Useless with money.... time to change but not sure how...

partialycloudy

colsten said:

You should put around 6-12 months worth of living costs into an emergency cash fund, such as Premium Bonds.

Then it depends on what your plans are - house move, kids, car, travel, changing career, setting up a business etc etc etc could all be valid intentions which will require money. A pension is obviously also a valid intention, and it will need a lot of money. Put as much as you possibly can into your respective pensions but don't give up having a life whilst you are getting closer and closer to your retirement. Just don't end up only having a life and forgetting that you might live in retirement for 30 or more years .

Why would you recommend premium bonds over a savings account? 

I looked into premium bonds and Martin Lewis doesn’t really seem to recommend them....

I’ve never heard of a LISA.... so will look into that.

it just feels like a mine field to be honest. We feel like we have quite a lot of disposable that we could be saving .... but once you start splitting it out between pensions, LiSAs, ISAs it dilutes it all quite a lot!! 

We do have pretty much a years worth of mortgage payments, but it’s split between different “pots”. 

Having never had savings before, and never really feeling like we had the disposable income to save... it’s hard to know what our goals should be. 

We have a house, we are married. We are having an extension done but that’s being added to the mortgage and only in creasing our payments by £100 a month..... 

We do both hate our jobs and it would be great to get to a point where we aren’t financially dependent on our salaries but we don’t really know how to make that reality... 

partialycloudy

Oh and I do get pension statements.... but I get them from a few different companies... 

MX5huggy

Premium Bonds:- Martin is a bit down on them. 

Historically they are out performed by savings accounts, but with rates as low as they are premium bonds are back in favour. 

The top “clean” easy access savings account or cash ISA is paying 0.45%, when I say clean you don’t need open some other accounts and fix them or it’s a regular saver or do 3 direct debits a month. Premium bonds are paying on average 0.9%. So with £10k you can drop it in the savings account and get a guaranteed £45 after 1 year (don’t spend it all at once). Alternatively put it in PB’s then using the calculator https://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result

Shows you might get nothing over the year just over 3% of the time then you’re very likely to win £25 or even £50 good chance of getting £75 and nearly a 50% chance of £100 the odds of bigger prizes drop off a bit after that. 

So you’re risking £45 for a good chance of £100. The calculator tells us 13.4% of people will win less than £45 or put it the other way 86.6% will do better with premium bonds.

What they are not good for is small amounts held for short periods, the likely outcome then is not winning (say £5k under 6 months).

2 years ago you could get 3% on savings so £300 on £10k & PB’s offered about 10% chance of £200, so we’re not good. 

£0 Exactly	3.09%
At least £25	96.9%
At least £50	86.4%
At least £75	68.4%
At least £100	47.8%
At least £150	17.0%
At least £175	9.18%
At least £200	4.87%
At least £250	1.63%
At least £350	1 in 119
At least £400	1 in 122
At least £450	1 in 122
At least £500	1 in 122
At least £750	1 in 440
At least £1,000	1 in 450
At least £1,500	1 in 4,523
At least £2,500	1 in 4,828
At least £5,000	1 in 4,828
At least £10,000	1 in 10,440
At least £25,000	1 in 24,264
At least £50,000	1 in 52,796
At least £100,000	1 in 128,140
At least £1,000,000	1 in 447,320

colsten

steampowered said:

3) Open a stocks & shares ISA. If you want to keep it simple, simply invest into a Vanguard fund such as the Lifestrategy 100 (https://www.vanguardinvestor.co.uk/investments/9232?intcmpgn=ls100_findmore_link). This is a diversified stock market fund that invests in thousands of different companies across the globe, so you will be putting your money to work - the average return generated historically by the stock markets is about 7.5% per year. Other funds are available.

One of the Vanguard Target Retirement Funds might be even more attractive than one of  the Lifestrategy Funds.

colsten

partialycloudy said:

colsten said:

You should put around 6-12 months worth of living costs into an emergency cash fund, such as Premium Bonds.

