What can I improve?

colinbest2

Hey guys,

Apologies if this question is a bit too generic, I've always tried to save money but I've never been the most money-savvy person, an example of this is I have only recently transferred my savings into a decent interest account from one offering 0.2%...

Here's a quick overview of my current situation:

27 years old.
Mortgage of £88,000.
Student loan debt of £7,422.46 with an interest rate of %1.5.
Car finance debt of £1,022.

Monthly wage: £2,100 after tax.
Marcus Bank Account: £15,500.
Barclays Current Account: £500.
Monzo: £500.
My employer pays 7.5% into my private pension account whilst I currently pay 3%.

I currently get my wages paid into my Barclays account, which I then split off into my savings account and Monzo account. I have an Amex Platinum Cashback Everyday Credit Card on the way which I will use for everyday spending which I will pay off in full at the end of every month. The Amex card will replace my Monzo card for everyday spending. I've done this as a way to make a small bit of money passively whilst spending money that I would have done anyway.

I guess my question is how am I doing currently? And given the information above would you change anything?

Thanks for reading and appreciate any feedback!

bowlhead99

As you say, it's a generic open ended question so I will just give a couple of pointers:

Is the car finance debt interest free? If not, it's likely to be at more than the 1.5% you get from Marcus, so if there is not a large penalty to clear it early, clear it early.

You could also set up a current account at another bank or building society, eg Nationwide's Flex Direct pays 5% on up to £2500 in the account for the first year of having the account. So £2500 of your Marcus money could sit in there all year and earn more like £125 than the £35-40 it currently earns (you do have to make a minimum monthly deposit into the account to make it look like your 'main account', but could immediately take it out again).

Plus, Nationwide are a decent financial institution overall so it is not bad to have s current account with them and get access to other services they offer (e.g. their credit card is good if you travel or buy things from abroad as there is no FX rate loading on foreign purchases). You don't need one right now but basically there is no real downside in opening a Nationwide account.

lisyloo

I don’t think your doing too bad.

What’s the apr on the car loan?
Should you be looking to pay that off?

I would be looking to increase the pension if you want to retire before 67/68 but it’s important to recognise that you can only get money from a private pension at 55 (and probably that will change to 57 for you), so you can only tie up money you don’t need.
If you don’t feel you can increase it yet then perhaps review when you get a pay rise and allocate some of your payrise to the pension (even only 1% would make a big difference over 30 years).
Pensions are very tax efficient as you get income tax and NI benefits but again note that there’s no way you can get the money out until 57 (anyone who says otherwise is a scam).

On the whole I’d say you’re doing pretty good to be putting towards a home, a pension and savings and over the long term you’ll be fine.

But you need more than 10.5% if you want to retire early.
I’m currently putting in 60% (yes six zero is not a typo) and I’m not saying that is in anyway normal, but funding an income for 30-40 year retirement is very expensive. You may not be too worried about retirement age at the moment. I would suggest talking to some relatives in their 50s and 60s. Most of them will tell you they are sick of work and can’t wait to get out, so whilst it’s very remote to you at the moment, you will reach a point in your 50s when your body starts aching and you hate work.
I suggest taking to older relatives whom you like and trust.
You can change your future bit by bit.

I’m hoping to retire at 55 rather than 67 and that’s life changing to me although I appreciate it’s just numbers to you right now.

colinbest2

Thanks for the replies.

So my car finance 10.9% APR. It's currently saying I have £1,1022 left on my account to pay including interest but my current settlement figure is £1005.41. Do you guys still think it's worth paying this off?

Regarding the Nationwide FlexDirect account, it is something I looked into doing, I'd use it to deposit my wages into it and potentially switch it to be the account my bills come out of rather than using my Barclays account.

Great information regarding my pension, its something I've been paying into but certainly been neglecting, I'll review this when I get my next pay rise towards the end of the year.

TJB24

colinbest2 wrote: »

Thanks for the replies.

So my car finance 10.9% APR. It's currently saying I have £1,1022 left on my account to pay including interest but my current settlement figure is £1005.41. Do you guys still think it's worth paying this off?

