What's some personal finance goals after you've bought a house?

Savingforahouse123

I'm 28 & graduated uni at 21. During that period I lived with my parents & remained very disciplined to save.

I then moved up north and in the process of completing on a 3 bed £168k house. I'll rent out a room to a lodger and should have my mortgage paid off in 5 years (only have a £20k mortgage as I put down a large £148k mortgage).

I used to earn £29k which for me was incredibly high as I have ADHD which makes work incredibly tough. I was underperforming though and have underperformed at all previous jobs in that field so I ended up changing careers. I'm now in a lower paid industry but the pace is slower and I'm doing better. I earn £21.7k and I don't think I'll ever be a high earner but the fact I've almost bought a house outright, I'm not sure whether I should just enjoy a comfortable, slower pace of life. I don't see myself ever earning more than £30k unless inflation causes my salary to go up.

Since moving out, I remain very frugal/savvy/minimalistic since I know my salary is low. This doesn't bother me as it's a habit ingrained in my lifestyle now.

Since my focus has been to save a huge deposit to buy a house for so long, I now need to change my thinking. I'm not sure what my goals should be next?

In the short term, I'm going to have to buy items for my house (thanks ADHD). Various thoughts are going through my head and I'm not sure what my next goals should be. Some thoughts:

1. Hopefully one day I'll have a wife and kids (currently single) so this house won't be my forever home. I should therefore do enough with the house so it's nice and liveable but not go overboard and become too house proud since it won't be my forever home. Spending too much on the house costs and I might not recoup the money back purely from an investment perspective. Part of me wants to make the house amazing though and get the garden landscaped, refurb the house etc. The house currently has few problems and is very liveable (it's a 12 year old property) so I'm being a perfectionist here.

2. Should I overpay and get the mortgage paid off ASAP?

3. Should I put the bare minimum into the house and look to save for a second house (BTL) ASAP? The second income of a BTL will help me since I'm unlikely to ever have a high income from my actual job.

4. Should I start investing in ETFS/index funds, especially since my pension is small as I've been on low incomes?

5. Treat myself a bit more... buy a fancy car like a BMW/Mercedes etc?

6. I dream about having a second house in another country so I can escape cold winters or extreme summers if it's too hot. Not sure on the rules regarding this but I'd happily buy a house in less developed countries (I love Bosnia for example).

7. Start a FIRE journey, especially as I feel my most free and liberated when not working. My leisure time consists of me going for walks, going to the beach, cycling, the gym etc so not expensive hobbies (I'm not the sort to go on mad shopping streaks or spend hundreds of pounds at fancy dinners/clubs etc).

MEM62

After the house is paid for financial independence is the next big goal.  Get working on that pension.    

solidpro

What a great post. You've done incredibly well. I think my own experience with getting 'over' buying a home was that I initially wanted the 'feeling' of paying off any loans, including the mortgage, which I did. I then realised that having a very low intest mortgage would have allowed me to invest that same money somewhere else at a much higher rate of return. Especially considering I had a remaining working age of decades.

So if it's one of your big goals, I'd do it just to have done it. You get a letter from the bank and you can pin it to your wall and just smile at it each morning. Then after a while, think about something else and if remortgagaing later to use that tied up cash to do something else, then don't be afraid of it.

For instance, one of the most effective way to own a second property is to do it by setting up a limited property company which you can run as a 'side hustle'. Business mortgages (getting a mortgage on a property through your own ltd company) is much more clunky and cumbersome than personal ones, so we remortgaged our own home to get £100k and used that money as a deposit through a director's loan to our new property company. Then after a while we paid that off too and now we have a home and another property which we own thru our ltd company, paid off, low risk and which enhances our income and potentially being FIRE in the future....

madlyn

WOW!!! well done you, your health and well being is far more important than any salary.
Is your discipline and focus something you have been taught by your parents? or is it because of your ADHD?
As you have achieved this, why don't you spoil yourself? as you said a nice car, maybe travel and just enjoy life for a while.

Martico

Firstly, you've done brilliantly. 

Secondly, it's really up to you, and what you'd like to achieve.

I'd consider a thought experiment. What would be your ideal (but realistic) life in, say, five years, ten years, 50 years? Any ambitions (like a winter home) you'd like to tick off, and when? Your ideal work/life balance, your ideal living and life situation? How does this fit in with your personal philosophy on living your life, being part of a family or wider community? Jot down or just think about some things you'd like to achieve / positions you'd like to be in, and work from there  

Savingforahouse123

madlyn said:

WOW!!! well done you, your health and well being is far more important than any salary.
Is your discipline and focus something you have been taught by your parents? or is it because of your ADHD?
As you have achieved this, why don't you spoil yourself? as you said a nice car, maybe travel and just enjoy life for a while.