Then it depends on what your plans are - house move, kids, car, travel, changing career, setting up a business etc etc etc could all be valid intentions which will require money. A pension is obviously also a valid intention, and it will need a lot of money. Put as much as you possibly can into your respective pensions but don't give up having a life whilst you are getting closer and closer to your retirement. Just don't end up only having a life and forgetting that you might live in retirement for 30 or more years .

Why would you recommend premium bonds over a savings account? 

I looked into premium bonds and Martin Lewis doesn’t really seem to recommend them....

I’ve never heard of a LISA.... so will look into that.
 

Premium Bonds are, sort of, best instant access accounts these days because with average luck, you get the equivalent of 1%-ish AER, and you can withdraw your funds at short notice without penalty.

A LISA is an entirely different animal. You can only use it for a property purchase, or at age 60, or you pay a penalty for early access. Not a good choice for an emergency fund, but obviously great to have if you have sorted your emergency funds, if you are under 40, and if you want to buy a first property or keep the money locked away until you are 60.

All your choice - just make sure you fully understand the rules of the choices you would perhaps like to make.

TheAble

steampowered said:

These days it is really simple to put yourself in a good financial position. There are only 4 things you need to do:

1) Open a savings account. Put 3-6 months of living expenses into it. This is your "emergency fund". Don't touch this except for emergencies (e.g. losing your job).

2) Make sure that you and your husband are contributing a decent amount to your pensions. This is especially important for your husband as a higher rate tax payer. A good contribution level is 15% of your salary. As you say that your employers are putting in 10%, you should put in 5%. 

3) Open a stocks & shares ISA. If you want to keep it simple, simply invest into a Vanguard fund such as the Lifestrategy 100 (https://www.vanguardinvestor.co.uk/investments/9232?intcmpgn=ls100_findmore_link). This is a diversified stock market fund that invests in thousands of different companies across the globe, so you will be putting your money to work - the average return generated historically by the stock markets is about 7.5% per year. Other funds are available.

4) Each of you can invest up to £20k a year into your ISAs. If you are ever in a position where you want to invest more than that, you might need to open a non-ISA stocks and shares account. The advantage of using an ISA is that all returns are tax free - outside of an ISA you could have to pay income tax on dividends you receive or capital gains tax on profit made.

All very good advice, in many ways it really is as simple as this. I'd probably pay down the mortgage though once the ISA is full and has a few years' contributions, rather than have unwrapped investments, but they're both worthy alternatives.

partialycloudy

Thanks all so much. I’m gonna look into these. 

Do you know if there is a calculator out there that will work out how much my DH will need to contribute to his pension to get a tax benefit.... not sure if I phrasing that question right. 

Mainly need to see how it would effect his monthly salary? If that makes sense

steampowered

Don't complicate it too much by getting too worried about the difference between premium bonds or savings accounts. Or the difference between one Vanguard investment fund and another.

The differences are all marginal. 

The real choice you have to make is savings products vs. investment products.  

steampowered

partialycloudy said:

Do you know if there is a calculator out there that will work out how much my DH will need to contribute to his pension to get a tax benefit.... not sure if I phrasing that question right. 

Mainly need to see how it would effect his monthly salary? If that makes sense

It's simple really. As your DH is a higher rate tax payer, he will get 40% tax relief.

If he increases pension contributions by salary sacrifice, that comes off his gross salary. For example, if your husband pays an extra £200 a month into his pension, that will reduce the amount he receives into his bank account by £120 a month.

*Figure corrected as kindly pointed out by grumiofoundation (got my basic and higher rate tax figures math mixed up) 

grumiofoundation

steampowered said:

partialycloudy said:

Do you know if there is a calculator out there that will work out how much my DH will need to contribute to his pension to get a tax benefit.... not sure if I phrasing that question right. 

Mainly need to see how it would effect his monthly salary? If that makes sense

It's simple really. As your DH is a higher rate tax payer, he will get 40% tax relief.

If he increases pension contributions by salary sacrifice, that comes off his gross salary. For example, if your husband pays an extra £200 a month into his pension, that will reduce the amount he receives into his bank account by £160 a month. 

*for 40% tax relief would be £200 in pension costs £120 in take home pay. (If salary sacrifice also save the 2% NI).