Pay rise - what to do with it?

kidmugsy

newbie_bonnie_blue wrote: »

I'm slowly paying off a credit card bill of around £4000 from my wild spending in my youth... I have no savings, and nothing saved for my pension. I currently rent ... I have been offered a job that is a £36,000 gross increase on my current salary.

I want to finish paying off my credit card, start building a deposit for a house, start saving towards my pension, and building an emergency fund. However, I don't have a clue where to start.

Getting rid of the credit card debt won't take long. Hurray! Next tax year (or sooner?) you'll be exposed to Higher Rate Tax, so you will have to decide the balance between saving for emergencies and house-buying, and contributing to a pension (up to the point where you become a standard rate payer). (Your employer will have to offer you a pension scheme in due course. Join it.)

If you are not going to be a higher rate payer this tax year, then ignore pensions until April, and knock off that debt, and start your cash savings. In fact, I think in your shoes I'd ignore pensions until the point in the (next?) tax year when it is clear that you really are exposed to Higher Rate Tax, and that's when I'd start my contributions. It would be vexing, after all, to make pension contributions and then have your employer go bust and make you redundant so that you're not a higher rate payer after all. By way of practice you can put notional pension money aside into a savings account while you learn the standard of living that you are comfortable with. If in doubt be frugal. It's much easier to adjust expenditure upwards than downwards, so start low.

And one other thing: never buy a brand new car.

atush

Or it could be vexing to not start the pension, and find that you gave up 1-4K in contributions (free money) between now and April?

the most important thing to remember with AN?Y pay rise, is to have plans for it and implement on day 1.

Once you get used to spending it, it is much harder to save it.

newbie_bonnie_blue

atush wrote: »

Who will you work for?? how many employees? They will HAVE to pay into a pension for you, under law soon. In the mean time, you could set up a PP at at least put in all salary over 41K.

I work for a HNW private family. They have under five employees. I'm sure that in due course there will be a pension offered, but right now I don't want to miss out on a year (or more's) worth of saving for the future.

I absolutely agree with not being able to save once you get used to spending what you earn, which is why I'm gathering opinions before I start earning it - a plan is super important to me!

I have no idea how to add more quotes than the one above, but to answer some questions, this is the type of job I hoped to get in about 5-10 years time. Private families generally want what they want, and if they like you, will offer whatever it takes to secure you. It is very much based on luck!

I have NO intention of buying a new car

Thanks again for all your input.

atush

To add more quotes, click the quote/wrap box and copy paste into it.

So look into a PP- your employers may pay into it in future if they like or you can run it alongside. And get ready to start one up the month before your salary increases.