Mortgage Free now what ?????

citizen_smith

Hello Gang,

I'm looking for advice with regards my current financial situ and if anyone believes I could be better positioned.

My priorities are to save as much as possible and also for my children as well as build an emergency fund.

I am 45 years old married with 3 teenage kids, I am now mortgage free with 6k in savings.

I earn 43,750 a year gross and my wife 12k approx.

Monthly Savings
£600 into a F&C investment Trust for me & wife
£400 a month into Baile & Gifford for the kids
£700 into easy access for car, unexpected expenses, holiday fund, kids school costs etc.
£300 into Pension + 3% employer contribution

I have critical illness & life insurance.

I often find myself dipping into the £700 each month to see us through the end of the month so its not always saved.

I struggle to understand how people build up a 6 month emergency fund. If I was to do this on the above plan it would take a minimum of 12months.

Any thoughts greatly welcome, especially around how to save and best use the money we have.

We have no other debts.
xx

DiggerUK

Many reading your post will be surprised at a family struggling to move on with a gross of £55k pa. Such is today's reality however.
Obvious first is to visit The Debt Free Wannabee board. I know you are not in debt, but advice on cutting back expenditures may give you some wiggle room.

The other reality to review is the sensibility, or not, of trying to save at the level you are. I don't think that is what you wanted to hear, but the truth is not always pleasant.
More importantly, you have a family life to live for. I'll tell you now, the first eighteen years of your children's lives are expensive, and the second eighteen years will bankrupt you.

Ain't life a 8itch. Best of fortune..._

Edit, don't worry one day you will be able to buy some gold.

dunstonh

£600 into a F&C investment Trust for me & wife

What tax wrapper are you using for that or is it unwrapped?

£300 into Pension + 3% employer contribution

Is that yours or your wife's pension?

I struggle to understand how people build up a 6 month emergency fund. If I was to do this on the above plan it would take a minimum of 12months.

You build the emergency fund before you pay £1000 into risk based medium term investments. In your case that is £1000 a month.

bowlhead99

citizen_smith wrote: »

I earn 43,750 a year gross and my wife 12k approx.

I struggle to understand how people build up a 6 month emergency fund. If I was to do this on the above plan it would take a minimum of 12months.

At the moment you are earning 43750 but 3600 of pension deductions a year is about £40k gross. The net takehome pay on the £40k taxable gross is about £30k a year (less a bit more national insurance if the pension scheme isn't a salary sacrifice one). And wife's takehome will be about £11.5k on a £12k salary. So overall maybe your family take-home pay is £41-42k. Perhaps £3.5k a month.

When you look at building a 6 month emergency fund, it depends, 6 months of what?

6 months net pay at the rates above would be £21k, so with only £6k of savings at the moment you are £15k short if you don't want to need to touch the investments for you and the kids in an 'emergency', although, of course, you could. You are a bit further away than that, if the £6k of existing savings is earmarked for cars and school expenses and you want to spend it on holidays so won't have it for the emergency / crisis when you lose your job or have something horrific and unexpected happen.

However, at the moment you are saving/investing 1k to 1.7k a month of that £3.5k a month and only spending perhaps £2-2.5k. In an 'emergency' when you are trying to cut down on your expenses, you probably won't take the luxury of stashing away money in new savings and investments, so you only need to cover your expenses, being that 2-2.5k a month. Six months of that is only 12-15k, and you already have 6k. Take six months off putting money into the investment trusts ((600+400)x6=£6k of extra cash savings) and you're there. Of course, a bigger emergency fund is better.

So, maybe you're right that it will take you a year to cut back on your investing and maybe skip a holiday to create the emergency fund that you never had before because you were focused on clearing your mortgage. The fact you no longer have a mortgage commitment is a good thing for the size of your emergency fund - it doesn't need to be as big as it would be if you had a fixed monthly mortgage outgoing. So, you can spend a year building up a sizeable cash cushion and then you still have another 20 years to build your retirement fund before you hit state pension age and might want to retire.

You don't mention how big your existing pension pot is, but perhaps not massive if you are only putting away under 10% yourself and only getting 3% from your respective employers. Maybe it's fine if you started young, but many people didn't. So, pension would be something to give some attention to - once you've created a better rainy day fund - as it's tax efficient ; but at the moment you are not in a higher rate tax bracket so it's not a no-brainer to do it just yet for only basic rate relief, if you're not happy with the size of your emergency fund yet.

System

citizen_smith

Thanks everybody for your responses, I will review in detail.

For now I should add that I have a pension fund of approx 186k with St James Place and my wife also has a pension pot of approx #60k.

We also have 30k saved for the kids and this is what we contribute to monthly.

I understand that I am in a financially privileged position but I I guess I'm assessing my financial situation and pondering if I could be doing anything better/smarter. I'm just trying to make the best I can with what I have.

Any comments positive/negative welcome.

atush

First stop is open a new a new pension with someone else. SJP is expensive.

F+C is good. Is it in an isa? If not, get it in one. After you have at least 3 months outgoings in cash, ramp up both as is as and pensions

dunstonh

For now I should add that I have a pension fund of approx 186k with St James Place and my wife also has a pension pot of approx #60k.

SJP is expensive and restricted. Choice should be to DIY or use an IFA. Nothing else.

I ask again about your regular IT contributions. Are they in a tax wrapper or not? (such as ISA).