How do you decide where to allocate what money to?

JustAnotherSaver

barnstar2077 wrote: »

Not sure how useful percentages are though, because ....<snip>

Fair point. I mentioned percentages because for some reason people seem to get a bit tetchy when you start talking real figures - it's a big secret, none of your business kind of thing.

Personally i couldn't care less as you'll see in my next post. I can kind of understand it when being discussed amongst people you know but when we're all online and none of us know each other then who cares really? I earned £20 off £25k last tax year for example and don't mind telling you. If someone asked me in person i'd tell them also as i don't particularly care, it is what it is and we all have our own lives but some people get uncomfortable about it. I thought percentages might've been a way to make people feel more comfortable about discussing but i see your point.



Each to their own.

Terry98 wrote: »

The one thing that has helped me the most in managing my money is the free programme MS Money.These days there are apps that can do a similar job but I have got 30 years of data in MS Money so I don't want to lose it!

I use a spreadsheet to the best of my ability although i know i could have a better system. I see spreadsheets and programs that others have implemented and i think how good it looks and how much easier it must make things for them, but i don't know how to set up spreadsheets that way. I'm pretty basic.

JustAnotherSaver

I haven't answered my own question...


My wife's pay is pretty fixed, give or take small pence. Mine varies. For example within the past 12 months the least i took home in a month was £1,478 whereas the best month i had was £1,989 ... £511 difference and as stated in my previous post my earnings in the last tax year were for the sake of £20, £25k. My wife currently earns just shy of £1,500 per month so very roughly we have £3,000 per month coming in.


We don't drink, we certainly don't smoke however we do have a habit of eating out once per week, more when we're on holiday. Takeaways were becoming a bad habit so they've been curbed. Aside from your regular expenses that everyone has (usual bills, transport etc) the only other major one i can think of that we have is a gym membership approx. £900 per year for the pair of us.


I'll talk about a mixture of the pair of us (e.g. emergency pot) but when it comes to retirement i'll talk about my own...



- Bills are paid on the 1st of the month where possible
- Currently putting in £135p/m to build an emergency pot (by emergency pot i mean being put out of work so therefore have no income and not washing machine has broken). I'm 2 months away from having 3 months of wages. This will then be reduced (i haven't decided what to yet, possibly £100p/m) to continue towards 6 months wages and then the monthly contribution will be reduced further as i build towards 12 months wages - and then stop. My thought process behind this is that 3 months is breathing space but not all that long, 6 months allows a bit of comfort but not complacency and 12 months covers a good stretch of time.
- Workplace pension: I pay in the minimum as my work pays in the minimum. To give you an idea, last month this was £80 from me. Salary sacrifice is not available.
- SIPP: Currently £200p/m with Cavendish. After reading various books i'm changing my mind on my investment approach (the funds i've selected) which is a thread i'll make in the coming days/weeks as i'd like to discuss and get viewpoints on that. Total pot is currently just shy of £18k with annual return of 6.5% apparently. I realise £200pm and £18k at my age (mid 30s) is not awful but certainly not great - so i realise i could do with increasing the monthly contribution. Starting late at 28 with lowly amounts through an IFA didn't help. I don't have a specific age i want to retire at, other than ASAP. I'd like to retire today but that's not possible, so simply ASAP.
- Lifetime ISA: Currently opened but not used. Investigating this avenue at the moment.


So whatever is left once the bills have been paid and the retirement pot has been contributed to goes in to a savings account - currently have £8k in cash available.

Last year we started with £2.4k, hit a high of £6.3k and ended the year with £4.6k.



The problem i have is - i know i need to pay more in to my retirement pot but then i don't want to leave myself short in ready cash and be unable to pay for something we need, e.g.:
* car needs replacing
* washing machine/fridge/freezer/dryer/TV etc needs replacing (or more likely in our case, a few of those at once)
* Roof needs renewing (or in other words, major house repairs)


Which makes me ask myself - how much do i need in cash and how much can i afford to pump in to retirement (as i'd like to do as much as possible without leaving myself short and allowing myself to sleep easy at night - naturally an anxious person anyway).


Sadly i've not found an answer to that question yet. I'm struggling to figure out a balance. Earlier this year for example we had two house repair issues that came to a total of about £2.0-£2.5k which really came out of the blue. We'd have liked to have gone away on holiday later this year and technically we could afford to but after an unexpected £2k outlay we're reluctant to then spend more on going away because 'what if...' XYZ needs repairing/replacing around the time also.


