From poverty to £1000 net savings pcm

grumiofoundation

Vietnam said:

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.

The first 2 options are not mutually exclusive. ISAs/Pensions are not investment options in themselves. You can (and should if possible) hold index funds within both wrappers.

The main financial benefit of buying a home and paying off a mortgage rather than renting is removing the need to pay rent in retirement. Obviously you can rent until retirement and then buy in cash but this obviously carries risk that your investments don't keep up with house price growth. 

 anywhere in mind to settle. 

However if you may end up moving over a short (say <5 years) time period then you could well end up losing out owning vs renting. House price drops, cost of buying selling, in your case loss of FTB benefits (FTB SDLT relief, LISA bonus). Plus the time it can take to sell as well as the non-financial issue that home ownership could 'tie you down', e.g. prevent you taking a job elsewhere. 

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. 

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. 

I am sure I am not the only posters seeing red flags here. 

The fact you haven't mentioned the risk that your portfolio falls in value 50+% (depending exactly what you have invested in...) is rather telling. 

This somewhat bursts your bubble (no pun nor predictions intended) but you have been investing for less than a year in a period that has been all up. The 100% increase in the value of the S and P 500 since March 2020 lows is the fastest doubling going back to WWII. The impression you give off is of extreme confidence in your abilities to outperform the market and of the one-way street that investing is.

But if your shares have risen 20% since october your portfolio has pretty much performed in line with a global index tracker (see link). Somewhat dampens your claim that picking good shares is 'pretty easy' since you haven't beaten a tracker fund. 

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-global-all-cap-index-accumulation/charts


In reply to the poster who suggested bank accounts are for chumps having an easily accessible emergency fund in cash is important, which for many would entail thousands.

Vietnam

grumiofoundation said:

I am sure I am not the only posters seeing red flags here. 

Ha, no it's just that holding shares in the moderate to long term in a company such as Alphabet or Barclays just seems to be a potential option, providing that more important things are sorted first obviously. But the only thing that believes I'm some kind of master trader is my ego.

grumiofoundation said:

In reply to the poster who suggested bank accounts are for chumps having an easily accessible emergency fund in cash is important, which for many would entail thousands.

Don't take this the wrong way as yourself and many others have been very very helpful and have put up admirably with my financial illiteracy. 
What is the point of an emergency fund, to keep, just in case the worst happens? 
Unlike yourselves and others here I haven't managed to work my way up and make something of myself since school. This means the worst has already happened. So why prepare for it again? 
In terms of sustainability, riskier options are more interesting to me, not because they are quick rich schemes, but because there is nothing sustainable about not making money. Not only do I have credit cards and an authorised overdraft for quick cash, leaving money sitting in an account when it could be invested is certainly not sustainable, I trust you would at least partially agree. 
My lifestyle has and shall continue to be made up of gigging rather than settling down. I am not going to be able to afford a middle class life, such as house, a car, wife, 2.4 kids etc. That's not to say they aren't attractive things to have. I just don't have the expertise or network to support their attainability and relevance.
I really hope I don't come off with a negative or poor-me attitude. If things were more settled in work and life, my strategy would be to throw money at pensions and ISAs and forget about it. In this scenario, those products feel much more like a nice-to-have thing if everything else works out. It's good to be sensible, however, there is not much sense in avoiding risk when there is little to lose in the first place. 

El_Torro

Vietnam said:

grumiofoundation said:

In reply to the poster who suggested bank accounts are for chumps having an easily accessible emergency fund in cash is important, which for many would entail thousands.

