Please tell me how much I should save every month?

NoveltySlippers

Alistair31 said:

What do you do for work that is making you feel as you do? 

I’m an academic, working in a university. Sounds great on paper. Reality (in my case, anyhow) not so much. The students are the best part.

enthusiasticsaver

As in everything I think a balance of spending and saving is a good idea.  Also just because your mortgage is not set to finish until you are 68 that does not mean you cannot retire early.  Saving can also mean overpaying the mortgage to get it finished earlier.  Go on to an online mortgage overpayment calculator and see how much just overpaying a small amount can make both in terms of getting it repaid earlier than term and savings on interest.  Also remember the less you spend the less income you will need in retirement.  

I agree with Barnstar that a budget is a priority when deciding on how much to save.  Divide expenses into essentials like mortgage, bills (if you share them with your partner) and food.  Work out annual expenses like Christmas, birthdays, car maintenance, holiday money and insurances and put some money aside in savings to cover these and the rest of your income divide into spending money and savings.  We always and still do half and half.  Anything left from our spends gets put into savings but the savings go into an account on payday so we get it out of the current account.  You have to make savings as much of a priority as spending to get anywhere.  

NoveltySlippers

steampowered said:

As you started your pension in your mid thirties, you should really be paying 15-20% of your salary into your pension (including employer contributions you might receive).

If you are much below that I think a pension should be your priority - more of a priority than paying off the mortgage. A decent pension will give you a lot more flexibility to either retire earlier or have a good standard of living in retirement.

Pensions are a much more efficient way of saving for retirement than cash savings or overpaying the mortgage, because:
- You get tax relief - so effectively an instant 20% boost for basic rate taxpayers.
- You get investment returns - pensions are stock and share based investments which typically return about 6-7% per year on average over the long term.

That said, I think you also need to use some of your money to enjoy your life. Life is too short to be miserable! Do make your money go as far as possible, but spending some money on things you enjoy - whether that's a holiday, or a nice meal out, or a hobby - is worth it.

Thanks, this is very useful too. I do need to up my payments. I’ve long known how little I know about finance. Financial illiteracy! It’s useful to know what is the best form of saving (pensions) - I really did not know. Though having an okay one is what has made me reluctant to leave this job.

NoveltySlippers

enthusiasticsaver said:

As in everything I think a balance of spending and saving is a good idea.  Also just because your mortgage is not set to finish until you are 68 that does not mean you cannot retire early.  Saving can also mean overpaying the mortgage to get it finished earlier.  Go on to an online mortgage overpayment calculator and see how much just overpaying a small amount can make both in terms of getting it repaid earlier than term and savings on interest.  Also remember the less you spend the less income you will need in retirement.  

I agree with Barnstar that a budget is a priority when deciding on how much to save.  Divide expenses into essentials like mortgage, bills (if you share them with your partner) and food.  Work out annual expenses like Christmas, birthdays, car maintenance, holiday money and insurances and put some money aside in savings to cover these and the rest of your income divide into spending money and savings.  We always and still do half and half.  Anything left from our spends gets put into savings but the savings go into an account on payday so we get it out of the current account.  You have to make savings as much of a priority as spending to get anywhere.  

Yes, I’d really like to overpay this, as the mortgage is only just over £300 each and my husband and I earn a similar amount, we can and should overpay. He drags his feet on this though. I’ll have to have a ‘conversation’. 

Emmia

NoveltySlippers said:

steampowered said:

As you started your pension in your mid thirties, you should really be paying 15-20% of your salary into your pension (including employer contributions you might receive).

If you are much below that I think a pension should be your priority - more of a priority than paying off the mortgage. A decent pension will give you a lot more flexibility to either retire earlier or have a good standard of living in retirement.

Pensions are a much more efficient way of saving for retirement than cash savings or overpaying the mortgage, because:
- You get tax relief - so effectively an instant 20% boost for basic rate taxpayers.
- You get investment returns - pensions are stock and share based investments which typically return about 6-7% per year on average over the long term.

That said, I think you also need to use some of your money to enjoy your life. Life is too short to be miserable! Do make your money go as far as possible, but spending some money on things you enjoy - whether that's a holiday, or a nice meal out, or a hobby - is worth it.

Thanks, this is very useful too. I do need to up my payments. I’ve long known how little I know about finance. Financial illiteracy! It’s useful to know what is the best form of saving (pensions) - I really did not know. Though having an okay one is what has made me reluctant to leave this job.

I'd say you need several types of savings, a pot of easy to access savings e.g. cash or premium bonds which will cover you for a few of months of outgoings. Savings which are over a medium term e.g. a stocks and shares isa, which are less readily accessible... and long term savings like pensions.

Edit: It's no good tying all your money up in pensions or a mortgage, because if you really need it - e.g. you lose your job, or the boiler and cars pack up simultaneously you won't have the readily available cash to deal with it.

kangoora

NoveltySlippers said:

Yes, I’d really like to overpay this, as the mortgage is only just over £300 each and my husband and I earn a similar amount, we can and should overpay. He drags his feet on this though. I’ll have to have a ‘conversation’.

I just did a quick calculation, 25 year mortgage, £140k @2.5% is about £628/month

Paying £200/month extra (£100 each) would reduce the term by just over 7.5 years

It is likely to be less depending on how far you are into your mortgage term you are though.

