To take risk or not to take risk

economic

Hi

this is more a debate then anything else as there is no clear answer. was wondering what people would do if they were in my situation:

I am 33, working in banking and soon will quit the industry. For income im looking to gain new skills and work part time.

my current financial situation is as follows:

- own property in Highgate: equity £350k with mortgage of £225k - lodger pays me rent to cover monthly payments.
- Cash of £250k of which £48k is in cash isa or current accounts earning 2.8-3%. another £56k in cash isa bond maturing soon which i will put into S&S isa. the rest (£147k) is in savings accounts earnign next to nothing.
- S&S ISA worth currently £46k
- pension worth £70k

my main priority would be to invest for income rather then capital growth given i will be quitting a well paid job soon. my outgoings are fairly low - excluding mortgage they tend to be under £800 excluding one offs like holidays.

so looking at investment ideas for the £147k of cash - property just looks both expensive and not worth it given all the tax changes and transaction costs. stock markets are quite high and certainly not the "smart" thing to do. its difficult to see where else one would invest the cash. perhaps keeping it in cash for now is a good idea given the macro picture?

i should add, before anyway advices to contribute to pension, im not too worried financially for later on in my life as my parents have a significant amount of wealth that would be passed onto me.

i am also not going to have kids (already decided).

what would you do?

BobQ

Assuming your parents will provide for your retirement is a mistake even if it is correct. Investing in a pension is still tax efficient and if they do not leave you the fortune you expect, what does that mean for your retirement? £70K in a pension is not a lot given you had a well paid job in banking.

You seem to have a perfectly good job that you have given up but have absolutely no idea what you plan to do with your life in the next 30 years. Are you after a serious career or just want to drift through life?

What skills and qualifications do you actually have?

How much of your savings do you expect to invest in your future unemployment and in funding your training?

You seem to have done well financially to date but if you really have no idea maybe you need an IFA? Given you have already ruled out a pension, property and stocks and shares (for fairly nebulous reasons and despite already having some of those asset classes) what are you left with? S&S are a long term investment.

Try posting on a thread covering pensions, savings and investments maybe an IFA can advise. I am not an IFA but it is fairly obvious that you are going to have to invest more in S&S if you want to get a reasonable income. How much income do you want/need in the future?

Can I say that you seem not to be very financially savvy for someone who worked in a well paid job in a bank! Maybe you should train to become an IFA yourself?

Dan83

You have also posted this on the saving and investment board

cells

why do you want to quit the day job?

Why have you definitely decided to not have kids, 33 if you are a man still gives time.

Mistermeaner

May as well just dig a hole and lie down in it. Don't need to worry about anything then.

Or you could make some little economics and give yourself some purpose.

Conrad

Not many people have amassed that amount of cash by age 33, you're either lucky (had gifts from parents / inheritance etc) or very tight and save much of your income. If you are very tight I would imagine you think about your cash day and night and know full well how you will invest it.


By all means amass wealth but have experiences on the way, life in the end is merely a collection of memories. Something about your post minds me of the tight misers I know that seem to get grumpier with every passing day in spite of great wealth.

economic

no im perfectly happy with my life. i have hobbies, into fitness training/bodybuilding, travelling (been to over 30 different countries), going out for dinner, cinema/films, technology and others too. its just that i dont have overly expensive hobbies and yes i am careful with my money. i dont drink alcohol so that may help a lot with saving. i also have a very well paying job - on average £100k a year gross over the past 10 years. shouldnt be a surprise tbh with how much i saved.

chucknorris

economic wrote: »

no im perfectly happy with my life. i have hobbies, into fitness training/bodybuilding, travelling (been to over 30 different countries), going out for dinner, cinema/films, technology and others too. its just that i dont have overly expensive hobbies and yes i am careful with my money. i dont drink alcohol so that may help a lot with saving. i also have a very well paying job - on average £100k a year gross over the past 10 years. shouldnt be a surprise tbh with how much i saved.

Me too, I've had a great day today, taking my dog for a 12 mile walk in lovely countryside, my perfect day would probably, that same walk in the morning, a game of bowls in the afternoon, and having friends around (or visiting them) for dinner in the evening (with more than a bit of wine though).

Mistermeaner

If you're continuing to amass wealth for no reason then IMO you have lost sight of life (unless amassing wealth gives you pleasure or is a side benefit of what you do)

Eg if i needed 1mil to fulfill my goals and had a property portfolio worth 1.1-1.6mil depending on selling at the optimum time i think id just say stuff it and sell it regardless of whether it was optimised.

I work now because i need to. As soon as my goal is hit (roughly 500k and the house paid) im off

westernpromise

You're assuming that you can freeze your life where it is right now. I'm not sure that works.

Most obviously, if you chuck in work and hunker down to live frugally for the duration until you inherit, you're not going to attract a long term partner who's going to go out to work till 65 while you don't.

You may inherit nothing; entire fortunes can be dissipated on long term care. A friend of mine has just lost his mother after 11 years fo Alzheimer's which cost the entire estate at equity withdrawal rates. You could get to 40 and you're the last of your family; are you sure you won't want children then? I've been there and they are a major comfort. I was convinced I didn't want children till I was 34; then I split up with a long term partner and realised I hadn't wanted them with her. And became massively broody overnight. Oh, and by the time I was 40, after 22 years of gym going, I'd had enough.

If you're alone and poor in old age how's that going to go? What if you have cancer and there's nobody to drive you to the hospital and sit with you while you have your chemo? This stuff matters, it really does.

Don't forget too that people in their 70s and 80s today pay more in council tax than they did in mortgage payments, Their mortgage never really went away even after it was paid off; and what if a future government decides to levy a wealth tax on you?

Noen of this is out there; it's all stuff that does happen and has happened to people.

chucknorris

Both the above posts are very valid, I'm 58 years old, and you sound more like someone at my stage of life than someone from your generation. Life is for living (you only get one go), fair enough if what you propose fully fulfills all your expectations of life, and we are all different.

But if you feel something isn't quite right, it might not be what you think it is.

EDIT: I would also add, if you are amassing wealth so rapidly, and you don't want to have kids, what is your plans for that wealth?