Best plan for averge earner who wants to think about her future (living in London!)

katherineemma_2

Hi

I'm probably quite similar to a lot of people living in London. I'm currently renting with two friends. I earn an average wage £27000. I have no savings but am pleased to save I've just got out of debt so the plan is to save over the next 3-5 years for a deposit for a house.

My dilemna is that I'm not sure whether to invest with my parents and get a smaller mortgage with them (they have zero mortgage) so they can get a bigger house to live in while I carry on renting in London. I'm getting kind of sick of sharing so I thought I would rent a studio flat instead. I would look at getting a 30,000 mortage out.

Or! carry on saving but realistically it's going to take 5 years to save £20k and even then I'm not going to get much in London. I thought about moving out (it also depends on if I meet anyone but I'm trying to be independent - I can't rely on someone else) of London but then I have to factor in travel costs. I like my job so would like to carry on working where I am but not sure if I could realistically ever afford to but in London. I have thought about part buy part share but still thinking on that oone.

Anyone else got similar stories? If I got a small mortgage with my parents I guess that would then limit me even further if I wanted to buy later on....

princeofpounds

It doesn't sound to me like you can actually explain how going in with your parents would actually work or make you any money (you going to charge them part rent?!), so I'm dubious as to how great an option that is...

Frankly you are better off acting as an independent financial unit and buying a place when you can actually afford to buy a place. And if you can't afford to buy a place then you need to be looking at improving your income and expenditures if that's one of your goals in life.

If you are a little more precise about your options I can talk about it in less general terms but keeping it simple is common sense.

Fire_Fox

Why is it going to take you five years to save £20K when you are on a decent wage? You are taking home £1700 a month - which will obviously increase over time - but only expecting to save £300 a month (£2K being interest accrued)? There are some really inspirational threads on MSE: 'Live on £4K for a Year' (for an entire family! DFW board) and 'Eat Healthily on 50p per Day' (OS board) are two of my faves.

Have you assessed your outgoings and can you account for every last tenner, or is there money that just seems to vanish each month? Are you willing to make sacrifices to your lifestyle in order to get a deposit together quickly? Have you thought about selling your car, matched betting, second job?

princeofpounds

I wouldn't knock in terms of savings plans. 27k is not an easy amount of money to get by on in London. If I was living elsewhere in the country, I would be able to buy a 2 bed flat mortgage free. As it is, that's barely the deposit for a 2 bed in a decent area of London (though obviously deposits right now are a higher than they used to have to be).

LHA rates for a 1 bed in SW london are £230 a week. That's the minimum, benefits-standard housing in a nasty area. So 12k a year minimum would go on rent for someone living independently. Add in council tax and that's over half your income gone already.

Fire_Fox

princeofpounds wrote: »

I wouldn't knock in terms of savings plans. 27k is not an easy amount of money to get by on in London. If I was living elsewhere in the country, I would be able to buy a 2 bed flat mortgage free. As it is, that's barely the deposit for a 2 bed in a decent area of London (though obviously deposits right now are a higher than they used to have to be).

LHA rates for a 1 bed in SW london are £230 a week. That's the minimum, benefits-standard housing in a nasty area. So 12k a year minimum would go on rent for someone living independently. Add in council tax and that's over half your income gone already.

Hence why I asked whether the OP is willing to make sacrifices to their lifestyle.

Running_Horse

Long term think about commuting from or working in the home counties.

You will only ever get part buy in London.

katherineemma_2

ok here is a rough breakdown...
I guess I do still have debts but I don't count them as they are secure/to family (but guess I should still get these both out the way first?)

£80 student loan (£2500 left)
£140 dad (made a loss on selling house with ex - don't even ask me about it - too complicated and just a mega relief to have sold it!) (£2000 left)
£360 rent -I've already sacrificed - I'm in a tiny room!
£80 bills
£120 travel - although I try to cycle and run to work where poss
£450 savings
£130 food - I shop at Tesco and Lidl and local store plus I grow my own
£150 going out (I need a bit of a life!)
£20 phone (payg)

I was reasoning that if I buy with my parents it would be something for the future (I'm an only child) plus it would mean my parents could get a better place now - bit like another pension I was viewing it but this would mean I couldn't buy somewhere but I thought if it's going to take 5 years to save for a deposit for a box in London maybe I should just do that and rent somewhere instead?

