Feel like I'm in "Savings Limbo"

Terry_Towelling

It's tough having to pay tax on your interest above £500 but still worth increasing your gains even so.

You could do a lot worse than shift your Virgin Double Take into a mixture of easy access and notice accounts. Paragon do 1.31% easy access and 1.66% 120-day notice (if they're still available at those rates).

You could then recycle the easy access funds into other regular savers. Virgin usually brings out a new one every couple of months (Issue 12 due out in July) so you could do many of these. The rate isn't the greatest (2.25%) but the cash is easy access.

I guess it's good to increase your pension pot and taking advantage of the tax-relief that goes with it. I wonder could you do 'salary sacrifice' for higher pension contributions? That could get you back nearer to basic-rate tax but it may have a drawback on any mortgage application because you'd have to declare a lower salary.

Beyond those mundane (but worthwhile) changes I guess you are looking at living somewhere cheaper. Paying £950 away each month for no asset-value return is heartbreaking - despite the fact you may be saving on property maintenance costs.

Moving further out of London is a balancing act because your travel costs and travel time will increase to swallow up some of your rent/mortgage saving. Perhaps there is merit in lodging with a 'little old lady' for a while whilst you get things going in the direction you would prefer.

There are thousands out there who would gladly trade their problems for yours. You are clearly not useless but probably just stuck in the deep rut that catches many of us at some point in our lives and we can't quite see a way out of it - but you will get there; you're only 31.

glider3560

woefulsaver wrote: »

Leave London

I get this a lot and I think it's definitely something worth looking into, my only concern is the train fare eating up the cost of any accomodation savings, but I'll consider looking into it if it makes sense. I'm not from London/South east myself so not too familiar with the surrounding areas!

I left London in order to buy a flat.


The travel time isn't actually too much higher. Just picking two random places that are 14 miles apart: Woking in Surrey is 25 minutes from Waterloo (train runs non-stop), whereas New Malden in Zone 4 is 24 minutes from Waterloo.


A one bed flat in Woking is around £190,000, whereas New Malden is around £230,000.



Even if the travel costs more, remember you are paying off a mortgage (and thus becoming wealthier) rather than giving money to your landlord for their mortage (and thus making them wealthier). You should take this into account, and you'd effectively be saving £950 (less the mortgage interest) every month.

Zero_Sum

When i said move out of London, i mean looking for a new job outside of London.

Even if its less money, you'll be better off when you factor in housing, as you do have a decent sized deposit. Could be paying £300 mortgage on a 3 bed semi family house up north compared to £900 rent on a bed sit.

kangoora

Can you approach your current employer about home working? I can't think of many reasons a software engineer NEEDS to be in an office. With decent broadband, VPN access, IP telephony and video calls all available you can probably work virtually anywhere in the country. This opens up a lot of areas with much cheaper house prices than London

Just need to be aware of commuting times/costs for any unavoidable meetings when you do need to visit the office.

cashbackproblems

hey i know exactly how you feel i was 29 and in a very similar situation salary/savings wise, renting in zone 5 and feeling hopeless! however from a young age 90% of my cash was in emerging market funds which grew a lot so i had about 110k aged 30, which allowed me to buy a 2 bed in zone 4 for 320k. there are areas which are 30-40min direct into london where you salary will easily get you a 1 bed maybe two e.g. a lot of south east london, essex and parts of east london and Bromley

i borrowed x4.5 my salary and pay 920£ pm mortgage, buying as a single is more scary but it helps if you have a 10-20k savings buffer in case of an immediate emergency. Your pension is fine and will grow over the next 30 yrs at the moment your focus should be property.

atush

Software engineers quite often work as a group bouncing ideas etc. So need to be together but with UFBB they can do virtual group working?

Or marry a rich girl.

The girl/partner doesnt need to be rich, just employed in a decentish job w/o huge debts. 2 incomes make buying a whole lot easier?

binaryuniverse

You're never going to be able to buy your first home In London, unless you come in to a large amount of money, or have a partner to increase the buying power. But on your salary, and current deposit, you should easily be able to get something outside of that area. £200k will get a nice property in Reading, for example, which is pretty easy to get in to London from there.

I'll be looking to buy, next year, and I have resigned myself to the fact I'll have to move out of my current city, to elsewhere. But the type of place I can get, for the money, will be so much nicer than what I can get here. So it's a worthwhile trade off, with commuting costs and what not.

And yes, it a ridiculous state of affairs where a 52k salary is not enough to buy somewhere. But there we are.

MallyGirl

binaryuniverse wrote: »

£200k will get a nice property in Reading, for example, which is pretty easy to get in to London from there.

It really won't! £250k will just about get you a 1 bed, or a 2 bed in need of work.

kidmugsy

glider3560 wrote: »

remember you are paying off a mortgage (and thus becoming wealthier) rather than giving money to your landlord for their mortage (and thus making them wealthier).

With a mortgage what you are really doing is renting capital rather than renting property. Which will prove better is a gamble. People with no historical sense of course believe "you can't go wrong".

