Ex-student finding his feet

DMills888

Hi all,

Having received the MSE weekly newsletter for several years, and using some of the helpful guides when purchasing car and travel insurance, I have finally broken my silence on this great forum to see if the knowledgeable users could dole me out some advice on savings and investments for the future. I am a newly qualified junior doctor and therefore am finally earning a salary following six years at uni.

My question to the forum at this early stage is a simple one: once I have paid off any existing loans/overdrafts etc (which I have as top priority), what strategy should i use to make the most of my salary? My medium-term savings goals would be to purchase my first property in the next few years, so i feel that i need fairly easy access to my savings. However, above and beyond that i have very little experience in this area and would welcome any help!!!

:beer:

DM

Annisele

I assume that as a doctor you have access to a final salary pension scheme? If you do, make sure you've joined it.

For now, I think you should just pay off your debts, and build up your (cash) savings until you've got six months of living expenses. Then reassess.

DMills888

Hi annisele, thanks for the reply.

Yes, we are strongly advised to join the NHS pension scheme as it is supposedly very competitive when compared with private sector pensions, so I have gone ahead and done so!

Priority no.1 is definitely to get rid of my existing debt, then begin to build savings from there.

Yorkie1

Aim to use up your Cash ISA allowance, given that you will be a taxpayer and, probably in due course, a higher rate one.

There are several threads on here about regular savers, or other bank accounts with better-than-the-worst interest rates, which you could use to try to protect your cash savings from inflation as best you can.

Stocks and shares investments are not recommended for an investment term of less than about 5 years (preferably towards 10) and they carry some risk of inflexibility in that if you need them at a particular time, their value is at the mercy of the market at that time.

opinions4u

I build my savings plans around the following:

1. Contingency (variable cash ISA, regular saver and easy access / short term notice accounts).
At some point I might not be able to work. So I aim to have six months net pay set aside to see me through in addition to any employer benefits. This money should be ring-fenced for significant emergency, not used to fly off on a trip etc.

2. Known Events (variable cash ISA, regular saver and easy access / short term notice accounts).
Holidays, insurance renewals and other inevitable lump sum bills that come up during the year.

3. Unknown Events (variable cash ISA, regular saver and easy access / short term notice accounts).
Your car will crash, triggering the excess. Your TV will cease to be. The washing machine will pack up. The fridge freezer will go kaput. The iPad will be no more. I assume a life of five years for major appliances and save accordingly based on a price of £500 for each replacement. So for eight "essential" items I'll need £4000 every 5 years. Setting £70 a month aside should cover this.

4. Longer Term Purchases (Fixed rate ISA, variable cash ISA and term deposit accounts).
New car. House deposit. House move. Home improvement or repair. Special holiday (the cruise, not the Costa Plonka). The sorts of major spending you might do every five years. I assume £10k for car and £10k for home improvements every five years.

5. Significant Life Events (stocks and shares ISA).
Wedding, divorce, children (including funding maternity leave), school fees, university costs, doing an Ashes tour down under. Even if they're not on the horizon, they're likely to happen. Factoring them into a savings budget now makes them easier to handle.

6. Retirement (employer pension scheme).
If there's the chance to pay extra in that gets matched by your employer, do it. Free money that comes with a chance to escape a workplace early that you may grow to hate!

Plan well, save hard, don't over-borrow, look to avoid taking a mortgage beyond the age of 50 (or your youngest child's 18th birthday) and don't forget to live a bit too!

I've probably missed a few things out above. You might have to compromise on some of the thinking above. But always keep it in mind and return to a robust savings plan as quickly as possible. Life is usually less of a crisis if your debt are low and your savings sufficient.

atush

Stage 5, S&S isa will also help you retire earlier than your scheme retirement age.

ShootForTheMoon

opinions4u wrote: »

I build my savings plans around the following:

1. Contingency (cash ISA, regular saver and easy access / short term notice accounts).
At some point I might not be able to work. So I aim to have six months net pay set aside to see me through in addition to any employer benefits. This money should be ring-fenced for significant emergency, not used to fly off on a trip etc.

2. Known Events (cash ISA, regular saver and easy access / short term notice accounts).
Holidays, insurance renewals and other inevitable lump sum bills that come up during the year.

3. Unknown Events (cash ISA, regular saver and easy access / short term notice accounts).
Your car will crash, triggering the excess. Your TV will cease to be. The washing machine will pack up. The fridge freezer will go kaput. The iPad will be no more. I assume a life of five years for major appliances and save accordingly based on a price of £500 for each replacement. So for eight "essential" items I'll need £4000 every 5 years. Setting £70 a month aside should cover this.

4. Longer Term Purchases (Fixed rate ISA, cash ISA and term deposit accounts).
New car. House deposit. House move. Home improvement or repair. Special holiday (the cruise, not the Costa Plonka). The sorts of major spending you might do every five years. I assume £10k for car and £10k for home improvements every five years.

5. Significant Life Events (stocks and shares ISA).
Wedding, divorce, children (including funding maternity leave), school fees, university costs, doing an Ashes tour down under. Even if they're not on the horizon, they're likely to happen. Factoring them into a savings budget now makes them easier to handle.

6. Retirement (employer pension scheme).
If there's the chance to pay extra in that gets matched by your employer, do it. Free money that comes with a chance to escape a workplace early that you may grow to hate!

Plan well, save hard, don't over-borrow, look to avoid taking a mortgage beyond the age of 50 (or your youngest child's 18th birthday) and don't forget to live a bit too!

I've probably missed a few things out above. You might have to compromise on some of the thinking above. But always keep it in mind and return to a robust savings plan as quickly as possible. Life is usually less of a crisis if your debt are low and your savings sufficient.

Thank you for a very useful, well-written post. I am in a similar position to OP, having just paid my student debts aged 25.
I like the sound of your template, which I will look towards whilst building my savings. So thank you!!

:beer:

opinions4u

ShootForTheMoon wrote: »

Thank you for a very useful, well-written post. I am in a similar position to OP, having just paid my student debts aged 25.
I like the sound of your template, which I will look towards whilst building my savings. So thank you!!

:beer:

I would caution that real life doesn't always allow for perfection. I'd be lying if I said I'd stuck to it consistently. But it is a fairly decent way of viewing things - what you know will happen, what you know might happen and what happens that you can never predict.

atypical

DMills888 wrote: »

once I have paid off any existing loans/overdrafts etc (which I have as top priority)

What kind of loans do you have? If you're talking about student loans, don't pay them off any earlier than you have to (the terms are too competitive to make that worthwhile).

Your overdraft (presumably at 0%) should be paid only when you have to too.

DMills888

atypical wrote: »

What kind of loans do you have? If you're talking about student loans, don't pay them off any earlier than you have to (the terms are too competitive to make that worthwhile).

Your overdraft (presumably at 0%) should be paid only when you have to too.

I took out a £5000 elective loan last summer, interest rate is 5.9% at present. I had originally arranged to pay this off over 18 months but striving to get it paid off as fast as possible to avoid unnecessary interest!

DM

resilie

Please note that the final salary pension scheme does not exist anymore for new joiners of the NHS scheme. You eont be a higher tax payer for another 2-3 years (depending on rotations and banding). Make sure you claim your professional fees back from HMRC (GMC, MPS/MDU, BMA) as well as for a new stet etc. TBH in your first year you won't really get that much so clearing that loan will be the only thing you probably do as a FYI.
Good luck and remember to have some fun along the way... ;-)