Advice around my current budget and investment strategy

analystfish

Hi All,

Over the past few years I have been learning and trying to make the most of my money. Up until around the age of 27 I just had all my money sat in savings and didn't budget.

During lockdown I got very much into learning all about this world, I've taken a lot of advice from YouTube, Reddit and MSE and tried my best to sift through the guff and take good steps towards my later life.

It's got to the stage that I feel like all I do is think about saving & I always feel a bit anxious in expecting some catastrophe like loosing my job.

So I thought it may be good just to post up what I am doing and see what people think & if what I am doing makes sense or If I'm doing anything poorly.

Some of the main changes I'm mainly deliberating:

• Being in the 40% bracket, would it be better to move my Emergency Fund to Premium Bonds to avoid the tax on the savings? I've already gone through the 500GBP a year allowance. But I don't know if I should just suck up the tax and pay it.
• Looking at the PB Calc it seems that I'd earn a few hundred extra quid a year in a savings account post tax, but interested in opinions.
• Increasing Mortgage Contributions
• Increasing Pension Contributions
  

I'll do my best to break down my current budget and accounts & thank you to anyone who takes the time to read through this and reply

Income (per month)

• Salary - 3,800GBP
  
• Partner Contribution - 600GBP
  

Outgoings (Per month)

• Mortgage - 1,550GBP per month (300 of which is overpayment) - rate is 4.85% - 250K left to pay one the mortgage.
  
• Gas/ Elec - 110GBP
• Water - 36GBP
• Life Insurances - 80GBP
  
• Council Tax - 205GBP
• Internet - 46GBP
• Fuel - 100GBP
• Food - 90GBP (This is mainly me buying food for the weekend, my partner pays for the food shop)
• Hair Cut - 16.50GBP
• YouTube Premium - 12.99GBP
  

Outgoing Investments

• Pension contributions (Relief at source pension scheme, I also reclaim an additional 20% at the end of the financial year & I have only been doing this amount for the past 6 months) - 1,000GBP
• ISA 2025 Saving Pot - 1,500GBP (For the past two years I maxed out my ISA, currently saving up to max it out next year) - when the saving fund is full I shall divert the savings to house projects I.E Solar Panels, New Boiler and other stuff.
  

This usually ends up leaving me with 700-800GBP left over which I have then use for slowly decorating the house basically and using for the various birthdays throughout the year.

Savings

• Current around - I like to end the month with 5K left in the account, this amount helps me cover my work travel expenses that I get paid back but it's a nice buffer. I used to have this at 10K but Ive been working on mentally reducing this number as I know it's too high even still.
• Emergency Fund - 30,000GBP - 4.85% interest rate
  
• ISA Fund - 18,000GBP - 3.75% interest rate
  
• ISA S&S - 48,000GBP - all in VWRP. Looking to diversify this a bit more when the ISA resets.
• ISA Cash - 5,800GBP - end of the year I will move this all over to the S&S ISA.
  
• Pension - 31,000GBP - only have my pension open for 5 year so I am working on building it up, I used to be self employed and did not set one up (silly I know).
  
• Car Fund - 400GBP - Only recently started doing this, this is for MOT, Service, Wheels etc
  
• Home Fund - 0GBP - Plan to add to then when I've maxed my ISA Fund, this will be for Boiler Service, Home insurance, other things that break.

Misc

• Own my car outright
• Phone - paid by my job
• Home/ Car insurances paid yearly at renewal
  

Mark_d

I take it 3800 is your take-home pay after deductions for pension, tax etc.?
Do you need life insurance?  If you die your beneficiaries will get your wealth, pension, plus any life assurance provided by your employer.
I have a 132Mb internet package with EE for about £32 per month.  I'm looking to downgrade to pay around £20 per month.  Do you need to be paying as much as £46?

I use all my ISA allowance for S&S as this is where I believe the significant income and capital gains will come from.  The Cash element of my portfolio is in Premium Bonds because prizes are tax free.  I tend to keep the remainder of my cash, £5k-£10k in my Kroo current account - interest rate is fairly reasonable and I don't have to worry about moving my money around.

I'm determined never to become reliant on a take-home pay of over £3k.  I think this is entirely reasonable.  So I put any extra into pension

analystfish

Mark_d said:

I take it 3800 is your take-home pay after deductions for pension, tax etc.?
Do you need life insurance?  If you die your beneficiaries will get your wealth, pension, plus any life assurance provided by your employer.
I have a 132Mb internet package with EE for about £32 per month.  I'm looking to downgrade to pay around £20 per month.  Do you need to be paying as much as £46?