Don't take this the wrong way as yourself and many others have been very very helpful and have put up admirably with my financial illiteracy. 
What is the point of an emergency fund, to keep, just in case the worst happens? 
Unlike yourselves and others here I haven't managed to work my way up and make something of myself since school. This means the worst has already happened. So why prepare for it again? 
In terms of sustainability, riskier options are more interesting to me, not because they are quick rich schemes, but because there is nothing sustainable about not making money. Not only do I have credit cards and an authorised overdraft for quick cash, leaving money sitting in an account when it could be invested is certainly not sustainable, I trust you would at least partially agree. 
My lifestyle has and shall continue to be made up of gigging rather than settling down. I am not going to be able to afford a middle class life, such as house, a car, wife, 2.4 kids etc. That's not to say they aren't attractive things to have. I just don't have the expertise or network to support their attainability and relevance.
I really hope I don't come off with a negative or poor-me attitude. If things were more settled in work and life, my strategy would be to throw money at pensions and ISAs and forget about it. In this scenario, those products feel much more like a nice-to-have thing if everything else works out. It's good to be sensible, however, there is not much sense in avoiding risk when there is little to lose in the first place. 

The point of an emergency fund is to plan for the unexpected. Hopefully your biggest struggles are behind you, but that may or may not be true. If you lose your current job how quickly will you find a new one? Hopefully very quickly, but if that's not the case you don't want to worry about how you're going to pay your rent and other bills while you're job hunting.

Many people choose not to have an emergency fund, personally I think this is hoping for the best rather than planning for the worst though. 

Vietnam

El_Torro said:

The point of an emergency fund is to plan for the unexpected. Hopefully your biggest struggles are behind you, but that may or may not be true. If you lose your current job how quickly will you find a new one? Hopefully very quickly, but if that's not the case you don't want to worry about how you're going to pay your rent and other bills while you're job hunting.

Many people choose not to have an emergency fund, personally I think this is hoping for the best rather than planning for the worst though. 

This is what interests me about mindset and investing. Are you saying there's a position where you won't ever have to be concerned with bills or jobhunting at all? They are always going to be on the radar in some form or another. So how far does that statement truly cut? 

If I lose my job and my flat, I will just have to start from scratch and find another one, as has been the case many times. If things get somewhat bad, I will have to beg and find a shelter. The absolute worst case scenario would be to become addicted to expensive and illegal drugs. Does your financial plan include that possibility?

Having an emergency fund of several thousand pounds is a luxury. So are sofas and dining tables. You may as well tell me to get a brand new widescreen TV and say it's essential. I simply don't have the money, and I'm not ever going to have the money by making bad choices.

It's charming to be presented to with the notion that it's unexpected to lose a job, lose housing, or face equivalent disasters. But it would be irresponsible to not gauge the reality and league of the advice and guidance intended for the better off. I am not going to be joining that club any time soon. 

Eco_Miser

This is what interests me about mindset and investing. Are you saying there's a position where you won't ever have to be concerned with bills or jobhunting at all? They are always going to be on the radar in some form or another. So how far does that statement truly cut?

I definitely reached that position 11 years ago when I retired (5 years) early. I had actually reached it years before that.

Furthermore, I reached it without ever being high paid: I never earned in a month what you now save. I didn't win or inherit the money either, just kept saving and investing - including buying a home.

Nebulous2

Vietnam said:

El_Torro said:

The point of an emergency fund is to plan for the unexpected. Hopefully your biggest struggles are behind you, but that may or may not be true. If you lose your current job how quickly will you find a new one? Hopefully very quickly, but if that's not the case you don't want to worry about how you're going to pay your rent and other bills while you're job hunting.

Many people choose not to have an emergency fund, personally I think this is hoping for the best rather than planning for the worst though. 

This is what interests me about mindset and investing. Are you saying there's a position where you won't ever have to be concerned with bills or jobhunting at all? They are always going to be on the radar in some form or another. So how far does that statement truly cut? 

If I lose my job and my flat, I will just have to start from scratch and find another one, as has been the case many times. If things get somewhat bad, I will have to beg and find a shelter. The absolute worst case scenario would be to become addicted to expensive and illegal drugs. Does your financial plan include that possibility?

Having an emergency fund of several thousand pounds is a luxury. So are sofas and dining tables. You may as well tell me to get a brand new widescreen TV and say it's essential. I simply don't have the money, and I'm not ever going to have the money by making bad choices.

