26 Years Old, Is my savings plan good?

saajan_12

Aiden8889 said:

Albermarle said:

Regarding the post of @exodi above, I was pretty much going to say the same thing.

Part of the issue is this '  basically because I generally have no clue what I will do with it yet...'

Although there is some risk with investing, this is minimised by using mainstream index trackers, and multi asset funds over a long period. 

You could well look back in 10 years time and regret not investing at least some of it, as normally investments will significantly outpace savings accounts.

I know but I'm kind of wanting a hands off approach for now because my life is basically work, revise, gym, revise, sleep, repeat lol.

So to start taking on another subject to learn... I just don't think I really have the room for it at the moment.

I'm happy to take a look at it in 3-4 years plus I'll probably be able to put away even more money then as I'll be chartered.

TBH the calculations and step by step write up in your OP was probably longer than the research needed to invest in a tracker index. The thinking for me when I started out was essentially:
* what do you expect to need the money for and when (eg < 5 years, 5-30 years, post retirement). 
* pick an investment platform (one of the big names is fine)
* pick an all UK / all Europe / all world tracker index and dump everything in there. 

The increase in expected return likely outweighs the need to refine the exact best tracker or best fees. 

Aiden8889

Emmia said:

At 26 I'd be putting some of those monthly savings into a SIPP - investment in your pension now while you're young will have a big pay off due to compounding. 

I'd also (depending on your plans for housing) be looking at S&S ISAs or a LISA.

It doesn't need to be complicated - pick an ISA and shove the money in it - spending time dithering or "researching" means you're not investing and losing money in interest.

Would you say a Vanguard managed S&S ISA is fine or do you mean self managed?

I can happily get a managed portfolio but I fear the returns will just end up being the same as a cash isa.

Emmia

Aiden8889 said:

Emmia said:

At 26 I'd be putting some of those monthly savings into a SIPP - investment in your pension now while you're young will have a big pay off due to compounding. 

I'd also (depending on your plans for housing) be looking at S&S ISAs or a LISA.

It doesn't need to be complicated - pick an ISA and shove the money in it - spending time dithering or "researching" means you're not investing and losing money in interest.

Would you say a Vanguard managed S&S ISA is fine or do you mean self managed?

I can happily get a managed portfolio but I fear the returns will just end up being the same as a cash isa.

My S&S medium risk ISA (moneybox) does significantly better than cash savings but, that's over the last ~8  years. There are times it's lost money, but I just kept saving - and it bounced back.

I'd go managed via Moneybox, Vanguard etc. and just leave them to it. I too don't have time to be fiddling around with my investments, although I'm sure some will mock me for this.

How long are you prepared/expect  to tie the money up for? A S&S ISA should be for at least 5years, and ideally more than 10+ years. Also look at employer pension contribution options and/or a SIPP - you're at a good age to invest in that with fairly small contributions.

nakie999

The mix of ISA + high-yield savers is pretty much the best "hands-off" setup right now. The only thing I'd add is to keep an eye on the ISA allowance each April so you can shelter more of that interest going forward. Beyond that you're already meeting your £3k target

penners324

Pension scheme seems a better place for most of it. Or as a house deposit 

Aiden8889

penners324 said:

Pension scheme seems a better place for most of it. Or as a house deposit 

Well I don't actually pay into a pension 🤣 I always opted out... I know that seems a bit stupid but I was going to wait until I'm chartered to start paying in.

I have little faith in the pension system to be fair, the age has only gone up and up for me within my lifetime. When I was young it was 61 and now it's 67.

I probably plan to tie it away for 3 years and maybe buy a house, rent 2 rooms out (for a reasonable price) as it isn't a HMO in my district and basically have my house and bills pay for themselves, rent that and rinse and repeat.

Though I could change my mind in 3 years and decide I want to open a business and put my qualification to use though once qualified I will be on at least £45,000 a year so it might be comfortable to stay where I am.

masonic

Cash is more hands-on for me than investing. Savings need to be regularly moved around to maintain a competitive rate. Whereas investments can be left in the same diversified fund (or few funds) for years or decades.

But it wouldn't be appropriate to invest money you intend to use to buy a house in a few years.

Though you really should opt back into your pension for the employer matching at least. Opting out is like volunteering for a pay cut.

You seem to be confusing pension ages. It's going up to 57 for private pensions and 67 for the state pension. You can't opt out of paying National Insurance contributions that earn entitlement to the state pension if you are working. I'm not old enough to remember the state pension age being 61. Has it ever been lower than 65 for males? Any women that weren't already middle aged in 1995 would have got used to equalisation with men.

