Debt free. Now what?

Upbeat_84

Hello MSE gang

Sg28

The best thing you can do from a purely financial perspective is increase your pension. If you have a sipp invest in a low fee global equity fund and watch the free tax top up money compound over 20+ years. 

If you feel you want the money more accessible I would open a stocks and shares ISA with the same strategy as above. 

Property is risky (especially at the moment!!) And takes work to manage.

What is your side hussle out of interest?

london21

Upbeat_84 said:

Hello MSE gang,

This slots firmly into the category of "first world problems" but I would really appreciate any pointers on this next stage of life.

I'm 39 and recently paid off my mortgage & other debts. Took my mortgage out in 2007 and looking at what I actually repaid vs. what would have been repaid had the mortgage run its term I've literally saved a good £400k!!

I wanted to get out of the career I'd been in since I graduated in 2005 which paid well but I absolutely hated. Once the mortgage was repaid I immediately resigned and got an entry-level IT role in Local Government (I'd always wanted to get into IT) and took a 60% pay cut (daunting!!). I've just finished a professional certification funded by my work and now I'm looking at doing some sort of funded IT-related degree over 5 years or some other technical certifications which should open the door to better-paid positions in time so the future seems bright!

I've got £20k sat in an ISA earning about £65 a month, I've got another £20k just sat in another account my bank basically not doing anything. I'm thinking of sticking that in an ISA as I haven't used this years allowance but TBH I don't see much point as the returns aren't great.

I've recently opened a savings account with a decent interest rate (paid annually) provided you deposit max. £250/pcm so I'm doing that. I'm sticking about £200 a month into my workplace pension (local government, employer adds circa 9%) and I put another £360 a month into a private PensionBee plan. I claim that on my Self Assessment each year also. Reason for PensionBee is there's no incentive to up my workplace pension as my employer won't contribute beyond what I'm already paying in.

I take home just under £2,000 per month after tax etc. I put £870 immediately into a savings account (£250 of that goes into the savings account mentioned above). £150 of this is to cover expenses like car maintenance, insurance, birthdays etc so I never have to pay it out of my current account if that makes sense. I'm that boring I worked out what all that stuff costs and just stick 1/12 of that amount away each month.

My partner contributes £240 per month to household bills and I have a side hustle where I earn a variable amount each month of between £1500 - £2000. Generally I just leave that in a separate bank account until it comes time to pay my taxes etc and I then transfer it to my personal account as a lump sum.

I don't think I'll ever retire unless I'm forced to through ill-health. I'll probably kick the 9-5 eventually and just teach drums from my garden studio when it's built.

All the above said, I know I'm in a reasonably fortunate position. I want to do "something" with my cash because the savings rates are shocking - I've contemplated things like pound-cost averaging into broad index funds for the next 20 years, buying a "fixer-upper" property and flipping it (don't think renting is for me given how the tax works nowadays), putting a small amount into gold and sitting on it until I retire or just whacking all of it into my PensionBee plan - I'm honestly stumped at what I could do.

Speaking to my brothers about it they're strongly advising me to buy a house and either rent the current one out or sell it. To be honest I'm done with mortgages. I bought this house in 2007 off-plan and we got hammered in the economic crisis and I think another one is coming. Our house halved in value and still isn't worth what we paid for it. Not that I'm bothered now the mortgage is repaid but it's put me off ever wanting to move now. Particularly as prices are so eye-watering.

Anyone been in a similar position who might have a more educated perspective? I don't mind taking some risk with an investment hence why I was considering index funds as they generally perform well over the long term as long as you set it and forget it, so to speak.

Many thanks!

Out of curiosity what was your previous role?

What I do.

I put some money in my pension every month around £420
Put some funds in a lower costs funds 
have some money in instant savings account paying 3.2%

Upbeat_84

Sg28 said:

The best thing you can do from a purely financial perspective is increase your pension. If you have a sipp invest in a low fee global equity fund and watch the free tax top up money compound over 20+ years. 

If you feel you want the money more accessible I would open a stocks and shares ISA with the same strategy as above. 

Property is risky (especially at the moment!!) And takes work to manage.

What is your side hussle out of interest?

My side hustle is what I did prior to going into local government which is digital marketing. I have a small portfolio of clients. Suits me better than working in an agency which is super high pressure and very long hours (I was doing 100 hours a week for years). I was a head of department in an agency looking after global brands.

Thanks for the advice re: pension, too. Much appreciated!

retiringtoosoon

Pension is the correct answer

rabbit87

I think pensions are now risky as life expectency is down 2 years due to covid. Emerging science is beggining to show that covid has many similarities to HIV in terms of the way it causes inflamation and other conditions such as heart disease. How many times have you had covid? if it is several you have to have in the back of your mind that you may not reach retirement age.

I think with interest rates as high as they are there is no better option than 1 year fixed bond. And also focus more on enjoying life now with the money you have because of the uncertainty with covid at the moment and the unknown long term consequences.

Upbeat_84

london21 said:

Upbeat_84 said:

Hello MSE gang,

This slots firmly into the category of "first world problems" but I would really appreciate any pointers on this next stage of life.

