Am I in a good financial position?

Teresa_H

Hi All,

I was wondering if I could have some objective opinions about my financial position and what you think my priorities should be. I worry so much about finance, having grown up around debt, and I am terrified of either losing what I have or being in a position where I'd have nothing.

In short,

- I'm 29, earn about 2500 net per month
- Don't drive, don't smoke, don't have many expensive habits
- I own my own flat outright (bought in cash 2 years ago thanks to an inheritance)
- I have about 10k in savings. It's been steady for about a year - I never seem to be able to really exceed the 10k mark. There always seems to be some new expensive I need to fork out for which digs into my savings (new kitchen, work clothes etc etc ( ). I'd love to have a better safety net. 10k doesn't seem like much in the grand scheme of things.
- I don't get any help from my parents
- I haven't paid anything into a pension and it worries me. On the other hand, I know that pension funds can be risky (look what happened with BHS) and someone told me I'd be better off saving and buying a second flat and renting it out, in lieu of saving for a pension.

Wish I knew where to start!!

Thanks :A

sourcrates

I don't think you don't need our advice.

You seem to have the general financial situation under control.


Pensions are not always worth paying into, interest rates are at an all time low as well, so saving in general is on a pretty flat level at the moment.


You can start a personal pension if you wish, or, in a few years time, all employers are to offer stakeholder pensions to there staff, so you will get one in time, as it will be compulsory.

Wimbrel

You might be best posting on the savings and investments and pension boards on this forum. Debt is obviously not an issue for you but I'm sure there are tips on long term financial planning which you might find helpful.

Karonher

It does seem that being around debt has had a good effect on your attitude to it. The only way to increase your savings will be to earn more or stop buying things you don't need.

There are a lot of downsides to being a landlord as a few friends found out. One had a string of bad tenants that cost him thousands while another bought a property that was not going to be easy to let.

This might not be the right part of the forum to post on but there is bound to be a section suitable.

Deadbeat

We're in practically the same position, so I only have one piece of advice:

Talk to your HR people about enrolling in your employer's workplace pension scheme. Contributions start at 1% of your gross and are usually matched by your employer. They are usually managed by professionals for a sensible risk/return profile and you can choose from several options depending on your tolerance for risk.

The sooner you start the better (I will refrain from confessing how long it has taken me to do this).

datlex

No you are not in a good position financially. You clearly are spending all or most of your earnings. You should be able to save a lot of your wage from what you say you are note able to. Where are you wasting money. The warning signs of impending debt are there.

Lrimas

You need to start a pension. Find out what your company scheme is and pay in at least enough to get a match. Usually (these days) these will be DC pension schemes where you can decide what you want to invest in. If you just leave it the pension administrators will invest it for you, which isn't a bad thing either.

If you can salary sacrifice you will save on both tax and ni contributions which is rather a lot (I believe it is 32%).

Becoming a landlord on the other hand is VERY tax inefficient.

You also need to spend less. It is great that you have your own flat and some savings, but if those savings are not going up it means you are spending the same amount that you are earning. That is a better situation to be in than most, but still not great. It means you can never retire, can never take a sabattical and will be in trouble if you are without a job for a while.

Keep a spending diary and cut out unecessary expenses.

But you already know that which is why you posted here. :money: So go and change your finances to be "good" instead of "better than average"

indesisiv

If you are earning that much each month and are not paying rent or mortgage then you are spending an awful lot a month!

With that you should be able to save about 1k a month as your outgoings shouldn't be to high.

dcouponzzzz

tbh with no loans, mortgage or car you should be able to save 75% of your earnings. Sounds like you're the target audience for http://www.mrmoneymustache.com/

I suggest you read his financial advice blogs (and the rest if you're interested)

Grenage

I would echo the above; if you are pulling in 2,500k a month, have no mortgage or rent, and cannot increase your savings, you are doing something massively wrong.

Brightspark87

couple of things stand out to me. Firstly, the BHS pension is not the kind of pension you will get (sorry to day). Even though the scheme is going bust people are going to be covered by FSCS and get 90% of their pension income. You will be paying into a money purchase pension scheme where you invest in funds rather than the BHS type called a final salary. It remains yours.

A second flat may be a good investment but I would suggest that a) it is not as tax efficient as the pension b) you understand the tax you will have to pay and b) you don't put 'all your eggs in one basket' ie don't buy a mirror image of what you have got I suggest if you do look a second flat going for something different.

You do (as said before) spend an awful lot but perhaps you are just enjoying things. I would suggest you have a large net income (gross pay I am guessing must be c£36,000).