Thank you. It's hard to pinpoint why I've been so disciplined (I'd say coming close to an obsession to save in all honesty) but I think it's down to multiple things:
1. My parents do live a very low thrills life. Their weekends entail going on walks or maybe going for runs (both low cost activities). I guess this has rubbed off onto me as I'm not materialistic and pretty low maintenance.
2. When I'm bored or have spare time, I think how can I make additional money. This went from a habit to being ingrained in my lifestyle. Probably related to my ADHD as I weirdly get a buzz out of saving (probably the low dopamine my brain is craving).
3. Insecurities - I know I'll never have a high salary but still have the determination to be wealthy in the future, so in order for me to do that I have to cut my spending to ensure I save as much as other people. I know I shouldn't compare to others but my group of friends are high earners and we don't discuss salaries so in order for me to have a similar net worth to them, I would need to cut spending more. I know this is bad but I'm being honest.

Ebe_Scrooge

What an inspiring story!

It depends to a large extent on your priorities, but there's a couple of "sensible" things I would be doing.  First, as MEM62 points out, paying a healthy amount into a pension is eminently sensible.  Retirement seems a long way off at the moment, but it will pay dividends, and should allow you to enjoy a long (hopefully!!) and comfortable retirement, being able to afford holidays, little luxuries, etc.

Secondly, and sort of more immediately, make sure you've got an emergency fund easily available.  With the best will in the world, when you own a house there will be repairs that need doing.  Sod's law says that if your boiler breaks down, it'll do so just as winter sets in.  If you're able to just call out a plumber and pay him to fix it without worrying, it makes a big difference.  Or you might lose some roof tiles or a fence in high winds - it's nice if you're able to get these sorted without having to rely on credit or a loan or whatever.

Aside from that, overpaying the mortgage (assuming you can do so without penalty - you can usually overpay 10% with no penalty) is well worth it.  You'll almost always be paying more interest on any borrowings than what you can earn in savings.

If you're planning on starting a family at some point - don't underestimate how expensive kids are.  Even more so if you want them to have as much fun as possible, join loads of clubs etc. (scouts, guides, sports clubs, dance classes, gymnastics classes, whatever it is that floats their boat).  And if they eventually go on to university, that's yet more expense.

So there are lots of expenses, whether short, medium or long-term that you need to plan for.

But ... there's no point in being financially stable if you can't enjoy yourself a little bit.  So if you're able to mix the "sensible" stuff in with some "fun" stuff, providing it doesn't cost an absolute fortune, then go for it.  It's all about getting the right balance.

Savingforahouse123

Ebe_Scrooge said:

What an inspiring story!

It depends to a large extent on your priorities, but there's a couple of "sensible" things I would be doing.  First, as MEM62 points out, paying a healthy amount into a pension is eminently sensible.  Retirement seems a long way off at the moment, but it will pay dividends, and should allow you to enjoy a long (hopefully!!) and comfortable retirement, being able to afford holidays, little luxuries, etc.

Secondly, and sort of more immediately, make sure you've got an emergency fund easily available.  With the best will in the world, when you own a house there will be repairs that need doing.  Sod's law says that if your boiler breaks down, it'll do so just as winter sets in.  If you're able to just call out a plumber and pay him to fix it without worrying, it makes a big difference.  Or you might lose some roof tiles or a fence in high winds - it's nice if you're able to get these sorted without having to rely on credit or a loan or whatever.

Aside from that, overpaying the mortgage (assuming you can do so without penalty - you can usually overpay 10% with no penalty) is well worth it.  You'll almost always be paying more interest on any borrowings than what you can earn in savings.

If you're planning on starting a family at some point - don't underestimate how expensive kids are.  Even more so if you want them to have as much fun as possible, join loads of clubs etc. (scouts, guides, sports clubs, dance classes, gymnastics classes, whatever it is that floats their boat).  And if they eventually go on to university, that's yet more expense.

So there are lots of expenses, whether short, medium or long-term that you need to plan for.

But ... there's no point in being financially stable if you can't enjoy yourself a little bit.  So if you're able to mix the "sensible" stuff in with some "fun" stuff, providing it doesn't cost an absolute fortune, then go for it.  It's all about getting the right balance.

Thanks (and thanks MEM62 too).

My employer is contributing the max into my pension. If I pay more into it, my employer won't go any higher. So this makes me think I might as well open my own stocks and shares ISA or invest in Vanguard or something as that's basically doing the same thing as a pension? I'm no expert but from what I've read, index funds/ETFs are good as they're diversified. So I guess my question is, what's the difference between investing in stocks and shares for the long term and investing into a pension as they're both money towards retirement and I think pensions usually consist of money paid into various stocks anyway?