Emmia

Aiden8889 said:

penners324 said:

Pension scheme seems a better place for most of it. Or as a house deposit 

Well I don't actually pay into a pension 🤣 I always opted out... I know that seems a bit stupid but I was going to wait until I'm chartered to start paying in.

I have little faith in the pension system to be fair, the age has only gone up and up for me within my lifetime. When I was young it was 61 and now it's 67.

I probably plan to tie it away for 3 years and maybe buy a house, rent 2 rooms out (for a reasonable price) as it isn't a HMO in my district and basically have my house and bills pay for themselves, rent that and rinse and repeat.

Though I could change my mind in 3 years and decide I want to open a business and put my qualification to use though once qualified I will be on at least £45,000 a year so it might be comfortable to stay where I am.

As a soon to be qualified accountant and someone who is seeking to maximise the benefit they can get from their savings and investments, that is frankly astonishing.

You're turning down free money if your employer contributes, you can get tax relief, you're not benefitting from the long term gains of compounding...  The younger you start with a pension, the less you need to pay in every month, to get the same overall "pot" at the end... And a pot started earlier will have a greater proportion of it's value not coming directly from your personal contributions.

Exodi

Aiden8889 said:

penners324 said:

Pension scheme seems a better place for most of it. Or as a house deposit 

Well I don't actually pay into a pension 🤣 I always opted out... I know that seems a bit stupid but I was going to wait until I'm chartered to start paying in.

I have little faith in the pension system to be fair, the age has only gone up and up for me within my lifetime. When I was young it was 61 and now it's 67.

This is flatly insane. Your chosen area of expertise makes it all the more astonishing.

Not only do you get employer contributions (aka free money) added to your pension, you also receive tax relief as well as the lump sum allowance on the way out.

So you've said you save 35% of your net wage, which is £670 a month - this means you earn £1914.29 per month. This would equate to a gross annual salary of around £25,900, if you consider income tax and NI.

Let's say you decided to add that money to a pension instead, and let's say worse case scenario you don't have access to salary sacrifice and your employer is a meany who only makes the legal minimum contributions (if you pay in 5%, they pay in 3%).

That means if you made the minimum contribution also, you'd lose 4% of £1914.29, or £76.57 from your pay. Then to your pension pot, you'd get the £76.57 + £19.14 tax relief + £64.75 employer contribution = £160.46.

You've turned £76.57 from your pay into £160.46 in your pension pot. But that's not just it, because when you take it out in retirement, 25% can be taken tax free - meaning if you were a basic rate tax payer in retirement, you'd save £8.02 in tax on this.

This doesn't even include if you have the ability to salary sacrifice, and can save on employer NI too...

It really is money for nothing being left on the table. Being opted in to your workplace pension is rule #1 in financial planning.

You may not have faith in the state pension system (I also have concerns, many share these) however very few have concerns about their private pensions - also FYI you can generally access these 10 years earlier than state pension age, so 57 not 67.

Unfortunately we see a lot of "I was going to wait until X" - there's always a reason. Just like how you'll look into investing in a few years. I fear your reluctance to look into pensions or investing will cost your future self significantly in missed compounding. Personally I think you've become a little obsessed with saving and have missed the forest for the trees.

Aiden8889 said:
I probably plan to tie it away for 3 years and maybe buy a house, rent 2 rooms out (for a reasonable price) as it isn't a HMO in my district and basically have my house and bills pay for themselves, rent that and rinse and repeat.

This sounds very much like a financial plan you'd hear from TikTok... tread very carefully is all I'll say.

Exodi

Aiden8889 said:

Emmia said:

At 26 I'd be putting some of those monthly savings into a SIPP - investment in your pension now while you're young will have a big pay off due to compounding. 

I'd also (depending on your plans for housing) be looking at S&S ISAs or a LISA.

It doesn't need to be complicated - pick an ISA and shove the money in it - spending time dithering or "researching" means you're not investing and losing money in interest.

Would you say a Vanguard managed S&S ISA is fine or do you mean self managed?

I can happily get a managed portfolio but I fear the returns will just end up being the same as a cash isa.

Vanguard recently introduced higher fees for small pots (<£32k) - something to consider.

Free options for S&S ISA's include Trading212 and InvestEngine.

Trading212 would be better (they're at least profitable) and I see you have a Cash ISA already with them so very convenient.

Common global index funds include VWRP, ACWI, FWRG, etc. You may want to include bonds in your portfolio, this is preference. But must importantly, do your own research and don't start gambling by investing in individual stocks (at least until you understand everything about investing).