Planning Ahead

bostonerimus

Your priorities should be paying off any high interest debt, saving 6 months to a year's spending in cash and then paying into a pension and an ISA. The relative amounts going into the ISA and the pension will depend on your tax status and desire for spending flexibility.

Is your mortgage repayment or interest only? If you were to buy a rental abroad how would you manage the property and have you done the sums as to how much of the mortgage the rent would pay. What if you lost your jobs and could not rent the foreign property? paying two mortgages would be a worry.

Noobie2011

takesyourchances wrote: »

Totally understand, there a lot of things to consider with overseas property. Also with apartments, you need to try and find out how the complex is being run, is there problems, there is never 100% of owners paying fees and various things affect the owning of your apartment by how other owners pay towards the complex as a whole. Things like that. If you can cover running costs with an overseas property from rental, that would be considered a sucess.



It can be a minefield. Also, if you were not living in the country you decide on, it is very possible to get extended rental stays per month at a good price and not have any outlay buying the property or hassles that can come along with it. So say for example you wanted to stay 4 months in the Canaries say during winter etc, you could get a very reasonable price per month with electric and water costs all included.



With a house etc if land, there is maintaining it when not there, security costs, maybe an alarm fee for remote response.



I just wanted to point some factors out, there are countries you can buy low cost apartments in, but they might not be the most stable or developed counries in many ways, but research as much as possible in general, weigh it up, is there a flood of rental properties or resale, it can be hard to rent in some areas if you don't have local contacts you can trust with networks for such types of rentals.



Maybe decide how much your budget for buying would be and look at what can be got in certain locations, then look as I suggested at rental prices and maybe even find out how much an extended rental cost would be and weigh it all up.


Also the capital cost of buying could be invested in income investments that could help pay for rental stays. This is coming from someone who owns 3 properties abroad, thankfully paid out and covering themselves.

Cheers, I think I may take a step back and focus on where best to save this money so that there is a balance between it making me good returns but also accessible(maybe with penalties) if we did decide to do something like purchase abroad before my retirement or available on my retirement(so maybe some in pension) so we can use for my wife to retire early.

Noobie2011

bostonerimus wrote: »

Your priorities should be paying off any high interest debt, saving 6 months to a year's spending in cash and then paying into a pension and an ISA. The relative amounts going into the ISA and the pension will depend on your tax status and desire for spending flexibility.

Is your mortgage repayment or interest only? If you were to buy a rental abroad how would you manage the property and have you done the sums as to how much of the mortgage the rent would pay. What if you lost your jobs and could not rent the foreign property? paying two mortgages would be a worry.

Yes when I said a few things have to happen to get to the £1,500 in Mar-20 that does involve initially paying off a couple of Credit Cards and Overdrafts. This is the 1st thing we are doing and by putting all our disposable into the debts this allows us to be debt free by Mar-20 on high interest debts.

In terms of the house we are about to secure a mortgage on a new house which will be re-payment plus due to slight credit issues in the past the interest will not be ideal. We did toy with overpaying on the Mortgage but the advise was only do this is the interest was higher than any other interest you could gain by investing. But I do see the big attraction in getting rid of a mortgage early.

I mean on some simple calculations if we decided to overpay £1,000 on our mortgage once the extra money came then our mortgage would be clear in 11 years and save us around £46k in interest. So that does seem very attractive and then means we have a mortgage free house with money relatively easy to access and could give us an option of looking at downsizing and freeing up money for a property abroad or using the extra money to allow my wife to retire early etc but gives us options

jamesd

Noobie2011 wrote: »

on some simple calculations if we decided to overpay £1,000 on our mortgage once the extra money came then our mortgage would be clear in 11 years and save us around £46k in interest. So that does seem very attractive

How much poorer will you be as a result?

You've looked at interest saved, probably without any inflation adjustment. You haven't compared it to any alternative use for the money. The long term average investment return of the UK stock market has been about 5% plus inflation a year, say 7% at the moment. What this implies if your mortgage rate is 3% is making yourself worse off by the 4% difference compounded each year.

You can compare the cases using a regular savings calculator. Compare the mortgage interest rate to the investment returns with the inflation adjustment added.

planteria

Noobie2011 wrote: »

Sorry I meant £1,500 a month gradually rising to £2,000 in 5 years time.

that's exactly what i took your first post to mean.. and it is a very useful amount of money to use on a monthly basis.

i would try to scrape another £2k/yr together each year and maximise your ISA allowance in a S&SISA. that way you have a real investment with the potential to beat inflation, which could be used for retirement or could be accessed to buy a property or for another use.

exactly what you want to invest in within your ISA is another question, of course, but a well-managed balanced/equity fund would seem sensible to me.

Noobie2011

jamesd wrote: »

How much poorer will you be as a result?

You've looked at interest saved, probably without any inflation adjustment. You haven't compared it to any alternative use for the money. The long term average investment return of the UK stock market has been about 5% plus inflation a year, say 7% at the moment. What this implies if your mortgage rate is 3% is making yourself worse off by the 4% difference compounded each year.

