Saving Now!

marathonic

Based on an income of £20k a year and saving around £950 a month, your expenses must be somewhere in the region of £450 per month.

That means that your current cash savings would cover expenses for almost 2 years. At this point, unless you have immenent plans that would result in a significant increase in expenses, you really need to consider investments as opposed to cash.

Have you read the recent headlines about inflation exceeding 3%. In effect, you are going backwards with your Cash ISA at 2.25%.

That's not to say to invest the funds in your cash ISA. You need cash investments as an emergency fund for unexpected expenses that may occur at a period where markets are low (meaning you shouldn't sell your investments to fund expenses).

The recent 10%+ pullback in the markets is all the more reason to consider looking into starting investing.

marathonic

To put this into perspective, I'd consider your current cash savings ample for an emergency fund for someone with expenses of £1670 per month, i.e. 6 months expenses.

I'd increase this 6-months to an amount of up to 12 months for someone with dependants. Basically, this would cover them and their dependants for up to a year if they happened to lose your job.

You're never going to MAKE money by saving in cash.

lawlie

Slow down for a second!

It's definitely a positive thing that you are planning ahead for the future, and getting familiar with the types of savings and investments you can do. Regular savings account is also a good sign and definitely recommend FD (I was lucky enough to get the 8% rate last year).

The problem is, don't get TOO excited about them now. Yes, be aware of them. The truth of the matter is, you don't have that money to invest now.

It seems like your next step is to save and invest in a house (sounds like it, from your plan). For that, you need to realistically think about how much you need, and when you need it (because there is no point in tying up your money in shares or passive investing if you are looking for your money in 1-3 years time to buy). Are you buying in London? You'll be saving for a while.

marathonic

lawlie wrote: »

It seems like your next step is to save and invest in a house (sounds like it, from your plan). For that, you need to realistically think about how much you need, and when you need it (because there is no point in tying up your money in shares or passive investing if you are looking for your money in 1-3 years time to buy). Are you buying in London? You'll be saving for a while.

My understanding of his posts suggested that he has no intention of moving out and was only looking at houses for the purposes of BTL. That idea should be shot down for many reasons. I am considering BTL myself but not until I have 40% equity on my own home and a 25% deposit for the BTL property.

Given the current level of savings of a little over £10k, an income of £20k and the fact that they are living in London, investing seems the best idea to me because there is NO HOPE of getting a house in London in the near future.

100saving

thanks for the above advice keep it coming!

i have looked at the news and have seen the inflation exceeding 3% (coming soon??).

i have some very short term plans. by December 2013 have 15k in saving. after this its hard to say as i will be having my review at work where i am hoping to get a pay rise and i am hoping for rise of around 2-3k in the next 6months once i finish my training. all this will effect the amount i can save. at the moment i save 950ish each month but in 6months i could be able to save 1200+.

i am doing a lot of reading on investments at the moment but it all still sound a little complicated. i have been think about getting a BTL for a few years now, i know a few people that have done well out of it that’s why its my first part of the plan. if you where me what would you do?

i know it has been said on here that i should not put all my eggs in one pot i.e. property. but i think buying one renting it out and using the rent + what i am earning to save, then reinvest again would be a good idea? i am not talking about just reinvesting in property i just don't know that much about shares etc.

marathonic

100saving wrote: »

if you where me what would you do?

I'd open a S&S ISA and pile everything into the Vanguard LifeStrategy 80% fund. This fund is well diversified and only missing a few things that could be achieved by adding one or two additional funds.

The thing is, the Vanguard LifeStrategy 80% fund is diversified enough that noone could tell you that it's a very bad idea to use ONLY this fund for your monthly investments for the initial year or two whilst you're reading more and gaining a better understanding of investments.

When you eventually decide to add another fund, I wouldn't sell any of the Vanguard LifeStrategy 80% fund. I'd just redirect a proportion of my subsequent monthly investments towards the new investment. This reduces the impact of the dilution levy (a small fee charged on entry to the fund that has little impact on your returns if you hold for 3-5 years).

To be honest, saving in cash is going to take a very long time to achieve a notable deposit for a property anywhere near London.

So basically:

• Vanguard LifeStrategy 80% fund
• Read, Learn, Read, Learn
• Add a fund or two to further diversify the Vanguard LifeStrategy 80% fund if desired

You'll have enough knowledge to decide what to do next by the time you reach the stage where you're able to buy a property.

Edit: My Vanguard LifeStrategy 80% fund suggestion isn't to invest all cash - I'd leave the current cash ISA savings where they are and invest 100% of new money into this fund.

innovate

100saving wrote: »

if you where me what would you do?

I would get of that BTL bandwaggon fast and instead understand what the advantages of a balanced investment portfolio are.

100saving

Thanks for the advice!

Does anyone know what bank is best to do S&S ISA? As I have my ISA with Barclays is this the best place?

Also how much is a good amount to start with? £3000?

innovate

Best is if you do not do an S&S ISA with a bank (if you did, you were almost certainly screwed).

You do not start an S&S ISA (read: an investment) with a sum of money you have to invest. You start it by deciding what your portfolio is. You want a balanced portfolio, and you want to keep it balanced.

Once you have decided on your balanced portfolio, you will look for a platform on which you can invest your balanced portfolio. It is extremely unlikely that you would want to choose a bank for this since they are unlikely to be able to accommodate your chosen portfolio, and even if they were, they would most likely not be the most economical. You'd want one of the discount brokers for your investment.

Loads more reading for you to do, methinks.

100saving

So I have been looking and reading more about the S&S and i have it down to two possible options:

Vanguard LifeStrategy 80% Equity - http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-income

HL Multi-Manager Income & Growth Trust Income Units
http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hl-multi-manager-income-and-growth-trust-income

just wanted to see your thoughts? I am thinking about keeping my savings growth going and just investing around £300-£400 a month and see how thing are looking before investing more?