What are our best options? Advice please!

x_missymoo_x

Hi all,

I apologise in the first instance as this thread is similar to one posted very recently, however I did not want to confuse things for the OP in question! Secondly, I am a complete noob when it comes to savings, money matters, and now buying our first property... I am thankful in advance for your patience

The situation is this - I currently have £4600 in a Natwest First Reserve account (with a pitiful interest rate, I know!) with the aim of saving to buy my own house.

I, until recently (pah!), have not been very good with money and have been consistently living to the limit of my £2000 overdraft of my graduate account A few months ago I reduced the limit to £1600, and for the last 3 months I haven't been more than £1000 overdrawn, however I have been putting money aside into our savings account. After an expensive Christmas I am currently around £250 in the black after only being paid on Dec 24th, but I know this isn't going to last very long... after some advice from the helpful people in the Home Buying area, I *think* I have decided I will be better off using some of our savings to put into my normal account to get me completely in the black (yay or nay??). Let's say I take £600 from savings to keep me in the black, live frugally and then not put anything away this month, we now have £4000 of savings. From January 2013 pay, I can then start saving properly and hopefully not need to dip into my overdraft again *fingers crossed*

So what do I do with my money!? I'm looking for something with high interest if there is such a thing, and *should* be able to put in £1k a month. I'm aiming for a target figure of around £15k, although more would obviously be better. I don't know if this is completey unrealistic but would love to be out before Christmas next year - 12 months!! :eek: Just for peace of mind I would like to be able to access our money at any time and not have limits for withdrawals. I'm clueless about ISA's although I keep hearing about them. I have also heard things about 'Save to Buy' schemes, however have since heard things about being tied down with not necessarily the best rates blah di blah.

So any suggestions, tips and advice etc on what to do with our money and how to get the most of it, with the main goal of buying our first property (before next Christmas!?), will be greatly received

innovate

How much interest do you pay for your overdraft? If more than you can get in a savings account, pay it off, then keep in the black and put the rest in savings. If less, keep the overdraft until the tables turn.

x_missymoo_x wrote: »

I'm clueless about ISA's

Cash ISAs are just savings accounts in which you don't pay tax on the interest. Have you read about about ISAs on the main site? http://www.moneysavingexpert.com/savings/best-cash-isa

x_missymoo_x wrote: »

I have also heard things about 'Save to Buy' schemes

You would commit months if not years in advance to a mortgage rate which may not be the best once you want a mortgage. They would have to pay you a huge interest rate on your savings to reduce your risk. No bank or BS pays huge interest rates these days......so best to stay clear of 'save to buy' schemes.

You should both start with cash ISAs. You can put £5,640 into one each before April 6 2013, and then £5,760 the next FY.

BUT you can earn better interest in a First Direct Regular Saver. You can put up to £300/mth each into one of these. Your money is locked up for 12 months - which shouldn't be an issue since you have a bit of spare savings readily accessible for emergencies. When matured, empty the Regular Savers into ISAs.
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

There's a special ISA forum on MSE. http://forums.moneysavingexpert.com/forumdisplay.php?f=18

You should also be thinking far ahead, about where your income will come from when you retire. The sooner you start putting money into a pensions pot, the more comfortable you can live in your older days. Are you in a company pension scheme / can you be in one? If yes, and if it's enough contribution, fine. If no, look at setting up your own SIPP, or increasing your contribution to the work scheme, with something like £50/month each.
http://www.moneysavingexpert.com/savings/discount-pensions

x_missymoo_x

innovate wrote: »

How much interest do you pay for your overdraft? If more than you can get in a savings account, pay it off, then keep in the black and put the rest in savings. If less, keep the overdraft until the tables turn.

From Natwest... "you will pay interest on the amount of the overdrawn balance that exceeds the relevant threshold at a rate of 1.38% per month, which is equivalent to 17.81% EAR."

As I am in my third year of being a graduate my interest-free limit is £500.

Buffett

If you're paying any interest on the overdraft then you're nuts leaving the whole £4600 where it is. Use it to keep yourself in the black and you'll save on the interest charges and thus be able to save money faster.

As innovate says, a cash ISA would at least give you tax free interest - what little you get these days!

Personally I'd leave ~£5000 in an easily accessible high-interest account as a contingency because, well, life happens! Anything above that you could put into an ISA account.

As you're looking to buy in the quite near future, the interest rate is not going to make much difference in terms of saving for your deposit. So focus on cutting costs wherever you can, sell things you don't need, etc..

x_missymoo_x

innovate wrote: »

Cash ISAs are just savings accounts in which you don't pay tax on the interest. Have you read about about ISAs on the main site? http://www.moneysavingexpert.com/savings/best-cash-isa

You should both start with cash ISAs. You can put £5,640 into one each before April 6 2013, and then £5,760 the next FY.

I apologise if I am being really thick here, I did say I'm a noob at this ...

So let's say I open an ISA and put what we've got so far into it. We can keep putting more in until we get to the £5640 limit. When that happens we can get my husband to open another ISA and put anything else into that. After April 2013 the limits are 'reset' as it were back to £5640. If and when we reach that limit, can either one of us open another ISA? Is there a limit to the number we could have, or is there a more preferable option for anything in addition the the ISA limit.

And secondly, what will happen when we want to take the money out? Are there penalties, e.g. losing the tax-free interest?

x_missymoo_x

Buffett wrote: »

If you're paying any interest on the overdraft then you're nuts leaving the whole £4600 where it is. Use it to keep yourself in the black and you'll save on the interest charges and thus be able to save money faster.