So yeah that's really where this thread came from. I struggle to decide on what to allocate where as i know i need to put more to retirement but at the same time don't want to leave myself short in the immediate which throws up the question of how much do you need in the immediate to then allow yourself to put more towards retirement - and then i wondered how others deal with this juggling act.


Hope that explains my thought process some

Alexland

I make enough sal sac pension contribution to avoid higher rate tax and child benefit clawback. My wife who is part time contributes enough to avoid basic rate tax.

We then fill S&S LISAs in the first months of each tax year before moving on to S&S ISAs. I am also trying to get our children's JISAs to match.

Thankfully our outgoings inc mortgage repayments are very low. Eventually we will need new cars but they are basic so we are sweating them hopefully at least another 5 years.

However our cashflow is never that simple as we also have various cash savings accounts, stoozy credit card repayments and promo cashback accounts to manage.

Alex

Apodemus

JustAnotherSaver wrote: »

Sadly i've not found an answer to that question yet. I'm struggling to figure out a balance. Earlier this year for example we had two house repair issues that came to a total of about £2.0-£2.5k which really came out of the blue. We'd have liked to have gone away on holiday later this year and technically we could afford to but after an unexpected £2k outlay we're reluctant to then spend more on going away because 'what if...' XYZ needs repairing/replacing around the time also.

Sounds like you are doing pretty well, compared to most folks!

When it comes to emergency fund, I guess we are really talking about financial resilience. And for household needs, DIY skills go a long way to increasing your resilience. The more you are willing/able to do yourself the less you need in the emergency fund, so I don’t think others can really advise on how much someone else needs.

Being a skinflint, I think I’ve only had one tradesman near our house in the last 20 years (taking a row of 30m trees down 20m from my neighbour’s house was a wee bit beyond my risk tolerance! ).

JustAnotherSaver

Apodemus wrote: »

Sounds like you are doing pretty well, compared to most folks!

When it comes to emergency fund, I guess we are really talking about financial resilience. And for household needs, DIY skills go a long way to increasing your resilience. The more you are willing/able to do yourself the less you need in the emergency fund, so I don’t think others can really advise on how much someone else needs.

Being a skinflint, I think I’ve only had one tradesman near our house in the last 20 years (taking a row of 30m trees down 20m from my neighbour’s house was a wee bit beyond my risk tolerance! ).

Some would say well, others not so. I know i'm in a better position than many my age but also i'm a million miles behind others. At the end of the day i don't concern myself with others too much as i prefer to just worry about myself and my immediate family. I'm mid 30s and i'm at just shy of £18k having started at 28 like i said.



On the other hand, my brother is mid 20s. Those who are familiar with me on here will know that i ask questions relating to my brother & sister here & there - this is because i have a strong influence in their financial situation ... to the point where if it wasn't for me (their words, not mine) they'd have pence to their name. No HTB ISA, no LISA, absolutely no pension, no provisions for car tax and insurance. Everything would be day-by-day and when 'the day' comes it'd be panic ...how do i afford that??
Bottom line - i didn't want them to make the same mistake i did by starting late. So i made sure they started at 18. My brother's pension pot is now £20.5k & his HTB ISA £8k. He isn't on megamoney, far from it. He's on about the same as i am & contributes no more ... he just started earlier because of me. So i could be worse but i could be better Weirdly his Cavendish account doesn't show his % return like mine does.


As said, the emergency fund, mine at least, is purely for if i get put out of work (long term sick, sacked/redundant). If that doesn't happen then one day it'll just end up as money in retirement.


Regards being hands on - i've never been good at that stuff. Never. Painting is about my limitation. Had compliments on the finish which felt good but honestly if i try anything else i make a right pigs ear of it to the point where it's just cheaper to pay someone to do it. :rotfl: My dad was a very hands on guy but then i suppose they were in the era he grew up in (40s) as they had to be. Sadly he died a few years ago so where i'd normally have turned to him for help, i can't.



I have a long job list and somewhere near the top is 1) tackling this LISA/pension situation and 2) balancing how much of our wage goes in to cash savings account/disposable income type of thing and how much goes towards retirement.


I can be pretty relentless with the saving, to the point where when we applied for our mortgage we had the mortgage withheld as they didn't believe someone on my wage could save the deposit that i had done so our IFA had to push it through. I started out with a goal in life to put as big a deposit as i could down so i didn't have to struggle. Achieved that. Next goal is to make it possible to retire as early as possible.