You can compare the cases using a regular savings calculator. Compare the mortgage interest rate to the investment returns with the inflation adjustment added.

I agree paying the mortgage with overpayments does not seem to beat other ways of saving. So maybe something like maximising an ISA. Not really clued up on stocks but is this risky or do you mean investing through a company who would manage it rather than doing it myself.

I always try and go cautious as for my pension most people see to use 5% compound interest but I have calculated ours on 3% to be less risky.

I will have a look at that website thanks

Noobie2011

planteria wrote: »

that's exactly what i took your first post to mean.. and it is a very useful amount of money to use on a monthly basis.

i would try to scrape another £2k/yr together each year and maximise your ISA allowance in a S&SISA. that way you have a real investment with the potential to beat inflation, which could be used for retirement or could be accessed to buy a property or for another use.

exactly what you want to invest in within your ISA is another question, of course, but a well-managed balanced/equity fund would seem sensible to me.

That does sound like a good sensible approach as we would be looking for a safer option and keeping it in there for a good few years. Stupid question but if we built up a 20k ISA in the year can we open as many more as we like as every year for a few tears we woukd have probably another 20k to invest

ValiantSon

Noobie2011 wrote: »

I agree paying the mortgage with overpayments does not seem to beat other ways of saving. So maybe something like maximising an ISA. Not really clued up on stocks but is this risky or do you mean investing through a company who would manage it rather than doing it myself.

Any investment (as opposed to savings) carries risk, but over the long term, and with good diversification, that risk need not be a particular concern. The best way to get started with investing would be through an S&S ISA investing in a multi asset fund. This would protect you from taxes, and give you good diversification. I would never advise buying individual company shares. Have a look at http://monevator.com/ to begin learning a bit more, and consider funds like Vanguard LifeStrategy, HSBC Global Strategy, or Blackrock Consensus.

Investment should really be for a period of 10 years, or more, so as to not face a likely loss. One of the biggest issues is to assess your attitude to risk. Investments will be volatile, with prices going up and down, so at any given time they could be worth more than you had put in, or less. Over the longer term you could reasonably expect to be up, but problems occur when people panic due to investments falling in value and choose to sell, thus turning a paper loss into a real one. If, however, they ride it out, the value could be expected to recover, and likely rise further. There are ways to minimise this volatility, and thus protect yourself against possibly selling when they have fallen further than you are comfortable with. The multi aset funds try to manage the volatility by offering diferent versions with more, or less, equities (shares) to fixed income securities (bonds). The higher the percentage of equities in the fund, the greater the volatility and, therefore the risk.

Noobie2011 wrote: »

I always try and go cautious as for my pension most people see to use 5% compound interest but I have calculated ours on 3% to be less risky.

Depending on your age, you might want to increase the risk in your pension, because over the long term you should see greater growth and, if you aren't managing it, there is perhaps less chance that you will panic and sell at the wrong time. That isn't to say that you should go crazy, but accepting that it is a ling term game may help you deal with the greater volatility. As you approach retirement, however, it would be wise to re-evaluate your holdings and start to de-risk, so that you don't lose out on the gains that you made while working.

Noobie2011 wrote: »

That does sound like a good sensible approach as we would be looking for a safer option and keeping it in there for a good few years. Stupid question but if we built up a 20k ISA in the year can we open as many more as we like as every year for a few tears we woukd have probably another 20k to invest

You can put a maximum of £20,000 into ISAs each year. You can split that across different types of ISA, but you can only have one of each type. Cash ISAs are one type (although for most people pointless due to the poor interest rates and the tax allowance on interest) and S&S ISAs are a different type. You can split your £20,000 across each type. At the beginning of the next financial year you get another £20,000 allowance and you can deposit that amount into one (or a combination of one of each type) of your existing ISAs, or you can open a new ISA. The restriction applies to subscriptions within a tax year.

Audaxer

Noobie2011 wrote: »

I mean just saving that much for say 4 years as an example returns 72k without adding any interest etc so to put those gradual savings into somewhere earning decent interest like and ISA but able to access in a few years to purchase a property abroad would be the best solution maybe and hopefully the interest meant it was a bit more than 72k

If you want to access the money in about 4 years time to enable you to purchase a property abroad, I think it would be too risky to invest it in a S&S ISA, as that it too short a time to be sure of making gains on investments. If your heart is set on purchasing a property abroad in a few years time, you just need to put your savings in the current accounts, NS&I accounts and/or Cash ISAs with the best interest rates, i.e. savings where your capital is guaranteed, rather than investments where it isn't.

Thrugelmir

Noobie2011 wrote: »

I agree paying the mortgage with overpayments does not seem to beat other ways of saving.

The one certainty in life is uncertainty. Building a stable platform first is a form of insurance. As one should only speculate with what one can afford to lose. The root of most peoples problems start with the unexpected 3 D's. Death, Divorce, Distress (i.e. job loss, unexpected bill). All those well made plans disappear with a loss of income and being forced sell assets at an inopportune time.