Reviewing my finances as I turn 40

R_P_W

Hi all, hoping this is the right place to post and get some collective wisdom and thoughts (I won't ask for 'advice' as I know that can mean something else in financial circles)

So, I'm almost 40 and having a bit of a review of my financial situation, wanting to make sure that I'm in a reasonable position.

Full time employed with a salary of ~£60k
House valued at ~£200k and a mortgage of £140k just fixed for another 2 years at 1.24%
Currently single with no children and not planning to have any in the future.
I have £20k in premium bonds and have been paying into a pension since I started work and currently have ~£230k pot and at the moment I'm contributing 15% and my employer adds on 7.5%.

I do have about £9k cc debt at the moment on a BT rate of 4.9% for the next 36 months.
Once bills and commitments are paid I typically have £1.5k a month left which I've been paying off some cc debt but I am also a little loose sometimes with cash on discretionary spending (something I'm trying to tighten up).

I guess my overall goals really are to become more financially secure, maybe be able to explore working part time in my 50s or just generally becoming less reliant on my current income.

So whilst I don't think I'm in a terrible place, I think my finances are a little confused so my thoughts on next steps are:-

1. Take £9k out of my premium bonds to pay off the credit card debt.
2. Possibly increase my pension contribution to 20% 
3. Maintain ~£10k cash/bonds for an emergency fund (so about 6 months of expenses)
4. Start a S&S ISA and likely Vanguard Lifestrategy 80% fund and contribute between 500 - 1000 a month 
5. Keep my mortgage payment at what is was before I remortgaged ( overpaying £75 a month) 

Any thoughts on my 5 steps ?  Should I do anything different?

Thanks in advance for any replies.

Albermarle

For age 40 , everything looks pretty good , especially as you have no expensive dependents.
Also the 5 step plan looks sensible , especially paying off the debt .

Maybe £10k in cash/PB's is a bit on the low side .

I guess my overall goals really are to become more financially secure, maybe be able to explore working part time in my 50s or just generally becoming less reliant on my current income.

Just be aware that funding a retirement of 40 years needs a big pot . There are people who retire/ step back from full time work in their 40's - encouraged by the FIRE movement ( Finanancial Independence Retire early ) but I think most regular posters on here would hang on to a good salary in a secure job until they were sure they had enough, and that probably means your idea of going part time may have to come a bit later .

steampowered

The first thing you should do is pay off that credit card debt. Keeping money in a 1% interest product (premium bonds) while paying 4.9% interest on credit card debt is madness.

Aside from that, your mortgage and pension situation looks healthy.

Personally I would be putting extra money into the S&S ISA. This generates a good return (historic stock market returns are about 7.5% per year). It is also flexible. You would have the choice of whether to use that investment to buy a bigger house or to retire early, depending on how you feel in many years time.

ColdIron

R_P_W said:

So, I'm almost 40

Open a LISA while you can? Some tax free income in your sixties is welcome if you are paying tax (which with your pension and state pension you likely will). At least it gives you the option

george4064

ColdIron said:

R_P_W said:

So, I'm almost 40

Open a LISA while you can? Some tax free income in your sixties is welcome if you are paying tax (which with your pension and state pension you likely will). At least it gives you the option

Just to highlight this point, I too think a (S&S) LISA would be a nice ‘diversifier’ from your pension pot.

OP, you can only open a LISA if you’re under 40 but you can contribute to it right up until your 50th birthday. So as long as you open it before your 40th birthday you should be fine.

Also, given it will be for retirement I strongly recommend you open a S&S LISA rather than a Cash LISA, because it will be a long-term pot and therefore you can afford to take some risk to generate some (hopefully) decent returns.

A good starting point on LISAs is here: https://www.moneysavingexpert.com/savings/lifetime-isas/

El_Torro

Since you’re currently earning about £60k I would put enough into your pension to not be a 40% income tax payer. Your pension Is already pretty healthy so I wouldn’t put more in once you get into the 20% tax bracket. Personally I’d put any extra investments into a S&S ISA or LISA.

MaxiRobriguez

+1 for paying off the credit card debt, using the premium bonds money rather than money from income. Use the money from income you haven't used to pay off credit card debt to push to your pension instead. Two major bonuses here:

1) You wipe the 5% debt
2) You do so in the quickest, and most tax-efficient way possible.

You're in a reasonably healthy situation so after you've done that there's no obvious steps of where to go next. If you're considering part time work in your 50's or even early retirement then the current pension provision needs to be improved - I think you'd want at least double of what you currently have, so perhaps get on top of your wasteful spending you acknowledge and squeeze that into the pension.

You'll also need a proportion of money which is accessible before 55 or 57 (whatever your pension provided allows you access from).

london21

Pay off the credit card debts
Continue to diversify investments
Pay into pension to reduce 40% tax
Overpay mortgage monthly even if just £100pm for example.