New to investing my personal circumstances and what I wan't to achieve

GotPrincess

Hey guys I've been pretty active over the last few days with loads of threads and questions but I thought i'd be much better posting a thread with all my current details and what not!
Don't flame me to much my life has been extremely stupid, wasted and not realized my true potential or worth but I'm finally in a place where I THINK I could build something.
AGE:40
WORK: Business Owner in the eCommerce space for the past two years
TURNOVER: Business is only 2 years old year one was £14,000 Year two currently £105,000 Next year £250,000
OUTGOINGS: £650 per month
SAVINGS: £15,000
PENSION: State pension + Work based pension with around 5 years of contributions all in all I'm screwed on the pension front 
DEBTS: £600 in unsecured credits
HOUSE: Rented all my life sadly due to how I used to live my credit rating is screwed for around another 3 years

So onto what I have and what I want to achieve 
Firstly lets address the main issue I know most of you are going to bring up which is the pension I'm of the mind that I don't want to invest in a pension now purely based on the fact that if i don't reach the pension age which is only ever going up then that money that I would contribute would be wasted I'm pretty firm on this point (I'm aware there is possible tax benefits for me paying into something now versus me investing but that bird has flown you would be wasting your time trying to educate me on that front)
So right now I have living expenses and around £7,000 in Gold and watches I'm aware I need to build up some form of fund for the future hence the thread I've just started and have chosen to invest in the LifeStrategy® 80% Equity Fund - Accumulation recently I've only a very small deposit made so far whilst I gather advice from you guys on best possible advice based on the above.

My risk profile I honestly would put me right at the top as being care free and as such I went for that product I would like to invest in riskier products alongside a slow and steady approach to the VGLS80 product.

Feel free to ask any further questions and Ill try my best to fill in the gaps only thing I ask is you respect my choices how I respect your opinions

Eco_Miser

Are you aware that you can start drawing your pension in only 15-17 years time? And that you don't need to buy an annuity? You could just start taking the dividends or selling a little of your holdings, just as you would to take an income from your other investments.

Having said that, I don't have much pension, as I didn't want to be buying an annuity at 65, so I put it all in ISAs instead.  However the rules have changed since then.

Another_Saver

Well if this was an AA meeting, you've made it to step 5, maybe step 7 so you're doing fine.
1. Your outgoings seem low, homeowning is generally a better idea but your rent must be cheap so no rush.
2. If you're self employed you may have a government gateway account, have you checked your national insurance record? You need 35 years to get the full state pension.

3. vanguard is a great SIPP choice for smaller amounts. I think the age to access it will be 58 by the time you get there, so personally I think you can afford that little extra volatility of VLS 100 along the way (the 20% bond companent will contribute less than savings accounts for the next 9 years or so, after that who knows what interest rates/bond yields will be).

Let's say you keep up £300 a month over the next 18 years, increasing your contributions in line with inflation, 3.6k a year becomes £4.5k including the tax relief (others in the forum may know more about how it works for self-employed/small business folk). This isn't complicated. I havd a vanguard sipp, i stuck £100 in when I opened it and a few weeks later £25 appeared in it. It's long complicated if you're a higher rate taxpayer.
Say you put that into VLS 100, let's say you make 3% ontop of inflation over 18 years, you end up with £105k @ 58, £115k if it does 4%.
If you think the state pension, £9k a year or so is livable, then that ~£110k only needs to last you from 58-68, roughly £11k a year (by then you ought to have derisked into something like VLS 80 or 60, or perhaps consider a target retirement fund).
Or you could work right up until 68, in which case you'll have your £9k state pension (or whatever it's worth then) and build upto maybe £225k in today's money if it makes 4% ontop of inflation. There's a whole debate about how much is safe to withdraw, £10k a year should be fine at that age, so you're living off £19k a year gross (there may be some income tax to pay).
4. Don't try and chase higher returns, just save as much as you can as early as you can and cram it into SIPPs and ISAs.

GotPrincess

Eco_Miser said:

Are you aware that you can start drawing your pension in only 15-17 years time? And that you don't need to buy an annuity? You could just start taking the dividends or selling a little of your holdings, just as you would to take an income from your other investments.

