Best way to maximise my savings?!

Julia21

Hi all,

I will be in a very fortunate position to be able to save £2,500 per month from January onwards when I return to my contracting position. I am planning to save up as big a deposit as I possibly can over 3 years and hopefully achieve my long-term goal of saving £100,000 (including interest accrued on my savings).

I am planning to pay £1,250 into my Newcastle Home Saver ISA (this is the maximum I can pay into this ISA each month and it has a high interest rate of 2.54% in any month I contribute and don't withdraw any money).

I am planning to pay £250 per month into my HSBC Regular Saver (I know there are better regular savers out there, for example first direct, but my credit rating is quite bad so I have been rejected when I recently applied to open an account with them).

I will then have £1,000 per month left over. Please let me know any suggestions for the best way to save/invest this money. I was thinking of possibly setting up a regular contribution to a managed fund with low risk. Please could I have your opinion on this?

The other thing I might do is contribute the full £2,500 to a mixture of a cash ISA and a stocks/shares ISA for the first 3 months (Jan/Feb/March) so that I have used up at least £7,500 of my total £15,000 ISA allowance for this tax year. Then I was thinking about doing the same thing, i.e. a mixture of cash ISA and stocks/shares ISA at £2,500 per month for the first 6 months of the 2015/16 tax year. Then my whole ISA allowance will be used up and I'll need to find the best solution for the other £15,000 I am hoping to save over the last 6 months of the 2015/16 tax year.

I really appreciate any feedback and I am very grateful for any helpful advice given!!

Thanks in advance!

Julia :beer:

Jake_1013

Are you single? :beer:

Notfarfromtheborder

Brilliant Jake:beer:

:rotfl:

eskbanker

Typically the advice is only to invest if you're looking at a horizon of 5-10 years before needing the money, so if your definition of long-term is in this territory then low-risk funds should be viable.

Keeping some savings in cash form as well is also worth doing, so consider a collection of interest-paying current accounts at 3-5% if you haven't already, although a poor credit rating won't help there.

Do you have a pension?

[Deleted User]

If you have an emergency fund in the form of 6 months expenses I don't really see the reason you would consider a cash ISA. Savings are expensive because inflation erodes them, you're paying (opportunity cost) to hold them. That cost is worthwhile for an emergency fund (because of the security it provides, a form of insurance) but beyond that unless you're 100% risk averse... there's no reason to hold cash.

1. Pension (to reduce the amount of income you're paying 40% on, tax relief is really valuable)
2. Use your entire ISA allowance for investments
3. Invest outside of a tax wrapper

That said if you're looking at using the £100,000 in 3 years you exclude yourself from both pensions and investments (because 3 years isn't really long enough to avoid potential losses). You should rethink your goal, do you really need to use everything you save in the next 3 years as a deposit? That would exclude you from a lot of opportunities to maximise the value of the money, and property is the most illiquid asset you can hold, unless you expect property values to soar in the future it would be a poor investment.

Talk more about your goal (what price house do you want to buy, why are you aiming to have such a high deposit?) and then a plan can be built around that.

atush

I am not really understanding how you will get a mtg for a house if you cant get a bank acct?

It seems to me you need to work hard on credit repair. Using a credit repair CC and paying bills early/on time and getting on the voters register.

And despite that you cant get at the money in 3 years, i'd be paying into a pension with some of the 40% HRT salary. Long term savings are just as important as short terms ones esp if 100 into a pension will only cost you 60.

kidmugsy

Julia21 wrote: »

I will then have £1,000 per month left over. Please let me know any suggestions for the best way to save/invest this money. I was thinking of possibly setting up a regular contribution to a managed fund with low risk. Please could I have your opinion on this?

Have a look at http://www.patplc.co.uk
including clicking on investment plans. However, 3 years is a pretty short time, even for a "low risk" fund.

Julia21

Hi all,

Thanks for all the advice, I really appreciate it and it's very thought provoking.

In answer to some of the questions above: My goal is to have as low a mortgage as possible, which is why I was planning on using the money as a deposit, but then I know that I'll be putting all of my eggs into one basket and I'll be at the mercy of house prices, but I will also be avoiding a lot of mortgage interest. I was thinking of splitting the £100,000 between two properties - one to live in and an investment property. Again, I realise I will be putting all my eggs into one basket by investing solely in property.

I have several small pension pots from previous jobs and also a private pension but it only has about £1,000 in it currently. I will be contributing monthly to my pension but I haven't decided how much to contribute yet. I'm very lucky that I don't fall into the 40% tax bracket as I contract through my own limited company which means that the rules are different and I only paid around 20% tax on my earnings last year.

I completely understand the comment regarding my bad credit rating but I am currently working hard (and have been for a few years) to rectify the situation. My credit rating should dramatically improve by early 2017 - before I plan to apply for a mortgage. It's a shame I can't benefit from the excellent range of interest paying current accounts out there at the moment but that's just the way it is. I was in £24,000 debt about 5 years ago and I've worked very hard to pay this off and accrue some savings.

If I invest some or most of my money into a low risk S&S ISA, which I will probably do, then I will be willing to wait at least 5 years to buy a property if after 3 years my stocks/shares have lost some value or if the interest accrued is minimal.

Ultimately I'm after a balanced portfolio of property, stocks and shares and liquid cash. It's just about deciding how much to put into each of these.

Thanks again for the forum contributions so far, and please feel free to add anything else or to ask any more questions - and no Jake, I'm not single! haha

Julia

Julia21

johnruso wrote: »

Hi
I will show today a simple way to invest or save your capital without risk. Whether you are new to the savings game or simply chasing the best returns for your existing cash, don't be disheartened by the low returns you see on offer. I think it will be a good way for you of others.
Thanks

This sounds dodgy!

Notfarfromtheborder

Maybe someone with a bit more knowledge could advise, however, if you could 'get yourself' into the 40% bracket, your pension contributions may qualify for 40% tax relief, rather than your current 20%

Julia21

Notfarfromtheborder wrote: »

Maybe someone with a bit more knowledge could advise, however, if you could 'get yourself' into the 40% bracket, your pension contributions may qualify for 40% tax relief, rather than your current 20%

Thanks for your advice Notfarfromtheborder, but I am rather pleased not to have to pay 40% tax on any of my earnings. I am all up for contributing to a pension but have other goals too such as property ownership and a good stocks and shares portfolio. It's all about balance I would say. I just need to work on which percentage to put where.