As innovate says, a cash ISA would at least give you tax free interest - what little you get these days!

Personally I'd leave ~£5000 in an easily accessible high-interest account as a contingency because, well, life happens! Anything above that you could put into an ISA account.

As you're looking to buy in the quite near future, the interest rate is not going to make much difference in terms of saving for your deposit. So focus on cutting costs wherever you can, sell things you don't need, etc..

Good advice, thank you

innovate

Each of you can put £5,640 into an ISA in the financial year 2012-13 (i.e. before April 6 2013). That makes £11,280 for 2 people.

In Financial Year 2013-14, each of you has a cash ISA allowance of £5,760. (£11,520 for the two of you)

If you have an instant access ISA,

• you can withdraw any time you like, without penalty.
• you cannot deposit more than your annual ISA allowance in each Financial Year, regardless of how much you withdraw
• you can also pay your 2013-14 allowance into the same ISA but you might want to open a new one if interest rates are better in April (and have your existing ISA transferred into it if transfers in are allowed)

If your ISA is fixed-term, you are likely to

• only be able to make one, max two lump sum deposits
• have to pay a hefty penalty for early withdrawals, if early withdrawals are possible at all

You cannot pay more than the annual allowances into your ISAs each year. From the figures you quoted, it doesn't look at if you'd bust the limits - - - but if you do, come back once you have fully read the ISA article.

innovate

x_missymoo_x wrote: »

From Natwest... "you will pay interest on the amount of the overdrawn balance that exceeds the relevant threshold at a rate of 1.38% per month, which is equivalent to 17.81% EAR."

As I am in my third year of being a graduate my interest-free limit is £500.

So there's your answer - reduce the overdraft to at least £500 tomorrow. Or tonight, if you do it online banking.

You could keep the remaining £500 , but only for as long as it is interest free.

BTW, First Direct accounts come with £250 interest-free O/D, and give you access to their 8% Regular Saver.

innovate

Oh, and you can get £100 for opening a First Direct Account. May be even £125, some MSEers are touting referrals for it, if this is your kind of thing.

x_missymoo_x

innovate wrote: »

So there's your answer - reduce the overdraft to at least £500 tomorrow. Or tonight, if you do it online banking.

You could keep the remaining £500 , but only for as long as it is interest free.

BTW, First Direct accounts come with £250 interest-free O/D, and give you access to their 8% Regular Saver.

Ok I'm just thinking aloud now as it were...

If I reduce my overdraft now to £500, this would give me an available balance of £750 until next payday - currently £250 in the black at present but this won't see me until payday. I still have about £250 of outgoings left to be paid this month, so that would give me £500 (the remaining overdraft) to live on until January pay - £100 a week. This means I won't be taking anything away from our current savings (as I had originally thought to do), but then I won't have anything to put into the savings at the end of January so savings will stay at £4600.

Assuming I go right up to my limit, when January pay goes in I will then be £1000 in the black (wages = £1500). My monthly outgoings are £300, so I would be left with £700 of my own money. If I could live frugally again on £100 a week, providing it worked throughout January, I would therefore have £300 still of my own money to put into savings. February pay would take me to £1500 in credit and I would be better off again, and hopefully not need to sink into overdraft again.

Obvisouly if things went balls up this month I could dip into the savings pot, but then hopefully I would be in a better position to put it back in plus more in the future.

Hmmm, this sounds good in theory now - can anyone see any problems with this? Have I made these calculations correct or have I misunderstood this completely??

If I can't even sort this out now what hope have I got when I actually own a house?!?! :rotfl:

jimjames

:eek:

x_missymoo_x wrote: »

Ok I'm just thinking aloud now as it were...

If I reduce my overdraft now to £500, this would give me an available balance of £750 until next payday - currently £250 in the black at present but this won't see me until payday. I still have about £250 of outgoings left to be paid this month, so that would give me £500 (the remaining overdraft) to live on until January pay - £100 a week. This means I won't be taking anything away from our current savings (as I had originally thought to do), but then I won't have anything to put into the savings at the end of January so savings will stay at £4600.

Assuming I go right up to my limit, when January pay goes in I will then be £1000 in the black (wages = £1500). My monthly outgoings are £300, so I would be left with £700 of my own money. If I could live frugally again on £100 a week, providing it worked throughout January, I would therefore have £300 still of my own money to put into savings. February pay would take me to £1500 in credit and I would be better off again, and hopefully not need to sink into overdraft again.

Obvisouly if things went balls up this month I could dip into the savings pot, but then hopefully I would be in a better position to put it back in plus more in the future.

Hmmm, this sounds good in theory now - can anyone see any problems with this? Have I made these calculations correct or have I misunderstood this completely??

If I can't even sort this out now what hope have I got when I actually own a house?!?! :rotfl:

Your calculations make sense but you might want to review your spending and outgoings in more detail. To be able to spend £2800 per month with no rent or mortgage (or do you also pay rent to parents?) you must have some serious spending although you also said you've saved £4600 in the 3 months since Sept which seems really good going.

Is the £100 per week joint spending or just one of you? Detail all your expenses down to the last bit and you may find ways to be able to save even more. As an example a £2 coffee may seem like "only £2" but do that every day at work and that's another £40 per month you'd have for savings.