Do I have my sums correct or am I pie in the sky?

nellis10

Triumph13 wrote: »

The extra year on the ISA was the big difference, but the smaller differences on everything else are down to you effectively calculating more than a 16% return on current year contributions!
On average your current contributions are only there for half of the year so your return on them should be just 4% x half the contribution. You are giving a full 4% and then giving another 4% on top of that at the end of the year!
A better formula would be A1= brought forward amount, B1 = current savings, C1 = (A1 + B1/2) * 4%, D1 = A1+B1+C1

That will mean I have longer and more to have to save!!! :eek::eek::eek:
Spreadsheets...bloody things!!!

Triumph13

nellis10 wrote: »

That will mean I have longer and more to have to save!!! :eek::eek::eek:
Spreadsheets...bloody things!!!

I already allowed for this in my calcs so you are fine. If anything I'd say your biggest danger might be going too extreme on your savings goals and losing heart as a result. You need to make sure you get the balance of enjoying being frugal rather than letting it dominate too much. I'm all in favour of 'jam tomorrow', but not at the expense of 15 years of dry bread.

nellis10

Triumph13 wrote: »

I already allowed for this in my calcs so you are fine. If anything I'd say your biggest danger might be going too extreme on your savings goals and losing heart as a result. You need to make sure you get the balance of enjoying being frugal rather than letting it dominate too much. I'm all in favour of 'jam tomorrow', but not at the expense of 15 years of dry bread.

I still have about £200 factored into my budget for Xmas/Birthdays/Splurges etc. I'm a rather boring person so I don't need much and everything gets spent on my son, or my waistline lol

I'll no doubt start off with gusto and then rein in it when I need to.

I DID however find a nice little excel formula for calculating "Future Value"

=FV(RoI/12, NoY*12,MI,CB)

Where:
RoI = Rate of Interest/12 for Monthly calculating
NoY = Number of Years for investing * 12 Monthly periods
MI = Monthly investment expressed as a negative
CB = Current Balance expressed as a negative

Example:
=FV(0.03/12, 14*12,-125,-96500)

RoI = 3%
NoY = 14 * 12 Months
MI = £125
CB = £96500

=£172,850.54

edinburgher

FV is great fun, just be sure to allow for/challenge the assumptions already being discussed in the thread (i.e. inflation and a realistic rate of return). It can be easy to get carried away!

I tend to assume low returns, but hope for slightly better, as it's always easier/less painful to update financial plans where unexpected upside has made it easier to achieve your goals

nellis10

edinburgher wrote: »

FV is great fun, just be sure to allow for/challenge the assumptions already being discussed in the thread (i.e. inflation and a realistic rate of return). It can be easy to get carried away!

I tend to assume low returns, but hope for slightly better, as it's always easier/less painful to update financial plans where unexpected upside has made it easier to achieve your goals

Thanks Ed!

If I assume 2.5% I think that would at least keep me in line with inflation if nothing else.

jamesd

nellis10 wrote: »

I have no DB pension, just current DC pension at work and my previous work pension which I am paying in about £1500 a year and then phoning the taxman to see if I get relief, which I won't from this year on, as I will keep my taxable income below the 40% threshold by upping pension contributions.

That will also help, I hope towards not paying 40% tax on my medical insurance benefit at work and thus should also increase my savings allowance from £500 to £1000 - correct? So I will all round even though nominally it looks as those I am a 40% taxpayer?

Wrong unless your pension contributions are by salary sacrifice or a workplace net pay scheme.

Otherwise you pay in net and get 25% added to give you 20% basic rate relief. But your pay and benefits would still have been taxed at 40% above the higher rate threshold. Tell HMRC the gross amount arriving into the pension and they will increase your basic rate tax band by that much. Then they will refund you the higher rate relief and/or issue a new tax code.

nellis10

jamesd wrote: »

Wrong unless your pension contributions are by salary sacrifice or a workplace net pay scheme.

Otherwise you pay in net and get 25% added to give you 20% basic rate relief. But your pay and benefits would still have been taxed at 40% above the higher rate threshold. Tell HMRC the gross amount arriving into the pension and they will increase your basic rate tax band by that much. Then they will refund you the higher rate relief and/or issue a new tax code.

Work pension is salary sacrifice and I am upping this to 20% which should bring my taxable income (£47K - Tax code 997L = £37500 - 20% pension contribution via SS = £9400) to £28K which puts me back in the 20% bracket, correct?

However I pay into a private pension £110/month via net pay and it was this I was getting relief on. However I've stopped this for 2017/18 due to the above calcs hopefully putting me in the 20% bracket again.

jamesd

Yes, that will get you into basic rate.

Also worth seeing whether you can cut your pay to minimum wage until you have all of the £9400 into the pension, without losing any company contribution. That maximises the amount of sacrifice in the range in which you get 12% NI saving. NI is calculated independently for each pay period unlike income tax and that's how the advantage arises.