Financial Planning — Advice Sought

bpk101

Hi –

My OH and I would really like to get on top of our family finances this year but feel slightly overwhelmed by the various financial planning to-do's on our list and the sheer amount of advice out there relating to each of them. I was wondering if in our case, speaking with a financial advisor might be beneficial, and if so how we best go about finding one.

If i share the different areas of financial planning we'd like to tackle, perhaps someone could help offer thoughts on which of them — if not all of them — a financial advisor would be able to help with and ultimately whether it would be worth using one.

1. Best place to save and invest based on short term and long term goals — We currently have around £120k split relatively evenly across 2 x Cash ISAs and a regular savings account. Obviously not the best place to have them! Some advice on where best to put all of this based on our goals would be great. 

2. Junior ISA best funds advice — We opened a Fidelity S&S JISA last year for our 2 year old although i'm not sure the Index Fund i picked is the best option. It would be great to have advice on this.

3. Advice on our current mortgage — We've owned out first home for 6 years, the first 5 we were on a fixed repayment mortgage but moved to a part and part payment / interest mortgage to help free up cash when our first child was born. However it's making me a little nervous that we're not paying off much of the mortgage currently and i wonder if some of the savings should go towards that. Professional advice on this would be great.

4. Financial planning towards the purchase of a new home — One of our short / mid-term goals is to sell our current house and purchase a new bigger family home (another addition to the family is on the way!). It would be great to discuss what our potential budget might be based on current equity, salaries, outgoings etc. and how that might translate into monthly mortgage payments based on our ages / mortgage term. A sort of reality check really before we get too carried away, it's all very well shopping around with the absolute maximum amount a lender might offer but i think we both need it spelled out to us exactly what this will mean financially once we start having to pay off the mortgage. 

5. Personal pension advice — My OH (38) has been paying into a works pension for the last 13 years and it would be great to understand if she's getting the best deal. I on the other hand (46) have unfortunately never saved into a pension and some professional advice on what that might mean for us in the future and any steps we should be taking now would be great.

6. Joint income planning — Our joint income is around £330k including bonuses with my OH's income accounting for about 70% of that. We've been together 12 years and up until now have always split things 50/50 (mortgage, bills, day-to-day spending etc.). However, with this arrangement in place (largely down to my own stupid pride) it can often be difficult to plan for things that i might struggle to afford personally (for example i might resist an otherwise affordable house price due to me not being able to afford payments based on a 50/50 split). It would be great for us to hear together some professional advice on how we might manage our joint income differently.

Many thanks!

eskbanker

bpk101 said:
Our joint income is around £330k including bonuses with my OH's income accounting for about 70% of that

Is that a typo?  Struggling to understand why you'd need to shift to a low-repayment mortgage to free up cash if that's the level of income that's involved, and likewise it doesn't sound right that you'd be earning about £100K but without making any pension contributions?

https://www.moneysavingexpert.com/savings/best-financial-advisers/ is somewhere to start on researching if/how to use a professional adviser and where to find one....

bpk101

eskbanker said:

bpk101 said:
Our joint income is around £330k including bonuses with my OH's income accounting for about 70% of that

Is that a typo?  Struggling to understand why you'd need to shift to a low-repayment mortgage to free up cash if that's the level of income that's involved, and likewise it doesn't sound right that you'd be earning about £100K but without making any pension contributions?

No not a typo, and a large part of why i desperately want us to get on top of our finances. As you've rightly pointed out, the amount we collectively earn doesn't justify some of the financial choices we've made (low-repayment mortgage etc.)

I think we both need to sit down with a moderator who can help my OH and i plan our finances better based on sound professional advice. Our understanding of what we earn and how we can best manage that income is escaping us. We have no real financial planning in place or any sort of system for budgeting, saving, investing etc (other than the aforementioned ISA's and JISA's). 

In terms of my own lack of a pension, i work in the creative industry and have been self-employed for many years now. The importance of a pension or any sort of financial advice or direction towards one is something i've never been overly-exposed to and time has just drifted by. 

Are these areas i mentioned the sorts of things an FA can help and advise on and is the cost of using one justified in my case? 

bpk101

eskbanker said:

https://www.moneysavingexpert.com/savings/best-financial-advisers/ is somewhere to start on researching if/how to use a professional adviser and where to find one....

ps: thanks for the link, a great place to start!

bpk101

I wonder if anyone has used the 30—60 minute Free Financial Health Check offered by Vouched For in the link and what the feeling was about it. Is it worth doing as a kick-off?

Albermarle

Probably this is not the best MSE forum for your post. You would have probab;y been better in the savings and investments one , where there are regular threads on using financial advisors. Although to be honest I do not remember any poster ever mentioning a joint salary so high, presumably because most people earning these sorts of amounts probably already have many financial arrangements in place 
Savings & Investments — MoneySavingExpert Forum

Are these areas i mentioned the sorts of things an FA can help and advise on and is the cost of using one justified in my case? 
Firstly an FA is one tied to a financial institution , ideally you want an IFA ( I for independent) .
There is a regular argument about whether the cost of advice is worth it but just the fact you are 46 and a high earner and have not got a pension , would point to the fact that you need one.
Normally they tend to concentrate on pensions, investments , inheritance , tax minimisation rather than property purchases.
Apart from anything else , you are probably paying more tax than you need to by not taking advantage of tax friendly investments like pensions . Also considering the money coming in you should probably be bathing in champagne every night , not wondering about mortgages and only having £120K savings and no other investments . Maybe the first thing to is to draw up a detailed expenditure list so you know where it is all going .

bpk101

Albermarle said:

Maybe the first thing to is to draw up a detailed expenditure list so you know where it is all going .

