Spend or save for future?

djwolf

Yeah I do need to reduce my debts which shouldn't be a major problem if I put the effort in, the only thing is I like to have the ISA as a back-up just in case I need urgent money for anything which might crop up. As for a pension I already have a works pension which currently stands at about £8k.

Thanks for the comments.

Aegis

ses6jwg wrote: »

too true

its alright you treat yourself occassionally - but IMo 3/4 of your disposable income should be saved or invested

The biggest issue is how much disposable income someone can actually generate, Here in London, it's quite possible that after paying rent/mortgage, council tax, groceries, utilities, transport costs, etc, you might be just about lucky enough to break even if you earn under the median wage. Putting aside 3/4 of not much is going to get you not much in the long run.

I would always think of this formula as more of a target than anything else, and a pretty unattainable one for most people until they hit their peak earnings with minimal outgoings. At the young end it's truly ridiculous, and at the old end for high earners it seems to assume that they should have a multi-million pound hoard of wealth rather than actually enjoying it.

BritRael

Primrose wrote: »

...I don't think 30 is also too early to start saving for a pension if you haven't yet considered this option. I think the country's economic problems are forcing many people to review their own spending philosophies, reduce their debts and increase their savings.....

100% agree.

As the OP has probably realised, 20 to 30 seems to go much faster than from 10 to 20. Well, the bad news is, from 30 to 40 it goes even faster, and as for 40 to 50, it's the blink of an eye

He is now in a reasonable position and thinking "I've got plenty of time", but soon this time will be gone. For me, it's better to think "right now, I have some spare cash each month, so I"ll save it for times when I don't have enough..".

As the old saying goes, 'make hay while the sun shines'. You never know, it might start raining tomorrow

BritRael

Aegis wrote: »

..Putting aside 3/4 of not much is going to get you not much in the long run....

True. But 'not much' each month is a lot more than 'nothing'.

Aegis wrote: »

...I would always think of this formula as more of a target than anything else, and a pretty unattainable one for most people until they hit their peak earnings with minimal outgoings. At the young end it's truly ridiculous, and at the old end for high earners it seems to assume that they should have a multi-million pound hoard of wealth rather than actually enjoying it.

This 'spend, spend, spend' for enjoyment is a myth that has been spoon-fed to the public by the media for years. Take a look on the debt boards to see if any who bought into it are still 'enjoying' it.

The book which has been discussed here has numerous cases of America's top earner's who although earning hundreds of thousands per year, have almost no money in the bank (in fact, many low/middle earners have more). They have an opulant lifestyle but literally live hand-to-mouth. Accident/illness/redundancy often brings this lifestyle grinding quickly to a halt. This clearly demonstrates that it is not necessarily the amount coming in that is important, it is the amount going out.

ses6jwg

You should spend some time in rural France.

None of them have very much money.

But they have good food, wine, great weather and strong family and social networks.

They are much happier than most British people I meet with their 42" Plasma and 59 plate Vauxhall Corsa.

Primrose

BritRael's comments about time passing more quickly as you grow older are so true. One of the best pieces of financial advice my dad ever gave me was to start a serious savings regime from the day I earned my first wage packet, and to start putting money away in a pension as soon as I could, even though my eventual retirement date was light years away and not even on the radar screen. I did and even though this meant that other consumer desirables sometimes had to be sacrificed to fund these, I have no regrets now I'm retired. I wonder how differently I would now be coping in the recession had I not gone down this route. It's the slow continual drip-feeding of savings and pensions over many years which you need to build up. It is rarely possible to make up the huge deficits necessary in later life, even if you are then in a better earning position.

johncolescarr

In my opinion, you should save and invest from as early age as you can to take advantage of compound interest (earning interest on your interest). You should aim to pay off debts as a priority. There is no point having savings and debts as the interest on debt is almost always higher so you are in effect throwing money away.

After clearing debt you should aim to save up 3-6 months of your income/expenditure as an emergency fund, put this in an easy access account.

The question you need to ask yourself is what are your short term, medium term and long term financial goals.

for goals <5 years (short term), you should look at putting money in a savings account. Add all your short terms goals up and see what figure comes out, this is what you need to save. decide how quickly you want to save it and this will set how much you need to save every month.

For medium to long term goals (such as a comfortable retirement, or paying off your mortgage) you might want to look at choosing some investments that carry more risk, but also offer greater rewards.

It may seem silly as none of us know exactly what is going to happen with our jobs or our lives, but making a plan gives you something to aim for.

I suggest you read some of the guides on the fool.co.uk website, they are very informative and make you think about your financial future.

Once you start to save a portion of your wage each month, you will not feel the loss of spending money after a few months, but you will notice a nice nest egg building up!