Cutting the Fat advice/Pension planning

Born_Free

Thanks for your comment.

I’m not an expert either and need to get better informed but my understanding is that because it’s my own limited company I could gain significant tax advantages by being able to put untaxed income away in a pension (up to 40k a year I think).

As I understand it I don’t come under IR35 tax rules, as discussed with my accountant, because of the way I manage my own hours and where I work etc.

I didn’t consider setting up a pension because initially my company made barely any money when I started it 7 years ago. I was barely earning more than I had been in my dead-end frozen-salary minimum wage job so the idea had been laughable (my own stupidity - even on minimum wage you should still save into a pension if you can). I could barely pay my bills. But then my income has steadily grown (definitely was right decision for me to work in different industry) but I haven’t updated my financial areangements to reflect this. My accountant did ask whether I wanted to set up a pension but once I started to earn money I was focused on raising a house deposit with my wife and I just let it slide. But now we are finally settled in a home we want to stay in I’m looking things over and realising I have made some big mistakes and need to do some serious catching up whilst we are earning well as we never know when this income could stop.

Born_Free

Thanks so much Taff. Yes you so right - something is not adding up in how we’re spending and you’re right I think we are simply frittering away money in the exact things you describe.

I will take a good hard look at our spending and we are tracking from this month so that will also look at any cash we spend (which unfortunately I don’t have records of). We need to understand exactly where we are wasting our money.

theoretica

My suggestion would be to start pension savings right away - if you wait until you have paid off debts, and built up savings, and dealt with whatever else comes up (one thing after another!) you may never get round to the pension/other retirement savings.

Born_Free

Yes - you’re right. Wife has been insisting on the same, to be fair. Every month that goes by it doesn’t get better, and as I say, I am really losing sleep over this now.

I will look on the pensions board, do some research and make a plan to start one in January. New year, new start...

-taff

Don't worry too much about it. You have a plan now, you're going to look at your budget your taking steps to sort things out.
Your debt is miniscule compared to your incoming, so as long as you have a plan to tackle it, and it doesn't get bigger [you could look at 0% money transfer cards for your loan for example] then yu seem OK. At least your LBM came quite early

enthusiasticsaver

I personally think the pension or lack of is more worrying than the debt which could be easily sorted by cutting back or being more careful. I agree that a £400 slush fund is too high. Budget properly by looking at what you spend out on and stick to that. I agree with the high emergency provision given your wife's health and you being self employed. How old is your child? Do you have an accountant to deal with your company accounts? The most tax efficient way is to start one up through your company so explore that option. In pension savings the general rule is the earlier you start the less as a percentage is needed monthly. As you are 42 and presumably will either need more than state pension monthly or want to retire earlier than that the rough guide is to halve the age you start at and put that as a percentage into your pension. So a 24 year old would pay in 12% (employer and employee combined) and a 42 year old would pay in 21%. As you are self employed that would be slightly more complicated as your company income would need to cover the whole 21%. Anything is better than the nothing you pay in now though so just get it started and give it as much priority as you do your holidays and insurances. Are you paying NI contributions?

Giddypip

Just a simple one but you can get prepay prescriptions for £104 a year https://apps.nhsbsa.nhs.uk/ppcwebsales/patient.do

-taff

Just had a thought, where is your child benefit?

wjr4

-taff wrote: »

Just had a thought, where is your child benefit?

He earns too much.