Advice for the bewildered

thelchap

Hi Everyone,

I’m after some general advice around what to best do with my money. For the first time in my life I have a bit of spare money each month, and I’m after some general advice over what’s the best approach. I’m looking for long term investments rather than quick wins, so happy to ride out any short term losses for the right long term decision.

A brief overview of my situation:
Currently single (no dependents) earning £50k per year
Mortgage of £600 per month (overpaying at £750 per month) with 23 years remaining
£6k sitting in a cash ISA
Currently putting 5% (+matched 5% by work) into pension pot

Currently I’m not living particularly frugally, and I’m aware I’m not making best of the money available to me and want to change this. I need to sort out the classic MSE topics (energy bills, current account), but after some general advice around other spare cash. So, in summary:

What best to do with c. £600 a month spare cash (pension/LISA/S&S ISA etc)
If S&S are the choice, any particular recommendations for “hands off” long term investments
Is overpaying my mortgage the right thing to do (currently at 1.79% with remaining balance of £145k - 75% LTV)
I want to keep a “pot” of cash available to me at short notice (would £2k be enough?) but can potentially invest remaining £4k of cash

Sorry for the open ended questions, but thanks for your help

L

ValiantSon

I'd say that you need to increase your pension payments. 5% is pretty low. You will also benefit as you are a higher rate tax payer, so the uplift on your contributions will be significant. Will your employer match any higher contributions? If so then even better.

thelchap

No - 5% is the max matched I can get, which is why I’ve kept at this level. Any rough idea on how much you’d push this? I’m likely to have a similar standard job long term, but unlikely to get much higher than 70k ish. Cheers

ColdIron

An easy target now might be aiming to take yourself out of higher rate tax

geeovana

A rough age might help give people an idea of your investing timeline.

gatters

Perhaps a cash pot slightly larger than £2k would be more comfortable.

When does your fixed mortgage period end? Apart from reducing your LTV next time you fix, savings can beat overpayments.

You could build a cash pot with 5% regular savers, and on maturity decide whether to save elsewhere, invest or overpay the mortgage.

thelchap

I’m 29 - so planning for the long term. My mortgage rate is due to expire in 4 months or so - so one thing I’m considering is using some cash to get down to 70% LTV - would that be a silly thing to do? My thinking was that rates would improve from 75% to 70%.

Fatbritabroad

thelchap wrote: »

I’m 29 - so planning for the long term. My mortgage rate is due to expire in 4 months or so - so one thing I’m considering is using some cash to get down to 70% LTV - would that be a silly thing to do? My thinking was that rates would improve from 75% to 70%.

Personally I would say increase your emergency pot to 6 months bills and increase your pension. Then overpaying your mortgage isn't the worst thing. You'll generally get better rates on anything up to 60% ltv

bostonerimus

You should up your pension payments.

How are those payments invested and how much are the fees, you should be able to answer both of those questions off the top of your head. If you can't find out immediately and then make sure your DC pension investments are appropriate for your circumstances.....if you are young you probably need a fairly high proportion of equities for long term growth.

Do a detailed budget so you can see where you can easily save money.
Put 6 months spending in a cash emergency account.....that can be an easy access saving account.
Then think about a S&S ISA and again invest in low cost funds (I like trackers).

Zorillo

10% pension contributions on top of the 5% employer contributions would seem sensible as it will take you nearly out of 40% tax and you'll thank yourself in the long run.

I'd also pay off as much of your mortgage as possible; it's true you can probably beat overpaying with investments but I'd prefer the security of knowing my house won't be taken away if I lose my job, I don't know if redundancy is a possibility in your line of work or not. It's an ever present danger in mine.

MallyGirl

Zorillo wrote: »

10% [STRIKE]mortgage[/STRIKE] pension payments on top of the 5% employer contributions would seem sensible as it will take you nearly out of 40% tax and you'll thank yourself in the long run.

Rule of thumb is half your age in percentage contributions when you start so 15% at 30.