy of the formula for those sitting within 2 standard deviations of the norm (i.e. roughly 95% of people).

I personally think it's aimed far too high at the lower ages. Someone aged 25 (i.e. 3-4 years outside university) generally hasn't got a hope in hell of getting anywhere near that £75k figure for many years.

I think a better yardstick is to have roughly 6 months income in savings, then some investments and pension money (using the retirement drip feed formula of half the age you start in gross percentage terms, i.e a 25 year old starting their first pension should aim for about 12.5% gross going towards their retirement).

ses6jwg

I would use your savings to pay off all debts (excluding interest free and student debt) then concentrate on savings and avoiding getting into debt again.

gives a nice clean slate to start with and takes the pressure off you.

bendix

jon3001 wrote: »

Here is the yardstick you need:
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

The formula for someone's average wealth based on age and income is:
0.1 * age * income.

E.g. for a 30 yr-old on £25K/yr the average wealth would be:
01 * 30 * 25 = £75K.

I'll brace for howls of incredulity again... :rolleyes:. But I've quoted examples of young people pushing far beyond these meagre number before (e.g. http://en.wikipedia.org/wiki/Mark_Zuckerberg for a 25-year old worth $2 billion).

This formula is utter nonsense. Given that most people's income at any point in their life is substantially higher than it was previously, I can't logically see how they are going to have accrued 2.5 or 2.5 or 4.5 or 5.5 times that in savings by the time they receive that income.

It's totally illogical.

jon3001

Aegis wrote: »

I personally think it's aimed far too high at the lower ages. Someone aged 25 (i.e. 3-4 years outside university) generally hasn't got a hope in hell of getting anywhere near that £75k figure for many years.

They probably skipped university to build a business or go into other high earning professions.

jon3001

bendix wrote: »

This formula is utter nonsense.

The formula is a statistical fit on actual data.

jon3001

Aegis wrote: »

Using the outliers on the wealth curve doesn't verify the accuracy of the formula for those sitting within 2 standard deviations of the norm (i.e. roughly 95% of people).

What is the total wealth under the curve divided by the number of samples?

mr_fishbulb

jon3001 wrote: »

They probably skipped university to build a business or go into other high earning professions.

What's the point of uni if you can go straight into a high earning profession?

jon3001

mr_fishbulb wrote: »

What's the point of uni if you can go straight into a high earning profession?

Know any good uni courses for footballers/sportsmen, pop-stars/celebs, professional gamblers, etc? What about the more mundane sales jobs and tradespeople - some of whom do very well compared to graduates.