Advice required

FunLovinCriminal

Morning All

Just some friendly advice required.
OH and I and Baby FLC are in this current situation:

Mortgage: £101,000 - 2.59% interest fixed for two more years
ISA: £7,000 1.49% tax free
TSB 5% interest account: £1,000

We are currently planning to add a brother or a sister for baby FLC.

My job is uncertain though - likelihood is a choice to take £180 per month pay cut - with a lump some of around £5500 (two years of pay difference)
Or redundancy.

What do you think I should be doing with the money saved? OP? Likelihood is I will need a new car in the next 12 months.

Any advice is gratefully received!

eskbanker

Sounds like your outgoings are likely to be increasing while your income may be decreasing so best bet is to get your money into places where it'll give the best return without being tied up long term.

You can do far better than 1.49% on the £7K by using interest-paying current accounts (even allowing for taxable status), especially if both you and OH open sole and joint ones to go with the single TSB you have so far, http://www.moneysavingexpert.com/savings/which-saving-account is a good summary of prioritised options....

bowlhead99

The advice above is sound. Stick it in the highest interest-paying account you can.

You'll see from articles in this site that there are accounts like TSB that pay 5% on amounts up to a certain level, others paying 4% and 3% gross. You can have multiple accounts between you (for example you and OH could both have a personal account and a joint account at TSB so be putting £6000 away at 5% instead of £1000 at that rate and everything else in a lower rate ISA.

If the mortgage is only at 2.59% then there is no big advantage in paying it off at the moment as you can achieve that or thereabouts net on the high paying current accounts. When your fix runs out if the rate is going to be higher then perhaps worth paying some of it off to get a better loan-to-value rate.

But no point paying away money now that you need to remortgage to get back, when you're facing job uncertainty and may need it for car or baby.

As you mention having a baby and maybe another one while you carry on with your job, perhaps your OH will not be working or be on a lower salary and lower tax rate than you? So, worth considering having most of the family savings in your OH's sole accounts rather than your accounts or joint accounts, to minimise tax.

robotrobo

FunLovinCriminal wrote: »

Morning All

Just some friendly advice required.
OH and I and Baby FLC are in this current situation:

Mortgage: £101,000 - 2.59% interest fixed for two more years
ISA: £7,000 1.49% tax free
TSB 5% interest account: £1,000

We are currently planning to add a brother or a sister for baby FLC.

My job is uncertain though - likelihood is a choice to take £180 per month pay cut - with a lump some of around £5500 (two years of pay difference)
Or redundancy.


What do you think I should be doing with the money saved? OP? Likelihood is I will need a new car in the next 12 months.

Any advice is gratefully received!

Well with the uncertainty at the mo with your job prospect,I would tighten the reigns now by not silly spending .
As far as me giving you advice!, no , because I like you rely on the knowledgeable posters on here.
But I can tell you that I have just given 40 days notice to withdraw 20k from my isa which was on 2%interest & I am funding the Lloyds club at 4% tax free for us 3x5kaccounts eventually.
I would say if your up to it !!, then have another child, because it's the best time of your life , it doesn't get any better.
As far as a car goes, if your current one is clapped out, it will need changeing sometime,but wait until you have sorted the job situation out, we have 2cars worth a grand total of 3k & I would not like to change them unless I need to, they are a waste of money,unless you are traveling to work to earn your living , then needs must.
If you can over pay your mortgage at sometime , it's not a bad idea to reduce the debt, but you have a bit of savings so you are doing something right.
Good luck & all the best

FunLovinCriminal

Many thanks for your advice people.

Basically the car is a diesel with £92k on the clock. I travel 20 miles each way to work, and know NOTHING about cars - we tend to get a car, run it till it starts to cost money (expensive issues with previous peugeots!) and then trade it in, get a car loan and start the process again.

We have found £100 per month that we can claw back from different methods and OH goes back to work next month - so goodbye SMP and hello full time money!!

I will look at better ISA's - should I leave till after April now?

We get told about our jobs on Monday, I think the choices will be voluntary redundancy - only been there 7 yrs, so the package would not be that great, or two years salary as a lump sum and a salary drop. Rough maths I think the lump sum will be £5000-5500 - where should I place that?

Mortgage is £600 per month, and with 14yrs left to run, I would like shot of it asap!

enthusiasticsaver

I would not tie the money up but do as others have suggested and put the ISA into a high interest current account. You may need it if your job is uncertain as you will not get help with your mortgage payments . 1.49% is a rubbish rate so not really worth bothering with it.

xylophone

Do you have a Santander 123 account? A joint account could hold all your household DDs, pay you cash back and earn you interest on balances up to £20000. A monthly credit is required but can be easily managed, if only on an in and out basis


How about opening a Nationwide Flexdirect account and depositing £2500 of the ISA in that.

Open a joint Nationwide Flexdirect account and deposit another £2500 in that.

Top up the TSB to £2000 and open a joint TSB with the remaining £1000. Set both to paperless statements and correspondence.

You will need to cycle money round the accounts to meet the conditions for interest but with faster payments this is no problem.