Having said that, I don't have much pension, as I didn't want to be buying an annuity at 65, so I put it all in ISAs instead.  However the rules have changed since then.

TBH I've never had money i used to have £30 in my pocket everyday through slave labor working for my dad and I was happy then I started my business and here I am a clueless dude spending his money instead of saving/investing I'm hoping at least in 2021 I will start on the right path.

I'm just not good with all the pension/investing stuff but if its as easy as opening another account on Vangard and chucking more money in it then it can be done I still feel I will weight more of my free cash into my VG80 fund but I guess having both isn't stupid and I won't miss the money unless my business fails in which case I'll prob hate life having to work for someone for £9 a hour again

bowlhead99

Is the £250k turnover created from your £650pm of outgoings? Or does the business cost money to run, paying suppliers etc? I know some people with £250k business turnover who make losses, and others who make 90% profit margin; and some of them need to retain a massive amount of working capital float for the timing differences between paying suppliers and getting paid sales invoices while others are very lean.

On the pension, you mention the 'possible tax benefits for me paying into something now versus me investing'; a pension is just a tax-protective wrapper around your investing, and the benefits can be huge if you are running a successful business with £50k profit / high rate income tax. (e.g. £10k invested in a pension costs £6k net cash to a 40% taxpayer, and £10k is a 67% boost on the £6k invested amount... while £10k invested in your vanguard product without a tax wrapper costs £10k, a 0% boost).

I mentioned pensions on your other thread because if you are trying to invest for 20 year plus (which takes you well beyond the age at which a private pension can be drawn) it would be crazy to ignore them. You ask for the 'best possible advice' but you're basically saying that you don't want the best possible advice because you've decided the 'bird has flown' and you won't listen to it, you instead want some other advice about how you can take more investment risk to make returns that way instead. Any advice to take more investment risk rather than improve your tax situation is unlikely to be 'best possible advice'.

If someone had told you they had some great free advice about how to get your business turnover from £14000 to £250000 in a low risk and efficient way, would you be curious and ask them about it, or would you stick your head in the sand and say, 'that bird has flown, I've already decided I should take more risks and get the turnover up that way and will simply cross my fingers that it doesn't fail...'

As to what riskier product you should add to your already reasonably volatile VLS80 product, I'm sure others will chip in with their best possible advice.

GotPrincess

Is the £250k turnover created from your £650pm of outgoings? Or does the business cost money to run, paying suppliers etc? I know some people with £250k business turnover who make losses, and others who make 90% profit margin; and some of them need to retain a massive amount of working capital float for the timing differences between paying suppliers and getting paid sales invoices while others are very lean.
I keep the business and personal outgoings separate all being said with out going into much detail after taxes etc etc were looking at a 40-50% Margin on the turnover 

On the pension, you mention the 'possible tax benefits for me paying into something now versus me investing'; a pension is just a tax-protective wrapper around your investing, and the benefits can be huge if you are running a successful business with £50k profit / high rate income tax. (e.g. £10k invested in a pension costs £6k net cash, a 67% boost, while £10k invested in your vanguard product without a tax wrapper costs £10k, a 0% boost).
I need to really educate myself on this 

I mentioned pensions on your other thread because if you are trying to invest for 20 year plus (which takes you well beyond the age at which a private pension can be drawn) it would be crazy to ignore them. You ask for the 'best possible advice' but you're basically saying that you don't want the best possible advice because you've decided the 'bird has flown' and you won't listen to it, you instead want some other advice about how you can take more investment risk to make returns that way instead. Any advice to take more investment risk rather than improve your tax situation is unlikely to be 'best possible advice'.
Agreed as noted in the other thread I'm clueless when it comes to these things I have a worry that one day my 20k a month will suddenly dry up and ill have XXX locked into some pension that I can't touch for X years and i'll be stuck behind a desk taking calls versus having it in a fund and if XXXX hits the fan I can withdraw it and have something to show for my efforts 

If someone had told you they had some great free advice about how to get your business turnover from £14000 to £250000 in a low risk and efficient way, would you be curious and ask them about it, or would you stick your head in the sand and say, 'that bird has flown, I've already decided I should take more risks and get the turnover up that way and will simply cross my fingers that it doesn't fail...'
I'm open to this 

As to what riskier product you should add to your already reasonably volatile VLS80 product, I'm sure others will chip in with their best possible advice.

