Help

Davethepioneer

Ok that has just confused the hell out of me, sorry for that but I just don't understand how paying my mortgage of and owing nobody anything can make me poorer. I was always led to believe that owe nobody anything and whatever you have is yours. Money is so confusing, best to spend it and just enjoy it hahaha

jamesd

Davethepioneer wrote: »

it would be fair to say that paying the mortgage, loan and CC off would be a good idea.

Loan and CC yes but mortgages are so cheap that it's probably a bad idea unless you're desperate to get rid of it instead of investing in things that pay its ongoing cost and more.

Davethepioneer wrote: »

I know I can split between cash isa or SS isa but I can't do no more than £20,000 between them. This still leaves a huge chunk of money so stocks and shares look the way to go but how much? Is it something you can DIY or do I have to pay the guy who came to see me.

If you're willing to do P2P lending, use the innovative finance ISA (IFISA) for P2P lending first because that saves you tax on the interest. Dividends and capital gains do better outside an ISA than interest does after the first £1000 worth of interest (and possibly the starter rate for savings on top of that but not likely to apply to you unless you retire).

You can DIY. You'll find lots of discussion of the Vanguard LifeStrategy range of funds here and you might just stick the money into one of them until you've learned more. There are reasons to prefer others in various ways but they are an excellent easy way to get started. The Vanguard LifeStrategy 20% Equity Fund would be a good choice with current equity market valuations, which are quite high, switching into the 40% or 60% after the next big market drop. They use a mixture of shares and bonds, with the lower share mixtures having less up and down movement. Given your apparent relative inexperience and likely excessive reaction to ups and downs due to inexperience it'll be better for you not to go above 60% at least until you've gone through one big equity drop.

P2P lending has the big advantage that you just don't see those drops, but you do have to deal with defaults from time to time and that takes a bit of getting used to.

Choose the income (inc) versions of the funds if it's outside a SIPP or ISA. it makes it easier to calculate the possible capital gains tax liability when you sell because you control the dates when you buy and always know the price you buy at. Accumulation (acc) versions tdo the reinvesting as convenient for the fund and that's a pain to track. Inside a SIPP or ISA the inc version can be handy to accumulate money to pay fees but no CGT calculations to worry about, so acc is OK. For CGT you need to track every sale and purchase and the average purchase price. Then when you sell you compare the sale price to the average purchase price to calculate the gain on the portion you're selling.

jamesd

Davethepioneer wrote: »

Ok that has just confused the hell out of me, sorry for that but I just don't understand how paying my mortgage of and owing nobody anything can make me poorer. I was always led to believe that owe nobody anything and whatever you have is yours.

Say you're making 7% from investments and paying 3% mortgage interest. You're 4% better off each year by keeping the mortgage, ignoring income tax for convenience. If you're expecting to make say 5-6% from BTL, same logic, why pay off a mortgage costing 3% when you can use it to make 5-6% instead?

The reason this makes sense is that it's not borrowing to spend but borrowing to invest, so you're making money on your borrowing, not losing money.

jamesd

For your boys, if you're investing your other money, you might want to do both the maximum £4,000 Junior ISA and £2,880 maximum personal pension (SIPP) contribution. Assuming you can afford the £13,760 a year cost of doing both for each of them.

Stick both into Vanguard LifeStrategy 80% because of the long and very long investing horizon, which makes the routine ups and downs irrelevant. General idea is that the JISA can pay a mortgage deposit and the pension greatly cuts how much they would need to pay into one.

Assuming normal historic investment returns of about 4% plus inflation for the LifeStrategy 80% equity sort of mixture, you paying £2,880 net, grossed up to £3,600 by tax relief, into the pensions for say 16 years would get them to a pension pot worth £80,502 by the end of the 16 years. Assuming that's at age 18 and they are allowed to take pension money at age 60 it'd grow to £430,731 at age 60. Using the "4% rule" to give an idea of approximate income, 4% of that is worth £17,229 a year of income in today's money. A pretty good start!

Same 16 year paying in assumption for the JISA's £4,000 a year gets to £89,445 after 16 years which I'll assume is age 18. Another 7 years until buying a property at say age 25 takes it to £118,292 in today's money. Enough to buy the whole home in many places, not just pay the deposit.

Davethepioneer

Plenty of me to look into here, you have all been a great help

grandst

The danger is a 2008 style crash comes along and wipes 40-50% off your investments, paying off debt then starts to look good.

jamesd

A 2008 style crash would be fine, though worrying, has been a good time for markets since. That's also why you diversify into lots of things, not just shares. LifeStrategy 20% Equity might see a drop of 10-15% or so in a repeat of 2008 because 80% of it isn't equities. LifeStrategy 80% Equity would be more like 35% down in the same situation.

Eco_Miser

grandst wrote: »

The danger is a 2008 style crash comes along and wipes 40-50% off your investments, paying off debt then starts to look good.

That's only a paper loss, and recovers quite fast (in the 2008 scenario), while selling investments to pay off debt crystallises your loss, and you never recover. Also the cost of the debt probably falls as well.

MallyGirl

Davethepioneer wrote: »

Pension wise you advise to put some into my wife's pension, now would that be her company pension to which her employer matches what she puts in but I doubt they would match a huge amount or do you mean setting up a private pension for her and one for me?

If your wife is not getting the maximum employer match amount I would get her to increase her contributions until she is - it is free money!

Davethepioneer

Firstly let me thank you all for the replies I’ve had on this thread so far.

Well I received my money. It’s still in dollars but is currently sitting at $995,000

I use XE currency rate checker as this is the closest to the rate my bank gives me (HSBC) obviously it only shows the market rate and not the real trading rate but it’s close enough. Anyway just before Christmas the dollars were worth around £763,000 but for the past couple of weeks we are hovering around £736,000-£740,000 which is a dramatic loss but it goes up and down so is to be expected. Anyway I obviously want to get this into sterling ASAP but clearly want the rate to be better which brings me to my question. Has anyone heard or had any experience with this company?

http://www.currencies.co.uk

They are a broker and can get better rates than the banks