From poverty to £1000 net savings pcm

jimjames

In terms of priorities I think pension would make more sense to be top, if you have employer option to match contributions then max that out if possible. You can also have a SIPP which would allow you to buy shares inside a tax wrapper.

With the level of investments you've mentioned there should be no need to have anything outside a pension or ISA wrapper, why pay (or have the potential to pay) tax when there is no need to do so?

RyanHello

Get your stocks and shares ISA maxed out. The tax benefits outweigh any other investments. 

I have been investing for years and if you're struggling with think of what to invest in. Stick it in a low fee index fund. They are cheap and outperform most managed funds.

I do have a small portfolio of single stocks. I do mainly stick to companies with a lot of cash in hand (Apple, Alphabet, Microsoft, etc). I also have a small UK one with a handful companies in .

Sticking your money in a bank paying 0.7% is for chumps. Only have cash in bank for a emergency and every day cash. Don't leave thousands in there.

eskbanker

RyanHello said:

Only have cash in bank for a emergency and every day cash. Don't leave thousands in there.

You're in a very fortunate position if you can't envisage any four-figure emergencies!

MaxiRobriguez

RyanHello said:

Get your stocks and shares ISA maxed out. The tax benefits outweigh any other investments. 

Not true.

People in higher rate tax bracket have a significant advantage contributing to pension over a S+S ISA, as do those who are not HRT's but are still on salary sacrifice schemes.

S+S ISA should be considered as part of a wider strategy. Is not be all and end all.

thickasabrick

Vietnam said:

My goals are torn between having a more decent quality of life, such as things like furniture, some nice clothes, a holiday, a nice camera and so on, between investing as much as possible because of how well paying it is. Given how late in the day things are, what is the right mentality to take with my finances and how do I stay realistic.

Perhaps go for a middle ground and put some of your spare income in a stocks and shares ISA, some in a pension and keep a reasonable portion for fun and living in the now.

Investing works better over a longer time frame, 5, 10, 15, 20 years, so set your mind that the money you place into these “tax efficient” wrappers to hold your investments will be for at least 10 years.

There are lots of articles and opinions on what style of investments are best. Choose one which suits your personality and risk profile. For me, low cost global trackers as described by Lars Kroijer, The Escape Artist and JLColliins to name a few are my choice. Held in a low cost platform. Monevator have a table of the “Best trading platforms and stock brokers”.

To stay realistic, keep a percentage of your spare income in a savings pot for stuff you want now.  It can double up as your emergency fund if you prefer. Once you’ve decided on a percentage of your spare income to invest, automate it.

For inspiration “The Million dollar age grid” from Four Pillar Freedom.

barnstar2077

I would give serious consideration to what it would take for you to buy your own home.  Buying mine is probably the best financial decision I have made so far.  It would make later life a lot easier.

DireEmblem

What company pension perks could you get - think of it as free money.  Especially if you are now a higher rate tax payer.

Instead of paying 40% tax and what 2% National insurance, or for every £58 you get paid, £100 could go into your pension, plus any NI Employer savings as well.  Then depending on how much you can build up into your pension pot, you might only have to pay 25% tax when you start to draw down your pension.

But before that, get a 6 month emergency fund in cash, and give yourself a budget to live - enough to buy nice things and holidays.  When doing that, maybe question things like do you really need a new Galaxy/iPhone every year for say £800?  I still have an iPhone 7, recently replaced the battery, ok its not the latest but it works good as new.  I just pay £11 for a Three unlimited sim(deal).  How much are you paying on your phone - if you are paying more, do that give any more value to you?

You are doing well if you can save £1000 a month.  Investing wise, anything above your pension, I would go with invest and forget.  A cheap global equity fund such as VWRP - Vanguard FTSE All World Index.  Maybe even allow yourself 5-10% to pick funds you like, like your Fundsmith.  If it performs well then great, if not then well, its just 10%.

I would also look at the referral threads on here.  Maybe take advantage of the signup offers through a GIA for Nutmeg and Wealthify.  I got £40 for depositing £400 in Wealthify, and £100 for £100 a month for 12 months in Nutmeg.  I see it as a head start and free money.

Crypto - maybe include that in your 10% play pot.  That way you're not exposing much of your assets to riskier holdings, but have some exposure just incase you are lucky one of your picks takes off.

