Finally debt clear and aggressively saving - what to do with the money?!

CharlesD

kangoora wrote: »

Loads of great suggestions on this thread regarding savings and investments but this stood out for me a bit for a different reason.

Please don't take the comments below as personal criticism, maybe they don't apply in your case.

Presumably you're both happy with a spartan lifestyle or you wouldn't be where you are now with the money situation but don't forget to have some fun along the way with the cash also.

I probably could have retired 5 years earlier than I did but I wouldn't trade in those family holidays to Disneyland/Orlando, (seeing our 5 year old meeting Barney the dinosaur was priceless), Las Vegas or family cruises (to name just a few) to retire a little earlier.

Assuming you have sufficient earmarked for savings/investments to be able to achieve your aims then there's not much point being the richest corpse in the cemetery

Thanks very much for your really important comment Kangoora. To be entirely honest it reflects a sentiment I find myself wrestling with only too often. My partner is very passive and easy going on these things, and seems to prefer me to make all the financial decisions, so our financial lives and anything related money, tends to be driven very heavily by my approach by default.

I don't intend this to come across as sob story, as I have worked with very vulnerable people in a past job and fully appreciate how lucky we are to have the assets we do. But our living spartan lives is mostly a reflection of my experiences as a teen and young adult (i turned 30 this year, but didn't start seriously earning money until 27-28 as I had to juggle postgrad studies, caring duties to both parents and fitting in temp / part time work alongside studies whenever i could).

I've never been on a holiday before, couldn't go on school holidays / trips as my families income was precarious and limited, and wasn't exposed to this much due to the social isolation that tends to accompany this type of social status. I was able to secure scholarships to study (which I felt were generous) saved some, but made a good chunk available to my my parents / household funds.

My experience growing up like that wasn't that it felt abnormal or that i was deprived, because it was my normal. But in terms of its influence on my financial life now, I feel no pull / desire / need, nor does it feel normal for me to think about booking a holiday or to spend much on entertainment as these are things I've never done.

In a way this has instilled me a very strong sense of anxiety around wanting financial security - to the point where if I get the urge to spend 'more' even on things like food shopping (let alone even considering something like a holiday) - a counterpoint urge soon kicks in and stops me to ensure the money gets saved in case we ever found ourselves in the level of financial difficulty I had growing up.

I feel like I should add that I regularly check in emotionally with my partner to make sure that my approach to running our finances isn't creating emotional tension for them (as they have a background of many luxurious holidays - just spent on credit cards :P). Thus far they have always said that they feeling nothing but joy at finally having money in the bank thanks to having someone handle it all for them :j

Reaper

I totally understand your need to save, it gives a feeling of security but it mustn't get out of hand. What works for me is to always save FOR something, not just for the sake of it.

Now some of that will be long term to ensure a comfortable retirement, but even that that doesn't mean unlimited saving. Pensions calculators will help you determine if you are on track.

Plan for a house, car, holiday, XBOX. Whatever it is save until you have enough but then don't be afraid to spend it and collect your reward. I find it harder to part with money than keep it but it is important to find the right balance.

AnotherJoe

CharlesD wrote: »

I think i have a strange workplace pension - its based off my salary, so my pension pot doesn't actually increase based on my standard contributions (which are 9% of my gross salary - and 18% extra from the employer). With a salary of £33,200 my pension pot only increases by £442 a year (despite monthly payments of £221). Don't really understand it so have fired off that question. The extra 1% i contribute is standard investment I think and constitutes a second pot within the same scheme.

Almost certainly this is a (very common) misunderstanding of a DB scheme benefits, are you with local government, civil service, NHS?
If I'm correct, there is no pot, the £442 each year is the pension you would be paid, for life, per year.
So, after one year there, if you left, when you retired, you'll get a pension of £442 a year. For life.

After two years, a pension of £884 a year.
After 20 years, £17,680 a year. Every year. For life.
And, to boot, that is at todays prices, it will be uprated by inflation every year, so it will be much higher than that in 20 years time, but in today's money that's what it woudl be.
The extra money you are paying would most likely be a separate pot or would help you retire earlier than the scheme age (which is probably 67 or so?) without downrating what you get at scheme age.
Hopefully that (a) makes sense to you and (b) is correct, since i assume that would be a pleasant surprise for you if it is.
FWIW to get those sort of benefits in a private field would cost about 3x what you are cyrrently payig.

CharlesD

AnotherJoe wrote: »

Almost certainly this is a (very common) misunderstanding of a DB scheme benefits, are you with local government, civil service, NHS?
...
Hopefully that (a) makes sense to you and (b) is correct, since i assume that would be a pleasant surprise for you if it is.
payig.

Thanks - happy to confirm you are correct and I'm grateful that you explained it like that as it was much clearer than my employer's pension service...
Indeed my partner is NHS and I'm University sector - both have defined benefit schemes. Though I'm unlikely to contribute into this scheme for long as due to a mixture of circumstances my contracts are always short term (1-2 years per contract) and subject to considerable uncertainty in between, and the NHS pension scheme seems to have multiple branches making it difficult to untangle

MaxiRobriguez

If it's on offer you should take it. DB pensions are almost impossible to come by in the private sector now and as AJ's pointed out it'll cost you 3x as much to get the same benefit from a DC scheme.