Where to invest £1000+ per month?

pipo

Hi all,

I have recently come out of debt having started contracting. With my first month's pay I paid off all my outstanding debt but now i am at a loss as to what to do with my 'new-found wealth'. As i am now a contractor i am earning quite a bit more than when i was a permament employee but i'm acutely aware of the pitfalls so i want to tuck away cash on a monthly basis in case i get laid off. The theory is if i can live off what i used to then i won't miss the extra that i'm getting now.

My cash ISA is now maxed-out for the year but only has £2k in there as i didn't really know how to manage it properly (wish i had read the golden rule on the main site now :doh:). Is there any point topping this up any more, or are there better ways to accrue interest using a different method of saving?

Any help is appreciated. Thanks

Mickygg

I would recommend always topping up your cash ISA as a first port of call. The rates don't seem great at the moment, but they will rise at some point and then shielding from the taxman is obviously good.

Other methods of interest saving are mainly fixed rate bonds, which offer slightly better rates of interest but then you have to lock away and in case you are laid off you may not have adequate acess to this.

I would open up an instant access interent savings account, like the AA or Tesco, and put your money in there as well as use your cash ISA full entitlement before the 5 April deadline.

KingL

pipo wrote: »

My cash ISA is now maxed-out for the year ... Is there any point topping this up any more

If it's maxed out (i.e. if you've already paid £5100 into it this tax year), then you can't top it up any more. Or do you mean something different?

Note that you generally can't add further funds to a fixed rate account, so if you are drip feeding in regular sums, you would probably have to open a new fixed rate account each month (which is possible, but a bit of an admin burden).

Other options are regular saver accounts (see here). Investments (equities etc, possibly inside an ISA (you have another £5100 allowance for investment ISAs)) and (when you have collected £5000) a Lloyds Vantage account paying 4% Gross.

lisyloo

The theory is if i can live off what i used to then i won't miss the extra that i'm getting now.

Very smart move.
I have been contributing to a pension for 20 years.
I really don't miss the money as I've never had it, but I honestly do know people who put it off and 20 years later they have nothing.
You really can adjust and over decades it equates to a six figure sum.

My cash ISA is now maxed-out for the year but only has £2k in there

This doesn't make any sense.
You can contribute £5100 to a cash ISA in any tax year.
So it's not possible for you to be maxed out and only have £2K in it.

You need to come up with a balanced plan.
I would suggest a combination of a pension, cash ISAs and stock & shares ISAs.
You might initially for a few months want to build up am emergency fund in your cash ISA.
Then once that's full I would look longer term and do all three above.
Pension money gives good tax breaks, but it's tied up until retirement, so you need to balance issues like
1) liquidity (how long it's tied up)
2) risk/return
3) tax breaks
4) managing your cash flow

Having a DD set up for your pension and the other savings should work great as you'll never get used to having the money.
The cash ISA can work as an emergency fund should you get sick or be out of work etc.

pipo

KingL wrote: »

If it's maxed out (i.e. if you've already paid £5100 into it this tax year), then you can't top it up any more. Or do you mean something different?

No, in fact when i tried putting some more in just now it said that i have now used up my allowance for the financial year and not allowed to put any more in.

KingL wrote: »

Other options are regular saver accounts (see here). Investments (equities etc, possibly inside an ISA (you have another £5100 allowance for investment ISAs)) and (when you have collected £5000) a Lloyds Vantage account paying 4% Gross.

I did look at those regular saver accounts in that link but the amounts seem to be limited (like the Santander one to £250 per month). Does that mean i should have eggs in several baskets?

The only caveat that i want to have is that i should only be able to access my money in the event of an emergency, and not an instant access one (otherwise i'd get too tempted )

I also looked at Zopa - anyone have any experience with this, good or bad? I'd like to know what you think.

pipo

lisyloo wrote: »

Very smart move.
I have been contributing to a pension for 20 years.
I really don't miss the money as I've never had it, but I honestly do know people who put it off and 20 years later they have nothing.
You really can adjust and over decades it equates to a six figure sum.



This doesn't make any sense.
You can contribute £5100 to a cash ISA in any tax year.
So it's not possible for you to be maxed out and only have £2K in it.

You need to come up with a balanced plan.
I would suggest a combination of a pension, cash ISAs and stock & shares ISAs.
You might initially for a few months want to build up am emergency fund in your cash ISA.
Then once that's full I would look longer term and do all three above.
Pension money gives good tax breaks, but it's tied up until retirement, so you need to balance issues like
1) liquidity (how long it's tied up)
2) risk/return
3) tax breaks
4) managing your cash flow

Having a DD set up for your pension and the other savings should work great as you'll never get used to having the money.
The cash ISA can work as an emergency fund should you get sick or be out of work etc.

Never really thought about pension - thanks for the tip. So it looks like you answered my question re eggs and baskets. I'll have to go and do some research, or i'm open for recommendations! :rotfl:

As for my Cash ISA, there is only £2k left in there as i've historically used it as a rainy day fund and it's seemingly monsoon season since April. :mad:

KingL

You can put upto £5100 into a cash ISA from 6 April 2010 to 5 April 2011. Only if you have paid in £5100 and then withdrawn £3100 would result in the situation where you have a balance of £2000 and are being told you can't add more. Otherwise it's an error on your bank's part and you should contact them about it. (edit: crossed in the post!)

Yes, you'd go for multiple regular saver accounts if you decide to go that road.

There aren't many accounts that allow you emergency access. You can either get to it or you cant. Maybe you should lock most of it up in fixed rates and just keep a little in a regular saver/Instant access account.

Ed: have a read on Martin's article on the savings fountain. http://www.moneysavingexpert.com/savings/which-saving-account

dunstonh

You can also put £5100 into the S&S ISA. If its long term then going 100% cash is not likely to be the best option. You may not have investment risk with cash but you have inflation risk and shortfall risk (i.e. consistently low returns, not providing enough to achieve objective)

John_the_Boy

If you need a pension that that should be a prime source of regular saving, you get tax perks and the money is tied up. Big downside if you need it fast but as you are saving for a rainy day you should have that covered.

Do you have a non-working partner where you can invest some money and make use of any unused tax allowance they have?

If your new found wealth pushes you into the higher rate tax band be prepared to pay extra tax on any savings that aren't tax free.

You could speculate on premium bonds.

Best of luck building up your nest egg.

Primrose

And don't forget to make allowances for the dreaded HM Revenue & Customs tax due. They seem to be making such a pig's ear of self-assessment at the moment that you need to ensure you always have sufficient money to meet your tax bills (and any unexpected nasty surprises if you're not dealing with your tax through an accountant.

JackRussell

pipo wrote: »

I also looked at Zopa - anyone have any experience with this, good or bad? I'd like to know what you think.

I've been using Zopa, as a Lender, for some time now... 2 years. I regularly drip feed £100 per month into it, and set it to Auto lend to A36 (responsible people over 3 years).

My current rate I lend at is 8% which seems to be working out quite well. The return has been better than a bank account and so far, touch wood, I've not had any bad debters.

The important thing to remember is that using Zopa as a way to build your savings is LONG TERM. There is no way of getting your money back early no matter what the circumstances.

One area I'm now looking at is Wine. Thinking of changing the £100 Zopa investment and switching it to SlateBin.com after seeing them mentioned/interviewed on BBC2's "How to Beat Tough Times: Money Watch"
http: // www. bbc. co.uk/programmes/b00t6cln

The above link needs stitching because I'm a newbie