Have a high-paying job for the first time - what to do with excess income??

bostonerimus

Keep a year's spending in the bank for emergencies, max out your pensions, max out your ISAs and invest in something like a low cost multi-asset fund if you are new to investing...something like VLS60 or 80. If you still have spare money buy something like VLS60 in a regular investment account. If you want something a bit different maybe look at an income property, but make sure you do the numbers and understand them before buying.

Billycock

jane054848 said:

After years of part time work & childcare, with moderate earnings, I've just started a job earning c.£200K a year.  My husband earns around 30K and our total outgoings are around 60K a year.  Mortgage is paid off, no other debt, we have 40K in ISAs as our total savings.  I'm intending to pay the yearly max into my pension and my husband's pension (we are 45) - but what should we do with the rest of the money?!  We have 2 kids but I'm not mad keen to put money in a trust for them to get when they are 18, in case they spend it on crazy things, although my ultimate goal for savings is help with their uni costs and a home deposit for them.  I don't have time to manage an investment property (or anything else time consuming).  I'm thinking just ISAs and normal savings accounts, but am I missing anything better we could be doing? Thank you! 

So, if you've just started a high paying job after years of part time work, you've no debts, your husband is earning around £30K per annum and your total outgoings are around £60K per annum then your part time job was already a high paying job. Congratulations 

jane054848

Thanks so much!  Yes, I will definitely take advantage of the back payment into pensions, and you make good points about JISAs and having more faith in my kids!    

The 60K expenditure was actually wrong, it included the mortgage which we are just about to finish paying off, so actual expenditure more like 30-36K.  

Billycock you are quite right, my job was already a high-paying job!  I just meant that to date I have only been able to cover living expenses & mortgage and have never been in a position to save. 

It's really useful to get all your advice, and I will also think about an IFA once I've read more of the investment threads unless I think I have educated myself sufficiently by then.  Thank you all! 

Albermarle

jane054848 said:

Thanks so much!  Yes, I will definitely take advantage of the back payment into pensions, and you make good points about JISAs and having more faith in my kids!    

The 60K expenditure was actually wrong, it included the mortgage which we are just about to finish paying off, so actual expenditure more like 30-36K.  

Billycock you are quite right, my job was already a high-paying job!  I just meant that to date I have only been able to cover living expenses & mortgage and have never been in a position to save. 

It's really useful to get all your advice, and I will also think about an IFA once I've read more of the investment threads unless I think I have educated myself sufficiently by then.  Thank you all! 

As well as reading through a few threads on here ,  a couple of books by John Edwards are often recommended . DIY Introduction to Personal Finance: A Basic Guide to Savings, Pensions & Investments: Amazon.co.uk: Edwards, John: 9781520742915: Books

Numerous guides on google- You Tube . These are two that are often mentioned .
Monevator - Make more money, invest profitably, retire early
PensionCraft - YouTube

MaxiRobriguez

You: £200k
1) £40k into pension
2) Results in £95k take home salary after tax.
3) £20k into S+S ISA.
4) Leaves you £75k.

Husband: £35k
1) £35k into pension
2) £20k into S+S ISA
3) Leaves him -£20k

Total household left-over = £55k, which gives you a £20k buffer on your outgoings. Use that to do what you want. I'm not sure I'd backfill the pension because £40k going into it over a number of years after high earnings anyway puts you at risk of exceeding the LTA.

I'd probably use the £20k to enjoy myself. You've earned that right with such high earnings. You're never going to have financial difficulties from here regardless of what you do if you have even a modicum of common sense - you'd be putting >£100k into investments annually. You'd probably end up with a million in investments even if you started from £0 on that trajectory after 7 years or so.

colsten

MaxiRobriguez said:

. You're never going to have financial difficulties from here regardless of what you do 

The things people write on the interweb.

Billycock

colsten said:

MaxiRobriguez said:

. You're never going to have financial difficulties from here regardless of what you do 

The things people write on the interweb.

Seems fine to me, you omitted part of the sentence. Should actually be- - You're never going to have financial difficulties from here regardless of what you do if you have even a modicum of common sense.
Modicum of common sense, in other words don't have a cavalier attitude with investments. Granted, nothing is infallible but with investments of that magnitude over 10+ years I'd certainly have a punt.

steampowered

greyteam1959 said:

£50 000 each into Premium Bonds.
Then contact a recommended Independent Financial Advisor for some guidance.
I know it is a bit of a boring suggestion compared with some of the above but it will stand you in good stead in 25 years time.

No it won't !!!

The current effective interest rate on premium bonds is 1%. The average return generated by the stock markets is 7.5%.

If the Op invested £100k into premium bonds, the Op would expect to have £128k in 25 years time.

If the Op invested £100k into a global stock market tracker fund, the Op would expect to have £609k in 25 years time.

colsten

Billycock said:

colsten said:

MaxiRobriguez said:

. You're never going to have financial difficulties from here regardless of what you do 

The things people write on the interweb.

Seems fine to me, you omitted part of the sentence. Should actually be- - You're never going to have financial difficulties from here regardless of what you do if you have even a modicum of common sense.
Modicum of common sense, in other words don't have a cavalier attitude with investments. Granted, nothing is infallible but with investments of that magnitude over 10+ years I'd certainly have a punt.

I knew someone would pick up on me leaving off the bit about common sense. So here we go: not even a modicum of common sense can protect you against redundancy, illness, accidents, natural disaster etc.. Nor will grand assurances from a stranger on the Internet who promises you will never have financial difficulties from here regardless of what you do if you have a modicum of common sense.

MaxiRobriguez

colsten said:

Billycock said:

colsten said:

MaxiRobriguez said:

. You're never going to have financial difficulties from here regardless of what you do 

The things people write on the interweb.

Seems fine to me, you omitted part of the sentence. Should actually be- - You're never going to have financial difficulties from here regardless of what you do if you have even a modicum of common sense.
Modicum of common sense, in other words don't have a cavalier attitude with investments. Granted, nothing is infallible but with investments of that magnitude over 10+ years I'd certainly have a punt.

I knew someone would pick up on me leaving off the bit about common sense. So here we go: not even a modicum of common sense can protect you against redundancy, illness, accidents, natural disaster etc.. Nor will grand assurances from a stranger on the Internet who promises you will never have financial difficulties from here regardless of what you do if you have a modicum of common sense.

You're still misrepresenting me, and taking my words too literally at the same time. 

I suggested enjoying the £20k rather than worrying what to do about saving/investing it... 

If there's a natural disaster that destroys global capitalism and renders investments worthless then that extra £20k saved is worthless too, so makes no difference if that was saved or spent.

And besides, redundancy/illness = won't make a difference unless it happens almost immediately, as there's enough saved after a few months to fall back on for a year, by which point another job is likely to be had.

So no, it's not 100% guaranteed to never have financial difficulties, but on a £200k salary and a bit of common sense then unless you are the unluckiest person in the world it would be difficult NOT to set yourself up for life within a few years, and failing that at least fall back to a position whereby you're comfortable if not raking it in.

To be plainly clear, my point: Enjoy the remaining £20k rather than worrying whether or not it should be saved/invested.