I'm 39 and recently paid off my mortgage & other debts. Took my mortgage out in 2007 and looking at what I actually repaid vs. what would have been repaid had the mortgage run its term I've literally saved a good £400k!!

I wanted to get out of the career I'd been in since I graduated in 2005 which paid well but I absolutely hated. Once the mortgage was repaid I immediately resigned and got an entry-level IT role in Local Government (I'd always wanted to get into IT) and took a 60% pay cut (daunting!!). I've just finished a professional certification funded by my work and now I'm looking at doing some sort of funded IT-related degree over 5 years or some other technical certifications which should open the door to better-paid positions in time so the future seems bright!

I've got £20k sat in an ISA earning about £65 a month, I've got another £20k just sat in another account my bank basically not doing anything. I'm thinking of sticking that in an ISA as I haven't used this years allowance but TBH I don't see much point as the returns aren't great.

I've recently opened a savings account with a decent interest rate (paid annually) provided you deposit max. £250/pcm so I'm doing that. I'm sticking about £200 a month into my workplace pension (local government, employer adds circa 9%) and I put another £360 a month into a private PensionBee plan. I claim that on my Self Assessment each year also. Reason for PensionBee is there's no incentive to up my workplace pension as my employer won't contribute beyond what I'm already paying in.

I take home just under £2,000 per month after tax etc. I put £870 immediately into a savings account (£250 of that goes into the savings account mentioned above). £150 of this is to cover expenses like car maintenance, insurance, birthdays etc so I never have to pay it out of my current account if that makes sense. I'm that boring I worked out what all that stuff costs and just stick 1/12 of that amount away each month.

My partner contributes £240 per month to household bills and I have a side hustle where I earn a variable amount each month of between £1500 - £2000. Generally I just leave that in a separate bank account until it comes time to pay my taxes etc and I then transfer it to my personal account as a lump sum.

I don't think I'll ever retire unless I'm forced to through ill-health. I'll probably kick the 9-5 eventually and just teach drums from my garden studio when it's built.

All the above said, I know I'm in a reasonably fortunate position. I want to do "something" with my cash because the savings rates are shocking - I've contemplated things like pound-cost averaging into broad index funds for the next 20 years, buying a "fixer-upper" property and flipping it (don't think renting is for me given how the tax works nowadays), putting a small amount into gold and sitting on it until I retire or just whacking all of it into my PensionBee plan - I'm honestly stumped at what I could do.

Speaking to my brothers about it they're strongly advising me to buy a house and either rent the current one out or sell it. To be honest I'm done with mortgages. I bought this house in 2007 off-plan and we got hammered in the economic crisis and I think another one is coming. Our house halved in value and still isn't worth what we paid for it. Not that I'm bothered now the mortgage is repaid but it's put me off ever wanting to move now. Particularly as prices are so eye-watering.

Anyone been in a similar position who might have a more educated perspective? I don't mind taking some risk with an investment hence why I was considering index funds as they generally perform well over the long term as long as you set it and forget it, so to speak.

Many thanks!

Out of curiosity what was your previous role?

What I do.

I put some money in my pension every month around £420
Put some funds in a lower costs funds 
have some money in instant savings account paying 3.5%

Previous role was head of department in a global ad agency. I specialised in digital marketing and analytics. Thanks for the advice, really appreciate you taking the time to reply!

Albermarle

I think pensions are now risky as life expectency is down 2 years due to covid

I have not heard that, can you send a link to the info ?

In any case, even if it were true, life expectancy would be on average still around the low 80's and normally you would expect a 39 year could take a pension from say age 58/59.

I think with interest rates as high as they are there is no better option than 1 year fixed bond.

It is one option amongst many. It maybe the best option in certain circumstances, but it is a very short term strategy. For example what do you do when the year is up and still another 20 years to retirement, and another 20 years retired and quite possibly longer. 

Albermarle

I'm sticking about £200 a month into my workplace pension (local government, employer adds circa 9%) 

Normally a local government pension is a Defined Benefit ( DB) type scheme ( whereas the PensionBee is a Defined Contribution (DC) scheme) . Is yours a DB scheme ?

Pension basics | Help with pension basics | MoneyHelper

With a DB scheme, the pension you build up is related to how long you work there and how much you earn. Your contribution is just an arbitrary minimum amount to be a member of the scheme. DB schemes are normally much better than DC schemes.

Whereas a DC scheme is more like a glorified savings/investment account with tax breaks.

redpepper64

Congratulations to be debt free. 

I would maximise pension contribution and Sipp contributions. We built decent sipp pots for my husband so he could took early retirement. 

retiringtoosoon

rabbit87 said:

I think pensions are now risky as life expectency is down 2 years due to covid. Emerging science is beggining to show that covid has many similarities to HIV in terms of the way it causes inflamation and other conditions such as heart disease. How many times have you had covid? if it is several you have to have in the back of your mind that you may not reach retirement age.

I think with interest rates as high as they are there is no better option than 1 year fixed bond. And also focus more on enjoying life now with the money you have because of the uncertainty with covid at the moment and the unknown long term consequences.

Oh my……..!