What to do with spare £1500 per month?

californiagirl

Husband and I have just paid off our mortgage and now want to turn our attention to savings (which we have never had..).
We are in our early thirties and have a net income of approx £4k per month. We have calculated that we could definitely put away at least £1500 per month (after bills, food, going out, holiday budget), but unsure of where to start.
We have no emergency fund, but we have zero debt and currently have access to a 0% credit card, so I'm assuming that will work in case the boiler breaks down, etc?
We don't yet have a current pension (I have a deferred LGPS that will pay £200pm), and we both have limited companies so I am guessing that is where we should start? I am only earning £10k a year at the moment as am taking on less work due to doing the bulk of childcare for our kids. DH earns about £50k pa.
We want to focus on saving £15-20k in the short term to buy a new car at the end of the year when we return our leased one.
There seem to be so many options as to where to put our money that it's hard to see where we should start. Any ideas? Thanks all.

unitedwestand

Well done on paying off your mortgage.

Personally I'd put it in to an ISA, you get a £20k allowance each from the 5th April of which you'll use £18k

AnotherJoe

Shockingly bad financial priorities. You aren't the only ones, there are many people on the mortage free wannabes forum proudly proclaiming how they plan to be mortage free, turning down free money from employers and HMRC that could be in their pension.

Pension should be first, mortgage second (not putting that money in your pension instead of mortgage has long term cost you literally many tens of thousands of pounds ) and now you intend to splurge your next lot of money on a car ?

Start saving into a pension unless you think £200 a month gives you a sustainable life style?

Do not save up £20k to buy a car.

Credit card as emergency savings works until you get made redundant.

Anonymous101

AnotherJoe wrote: »

Shockingly bad financial priorities. You aren't the onky ones, there are many people on the mortage free wannabes forum proudly proclaiming how they plan to be mortage free, turning down free money from employers and HMRC that could be in their pension.

Pension should be first, mortgage second (not putting that money in your pension instead of mortgage has long term cost you literally many tens of thousands of pounds ) and now you intend to splurge your next lot of money on a car ?

Start saving into a pension unless you think £200 a month gives you a sustainable life style?

Do not save up £20k to buy a car.

Credit card as emergency savings works until you get made redundant.

Agreed... Being mortgage free is one thing to aim for but its far from the most efficient or robust form of financial planning.

OP - The first thing to do is sort your pensions. As a guide in % terms you should be looking to save half your age at which you start a pension. However due to having no mortgage you'd be wanting to contribute more than this, particularly in your husbands. Since he's a higher rate tax payer you want to move him out of the 40% bracket. This is the most efficient way you can save money in the long term.

After this really its about finding the best interest cash savings account for your short term savings and once you've comfortably built up a safety net of cash circa 4-6 months expenses I'd open a stocks and share ISA and begin investing for a more medium to long term horizon.

californiagirl

AnotherJoe wrote: »

Shockingly bad financial priorities. You aren't the onky ones, there are many people on the mortage free wannabes forum proudly proclaiming how they plan to be mortage free, turning down free money from employers and HMRC that could be in their pension.

Pension should be first, mortgage second (not putting that money in your pension instead of mortgage has long term cost you literally many tens of thousands of pounds ) and now you intend to splurge your next lot of money on a car ?

Start saving into a pension unless you think £200 a month gives you a sustainable life style?

Do not save up £20k to buy a car.

Credit card as emergency savings works until you get made redundant.

Actually, we're pretty happy with our progress so far. I don't know many people who bought a house aged 20 and have lived a relatively modest life in the decade since in order to renovate, sell, renovate, sell, and finally build their own house and be mortgage-free with two kids.

I've already said we plan to go down the pension route, so clearly our financial priorities are not screwed as you suggest.

What's wrong with saving up to buy a car? We want something 3 years old, family size, reliable - a much better option than paying £300 a month for a car we effectively rent? Please do tell me the much better alternative I am missing.

We are self-employed so won't be made redundant, and if we do lose our jobs, at least we won't lose our home.

ColdIron

unitedwestand wrote: »

Personally I'd put it in to an ISA, you get a £20k allowance each from the 5th April of which you'll use £18k

Given the £1,000 pa tax free personal allowance on savings interest and rotten rates, a cash ISA would be very low on my list

californiagirl

Thanks, Anonymous101.

Anonymous101 wrote: »

As a guide in % terms you should be looking to save half your age at which you start a pension.

Not to sound like a total pleb, but can you explain this?

Anonymous101 wrote: »

However due to having no mortgage you'd be wanting to contribute more than this, particularly in your husbands. Since he's a higher rate tax payer you want to move him out of the 40% bracket. This is the most efficient way you can save money in the long term.

So if he contributed, say, £10k PA into a pension, that would move him entirely out of higher rate tax?

xylophone

If you are saving for a car, you might each open a Nationwide Flexdirect current account and a joint and a Flexclusive Regular Saver.

And start those pensions.....

stoozie1

Yes but for 17/ 18 it's much less than that, c. 4k of pension contributions.

As he would then be a basic rate tax payer you can give him the remains of your unused personal allowance which gives you just over £200p.a.

How many children do you have?

Congratulations on being mortgage free!

stoozie1

Ps pension conts will also stop your child benefit being withdrawn once he steps over the 50 k of earnings.

inflationbuster

@californiagirl - l would save your money in an ISA and continue leasing.
Your ISA can be your emergency fund and if you don't end up using it think of it as your second pension. You've done well to become mortgage free so go build that emergency fund up. As your salary rises you can always put extra money away every month arranging this via your employer for example.