This is something i've actually drawn up over the last few weeks. Essentially i've created a spreadsheet that includes:

Household Outgoings — Itemising all regular monthly expenses (mortgage, bills, groceries, travel etc.)

In addition i've added pages for:

Household Incomings — Our respective incomes
Saving Investments and Pensions — Where our money is currently saved and / or invested and how much

I did this in preparation for hopefully talking to someone about better financial planning. It's great having this information laid out but i've no idea what to do with it or how to use it. 

I feel like I need someone with good financial knowledge to sit down with us, go through it all and a) flag up anything that looks alarming i.e. excessive amounts spent in one particular area, wrong mortgage product etc. and b) help us put a better plan together based on our goals. 

eskbanker

bpk101 said:

Albermarle said:

Maybe the first thing to is to draw up a detailed expenditure list so you know where it is all going .

This is something i've actually drawn up over the last few weeks. Essentially i've created a spreadsheet that includes:

Household Outgoings — Itemising all regular monthly expenses (mortgage, bills, groceries, travel etc.)

You'll probably find that it's more informative to look at all the spend that isn't regular, as this will often mount up to be way more than you think!  Trawl through a year's worth of statements and it'll be an eye-opener....

bpk101

eskbanker said:

You'll probably find that it's more informative to look at all the spend that isn't regular, as this will often mount up to be way more than you think!  Trawl through a year's worth of statements and it'll be an eye-opener....

I'm sure you're absolutely right, but rather than spend a lot of time looking at this retrospectively, what i'm hoping to do is draw a line under how we've lived to date and, moving forwards, establish a more sensible and realistic budget based on what we earn vs. what our fixed expenses are, whilst also factoring in any goals that might require forward financial planning (saving towards a new house etc.)

I'll level with you here... my OH and I aren't always aligned on how much is deemed necessary to spend on groceries, holidays, other luxuries etc. An attitude of 'spend it as you earn it' is all very well but not if at the same time you're harbouring dreams of buying a big expensive house or retiring early. I feel there's so much more we can be doing with our income that will benefit our goals in the long run. 

I'm hoping an IFA – as well as answering some of our other queries – might be able to offer a cold, hard reality check as to how that house or that retirement plan etc. is unachievable if we don't budget accordingly.

eskbanker

bpk101 said:

eskbanker said:

You'll probably find that it's more informative to look at all the spend that isn't regular, as this will often mount up to be way more than you think!  Trawl through a year's worth of statements and it'll be an eye-opener....

I'm sure you're absolutely right, but rather than spend a lot of time looking at this retrospectively, what i'm hoping to do is draw a line under how we've lived to date and, moving forwards, establish a more sensible and realistic budget based on what we earn vs. what our fixed expenses are, whilst also factoring in any goals that might require forward financial planning (saving towards a new house etc.)

I do understand where you're coming from, but still believe that to change the cost of your lifestyle, you need to understand it, rather than simply believing that you can start again from scratch with a top-down budget - look after the pennies and the pounds look after themselves and all that.  It's entirely your choice obviously, and you certainly should have plenty of surplus money so shouldn't need to be tightening belts and so on, but the fact that you don't seem to know where it's all going is worth addressing IMHO....

bpk101

eskbanker said:

I do understand where you're coming from, but still believe that to change the cost of your lifestyle, you need to understand it

But how do we know whether in fact we need to change the cost of our lifestyle without first establishing in more concrete terms some of the goals we regularly discuss and working out what it will actually take to achieve them?

All i can say is at the moment there's an overbearing sense of 'winging it' in the way we currently approach our finances, talking emphatically about how we can afford this house or that house for example in the near future without any real sense of what are current spending habits or savings and investment choices might be doing to impede that.

I'm just hoping some sort of financial advisor or planner might help put in real terms what goals are achievable and what steps we should be taking now (defining a fixed spending budget, placing our savings in better accounts, using our savings to pay off lump sums of the current mortgage etc.) to ensure we reach them.

In my mind a conversation would go something like...

IFA: So you want a nice family house, based on your income you could probably get a mortgage for £X but the reality is based on your age and the resulting mortgage term you'll be looking at monthly repayments of £X. Are you comfortable with that and the lifestyle / budget required to accommodate it?

IFA: You'd like to retire and enjoy your senior years in comfort but cloth-ears here didn't start a pension, these are your options and this is what you could be doing now to prepare. It will have an impact on your current spending so are you comfortable with that and the lifestyle / budget required to accommodate it?

IFA: You want your kids to be able to afford university or a down payment on a house, well done you've opened JISA's for them but did you know if you were to do this as well you might be able to help them do more. Can you in fact afford to do 'this', let's work it out.

Etc. etc. etc.