Regarding the Nationwide FlexDirect account, it is something I looked into doing, I'd use it to deposit my wages into it and potentially switch it to be the account my bills come out of rather than using my Barclays account.

Great information regarding my pension, its something I've been paying into but certainly been neglecting, I'll review this when I get my next pay rise towards the end of the year.

Hi colinbest2, I think you're doing alright. How much equity do you have in your home, since that's a big part of your overall net worth?

Further, how much do you save per month? Do you have a strict budget? If not, this is a first, get your outgoing and income onto a spreadsheet. Then go through each outgoing and see if you can reduce it - haggle down your broadband, do you need a TV licence, single occupiers discount for council tax, etc. Then analyse your monthly disposable spend on your Amex card; how much a month are you spending on eating out and takeaways? Could you see yourself reducing this? It's for you to decide what actually brings you value in your life.

For me personally it's about reducing outgoings and saving as much per month as you feel you are able to. I'm in a similar age/financial situation to you and I manage a 34% saving ratio from my take-home pay, which I invest into a Stocks & Shares ISA that I run actively, which is up 14.5% in 11 months at time of writing. You might want to consider that as an alternative for some of your cash savings, if you have that mentality.

colinbest2

Hi TJB24,

Great reply and thanks so much for the pointers. I'm gonna sit down tonight and log down every outgoing against income and see exactly where I stand currently. At the moment I don't have a set budget that I adhere to and save, I just put what I haven't spent at the end of every month into my savings account. Using the spreadsheet, with the help of the Yolt and Monzo app I'll have a better idea of what I can budget.

I've only recently started looking into ISAs, specifically the stocks and shares kind. Do you have the type of one where the company invests for you? Or do you manage where your money is being invested yourself? I've seen a few of these robo-investing companies being advertised a lot more.

chockydavid1983

colinbest2 wrote: »

So my car finance 10.9% APR. It's currently saying I have £1,1022 left on my account to pay including interest but my current settlement figure is £1005.41. Do you guys still think it's worth paying this off?
.

I'm not too sure what you mean by settlement figure but if there's no penalty for paying off a 10.9% loan early and you have the cash in a savings account paying 1.5%, then you should clear the debt.

badger09

As others have said, I think you're doing quite well.

Paying off that expensive car loan looks like a no brainer and I would also look to increase your pension contributions.

You say your wages are paid into your current account with Barclays. Do you get Blue Rewards? If not, that is something you should look into.

There is no need to have your wages paid into Nationwide Flexdirect. Simply fill it up with £2.5k, then every month, pay £1000 in & out again, (or out & in again :cool:) by standing order if you want.

lassfarfromhome

For an easy investment to put your isa money into I’d think about a low-cost global index tracker such as vanguard’s vwrl which you should be able to buy on most platforms.

My other pearls of wisdom are these:

1) start tracking all your expenses. This will tell you areas where you are spending but getting little value, and even areas where you could do with spending a little more (on activities you really enjoy for example). I’m talking about value to you and your sense of wellbeing.

2) it’s great that you are thinking about this stuff while you are still young. You are doing really well.

3) you might read a great book called “your money or your life” by vicki robin. It will make you think about how you spend money and puts it in context with the time you had to give up to earn that money.

colinbest2

Again, thanks all for the replies. They've really helped.

Consider the car loan paid off, just done that tonight. Will also look properly into opening a Flex Direct account and dumping £2.5k in that. I looked at the Barclays Blue Reward and I'd certainly get the reward for the 2 direct debits so I've signed up to that for a little bit of free money.

I'll also take a look at that book, from a quick look it seems quite interesting.

Also signed up to a budget tracker and currently going through expenses! It's an eye-opening experience for me :laugh: Do you guys use any tools or apps to help you budget or track expenses? Or is it just better to use the trusty old spreadsheet?

Alexland

On the pension is 7.5% the maximum the employer will contribute or would they add more if you increased your contribution above 3%?

Also do you know if it is a salary sacrifice pension scheme where you would also save the national insurance? If not then once you have harvested the maximum employer contribution then as a basic rate taxpayer you might want to invest any further retirement contributions into a S&S Lifetime ISA.

Alex