Total beginner: Debt free, 80k cash savings, single... What next?!

markmetcam

Hi all,

I'm looking for your advice.

I'm 32, UK citizen but live abroad and have saved up about 80k GPB. I don't know when (or if) I'll move back to the UK and have been gone for about 4 years now.

I've no debt, no commitments or family. Earn around 75k pa however work on temporary contracts so is not a guaranteed income and is likely to drop next year.

I'm risk averse, have bank accounts open in a handful of countries, visas etc.

I want to do something more with my money than just leave them in savings and was considering buying (cash) to let in the UK and can see gross returns of about 9% in some areas I'm familiar with. My investment would be for the medium to long term.

BTL, ETF's, ISA's... Honestly speaking, I've no clue which is the wisest choice to make next _pale_

Any advice would be greatly appreciated!

ChopperST

Being risk averse and putting all your eggs in one relatively insoluble asset (i.e. a BTL property) doesn't really go hand in hand.

Do you have a pension?
Do you own your own property to live in?
When you say medium to long term how long do you envisage that being?

markmetcam

Wow, thanks for the fast response ChopperST!

Yes, I've a pension however haven't added to this for a few years since getting into contracting roles.

Regarding solvency (and I stress I am new to all this) I figured buying a property outright would have far lower costs if the property was unoccupied and therefore lower risk?

I don't own a house however do like the idea of having somewhere to live if ever needed.

Medium to long term as in 3 -10 years

Cheers,

Mark.

jabba42

If you can live anywhere, go somewhere where you get more housing for your money The UK is overpriced, rainy and overpopulated.

kidmugsy

'It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife.'

puk999

Some random, rambling thoughts. Not supposed to be a comprehensive response:

Well done on saving > £80k With it in cash it'll be at risk to inflation. In real terms cash will not purchase in 10 years time what it can purchase now.

Have a safety buffer (emergency fund) of a few month's salary to protect you from job loss, or some other unforeseen event which needs you to rely upon what money you've built up. So don't put all your money in a property (or other investments) without an emergency fund. You don't want to sell the property quickly at a much reduced price or sell investments when they might be in a trough.

Contribute to your pension. I'm 44 and wished I had ploughed money in there when I was in my early thirties. The longer you leave it the more you need to put in. You're a higher rate taxpayer right? Then your contributions will enjoy higher rate tax relief. Want to put in £1000 to your pension pot? Then you'll only need to put in £600 from your net salary. The other £400 will come from the government. (You'll get £200 automatically and need to reclaim the other £200 from HMRC manually). Caveat: I'm making assumption that you can receive the tax relief even though you live abroad. Hopefully someone will clarify this.

The great thing with pensions (at the moment) is that when you come to draw on it, 25% of it is tax free. So you've got all that tax relief on the way in and much reduced tax on the way out. The "drawback" is you have to be 55 to access the money. Pension rules might change over the next couple of decades. Maybe for the better, maybe for the worse, but you need to support yourself later in life so set the foundations now. You never know, the government might make the tax relief less favourable for higher rate taxpayers in the future so fill your boots now?

As well as contributing to pension, contribute to an ISA. I would suggest a stocks and shares ISA as that is the only way to beat inflation over the long term. I contribute to ISAs as well as pensions. ISAs give me the flexibility to access the money before retirement should I need to. There's no need to report anything to HMRC as the ISA is a shelter from tax ("wrapper" is the term a lot of people use). No records to keep, no capital gains tax to pay, no income to report. Again, not sure what the situation is living abroad, sorry

In summary, I think you should consider getting exposed to the stock market via pensions and ISAs (if possible). Markets have been climbing for a few years now. It's not unfeasible for a drop to happen. You might therefore want to introduce yourself to the market over a period of time by drip feeding. Dumping £70k into the market and then seeing it drop the next week by 40% will be painful, especially as you say you might need the money back in 3 years time!

You might want to consider a mortgage with the BTL. We are in a very low interest rate environment. You will be subject to income tax on the rent you receive from the BTL. Having a mortgage allows you to deduct the interest from the rental income so you're paying tax on a reduced amount. I agree that it's nice to own a house if you ever needed to come back and live somewhere!

Good to keep a balance when investing. Some in property, some in cash, some in stocks and shares (using funds rather than individual shares though), maybe even some in commodities (gold/silver).

EDIT: Keep reading this forum. Also look at monevator.com. Read Tim Hale's Smarter Investing book (or get recommendations for others).

Archi_Bald

puk999 wrote: »

As well as contributing to pension, contribute to an ISA. I would suggest a stocks and shares ISA as that is the only way to beat inflation over the long term.

You can't make contributions to an ISA if you live abroad. http://www.hmrc.gov.uk/isa/faqs.htm#14

jimjames

Archi_Bald wrote: »

You can't make contributions to an ISA if you live abroad. http://www.hmrc.gov.uk/isa/faqs.htm#14

I'm also assuming you can't get UK tax relief on pensions when you aren't paying any UK tax.

Archi_Bald

Probably not, and you probably can't even open a UK pensions account if you are not a resident. I believe you must be a relevant UK individual when applying for an account.

Many people on here have abundant knowledge about matters that apply to UK residents and tax payers but non-residents are probably better off on expat forums, and/or their own financial advisors and/or ask HMRC directly.

DonM

Pensions & ISA's are out for the time being until (if) you move back. There are other investments that you can use to equally reduce tax liable due on your investment returns. As mentioned buy to let (BTL) is a risky proposition that is against what risk level you see yourself as. BTL is definitely not a short term (3 year) option.

I would recommend that you first read some more information on investing options as it can be counter-intuitive to some. For example hold money in cash is low risk over very short periods and high risk over long timeframes due to inflation potentially reducing the true value.

I've previously written an article that hopefully of benefit to you...
http://www.liberty-wealth.com/news/understanding-and-benefiting-from-risk-869.html

Archi_Bald

DonM wrote: »

Pensions & ISA's are out for the time being until (if) you move back.

The UK isn't the only country in the world that encourages pension savings. It could be that the OP could contribute to a subsidised pension investment in their country of residence. Non-subsidies investments are of course open to everyone.