What savings should I have?

guitarman001

Colin_Hunt wrote: »

There you go, problem solved.
Nice that you helped design something in a car, millions of people have consumed products I "helped" to produce, not important at all, it would still have happened had I left (as I did).
The house I linked to is similar to my first property, and for many couples would represent a mortgage on a joint earnings multiple of, erm, one/two.

By the way, I'm not being confrontational Just in case it comes that way...

Do you mean that as the years go by the house will have appreciated in value so you can afford something bigger? If so (big assumption) I don't buy that these days as property inflation means the house you want to buy has gone up in value as well (the difference has gone up)

guitarman001

bowlhead, I'm not saying NMW earners should be in mansions.
What I'm saying is that I'm a higher earner and should not have the aspiration to live in similar.

Colin_Hunt

guitarman001 wrote: »

By the way, I'm not being confrontational Just in case it comes that way...

Do you mean that as the years go by the house will have appreciated in value so you can afford something bigger? If so (big assumption) I don't buy that these days as property inflation means the house you want to buy has gone up in value as well (the difference has gone up)

No, HPI is no help at all, the property in the link is very similar(in fact better) than the one I first bought, I paid £10k and sold(after improving) for £12k.
The next place cost £32k and is now "worth" c.£186k (six times), so if price rises were relative the first place would be c.£72k, it sold recently for £96k, so the first place was a better "investment".
I dont mind losing out, I live in a much "nicer" area.

bowlhead99

guitarman001 wrote: »

By the way, I'm not being confrontational Just in case it comes that way...

Do you mean that as the years go by the house will have appreciated in value so you can afford something bigger? If so (big assumption) I don't buy that these days as property inflation means the house you want to buy has gone up in value as well (the difference has gone up)

But if you are complaining that houses are now 6-9x salary and you don't think the multiple is going to increase more, so you won't get the same kind of 'free ride' previous generations did, then you are saying you're not expecting them to go to higher and higher multiples.

So, as you progress through your career from a 20 year old office junior to a 30 year old designer of computer things, you build up a certain level of savings and buy a house if you want. Then as you progress to 40 year old senior manager at a higher salary you are putting something away for the next jump. What you earn over the next decade, ignoring any wage inflation, should be multiples of what you earned over the last decade when on average you were only 25 and a few years into your career. So, these savings plus your first house (which you have paid down some of the mortgage on) should allow you to trade up.

No, your first house can't just be exchanged for a second bigger house after it inflates for a bit, because the second house will have inflated too. So you need to keep saving your higher and higher wages while increasing your equity in the first house on a repayment mortgage. But it is not impossible.

And when you reach the end of the road, if you have been doing it in London where it is particularly tough because of the competition, you can rejoice in having lived with that tough challenge when you cash in and move up north where your money will then price the locals out of the market when you cash out of a 2 bed apartment and buy a 6 bed mansion.

Of course, you could just buy a house up north now for cash. But you don't want to, because you think you have better employment prospects in London and a better headline salary. The reason you want to be in London is the same reason other people want to be in London. It is like complaining about being in traffic. You are traffic. Every snowflake blames the next one for the avalanche. Etc.

bowlhead, I'm not saying NMW earners should be in mansions.
What I'm saying is that I'm a higher earner and should not have the aspiration to live in similar.

Yes, if you have a lot of money you should be able to have a nice place. However, you're in competition with other people who are high earners. I'm one of your competition, and ended up buying with friends as it was easier to pool resources and get more for our money (lots of square footage, garden, driveway, nice kitchen etc etc compared to us each buying little flats in worse areas). Other people buy with a wife or partner. We all make choices and hope they work out. But a lot of people in London with 6-figure income potential will aspire to more than the 2up 2down in the location on the link, while there are only so many places to go around.

It is not our fault you chose a field where the jobs are specialised and full of people earning high wages who all want to live in the street that you want to buy in. The fact that some ancestor of your friend was able to buy a nice bungalow on 'only' a teacher's salary is neither here nor there. You could pretty much buy a whole house on just your savings right now and you've only been in employment for a decade. But it is not the house you want because it's not near your office.

Your job and office location are decided by you. If you refuse to accept a 'worse' job or a 'worse' location, that's just you being greedy. Like the owner of a London flat who would rather rent it out for £x a month instead of sell it to you for less than £350k. He is just being greedy. But blaming him for buying 10-20 years ago or accusing him of having an easier ride, won't actually make your own ride any easier. You can moan all you like, and try to rant on Sky, and rant further when they don't accept your comments because you wrote too much, but it doesn't actually solve your problem. Your solution is to keep working hard, changing locations if necessary, and get whatever is the best combination of work/lifestyle now and later.