I think my plan is:
1. Short term (0-5 years) - Overpay my mortgage to get it paid off 
2. Medium term (2-8 years) - Then invest either into my pension or into stocks
3. Long term (4-8 years) - Consider a second property either as a BTL or a house in another country with a different climate (I could always rent this out when not living there too)

Ebe_Scrooge

Savingforahouse123 said:

Ebe_Scrooge said:

What an inspiring story!

It depends to a large extent on your priorities, but there's a couple of "sensible" things I would be doing.  First, as MEM62 points out, paying a healthy amount into a pension is eminently sensible.  Retirement seems a long way off at the moment, but it will pay dividends, and should allow you to enjoy a long (hopefully!!) and comfortable retirement, being able to afford holidays, little luxuries, etc.

Secondly, and sort of more immediately, make sure you've got an emergency fund easily available.  With the best will in the world, when you own a house there will be repairs that need doing.  Sod's law says that if your boiler breaks down, it'll do so just as winter sets in.  If you're able to just call out a plumber and pay him to fix it without worrying, it makes a big difference.  Or you might lose some roof tiles or a fence in high winds - it's nice if you're able to get these sorted without having to rely on credit or a loan or whatever.

Aside from that, overpaying the mortgage (assuming you can do so without penalty - you can usually overpay 10% with no penalty) is well worth it.  You'll almost always be paying more interest on any borrowings than what you can earn in savings.

If you're planning on starting a family at some point - don't underestimate how expensive kids are.  Even more so if you want them to have as much fun as possible, join loads of clubs etc. (scouts, guides, sports clubs, dance classes, gymnastics classes, whatever it is that floats their boat).  And if they eventually go on to university, that's yet more expense.

So there are lots of expenses, whether short, medium or long-term that you need to plan for.

But ... there's no point in being financially stable if you can't enjoy yourself a little bit.  So if you're able to mix the "sensible" stuff in with some "fun" stuff, providing it doesn't cost an absolute fortune, then go for it.  It's all about getting the right balance.

My employer is contributing the max into my pension. If I pay more into it, my employer won't go any higher. So this makes me think I might as well open my own stocks and shares ISA or invest in Vanguard or something as that's basically doing the same thing as a pension? I'm no expert but from what I've read, index funds/ETFs are good as they're diversified. So I guess my question is, what's the difference between investing in stocks and shares for the long term and investing into a pension as they're both money towards retirement and I think pensions usually consist of money paid into various stocks anyway?

You're right, they do pretty much the same thing - a pension plan will be invested into stocks & shares.  There's no difference really  whether you make extra contributions to your pension, or whether you have a "private" investment fund running alongside it.  The only thing to consider is the fees, really.  Any investment such as this will charge fees, to pay for the investment manager who runs the fund.

If you have two separate investment portfolios running, you're paying two sets of fees (I've got several pensions from various companies I've worked for over the years, and am thinking of looking into shifting them all into one place for this very reason).

The fund manager will hopefully know what he's doing, and will shift investments around to get the best return, based on your choice of risk vs return.  One investment company might have a better fund manager than another, so might give you better returns - but it's pretty difficult for an ordinary man-in-the-street such as you or I (well, me certainly!!) to know if they're doing a good job or not, other than by comparing your annual statements.

But yes, aside from the consideration of fees, it makes no difference really.  And investments such as this should be considered as long-term investments - so you might lose a big chunk one year, make a big chunk another year.  The aim is to show a profit over the long term, so they're not really suitable for an investment term of less than - say - 10 or 20 years minimum.

InvesterJones

Ebe_Scrooge said:

If you have two separate investment portfolios running, you're paying two sets of fees (I've got several pensions from various companies I've worked for over the years, and am thinking of looking into shifting them all into one place for this very reason).

Though it has to be said, if the fees are % based it usually makes no difference how many sets you have (albeit some providers eventually cap fees at some point).

[Deleted User]

Savingforahouse123 said:

I think my plan is:
1. Short term (0-5 years) - Overpay my mortgage to get it paid off 
2. Medium term (2-8 years) - Then invest either into my pension or into stocks
3. Long term (4-8 years) - Consider a second property either as a BTL or a house in another country with a different climate (I could always rent this out when not living there too)

I would switch 2 & 1. That 20k mortgage you will be overpaying in the next 5 years could instead be invested in the market and benefit from longterm compound interest. Why are you eager to get the mortgage paid off quickly? What is the interest rate?

Either way, you are in a great financial position at your age. You probably can't make a bad decision (other than buying a luxury car).