ColdIron

Retirement on a state pension, sounds grim. Would £9,000 pa even cover your rent?

Linton

You seem to need help setting yourself up financially for the future.  But it reads a bit like you were going to an architect asking for help designing your new home and when he asks you what you want you tell him that you have chosen the wall paper and the design needs to go with the furniture you have selected.

Do you want broad help? If so some broad questions:
 - What do you want the money for?  How much and when will you want it?  This is the starting point.  Your intentions can change in the future, they may be impossible to achieve or you may simply change your mind.  That is fine.  But without some objectives how you invest and what you invest in is pretty arbitrary.
 - How much can you afford to contribute?  How secure do you think your future income is?

Obviously it is important that the answers to the two questions are compatible.

If you dont have objectives and simply want a comment on what you have said so far, some points:
1) Keep much of your current savings in cash.  Investments are for the long term (5-10 years as a minimum) and you dont want to have to sell them in an emergency especially if prices happen to be down at the time.

2) If you dont want a pension (in my view your reasons are suspect and possibly ill-informed, but that is up to you) you should at least be using an S&S ISA.  It provides complete protection from tax and avoids the need to keep detailed records for HMRC,

3) Nothing wrong with VLS80.  There are many worse options you could have chosen.  But it would be wrong to see it as "slow and steady".  In a crash like others in the past 50 years it could fall by perhaps 40% when VLS100 drops 50%, so not much difference in practice.  From what has been said on this forum before It is at or beyond the higher risk end of what many inexperienced investors would be happy with.  Think carefully about what you would do In the event of it falling 40%. If the answer could be "sell it all to protect what is left" then it is probably too risky for you.

4) I think you should pay off the debt and not take on any more, except for a mortgage when the time comes.

GotPrincess

Do you want broad help? If so some broad questions:
 - What do you want the money for?  How much and when will you want it?  This is the starting point.  Your intentions can change in the future, they may be impossible to achieve or you may simply change your mind.  That is fine.  But without some objectives how you invest and what you invest in is pretty arbitrary.
If I had to pluck a magic figure out of the air then buy the time I hit 60-68 id like say £200,000 which given my lifestyle should be just fine till I end up underground 
 - How much can you afford to contribute?  How secure do you think your future income is?
I've not really sat down and thought about this BUT I belive if i continue as I am I can afford to do around £1,000 a month across a range of investments
2) If you dont want a pension (in my view your reasons are suspect and possibly ill-informed, but that is up to you) you should at least be using an S&S ISA.  It provides complete protection from tax and avoids the need to keep detailed records for HMRC.
Is this something the vangard platform offers although im leaning towards having a pension and investments now 
3) Nothing wrong with VLS80.  There are many worse options you could have chosen.  But it would be wrong to see it as "slow and steady".  In a crash like others in the past 50 years it could fall by perhaps 40% when VLS100 drops 50%, so not much difference in practice.  From what has been said on this forum before It is at or beyond the higher risk end of what many inexperienced investors would be happy with.  Think carefully about what you would do In the event of it falling 40%. If the answer could be "sell it all to protect what is left" then it is probably too risky for you.
I wouldn't sell it my look on life is there is always more money in the world to be earned the question is would I be happy having to 'work' for a living

Eco_Miser

An S&S ISA is just a tax wrapper round investments. It's available on Vanguard and just about every other platform available. A SIPP is another tax wrapper, with different rules, available on slightly fewer platforms.

GotPrincess

You can have VLSxx funds in ISAs and SIPPs, with Vanguard themselves or on other platforms such as Halifax Sharedealing or iWeb. You should chose the platform with the lowest ongoing cost.
OK I will do some research today unless anyone has any ideas on best place to currently trade