Sorry for the long post. Got carried away a bit there :rotfl:

Fingerbobs

Novice_investor101 wrote: »

From pretax gross salary -
[...]
- £50 a month into a sharesave scheme

Are you sure your Sharesave contributions are taken from your pre-tax salary? I thought Sharesave schemes came out of net pay after tax - mine certainly do.

geoffers4

Can I comment on a different aspect? The OP mentions a couple of times having to "pay the usual bills first" - as if these are a fixed amount. But in my experience bills are highly variable - and you could potentially free-up a lot more cash to put into the retirement fund if you made changes on things like:
*where you buy groceries (we've saved thousands by switching to Aldi)
*making meals and packed lunches at home, rather than eating out/buying lunch at work
*choice of mobile phone package (SIM-only for example)
*shopping around for energy, insurance, broadband
*going out for a bike or run, rather than paying gym membership
etc.

Also, the OP is clearly worried about unexpected large expenses. But some of these could be accommodated by delaying the expenditure for a month or two, to do a "quick save up". Or alternatively I have a large credit limit on a credit card that I use for big spends, and then pay off as quickly as possible - rather than raiding pension pots that are locked away. Another option is my Vanguard S&S ISA, which I could raid if really desperate (but have never had to).

Anyway I hope these ideas are useful. The OP is doing a lot of things right already!

ricky_v

A friend once said to do everything in 3rds, so assuming homeowner with no non-mortgage debt and DC pension;


1/3 of gross monthly salary into pension (both employer and employee contribution)


Then after bills and living expenses;


1/3 into cash savings
1/3 into S&S fund
1/3 into overpaying mortgage


It's not a hard and fast rule, but IMO they're good ratios which covers alot of eventualities.

Afraid_of_Kittens

I have 3 local Government Pensions - 2 that I will receive at age 60 with a nice lump sum and one at age 65. I am no longer a Local Government employee.

I have money going into a NEST Pension (Sharia fund) - I add extra money to make the monthy contributions to £300 per month.

I have sold all my shares and sold my gold last year (I wish I hadn't sold my gold) - money put into a Legal and General stock and shares ISA. I have 4 seperate direct debits of £50 on 1st, 7th, 14th and 21st of each month putting money into 4 seperate funds in my ISA. (Emerging Markets Government Bond (Local Currency) Index Fund. Global Technology Index Trust. US Index Trust. International Index Trust) At least once a month I put £100 into another fund such as Asian Index Fund.

I am a high risk investor as I will be getting Local Government Pensions and lump sums so will live comfortably - at my current rate of growth my NEST pension should be £100k in 10 years and hope to have a similar amount in my ISA. I accept the fact a recession could wipe out my ISA and NEST pension but my other ensions and lump sum will be my safety cushion.

£10 on the National lottery.

No mortgage or debts.

Aim to retire at 62. (my wife receives her state pension and private pension)

JustAnotherSaver

geoffers4 wrote: »

The OP mentions a couple of times having to "pay the usual bills first" - as if these are a fixed amount.

No offence here but i didn't, that's just what you took from it. That isn't your fault - it's just words on a screen so i suppose it's down to me not making it clear enough.


When i said "pay the usual bills first" i meant bills you can't get away from, you don't really have a choice in the matter. Take 2 examples for myself....
- My mortgage is a fixed fee per month. There'll be others obviously but i'm using mortgage for this example. Bills like these are easy to work with (obviously) as they don't move sideways.

- Then there's fuel for the car. Some would argue that you don't 'have' to and that you do have a choice but they're just trying to be difficult. Without fuel i can't get to work and don't get my income, therefore it's a necessity. The price of this varies - how frequently i fuel up, what they decide to charge per litre, have i taken any unusual journey's that have used more fuel than i normally would've etc.
Fuel is just one example.


So what i was meaning was simply bills, as in mortgage bill (or to phrase it differently what your mortgage cost you that month) and fuel bill (or to phrase it differently what you ended up spending on fuel that month). You can't get away from spending on these things, although the amounts will change.


But to be clear it wasn't meant as though anything was fixed at all, other than the bill itself.






Slightly off topic - we did try Aldi. We weren't fans unfortunately.
Though the weekly shop is done on a Friday so Thursday evening is spent on the iPad looking around the supermarkets that we do shop at to work out what is cheaper where.