You can move monthly interest earned to the unfilled TSB.

You might want to open a Lloyds Club account once you get the redundancy money - up to 4% on up to £5000 provided that you have two DDs and pay in £1500 a month- once agin you "cycle round".

When the two NW accounts have been open for a year, you could switch for any switching bonus but shift the bulk of the money to Santander and so on......

Always check T&Cs very carefully.

bowlhead99

FunLovinCriminal wrote: »

trade it in, get a car loan and start the process again.

Well, you are asking what to do with the £5k cash that you may be able to take as redundancy payout. A car loan is not going to be interest free and it is not going to be lower than your mortgage; it is going to be higher than the top savings rate you can find net of tax. So, rather than worrying about where to save the £5k, you could use it to allow yourself to trade up your car without needing to get a loan with a crippling interest rate.

Or, if the car is a diesel and has only done 92k, don't upgrade it at all. You can get another 5 years out of it. There is only so much that can go wrong with a car in a given period - even if you need a new clutch, new tyres all round, new discs all round, new shocks etc - it costs a lot less to fix all that every few years rather than buy an entirely new car that depreciates faster.

I will look at better ISA's - should I leave till after April now?

We can tell you now that now or in April you will not find a rate that beats the high interest current accounts mentioned. If you get 5% on an account and pay tax on the interest to leave 4% net, that is much better than a tax free ISA at 1% or 1.5%.

You and OH have a £30k limit on new money going into ISAs, between you, every single year. Especially with more maternity coming up you will not get close to running out of ISA 'space' in the next couple of years. So, there is no incentive or hurry to use up those types of accounts now or in April, if the rates are not better. Ignore ISAs and check back on the rates in a few year's time and if it turns out they have become more competitive, swing your spare money out of current accounts and into the ISAs at that point. Not now.

Rough maths I think the lump sum will be £5000-5500 - where should I place that?

In high interest current accounts just like the other money, earning 3 or 4 or 5% interest before tax. Unless you can use it to pay off a car loan or avoid a new car loan that would otherwise be costing you 4 or 5 or 6% or more of your after-tax income.

Mortgage is £600 per month, and with 14yrs left to run, I would like shot of it asap!

Well, you could overpay to get shot of some of it, and then run out of cash, and then how are you going to get back the cash when you have a family emergency or lose your shaky job? You would struggle to remortgage and get the money back out again if you were jobless, and may end up needing to borrow at higher rates to get your next car or baby items or whatever .

The mortgage interest rate for the next couple of years didn't sound very high so I would not be in a hurry to pay off if you have not exhausted all the high interest current accounts and could keep the flexibility that comes from lots of cash on hand. Aim to get enough put away to pay some of it off whenever the mortgage rate goes up, but it should not be a priority until you have a well established emergency fund and job loss fund and car fund and baby fund.

jimjames

FunLovinCriminal wrote: »

Many thanks for your advice people.

Basically the car is a diesel with £92k on the clock. I travel 20 miles each way to work, and know NOTHING about cars - we tend to get a car, run it till it starts to cost money (expensive issues with previous peugeots!) and then trade it in, get a car loan and start the process again.

We have found £100 per month that we can claw back from different methods and OH goes back to work next month - so goodbye SMP and hello full time money!!

I will look at better ISA's - should I leave till after April now?

We get told about our jobs on Monday, I think the choices will be voluntary redundancy - only been there 7 yrs, so the package would not be that great, or two years salary as a lump sum and a salary drop. Rough maths I think the lump sum will be £5000-5500 - where should I place that?

Mortgage is £600 per month, and with 14yrs left to run, I would like shot of it asap!

92k miles for a diesel is nothing. You're far better off paying to maintain it than buying new cars, purely from.a mse perspective.

My diesel was approaching 250k when I sold it with no major problems.

FunLovinCriminal

Many thanks for all your knowledge and advice.

Just because in my hurry, I don't think I explained everything so well.

I will not be taking the redundancy, only 40 (ONLY! ha!), so the alternative is earning less per month but being paid two years difference as a lump sum.

e.g was on £20k, now on £15k, with a lump sum of the difference (two years worth)

What I need to do is find the best place for that and the £7k ISA to help us out.

I am agreeing, new car seems daft, from what I have read the car has depreciated so much just by driving it off the fore-court - so I will work on keeping it road-worthy for as long as possible

kangoora

FunLovinCriminal wrote: »

Many thanks for all your knowledge and advice.

Just because in my hurry, I don't think I explained everything so well.

I will not be taking the redundancy, only 40 (ONLY! ha!), so the alternative is earning less per month but being paid two years difference as a lump sum.

e.g was on £20k, now on £15k, with a lump sum of the difference (two years worth)

What I need to do is find the best place for that and the £7k ISA to help us out.

I am agreeing, new car seems daft, from what I have read the car has depreciated so much just by driving it off the fore-court - so I will work on keeping it road-worthy for as long as possible

Take the lump sum and get another job paying £20k if I was you. I'd feel zero loyalty to a firm that forced me to choose between a 25% pay drop or redundancy.