I use all my ISA allowance for S&S as this is where I believe the significant income and capital gains will come from.  The Cash element of my portfolio is in Premium Bonds because prizes are tax free.  I tend to keep the remainder of my cash, £5k-£10k in my Kroo current account - interest rate is fairly reasonable and I don't have to worry about moving my money around.

I'm determined never to become reliant on a take-home pay of over £3k.  I think this is entirely reasonable.  So I put any extra into pension

Thank you for the reply Mark.

1. Yes 3.8K after all the tax deductions and pension have been taken.
   
2. Life insurance was heavily suggested by my parents, my mortgage advisor also said that if I lock in now I can have a fixed price for life. I have Critical Illness, Life and Sick Pay for that one payment. I debated with them on needing this but I trusted their perspective as it may benefit me or my partner in later life.
   
3. Internet, very valid. When I bought this place it had up-to 900mbps, so I kind of jumped at the opportunity to try it out. Me and my partner to work from home and I do handle large files pretty frequently so it does help. Locked in for two years I think, I will check the contract. But yes this is a good thing to consider reducing.
   
4. If you are comfy sharing your PB details, how much do you win on average and with how much invested? My main concern is loosing out on money if I get poor luck on never making anything on my money (I.E if I moved my 30K from savings to PB's), I've seen some people say with 20K invested they have never won anything.
   

boingy

If I were you, with those numbers I'd be splitting my surplus income between pension and mortgage.
Pension is a very tax efficient way to save, especially for a higher rate tax payer, and you do need to grow that pension pot but remember you can't have it back until you are in your late 50's. Paying towards your mortgage makes sense because of the rate you are paying on it and you can think of mortgage reductions as "tax free" when compared with putting the same amount in a taxed savings account.

None of us can tell you that Premium Bonds would be better for you but if you want to find out why not put half your emergency fund into PBs and see how they perform compared with the savings across a year or two. 

Definitely continue maxing your ISA(s) each year. There is no reason why your emergency fund could not eventually be in an easy access cash ISA. You can typically get the money out in a day or two. If you are married you could consider transferring money to your spouse to put in an ISA, although be aware that it is then their money and entirely under their control.

That 5k in your current account is not earning you any money. Maybe consider opening a savings account at the same bank, even if the rate is not the best. You can shunt money between the two instantly with an app or online. Some banks even have a "sweep" feature where you can specify a minimum balance in your current account and the bank will automatically top up your current from your savings to maintain that balance. (I use this feature with Virgin - other banks are available).

But don't get obsessed or worried by this stuff. Find a system that works for you and then forget about it. Maybe review it once or twice per year to check that rates are still OK. 

bucksman

This was an interesting read, and it got me thinking about my expenditure, too.  However, a few thoughts: are you on a water meter?  If not, it is certainly worth considering to cut this cost.  How about moving to an EV car and benefiting from nighttime charging from home on lower-rate electricity?  Maybe look to move your ISA fund to a better interest rate - there are some fixed deals near or at the 5%. 

analystfish

bucksman said:

This was an interesting read, and it got me thinking about my expenditure, too.  However, a few thoughts: are you on a water meter?  If not, it is certainly worth considering to cut this cost.  How about moving to an EV car and benefiting from nighttime charging from home on lower-rate electricity?  Maybe look to move your ISA fund to a better interest rate - there are some fixed deals near or at the 5%. 

Thank you for taking a look!

Yes I’m on a water meter, I read it every month and submit the readings. I think a few pounds over my actual usage, probably need to let the water company adjust my direct debit. 

I left it as is as I wasn’t sure how much water I’d use over the summer for cleaning my car, watering the plants/ grass. 

Not sure if that’s a lot of usage or not, when I rented my flat had water included so I never had to check it.

But now summer is winding down I’ll look to adjust my direct debits. 

Only got my car at the start of the year, so was planning on keeping it for a good 5+ years. Don’t do much mileage so an EV could make sense. Will probably think about that in a year or two.  As I changed cars 3 times in like a year, didn’t want to finance a car anymore so bought outright but the car I got was a performance car and drank fuel so got a far more economical car instead. 

I’ll do some hunting for some better rates on my ISA fund.