How Much do you Save?

bowlhead99

stoozie1 wrote: »

This is very interesting. So if you had a £40k emergency, this would be ok because you could draw on your investments without worrying that you could have done so at a bad time, growth-wise?

Not many people actually have £40k emergencies. Perhaps someone with a £55k salary who loses their job for a year would consider that a "£40k emergency" because they have missed out on earning £40k of net pay. However, if as in Jamesd's case the ongoing income from the investments is sufficient to pay the ongoing bills just out of its normal cash flow, then losing a job and taking a year to get re-employed isn't actually an 'emergency' because the cashflow to pay the bills doesn't go away and investments don't need to be sold.

And if as he suggests the portfolio includes a number of P2P loans with short term maturities there will always be principal rolling out of them which could be spent instead of redeployed, avoiding the need to actively sell an investment at a loss.

In the case of someone highly leveraged with a huge overdraft which they have somehow been able to get at a really low rate and using to 'stooze', I guess an example of a proper £40k emergency would be a case where the bank calls in the £40k overdraft, demanding immediate payment, at a time when you have lost your job and are unable to get a loan or credit card to replace the credit facility. The ongoing income from investments wouldn't be enough to clear it. However, most people with stoozed balances don't use 'repayable on demand' facilities such as overdrafts - instead, fixed term loans, mortgages or credit card deals, so they are not going to get called in overnight; you can plan for their maturity.

stoozie1

Thank you bowlhead.

I have not yet had sufficient wealth that this would come into play, but I imagine that if I had investments to the level discussed above I would have perceived urgent need of sums that large fairly regularly.

As that's atypical, from what you are saying, I'll rethink my investment strategy. (Because the advice I've had assumes a more typical investor).

MEM62

14% of gross salary into pension via salary sacrifice (+ 4.5% added by employer)

6% of net income into cash ISA.

8% of net income into share ISA

[Deleted User]

longleggedhair wrote: »

I've saved hard for years , and always lived frugally. I'm another person who's never been on a high wage (usually it's been around 20k annually) started saving around 2005 and have managed to reach about £175,000. Now a good part of that is due to investment returns over the past 7 years which have been brilliant and a couple of lucky turns.

But it wasn't at all that difficult. I have a car and a nice home, but no expensive tastes. I've dropped back to part time work and only pick up about £900 per month so my saving is now down to about £200 per month. But I recon I'm getting about £600 monthly in investment income which I let roll up.

Modest savings wisely invested can make you rich fairly easily, you just have to give it time and keep at it every month. My aim is to leave work eventually and enjoy more of my free time (I've always hated work!) and that's been my goal.

The thing overall I have found is the feeling of security and safety having money behind you gives. Both my parents worked hard and earned far more than I ever have but they both wasted their money and never had any money behind them, I was determined never to have that constant fear of job loss etc.

Keep up the good work and before you know it you'll be surprised with how much you've accumulated.

What an inspiring post.

I am taking part in the other savings challenge on here and am in awe of the amounts sum are able to save in a month, some are like 12k so its lovely to hear from someone on a normal salary just chipping away, a bit like the hare and the tortoise.

Anno88

Hi everyone ,,, I have just got back into f/t work and am saving £300.00 a month whilst clearing debt.
I hope to clear all the outstanding debt by Dec'2017, and then can up savings to £1000.00, all being well.


The £300.00 goes into a regular saver ... what's the best way to maximise my savings growth for the future.
Am a complete savings newbie!
Any advice appreciated :-)

gingercordial

The way I do it is that I budget a set amount to savings each month, then budget my household expenses and my fun "allowance", then any left over/extra income goes to savings too.

As it stands my amount going to long-term savings each month (for a house deposit) is about 45% of my take-home pay. I admit it has been a bit lower for the last couple of months as we are getting married in June so some of it is being diverted to the wedding budget.

However a lot of my income is put to short-term savings too, because I budget fully and put aside each month to build up pots for annual spends or big things, like holidays, car repairs, insurance renewal etc.

If I look at it the other way, I spend roughly 25% of my take-home on rent, 10% on "fun", 10% on regular monthly bills eg council tax, groceries, electricity, water, mobile phone. That makes 45%, which means 55% is going to either short- or long-term savings.