It's charming to be presented to with the notion that it's unexpected to lose a job, lose housing, or face equivalent disasters. But it would be irresponsible to not gauge the reality and league of the advice and guidance intended for the better off. I am not going to be joining that club any time soon. 

Your posts are thought-provoking and offer us a glimpse of a life that a lot of people on this forum will never have known. 

I've never made a fortune, generally not had much of an emergency fund, but I've been in stable employment for 40 years and find myself semi-retired with more money than I need to fund my life style. 

There were several 'lucky' things to help with that.

1. I had/have an extended family that would have put me up or given money in extreme circumstances. 
2. I trained as a nurse at 20, which opened a door to steady employment, as long as I meet certain standards and follow the regulatory requirements for my profession. 
3. We bought a property when I was 22 and built up some capital fairly quickly. Before I was 30 we were able to buy a newbuild family home. 

There were also some negatives. 

1. I've taken chances, given up reasonably well paid jobs on a whim, as they were not working for me. I spent a miserable year as a financial adviser where money was very short. We had to make dramatic cuts to our lifestyle.

My wife's health has been an issue and we've mostly brought up a family on one wage. 

Despite any of that, and knowing that many people are only 2 months wages away from poverty, I've never seen it as likely to happen to me. Not only that, but I don't really know anyone in my wider social circle it has happened to. My field isn't really mental health, but I've had some involvement with services supporting people who were homeless, struggling with addictions, and leading chaotic lifestyles. So I know in abstract that it happens, have met and occasionally supported people it has happened to, but still live in this bubble where I can't quite see it happening to us. 

El_Torro

Vietnam said:

This is what interests me about mindset and investing. Are you saying there's a position where you won't ever have to be concerned with bills or jobhunting at all? They are always going to be on the radar in some form or another. So how far does that statement truly cut? 

If I lose my job and my flat, I will just have to start from scratch and find another one, as has been the case many times. If things get somewhat bad, I will have to beg and find a shelter. The absolute worst case scenario would be to become addicted to expensive and illegal drugs. Does your financial plan include that possibility?

Having an emergency fund of several thousand pounds is a luxury. So are sofas and dining tables. You may as well tell me to get a brand new widescreen TV and say it's essential. I simply don't have the money, and I'm not ever going to have the money by making bad choices.

It's charming to be presented to with the notion that it's unexpected to lose a job, lose housing, or face equivalent disasters. But it would be irresponsible to not gauge the reality and league of the advice and guidance intended for the better off. I am not going to be joining that club any time soon. 

I suspect I'm not going to change your mind about how important emergency funds are, no matter how many posts I make on the subject. The reverse is also true. Still, I'll comment on your post since I find your mindset on the subject interesting. 

As you've said yourself your current investment portfolio is about £10k and in your current position you can increase your savings / investments by £1k a month. For someone in their later thirties this is less than many people, though also a lot more than many others. If you continue to put away £1k a month your position will only get better as well. 

You say that if things get really bad you can always be homeless and go to a shelter. I find this an odd idea, since an adequate emergency fund should mean that you don't need to do this. I won't pretend that I've ever been homeless, but in my opinion not being homeless is a benefit and if it can be avoided it should be. I'm not sure what your point about drug addiction is. Yes, anyone can get addicted to expensive drugs, though building an emergency fund to be able to buy all the cocaine you'll ever need is taking the concept of an emergency fund to the extreme.

I also don't think that an emergency fund will hurt your long term returns as badly as you seem to think it will. If you start building one now (assuming you keep your £10k in investments) you should have one in a matter of months. After that any spare money you have can go into investments. 

I agree that an emergency fund is a luxury, in the sense that not everyone can afford one. However I would argue that someone who is renting and can put away £1k a month should be in a position to afford one. 

solidpro

Vietnam said:

If I lose my job and my flat, I will just have to start from scratch and find another one, 

You want to be doing that at 70? Or you just have no interest in living that long?