A second (or third, forth, fifth, sixth etc) opinion

LightbulbFlashing

Hello everyone, I'm just posting on here really for some second opinions and advice from you all, you've been a great help in the past so I would like to ask you all to have a look here.

I'm a recent 'Debt Free Wannabe'. A year ago I had 4k in debt (overdraft, Credit Card and loan), and this was getting progressively worse. I had my head in the sand and was avoiding the issue.

I had my lightbulb moment and spent the last year building myself out of debt and into the black. I'm now really into money matters (I'm not obsessed by it and I know there are more things in life) and saving.

I've now reached the point where, having lost my last project, I wanted something new to do and have set myself a goal to start of building a secure financial future for myself.

I don't propose to put a SOA of affairs on here as I can manage my budget well enough. After tax I have around 2k, my essentials (mortgage, utility bills, council tax, phones, internet) amount to around 1k. I also receive £480 a month from my fiancee for bills etc. We're getting married hopefully next year and I am saving at least £250 a month into a savings account for this (currently at 4.5k).

What I have started doing is this:

Proposal to set up an ISA and save a small sum each week for events such as Christmas.

I have contacted my bank today and ask if I can pay off an additional £50 a week on my mortgage to reduce its life (at this current rate, this will take off 7 years of my 35 years left). My mortgage is the big thing I want to look out, but not sure how I go about it? I am due for renewal in Jan 2015.

I have set up a 10 year regular savings plan with work where the money goes out of my account before I get paid. I will pay £5 a week.

I have £4800 left on my student loan. I pay around £160 a month, and have set up a DD to pay off an additional £40 a month to get this cleared.

I am considering buying some shares with Royal Mail.

I have a good pension with work already.

Thoughts, ideas?

Thrugelmir

Don't buy shares in Royal Mail unless it's part of a bigger investment plan. Holding a relatively small parcel of shares in one investment isn't really worth it. Targeting your mortgage is more advisable given the term you have. As once this is repaid. Then it's one of life's major worries taken away.

Archi_Bald

Thrugelmir wrote: »

Holding a relatively small parcel of shares in one investment isn't really worth it.

It is also massively high risk to focus on just one share. If you must do that, then there appear to be a huge number of more promising shares than Royal Mail.

Very difficult to comment on the remainder since we don't have enough information about the OP, their tax status, the terms of the investments/savings they have already chosen, or where they have their current account(s) etc etc. But I'll have a stab, anyway:

The overpaying of the mortgage seems a good plan if the interest rate is above 2.4%ish. Not sure about repaying the student loan - depends on what the interest rate on it is, and what your repayment terms/obligations are. Being part of the company pension scheme sounds good, whilst the £5 a week into a 10-year savings plan could have been not the smartest decision. These sorts of plans usually pay a lot less than plain savings accounts/ISAs.

Savings for Xmas? It's getting a bit late now for this year, but perhaps a Nationwide FlexDirect could suit. It beats the pants of any ISA, and anyone working should be able to get the tick on the min monthly deposit easily. Lots of information in other threads about this, as well as other current accounts that the OP may or may not already have.

LightbulbFlashing

Archi_Bald wrote: »

It is also massively high risk to focus on just one share. If you must do that, then there appear to be a huge number of more promising shares than Royal Mail.

Very difficult to comment on the remainder since we don't have enough information about the OP, their tax status, the terms of the investments/savings they have already chosen, or where they have their current account(s) etc etc. But I'll have a stab, anyway:

The overpaying of the mortgage seems a good plan if the interest rate is above 2.4%ish. Not sure about repaying the student loan - depends on what the interest rate on it is, and what your repayment terms/obligations are. Being part of the company pension scheme sounds good, whilst the £5 a week into a 10-year savings plan could have been not the smartest decision. These sorts of plans usually pay a lot less than plain savings accounts/ISAs.

Savings for Xmas? It's getting a bit late now for this year, but perhaps a Nationwide FlexDirect could suit. It beats the pants of any ISA, and anyone working should be able to get the tick on the min monthly deposit easily. Lots of information in other threads about this, as well as other current accounts that the OP may or may not already have.

Ok, if it helps, I earn 35K a year, my partner is on 25K. We have no children, both work in the public sector, both in our 20s and have no children.

Have current account with Lloyds, the savings plan is with an organisation connected to the public body I work for.

Christmas won't be a problem, we are going away and have free bed and board that week, it will just be presents. My student loan was from the period of 2002-2005, so it rests at 1.5%. I just want to get rid of it out of principle, and then throew that money at my mortgage.

Porcupine

LightbulbFlashing wrote: »

Christmas won't be a problem, we are going away and have free bed and board that week, it will just be presents. My student loan was from the period of 2002-2005, so it rests at 1.5%. I just want to get rid of it out of principle, and then throew that money at my mortgage.

What's your mortgage rate? If you're struggling overpaying the student loan is a really bad idea - you can get better than 1.5% in a savings account. The loan will never give you a bad credit rating, it'll never throw you out on the street - but defaulting on a mortgage could.

So you have roughly two options: pay back the mortgage upfront, or keep the money in savings accounts and try to make more than the mortgage rate. The second is more work, and requires discipline that you won't fritter away this pot of money. But it also gives you a bigger fund that can sometimes make things easier (eg buy annual car insurance rather than monthly because annual is cheaper).

Archi_Bald

LightbulbFlashing wrote: »

Have current account with Lloyds

Don't want to sound nosey - but what sort of current account do you have with Lloyds? Do they pay you interest? Is it a current account? Could you benefit from cashback that the Santander 123 pays? Could you benefit from a Halifax Reward (each)? etc.

Archi_Bald

Porcupine wrote: »

you can get better than 1.5% in a savings account.

And a lot more in some current accounts.

LightbulbFlashing

Porcupine wrote: »

What's your mortgage rate? If you're struggling overpaying the student loan is a really bad idea - you can get better than 1.5% in a savings account. The loan will never give you a bad credit rating, it'll never throw you out on the street - but defaulting on a mortgage could.

So you have roughly two options: pay back the mortgage upfront, or keep the money in savings accounts and try to make more than the mortgage rate. The second is more work, and requires discipline that you won't fritter away this pot of money. But it also gives you a bigger fund that can sometimes make things easier (eg buy annual car insurance rather than monthly because annual is cheaper).

Hi, I'm not struggling in paying the student loan? Though I am considering using the £40 a month extra on the loan and instead diverting it to the overpayment on the mortgate, thus paying off £90 extra a month instead?!

Masomnia

LightbulbFlashing wrote: »

Hi, I'm not struggling in paying the student loan? Though I am considering using the £40 a month extra on the loan and instead diverting it to the overpayment on the mortgate, thus paying off £90 extra a month instead?!

Yes it sounds like you'll be better off over-paying on the mortgage.

Are there any additional fees for paying off the mortgage?

Compare the interest rates. Pay off the one with the highest rate first. I would certainly make the mortgage a priority over the student loan, especially if it doesn't cost you extra to over-pay.

Or, if net saving rates are higher than the cost of borrowing, save instead!

sabretoothtigger

overpay debt, fix the rate if that then allows you to. You will then spend more near term but will reduce risk which can be more profitable.

An index tracker fund over a single share for the same reason, risk reduction is a form of smart money use like debt reduction