I'd advise you not to just fixate on overpaying a mortgage, it is much less tax efficient than savings into pensions but we did both as reducing that mortgage term is a nice feel-good factor.

83705628

I used to be like you, then I took an arrow to the knee.
No but seriously, the light bulb moment is only the start. Treat your finances as a project to work on. Export your monthly bank and credit card statements into Excel andreview it critically like marking a student's work, you need to be able to justify each and every item without feeling guilty that you're wasting money. Be thrifthy, be frugal, be unashamedly tight. I left uni 4 years ago with £2k saved, the same amount I started uni with, my first job was £18k for 8 months at a housing association, and for the past 3 years I've been in the Civil Service on £23-£24k. I have averaged £1k/month saved since leaving uni (yeah I'm living at home but I'm paying rent), learned about investing and index funds, I track my wealth and income/expenditure monthly, I recently passed the £50k mark. Next stop £100k.

Short term - have plenty of easy access cash savings earning the best interest rate it can, there's no absolute rules but 3-6 months of take home is a healthy minimum before you start thinking about anything else. My attitude is that I never touch this cash pile, and I never do anything that could risk me having to touch it.

Then - start overpaying the mortgage, increasing your pension contributions and investing.

Emmia

NoveltySlippers said:

enthusiasticsaver said:

As in everything I think a balance of spending and saving is a good idea.  Also just because your mortgage is not set to finish until you are 68 that does not mean you cannot retire early.  Saving can also mean overpaying the mortgage to get it finished earlier.  Go on to an online mortgage overpayment calculator and see how much just overpaying a small amount can make both in terms of getting it repaid earlier than term and savings on interest.  Also remember the less you spend the less income you will need in retirement.  

I agree with Barnstar that a budget is a priority when deciding on how much to save.  Divide expenses into essentials like mortgage, bills (if you share them with your partner) and food.  Work out annual expenses like Christmas, birthdays, car maintenance, holiday money and insurances and put some money aside in savings to cover these and the rest of your income divide into spending money and savings.  We always and still do half and half.  Anything left from our spends gets put into savings but the savings go into an account on payday so we get it out of the current account.  You have to make savings as much of a priority as spending to get anywhere.  

Yes, I’d really like to overpay this, as the mortgage is only just over £300 each and my husband and I earn a similar amount, we can and should overpay. He drags his feet on this though. I’ll have to have a ‘conversation’. 

I'd be careful if you have different attitudes - getting to mortgage free as quickly as possible is great - however life is also for living and one person denying holidays, scrimping and saving everywhere when the other person is not quite on the same page (by which i mean saving, but not quite as hard) can wreck a relationship.

You can't take the money with you, and its really important that both halves of a couple are in agreement on the approach - do you want to be mortgage free, but divorced as a result? Or mortgage free but you don't live long enough to do the things you plan to do when you're mortgage free?

MovingForwards

I earn under £21k, my mortgage payment is more than your share, and have a spreadsheet for all my outgoings. I fill the details in over Christmas ready for the new year. That way I know in advance of each month what I expect to pay.

Food shopping, if I don't spend that weeks food budget in full, the unspent money is moved to savings. If I don't go food shopping that weeks money is sent to savings. I've a full pantry and freezer at all times.

As I'm not currently commuting to work, each Friday I move a week of the commute costs I've not spent to savings.

I have a spreadsheet for all my savings accounts, each savings account represents one aspect of my life eg car insurance / repairs / MOT / Tax and home insurance, home repairs, garden costs, interior emergency repairs, replacement furniture / decorating, emergency fund to cover mortgage payments, emergency fund etc.
Again, over Christmas I check how much that year has cost me, add a bit extra on as costs rise, then divide each one by 12, that's how much I need to put away as a minimum each month.

To stop frivolous spending I work out how many hours, or minutes, I have to work to pay for it, hurts even more as I don't like my job either. I do not make impulse purchases, add things to my eBay watch list and leave it for several days while I debate if I really need it. I do surveys to make points and convert them into vouchers for home things, supermarket points are saved each year and pay for Christmas.

I pay into the works DB pension, have some small pensions from old jobs, invest a small sum into S&S ISA each month and also overpay my mortgage. 

As I only completed my purchase a few months ago, this year I'm focusing on building savings up, next year I will be starting a private pension and reducing my savings each month to balance the books.

My overall focus is saving enough over the next few years, finding a role with less hours and more job satisfaction.

It's all within your control to make changes to your spending habits.

NoveltySlippers

kangoora said:

NoveltySlippers said:

Yes, I’d really like to overpay this, as the mortgage is only just over £300 each and my husband and I earn a similar amount, we can and should overpay. He drags his feet on this though. I’ll have to have a ‘conversation’.

I just did a quick calculation, 25 year mortgage, £140k @2.5% is about £628/month

Paying £200/month extra (£100 each) would reduce the term by just over 7.5 years

It is likely to be less depending on how far you are into your mortgage term you are though.

I'd advise you not to just fixate on overpaying a mortgage, it is much less tax efficient than savings into pensions but we did both as reducing that mortgage term is a nice feel-good factor.

Thanks Kangoora this is a really useful calculation! We can spare the £100 to overpay and a 7.5 year reduction of the mortgage teen is huge. 

Will definitely heed the point about not fixating on the mortgage but that type of overpayment is definitely do-able. I’ll be quoting that calculation - thank you!