Wildsound

I am in a very similar position in Oxford, although I do have the added benefit of a partner when we come to buy (we are looking to do this this time next year). My guidance on your issues would be as follows:

£52,000 a year salary - this isn't as bad as you think even if you are in London

Roughly £20,000 in pension - Whilst others might flame me for saying this, you short/medium-term aspirations and goals are more important. There's no point, in my opinion, going overboard on saving for a retirement with an unknown retirement date (given your age), the chance of being hit by a bus, and the uncertainty of what future governments might do to your pension/tax rate in the future.

I'm going to up my contributions to 8% (employer 9%) very soon - I personally contribute the bare minimum that I have to in order to get my employer contributions (for me, personal 2% and employer 5%)

Roughly £64,000 in savings spread across
£20,300 Virgin Money Cash ISA (1.4% interest - matures this month) - assuming that this is a cash bond, this might cause a problem, as you contribute to a HTB ISA, I am not sure whether it will be able to maintain it's ISA status when it converts to a standard cash ISA (which is usually what happens). I don't have an answer for you on this one, but worth keeping an eye on
£26,600 Virgin Money Double Take Savings (1.25% interest)
£6,400 Virgin Money Help To Buy ISA (3% interest)
£3,000 NS & I Investment Growth Bond (2.25% interest)
£3,000 Tesco Bank Current Account (3% interest)
£2,500 Nationwide Current Account (5% interest) - as said before, open a 5% regular saver
£2,000 Santandar Regular Saver (5% interest)
£2,000 Santander Current Account (used for daily stuf) - is this a 123 lite account? if not maybe switch to this to benefit from reduced monthly fee of £1 and still benefit from the cashback on bills - although you won't be getting any interest, from my calculations, you are receiving less interest per month than the monthly fee of the standard 123 account of £5
£900 in Vanguard S+S ISA (..current valuation, but contribute £200 a month)
Debts
£700 on a 0% credit card that I pay off at £71 a month until the 0% period ends
Major monthly expenses of note
£950 rent to landlord (zone 4 London)
£190 for bills
£160 tube fare

1) I would open a Lifetime ISA (LISA) asap!!
As you are allowed both a Lifetime ISA AND a cash ISA (as they are considered different ISA products), you could have a cash Lifetime ISA (with Skipton building society, and with Nottingham soon I believe) and your current cash HTB ISA.
As you have indicated an initial 5 year time scale (although 5 years is a long time, you may be in a much better financial position in that time) I would recommend a stocks and shares LISA. If you want to invest yourself and do some of your own research, Hargreaves Lansdown is a great choice (which I use) but something like Nutmeg offers a service which manages your portfolio for you.
By contributing £4,000 to a LISA, you receive a government bonus of £1,000 (25%) paid almost straight away (usually a few weeks waiting time) which you can then benefit from interest or investment growth.
You would still contribute to your HTB ISA every month (as you aren't going to get any better interest rate elsewhere), but you would use your Lifetime ISA at the point you buy a house as you can't use the bonus from both. You would then simply close your HTB ISA (pocketing the interest) with no penalty (there would be a penalty to close a Lifetime ISA in reverse)

2) You can actually generate a fair bit of extra money by making some smart consumer choices (e.g. switching energy supplier, broadband etc... shopping at aldi/lidl, not buying a new phone handset every year on a £50 per month contract...) - some may have refer a friend features, so may be worth using these to recommend to friends for free money for both of you (e.g. nationwide refer a friend, energy supplier refer a friend etc...)

3) I would probably get a rewards type credit card (e.g. AMEX, John Lewis, M&S card) which you would benefit from cashback or rewards. Once you have this in place, look to pay off that 0% credit card and close it down (this will come in useful when you come to actually apply for a mortgage)

4) If the Virgin ISA cash bond manages to maintain it's ISA status after maturing, I would looking to transfer this into your stocks and shares ISA (follow the steps on your S&S provider account)

5) Move £4,000 from the Virgin double take into Lifetime ISA (as above)

6) Move £11,200 from the Virgin double take into the Stocks and shares ISA to fully use up your annual ISA allowance of £20k (assuming that you continue to contribute £200 per month into the S&S ISA and also £200 per month into the HTB ISA)

7) Any excess from the virgin account(s) should go in a standard investment account, probably with your current S&S ISA provider. You have enough cash in high interest current accounts to act as security for yourself should you encounter any short term financial hardship. As you have indicated a 5 year time scale (although I think you will be alright in less than this) I would go for a ~70% equity ~30% bond/property/alternative split (take some time to do a bit of research, it's not hard to get the basics right in my opinion) [usual disclaimer of the fact investments can go down as well as up!! :cool:)

8) Get a girlfriend/boyfriend (jokes - but in all seriousness, 5 years ago, I was single with average/poor savings - I am now with a partner of nearly 3 years in a strong position to buy in Oxford in the near future - in conclusion, 5 years is a long time!)

Overall you are in a pretty strong financial position and in some positive habits (better than most people), so I wouldn't stress too much! :beer: