Sold House - How Should I Invest

NorthernMonkey1

Hello all,

I've now got a completion date for my Flat, which I own in full.

My current house is worth ~£125k, and has an outstanding Mortgage of £75k as well as £15k on a 0% CC, with 28 months to run on the interest free period. The flat has sold for £78k, of which after fees, and some money I borrowed from my parents to do it up, should leave me with £75k.

I have savings of £3800 which are earmarked for work on this house (wallties) and £1000 in a S&S isa. The mortgage is at 3.54% tracker with no overpayment penalties.

I'm 37, and would like to retire at 55. I intend financing this via my work DC pension, into which I currently pay 32% of gross + 10% employer contribution. I have no other debt at all, but do drive a rubbishy 11 year old fiat panda, and I don't think my emergency fund is big enough. My monthly expenses minus mortgage (but including 0% CC payment) are about £1300, so I think I need an emergency fund of ~£5000, plus some to cover the car if it does go pop any time soon.

I was thinking of either

a) paying off the entire mortgage
b) paying off £60k, remortgaging to a much better rate, and putting £15k into a S&S isa on a global tracker fund
c) Something else?

What would you do in my situation

AnotherJoe

Given the focus on early retirement and also some recent stuff I've read on why, long term an emergency fund is a bad idea,https://earlyretirementnow.com/2016/05/05/emergency-fund/

I'd look at putting more money into a pension, possibly a SIPP aside from your employers. That depends how much your contributions come to of course, less than £40k ?

Or buy a better car and enjoy that.

jdw2000

How big is your pension pot at the moment?

As a rule of thumb it should be £100K by the time you are 40.

NorthernMonkey1

About £130k.

I'm not really interested in cars TBH. If this one were to die, I'd just go buy another for £2000

greenglide

Given the focus on early retirement and also some recent stuff I've read on why, long term an emergency fund is a bad idea,

But the article actually says (if you cut through the US cr*p) how to handle "emergencies" using all sorts of methods which do involve liquid assets.

Currently many people who have emergency funds use interest [STRIKE]current[/STRIKE] paying current accounts to meet this so this is not "dead" money. Also when using drawdown as an income stream an emergency fund in accounts like this is more suitable in many ways to be able to avoid having to sell equities at an unsuitable time.

I would treat this suggestion with a huge amount of scepticism!

AnotherJoe

greenglide wrote: »

But the article actually says (if you cut through the US cr*p) how to handle "emergencies" using all sorts of methods which do involve liquid assets.

Currently many people who have emergency funds use current paying current accounts to meet this so this is not "dead" money. Also when using drawdown as an income stream an emergency fund in accounts like this is more suitable in many ways to be able to avoid having to sell equities at an unsuitable time.

I would treat this suggestion with a huge amount of scepticism!

(Did you mean interest paying current accounts ?) Yes I see where you are coming from in that case) their reasoning was that you have say 6 months money tied up that could have been in the market growing for 30-40 years, instead of using it for some small portion of that time to avoid selling shares or whatever.

It does depend though what you mean by emergency money. I think the concept is not to have say £10k sat there doing nothing. Maybe it's different if it's in 3-5% accounts it's no different to having it in an income fund I suppose.

In the bigger picture, for drawdown in retirement, a study using stock market data from the past 100'years or so did show that a 1-2 year cash buffer in drawdown was advantageous to avoid selling at inopportune times.

Eco_Miser

AnotherJoe wrote: »

Given the focus on early retirement and also some recent stuff I've read on why, long term an emergency fund is a bad idea,https://earlyretirementnow.com/2016/05/05/emergency-fund/

He's relying on using credit cards to tide him over until his next pay-check, relying on his severance package (redundancy money) if he loses his job, and apparently on being able to borrow on his mortgage if that isn't enough.
So, if you've got enough available credit, and a good job, and an offset mortgage with plenty of equity in your home maybe you don't need an emergency fund.

But he was also talking about keeping tens of thousands of dollars in a half percent savings account. MSE'ers know how to get 3-5% on that sum, and many reckon on using cash instead of bonds as part of their investment portfolio, as well as a buffer for drawdown.