I'm also paying 6% into my work pension fund as they match and double it; since I don't see it in my take-home pay I don't even think of it as savings.

The You Need A Budget (YNAB) software has been instrumental in me getting to this position. Until a year and a half ago I basically spent everything I earned, and sometimes more. I was brought up in a wealthy family, straight into a very good job after university, never had to worry about money or budgeting (not boasting, but recognising I am very fortunate) but never managed to save anything either. Using YNAB to track my income, allocate it to a budget and track my spending has been life-changing, no exaggeration. It took a while to break myself of the reckless spending habit but now I log everything I spend on the YNAB app on my phone as soon as I spend it, and I refer to it to see how much I have left before buying anything. For whatever reason this has clicked with me better than any other method I might have looked at. I love it.

Crystal_Pixie

pricew1970 wrote: »

£20 for 3 months combined salary.. I would demand a rise that's slave labour ��

I realised I missed the "k" off! Indeed I wouldn't get out of bed for that amount...

Anno88

Hmmm. I do save straight from my pay cheque, but then find it impossible not to spend everyday - even if its just £2 a household necessity of some kind. I find I like to put away more than I can really afford, and then end up living in an overdraft till next payday.


I am improving .... in the past my total savings over a period of time was exactly equal to my credit card debt!


All so ''in the mind '' isn't it !!

jamesd

stoozie1 wrote: »

This is very interesting. So if you had a £40k emergency, this would be ok because you could draw on your investments without worrying that you could have done so at a bad time, growth-wise?

I have something like £120k of credit card and mortgage borrowing. If I was told to repay all of that within a month without borrowing and without touching investments with highly varying values, I could. I could probably do the first £50k the next business day without touching investments that have big price variations.

Assuming credit is available rather than all withdrawn I could probably handle £100k in a week without touching volatile investments, though using some borrowing.

That's part of why I can have say sixty thousand pounds of stooze pot and not be scared of the amount. That money is invested and I also have other investments that could without much value risk pay it back a second time. Ten years ago? No way. Eleven years ago I had about no money, having just cleared debts. But I did have my job, courtesy of having been an unpaid volunteer at a famous place when it wasn't so famous, which made me an attractive hire. That volunteering is one of the candidates for being the best decision I've made in my life, without even the slightest clue of what it would lead to.

But that's ten years of over 60% savings ratio at a nice income level so I've come a long way and it shows in the financial options that I now have available. I was posting here ten years ago, so anyone who wants to can look back in time to the relatively clueless and impecunious me from then and see how things have changed over the years. That's part of why I give numbers: I'm at the I've done it stage so I can show what's possible (though the details and amounts depend on income of course).

I'm close to "peak assets" and in my likely "peak earnings" period, with enough in assets accumulated to retire and live comfortably - by my standards - for the rest of my life. That means I'm at close to maximum capability for dealing with unexpected bills, though I am constrained by not being 55 yet so I can't get at pension money for a while longer.

I also have permanent health insurance at 75% of my base pay until state pension age if I can't work, critical illness insurance and private medical and dental cover. I'm big picture cautious, but relatively high risk for investments because that is what reduces the long term big picture risk.

Most people reading this discussion will probably be far earlier in their life and savings cycle, with years of work in their future to accumulate resources that I have already lived through. In that case don't do what I can do today, do what I could and did do earlier on as part of my own journey.

jamesd

stoozie1 wrote: »

I have not yet had sufficient wealth that this would come into play, but I imagine that if I had investments to the level discussed above I would have perceived urgent need of sums that large fairly regularly.

I could pay all of my regular living costs and have change from £12k. I set my could retire income target at about £18k because that was then median average retired household income, it's more like £22k now.

It's worth a read of the book The Millionaire Next Door. It does a good job of explaining and illustrating the differences between everyday US millionaires and living a millionaire lifestyle.

I'm not a millionaire in US dollars or pounds, though if I don't spend more I might be a pound millionaire in ten to fifteen years or so even if I had no job between now and then. I'm idly contemplating doing it just because I can, courtesy of having saved so much, and because I never dreamed, coming from a background of poverty by UK standards, that I might.