And at the end of it all, make sure you enjoy life, and look at the value you get back for the pennies you spend.

jamesd

You're in a situation where it might be possible to retire at 57 if you try. Depends on your specific income needs and commitment, helped by you being used to living on much less. I stated around my mid forties and retired at 55 with more than half a million and a cheap flat having spend most years investing more than 60% of my income during a long bull market.

Pensions in the SIPP form can hold shares including investment trusts and ETFs as well as funds. That's the difference between a SIPP - self-invested personal pension - and the generic type which will usually offer only funds. P2P lending within a pension is also possible but so hard to find it's not really worth thinking about compared to ISA.

ISA comes in four main flavours: cash, stocks and shares, P2P and lifetime. P2P is offered directly by the P2P lending platforms and most of my own P2P is in ISAs these days.

So, first thing to consider is doing your investing inside a pension or ISA for the tax breaks. Pension offers greater tax breaks than ISA, particularly in higher salary parts of income or with salary sacrifice if your employer offers it.

Owning a home can save you money. It doesn't have to be fancy, 60-70k can get you a decent enough flat in some places, or maybe a small house.

I switched from cash to primarily investments after I'd accumulated 20-30k.

In investment places, bond means debt securities issued by governments and companies. In savings places it means term deposit accounts, like two month or two year terms. Use bonds here or in a pension forum and it'll be the company and government debt meaning that people will read it as, not the term deposit account one.

solidpro

I only starting trying to be smart with any income around 38. 

I setup a private pension and paid into it.
Later, I setup a S&S ISA and try and max that out.
I bought a BTL, paid it off and that brings in £2k a month.
I've thought about other things - specific shares - mainly for dividends, gold, art etc but honestly, unless you're making *A LOT* of money, you'd be hard pressed to need to go beyond the first two (pension and ISA).

I think the biggest issue is that constantly grinding on those is boring. But hey-ho, take up jigsaws.

Vietnam

Thanks and sorry for the slow reply, simply researching everything here will take time. I will be reading this thread many times over across the months ahead. Investing is fascinating, even learning the basics, this is a wealth of information.
From the feedback here there appear to be three main sensible options: ISA & pensions, index funds, or home ownership.

RyanHello said:

Sticking your money in a bank paying 0.7% is for chumps. Only have cash in bank for a emergency and every day cash. Don't leave thousands in there.

The exact thing that got me into investing was how poor savings accounts perform. Last October I started seriously investing and my portfolio has made almost 20% since. That's a ten thousand percent increase from what my bank offers. The only risk in investing appears to be NOT investing. By leaving it in my savings, it would literally lose value. 

Nebulous2 said:

Despite getting a decent payrise you may quickly find that you do not have £1000 to invest a month. Expenditure tends to rise with income, and you will need to be very disciplined to maintain your outgoings where they were / are. 

This is wise thing, but it is tempting to start thinking about buying up, sorting out having a real living room for instance. Having my first TV, first sofa etc. when you have no money you can't afford proper furniture and have people round or anything. Yes I have a bed but only because some random person gave me one. 

kuratowski said:

This is a savings and investments forum and we're all very keen on financial products (especially pensions and ISAs) but don't overlook the benefits of owning your own home.  At your age it's in no way too late, and should be achievable too if you have that amount of disposable income today, after paying rent.  Owning your own place takes lot of pressure off your income requirement in retirement.

Home ownership seems rather overrated, the amount of planning research, and logistics, plus the cost of maintenance, legal fees, insurance, possibility of depreciation, and the lengthy and unpredictable process of selling the property along aren't attractive to me. I get that home ownership comes with a status symbol as well, but don't have anyone to show it off to or anywhere in mind to settle. 

grumiofoundation said:
Is picking good shares easy? Why can't all the well paid fund managers do it? 

What has worked for me so far is to pick companies with popular financial or technology products which are essential to the running of the economy, local infrastructure and to the government. You can't tell the future but you can buy shares in the companies most responsible with designing it, and ones that don't expect it to be a thankless task either, i.e. want a bit of recognition and reputation out of it. That you have to read between the lines in their statements or whatever marketing material they are offering. Companies that do essential services though, and don't expect much credit, do not seem like good investments. It's no good investing in a company that doesn't care much about the investment.