If your £60k would get you a $100k house in US/Canada and a good job, or a €75k apartment in Germany and a good job, but it won't get you a house in the UK where you can commute to your job and social circle, you need to decide what is most important to you and maybe end up moving.

When a company decides where to put a factory it has cost of labour and availability of skilled labour and proximity to infrastructure and materials and customers, to consider. Companies tend to make less emotional decisions. If you run your life on maths and logic rather than emotion it might well lead to you emigrating. You might not actually enjoy it unless there is an inherent happiness from having your name on a title deed that exceeds the negative of leaving your friends and family behind and maybe not being able to speak English down the shops. But as an aside, you'll find people in Germany are way less hung up on home ownership than the Brits - renting for your working life is completely acceptable.

JasX

Well, this thread seems to have wandered off onto controversial ground.

I guess the key lesson is times do change, some things get better, some things get a lot tougher. Some lessons and conventional financial wisdom from the last few decades goes completely out the window (and there will be those who to their detriment didn't notice), there will be some that are truer than ever (and again there will be individuals who think those rules don’t apply any more to their detriment).

So yes I see plenty of things a lot of people my/our age get wrong (which I'll call late 20s early thirties)

1-Seeing debt as the norm and using credit where it could have been easily avoided. Paying interest *ever* is a horrific drain on quality of life, when you hit later life every single £1 you've paid in interest is £1 less of total 'stuff', 'fun', 'holidays/world experiences' etc etc you missed out on is the way I've always seen it. If you can get something slightly cheaper by getting it in 3-6 month’s time is usually worth it in the long term. Older generations did this, the view 'everyone has debt these days' and using credit being seen as a norm seems to be condemning large numbers to a much poorer quality of life due to obvious effects they seem oblivious to (Education system to blame?).
There are very narrow criteria where debt is a good thing (eg to start/seed a new business that will grow and make more money than the interest being paid based on a sound business plan) -debt for the sake of it is horrific.

2-My generation seems to have forgotten/lost the ability to either a) do basic DIY themselves and b) consider repairing something over throwing it out and getting a new one. Ok so I'm an engineer and have something of an advantage here but having parents and grandparents in less technical professions (nursing, running a bakers shop etc) they certainly knew a thing or two about fixing a chair/table leg, tiling their own bathroom and making a decent job of it, hanging their own wallpaper etc etc, particularly when they were young.

3-My generation also seems to have lost the ability cook/run an efficient household budget, the 'old style' board here is testament to making good use of leftovers, cooking from scratch, efficiently sourcing ingredients, using your freezer etc etc. Frankly I struggle to understand SOAs around here where people spend £400-£450 on monthly groceries. I personally make a point of eating based on 'what I have in the fridge' and virtually never throwing any food away. eg a couple of weekends back for a friends BBQ I knocked up food for myself and two friends overfeeding them and probably enough spare for others to dip into that it could have been 4-5, this cost me £45, £10 filled two rucksacks from a local market with fresh veg and between that Aldi, and a few extras from Sainsbury’s it not only did the BBQ but kept me fed for the next two weeks with very weather appropriate salads, roasted vegetable cous cous dishes, a curry etc etc with minimal top up shopping.
People who can't feed themselves without buying a Waitrose/M&S ready meal per person every day with extras or grabbing a takeaway menu waste heaps

Well those are the main three bugbears of mine, I guess there are a few more general observations I have.

4-Renting is a mug's game -if you assume people eventually buy and spend c20years buying a house outright and then live virtually rent free in a house they own at some point in their lives. Every year they then spend before buying renting is 100% dead money. I bought early on (age 26) which took living with my parents from age 21-25 scrimping together a deposit to get on the ladder in London (not a fun time). I have a sibling who rented their own place with friends after uni but realised age 27 they were getting nowhere near getting a house deposit together and moved back in with parents at that point (even less fun!) but eventually got somewhere with fianc! aged 30.

I guess the problem with 4 is a chronic undersupply of homes drives prices up regardless and leads to something of a race to the bottom in both markets -> people renting smaller and smaller rooms in increasingly sub-divided houses or sharing with more people on the renting side or people getting more creative when buying -> I have a friend who bought a 3 bedroomed place and converted the living room into a 4th bedroom where he lives. Uses the 3 rental incomes to help fund the mortgage and is overpaying like mad planning to slowly reclaim the rooms for himself and kick out the tenants one by one over the next 5-10 years. Neither of these situations is a good thing but illustrates the lengths those determined to do something that makes financial sense are willing to go to in the absence of a proper fix for the countries housing situation.

