How Much Do You Keep in Savings Whilst Trying to be MF?

RoaringTwenties

Just something that's been going round in my head recently, thought I'd start a thread and see if anyone wanted to chat about it

Our savings have been up and down over the last decade or so, at one point we had £10, at another £20,000 (the former after expensive fertility treatment, the latter after I worked 6 months notice before becoming a SAHM and saved every penny!) We are quite close to MF now - about £20,000 left - and have decided to run at low savings for the next couple of years till we get it completely paid off. We've currently got £3000 in ISAs. We put money aside every month for everything from the TV licence to annual landline rental to new specs to kids Xmas/birthdays to car insurance/MOT/breakdown cover to holidays fund, so all that kind of stuff is covered. In a separate pot we have enough money to buy a new car (which we're going to do when we trade ours in this summer).

We are also well insured with life/critical illness policies, OH has death in service and v generous sick pay, and we have accident/sickness/unemployment insurance that pays out swiftly and for a year. We've just replaced our kitchen & ours is a modern house so unlikely to need a roof anytime soon. The £3000 is really for the boiler [STRIKE]which is on its last legs but we'll just ignore that for now[/STRIKE] :rotfl:

We had an opportunity with our recent inheritance to have a sizeable amount of savings but with interest rates as they are we just didn't think it worthwhile, it's more important to us to be MF. We don't have the usually advised 3-6 months money aside, but we think we've got the balance ok. I just wondered how other people manage this stuff, where does the balance lie for you?

Hurdler

I quit my job to retrain for a new career and having been able to buy my house with some of an inheritance and recently invested the rest this is what I have as a split:

Investments (long term 5-10 years out of my sticky grasp)
ISA savings as uber-emergency cash
Ready Cash - 6 months of bills outgoings (freelance journalist so need the buffer), a year of the cash allowance I give myself every week, car fund to pay for my motor

I took out a decent life policy when I got my first job - the terms of which I cannot get now for the price I have now and again I am freelance so whilst it is expensive now I am in my mid 40s, I am single and I want to ensure I have that cover so it stays.
Will get a final salary pension from IBM and have a pension plan paid for by my limited company.
I have a 3 month business outgoings buffer in my Business Current account and I put aside my corp tax and VAT in a business saver.
I pay myself the minimum salary, my expenses and a dividend up to the amount of my business current buffer.

I also have a BTL property that just covers itself and is outside my MFW scope for now.

I ought to be mortgage neutral on my house by the end of the year taking into account my investments, ISA and "liquid" cash but I have not included my current pension plan in that.

WishIwasstill25

Hmmmm, an interesting dilemma and one I have been thinking about for a while. I think the amount of savings out aside for bills etc depends on how secure your job/benefits are.

I work in the public sector, so, despite what we all seem to be saying by striking and griping, we do have good sickness benefits and I am unlikely to be made redundant. For that reason I've never made putting 3-6 months money away a priority.

I save monthly for the annual bills, but put aside money based on what it would cost me to pay in instalments. This means that the account is in credit compared to what is required, I'm debating whether to take the surplus out as an overpayment, or whether to top this account up so that there is 2 years worth of bills in there. Not sure.

I save for Christmas and summer holiday spends, £50 a month.
I also have an easy access 'slush fund' I'd like to build that up to £1000, in the short term.

Husband is self employed, in theory we should have more savings because his income is potentially irregular. But I pay all the house bills, car bills etc, so it's not a disaster if his income drops, just means less treats.
He puts 20% of all income in a 'tax' account. His tax bill is always less than this, but he uses the savings to purchase capital items for his work.

He has an ISA which was healthy till I needed a new car before Christmas.

Our real fall back though is an inheritance from my grandparents. It's invested currently, and there would be some penalties if we needed to access the money, but it could be done.

We have life &critical illness on the mortgage, and I have death in service benefits and am building up what should be a decent mortgage. Husband is less well insured, which doesn't worry me, as I'd rather he was around than having a large amount of money in the bank. But what does bother me is he doesn't have a pension plan. (He doesn't seem to worry about it....) this is why we are trying to become mortgage free as quickly as possible.

Our plan is to pay off the mortgage, then save for a deposit for another house. When we've moved I plan on handing the keys over to a letting agent and walking away till husband wishes to retire. I'm sure it's not that simple, but I'm not at the point yet where I need to work out the details.

I'm comfortable with the balance at the moment, but simply by being public about my mortgage free journey I think means that I want to strive to be more financially secure overall.

in_need_of_direction

I started a similar thread when starting my mfw journey. In the end I went for 4.5 months of what joint outgoings would be if one of us wasn't working. I also went with £200 actual cash. I worked on the premise that it would be unlikely that both jobs would go at once, one is private sector and the other public sector. I also considered that I have a three month notice period and we would make significant cuts for that period. We however are also at the stage where our offspring, in theory, are self supporting. Basically what I'm saying in that any limit has to take account of your circumstances. Best of luck with it anyway.

LydiaJ

Totally agree it depends on your circumstances.

I think my job is pretty secure. (I teach at an independent school, so in theory not as secure as a state school, but it consistently seems to be doing OK at attracting students, and I don't think it's going to go under.) I also have income from a couple of widow's pensions from my late husband's pension schemes (mostly from the NHS one), and I get widowed parent's benefit, so those are obviously very secure indeed. I'm aware I'll probably lose most of my child/working tax credits when I eventually get switched to universal credit, but I could probably adjust to that fairly easily. I have critical illness cover.

So for me, having a savings buffer isn't about protection from loss of income. I'm thinking more along the lines of what you say about your boiler. My boiler's only 3 years old, but what if I need repairs to my roof, or I need to replace my car or washing machine or something? So that's the kind of figure that I have in mind when thinking about how much savings I need to have.

Tahlullah

For me, the answer is dependant on the type of mortgage you currently have. I have an offset which means that any savings reduce the interest paid on the interest only mortgage. This also allows you to overpay.

The mortgage gives you the equivalent of a permanent loan facility at mortgage interest rate, rather than personal loan rate. So, all of my money and savings are in my mortgage, reducing the amount I have to pay in interest and allowing overpayments to have a bigger impact.

Additionally, if I need money for new boilers, or 6 months running costs because of a loss of income, I can access it, and more through the mortgage.

So my answer is that savings are not as important as overpaying the mortgage and becoming mortgage free.

littlegreenpeas

Both oh and I have fairly stable jobs but if things were to go pear shaped I want to feel like we have some breathing space. We have decided to get to 10k. We are not there yet but we are working on it.
Lgp