My monthly saving plan

LottieJ

Hello MSE-ers. I am new to the forums - please be gentle as I am not the most financially savvy.

I want to start making some smarter decisions about my savings. I have about £23k in a cash ISA, some of which will be required to pay my tax bill come January. I haven't yet settled my accounts but am working on the basis that I probably have at least £13k over my tax bill.

I am thinking of sticking £3k into a pension arrangement (37 years of age, self-employed and no provision to date), £1000 to open a share ISA and £1000 into Zopa p-2-p lending. That will leave £8k by way of cash savings that aren't required to pay my next tax bill.

Thereafter, I need to start making squirreling away money on a monthly basis. After putting away sufficient to pay my tax and monthly outgoings, I think I can probably save £500 per month.

My current plan is to split this 50/50 between pension provision and savings/investments. I am thinking that I will adjust these proportions making greater pension provision as I get older but I have a young daughter and don't want to tie up too much now. Hopefully my income will increase over time and I will be able to prioritise my pension provision.

Of the £250 I plan to save each month, I am thinking that I will split this as follows:

• £50.00 overpayment on mortgage (my husband will also match that) - not a saving exactly but makes sense to me to pay down the mortgage
• £50.00 into Zopa - my thoughts are that this is a medium term, reasonably safe investment but can still be accessed in an emergency and next year it can be put in an ISA I believe
• £50.00 into easily accessible cash savings to supplement existing savings, just in case
• £100.00 into shares ISA (my remaining ISA allowance will be used to hold the money I put aside for tax in a cash ISA) - probably a tracker fund as I don't have sufficient knowledge or confidence to go completely DIY

I do not have any specific goals in mind beyond trying to make sure that I have some money aside for emergencies, start to accrue some medium term investments that will hopefully give a better return than a cash savings account and start to save for retirement.


These sums aren't set in stone and hopefully, if my income goes up over time, I can put a bit more in the pot.

Partly I am typing this all out to get it straight in my head and have a plan but I would be very grateful for any feedback/comments.

bigfreddiel

Having a plan is a really good start, you would be amazed at how many people don't!

And your structure looks okay, for your equity ISA look at ETFs, low cost tracker style fund but traded as a share but no stamp duty. Very low cost. You could open a shares ISA with any of the major players, I use td directinvesting, it's free once you have £6k in it, and you can drop feed monthly for £1.50 a trade.

You need to do a bit of research on platforms and ETFs, the monevator.com site has this info.

Well done so far, cheers, fj

atush

I would ax the Zopa and the overpayment. The ISA is fine, as is cash savings. You need to build up at least 3 months spending. You could add the Zopa money here and the overpayment money into the ISA.

The rest I would put into a pension.

If and when rates go up, you can always adjust things but right now it makes little sense to overpay unless you have an offset mtg. And if rates really bumped you could pay of some of it with your ISA.

AndyT678

If it were me I'd be putting more priority on pension contributions for any money that you think you can do without until you're 55.

Also I don't see the benefit of a hybrid approach of overpaying the mortgage by £50 and putting £150 into P2P / S&S ISA. In my opinion, if you think investments will outperform your mortgage rate then just do those but if you don't think they will then don't do them at all.

LottieJ

Thank you! I have opened a S&S ISA with Charles Stanley Direct, as they were recommended in Martin's article on ISAs - just waiting for verification pin to come in the post. There are no charges on fund trades (I think) and 0.25% per annum platform charge.

I've also opened a regular saver account with HSBC, which will give 6% on £3,000 as I have an account with them.

I will look into ETFs - thanks for the tip!

Lottie

LottieJ

I think the mortgage idea is really just a mental fix on owning our own home outright and being new to the idea of investing I am not confident that my investment plans will out perform mortgage rates. Also, the risk of my investments going down in value makes me feel a little nervous, whereas there is no risk of loss with paying off the mortgage. Your comments are food for thought, however.

Once I've got it all set up, I can keep it under review and adjust if it isn't making the best of my money.

@Andy, I realise that you are right that I do need to make more pension provision, but I have quite a lot of shorter term expenditure to meet. I have a young daughter under 2 and nursery fees to pay at present and other expenditure looming as we've just moved into a new house - once those costs are out of the way, I will put more aside for my pension. I probably can put aside a little more than £500 per month and once my tax liabilities are known may make an additional lump sum to my pension.

bottleandahalf

LottieJ wrote: »

I think the mortgage idea is really just a mental fix on owning our own home outright and being new to the idea of investing I am not confident that my investment plans will out perform mortgage rates. Also, the risk of my investments going down in value makes me feel a little nervous, whereas there is no risk of loss with paying off the mortgage. Your comments are food for thought, however.

Once I've got it all set up, I can keep it under review and adjust if it isn't making the best of my money.

@Andy, I realise that you are right that I do need to make more pension provision, but I have quite a lot of shorter term expenditure to meet. I have a young daughter under 2 and nursery fees to pay at present and other expenditure looming as we've just moved into a new house - once those costs are out of the way, I will put more aside for my pension. I probably can put aside a little more than £500 per month and once my tax liabilities are known may make an additional lump sum to my pension.

Dodgy time for investing in stocks now, though?
Markets are very flat and major correction possible.

LottieJ

bottleandahalf wrote: »

Dodgy time for investing in stocks now, though?
Markets are very flat and major correction possible.

I really know next to nothing about investing in the market, but does this still hold true for a long term investment? I would regard the ISA as the longest term investment in my plan.

colsten

LottieJ wrote: »

I've also opened a regular saver account with HSBC, which will give 6% on £3,000 as I have an account with them.

Your max deposit per month in that account is £250. There are a couple more 6%ers: FD M&S, and 5% at TSB, and 4% at Lloyds.

colsten

LottieJ wrote: »

I really know next to nothing about investing in the market

In which case, don't make any further rash moves. Opening a platform account without knowing what you want to invest in was quite rash already, although CS is generally alright for newbies.

Stick your cash into good interest-earning current accounts and regular savings accounts, and spend a couple of months reading up about investments and understanding them enough so you can build an appropriate portfolio for yourself. The general favourites on this forum are "Smarter Investing" by Tim Hale, and http://monevator.com/category/investing/passive-investing-investing/

LottieJ

Thanks for the book suggestion, I'll buy that for my kindle. I read some of the monevator articles on passive investing and Martin's article on ISAs before opening the CSD ISA but am doing further research before I decide which funds to invest in.