There has got to be a correction at some point (hence despite now having a decent job and income I'm personally happy staying in a modest sized dwelling out on the fringes of London zone 5 and expect I'll put off trading up for many years)

Guitarman I guess the defence against currency devaluation is the same as it's always been -> spread your money around as many different asset classes as you can -> personally I'm a big fan of online fund supermarket (ie low fee) stocks and shares isas and keep the savings pot I have split between the house I own (ie overpaid mortgage), cash and about 15 different funds which are as diversified in intent as I can get (blue chip developed world equities, some emerging markets, some property/resource focused, some responsive/unrestricted/'special situational' funds, etc etc).

Anyway offtopic-ish ranting seemed to be the order of the day, I think that's me for now


oh no 3) - people tend to 'upgrade' things unnecessarily frequently these days too -I was very happy with my 4 year old smartphone till it finally died (I gave it a few software upgrades in it's time to keep the interface sleek but since it did email and browsing without issue I had no problem with the IT guys at work occasionally yelling at me 'hey, is that a windows phone ...but from before windows phones actually got good'), a side effect of this approach is the £7 a month I pay for an old style 'unlimited' unlimited mobile internet option I've now transferred to my shiny Google nexus4 phone they are all extremely jealous of ;p

JasX

PS mainland Europe can be quite punishing on the taxation front I believe.... ?

Is there even an equivalent to ISAs you can use to shelter assets from tax drags?

kwmlondon

JasX wrote: »

Well, this thread seems to have wandered off onto controversial ground.

I guess the key lesson is times do change, some things get better, some things get a lot tougher. Some lessons and conventional financial wisdom from the last few decades goes completely out the window (and there will be those who to their detriment didn't notice), there will be some that are truer than ever (and again there will be individuals who think those rules don’t apply any more to their detriment).

So yes I see plenty of things a lot of people my/our age get wrong (which I'll call late 20s early thirties)

... ;p

Thanks for sharing, and your point of view is interesting, but what's always a mistake is to take your experience and expect it to be the same as other people's. Your options and choices in life are unique - it may seem that they are similar to other people's, but that's an illusion.

We can offer advice, and we can sometimes take it, but at the end of the day each of us has to make our own choices as we live our own lives. Other people making judgements on our decisions are ultimately ill informed - even my partner, my family, the people closest to me and know me better than anyone else (and have often gone through the same experiences) will not understand what my options are.

I am not critisising you at all, but there does seem to be a great deal of friction on MSE because people get very angry that other people don't see the world the same way they do. Social media can isolate you from different views and opinions and it can be very easy to forget that the person typing the comments you (we/they) are reading has feelings, views, opinions and is as valid and relevant as anyone else.

*sigh*

Needed to get that off my chest...

Buzzybee90

I'm just happy my social circle of young people aren't like these supposed wasters. Renting is a mugs game? It's not really a choice for a lot of people. Shared housing is the same price (or more expensive!) that the two of us sharing a one bed flat so it's not really somewhere we can cut back on. At least someone fixes things when they break!

JasX

kwmlondon wrote: »

I am not critisising you at all, but there does seem to be a great deal of friction on MSE because people get very angry that other people don't see the world the same way they do. Social media can isolate you from different views and opinions and it can be very easy to forget that the person typing the comments you (we/they) are reading has feelings, views, opinions and is as valid and relevant as anyone else.

*sigh*

Needed to get that off my chest...

I don't know, I thought a fair bit of that was pretty universal:

-Consider fixing things before throwing them away and buying a new one
-Learning to actually cook and avoiding food waste
-Think very carefully careful about paying even a few £s in interest, ever....

I just seem to see a relatively small proportion of people my age and below doing all the above and think there is a lot of inefficiency going around. Yes my personal perspective is not universal. Yes there will be some who do do all the above and encounter other obstacles.

JasX

Buzzybee90 wrote: »

Renting is a mugs game? It's not really a choice for a lot of people.

Yup, the point I was making was generally it's not a great/efficient situation to be stuck renting. Some (a lot) don't have a choice about it, some could make a choice but don't act on it, some do act on it and go to varying lengths to do so, some of which come with other hardships.

I also make no comment on the best way to fix it, part of it will be down to adequate supply of suitable housing (at all levels), could part of it be addressed by trying to steer the country towards being less 'London centric', probably.

Is steering the country towards being less 'London centric' going to be easy? -no, is steering the country towards being less 'London centric' a good thing to aspire to that it'll be possible to try and do in a ham-fisted manner that does more damage than good? -politicans often find a way