But..I'm a bit of a nester so I'd love to have my own space and hence I don't know whether to just bite the bullet and save everything I can (if you can tell me how else to cut spending - please do! I've been monitoring my money for over a year and done pretty well - I was over £8k in debt on cc - just as a%%e about the old house...but anyway!)

shebrett

Could save money on the travel. If you're planning to work in the same place for a while then you could rent somewhere along a direct bus route to work and a monthly bus pass is around £55 per month as opposed to the rail/tube passes which are far more expensive. South London has loads of share houses around your current rental price.

katherineemma_2

That is true. I guess I could also try and be a bit more savvy with food and going out costs too. I'll check out those posts.
I've thought about doing medical trials - though possibly this is dodgy!
So all in all - you reckon stick with it save save save save and buy something of my own in 5 years. One good thing that has come out of this awful recession is I certainly feel a lot more like money and credit is a thing of the past - I used to be so careless and carefree with it. :beer:

property.advert

Do you work long hours ? What about some part time work in a pub or nightclub ? You get a bit of a social life out of it and some cash. If you get a late bar, you can get maybe £50 a night I would think. When I was young, I worked the bar, had a few drinks bought, cleaned up and went to meet my mates in the nightclub. Used to get in free as well because the door staff were employed by the same company.

Can be tiring and looks like only a little money but you don't compare it to your salary, you compare it to your disposable money, after bills and everything has been paid out. It seems a lot more then.

Fire_Fox

katherineemma wrote: »

ok here is a rough breakdown...
I guess I do still have debts but I don't count them as they are secure/to family (but guess I should still get these both out the way first?)

£80 student loan (£2500 left)
£140 dad (made a loss on selling house with ex - don't even ask me about it - too complicated and just a mega relief to have sold it!) (£2000 left)
£360 rent -I've already sacrificed - I'm in a tiny room!
£80 bills
£120 travel - although I try to cycle and run to work where poss
£450 savings
£130 food - I shop at Tesco and Lidl and local store plus I grow my own
£150 going out (I need a bit of a life!)
£20 phone (payg)

I was reasoning that if I buy with my parents it would be something for the future (I'm an only child) plus it would mean my parents could get a better place now - bit like another pension I was viewing it but this would mean I couldn't buy somewhere but I thought if it's going to take 5 years to save for a deposit for a box in London maybe I should just do that and rent somewhere instead?

But..I'm a bit of a nester so I'd love to have my own space and hence I don't know whether to just bite the bullet and save everything I can (if you can tell me how else to cut spending - please do! I've been monitoring my money for over a year and done pretty well - I was over £8k in debt on cc - just as a%%e about the old house...but anyway!)

Well done on reducing the £8K debt and for saving £450 a month, great start. :T OK so out of your take home of £1700 a month you can account for £1500, where is the other £200? Don't you buy Christmas presents, have your hair cut, buy any toiletries or clothing? I would suggest you sit down with your bank statements for the last six months and complete one of these:
http://www.makesenseofcards.com/soacalc.html

Your rent is low, no savings to be made there! With the cooperation of the rest of your household you may be able to cut your bills down - have you switched energy suppliers, do you read the meters regularly, could you use a little less hot water, could you agree to turn the heating down a degree in the evening and off overnight? Why is your travel so high if you are cycling and running regularly? Can you use the bus instead or tube, if you buy a travel pass would you be cheaper buying daily tickets only when it is wet or icy?

£130 food is high for one person, £100 is easy if you are willing to batch cook and look at wastage, £80 perfectly possible, less if you are vegetarian! Wow to growing your own in London :money: are you being clever and growing the most expensive fruit and veggies? I am guessing you like cooking if you like growing so get a slow cooker, pop over to the Old Style board and join the Grocery and Storecupboard Challenges. Are you taking your own lunch to work?

Of course you need a social life, but are you getting the best value for your £150 budget? Can you eat at home and only go out for a drink, go to the cinema on Orange Wednesdays, buy wine from Tesco and sit in the park with friends instead of a pub in summer, cook a course per mate instead of eating out, are you taking advantage of all the free stuff that goes on in the city?
This is a fun book to read:
http://www.amazon.co.uk/How-Lived-Year-Just-Pound/dp/1906593124/ref=sr_1_1?ie=UTF8&s=books&qid=1262557649&sr=8-1

If you do decide to strike out and live on your own, be sure you can afford somewhere with enough space to have a few mates over. There is nothing worse than the four walls of a bedsit or studio flat AND not being able to afford your old social life. If you can have a casual drinks party or DVD-and-a-pizza night you may find you actually save money as you don't have to pay for the taxi home!