Savings/Investments

[Shorty]

Continuing the trend of admitting how old most of us are getting, a thread about savings, investments and monies!

 

Anyone consider themselves especially savvy in this department? Anyone willing to offer advice? For example, I've recently been considering filtering a chunk of savings into a Stocks & Shares ISA, but I don't know enough about the market to know where to start or what you can trust!

 

When I bought a house, one of the best things I did was get a Help to Buy ISA. If you're even slightly considering a house, you should get one of these ASAP! Or, if you have a bit more money and a bit more time, there's the LISA (Lifetime ISA) which can be used for a bonus either towards a house deposit, or withdrawn when you're 60 for a bonus.

 

Nobody needs to talk about their salaries or anything, but with what you do have, are you smart with your finances? Do you bother budgeting, do you save at all, or are you blowing your paycheck every month?

 

There's also the concept of FIRE which I believe has been discussed before. Financial Independence / Retire Early (may be paraphrasing, don't remember it exactly). The idea of that is to live frugally and save/invest smartly to reach a magic number so you can retire early. @Mr_Odwin I believer has talked about it here.

 

Something I've never touched on at all is actual, proper investment, as in, monitoring the market and buying and selling. It's a lot like gambling, and takes expertise I'll never have. But does anyone here dabble? Doesn't @ReZourceman work advising in this department?

 

And to close on a bit of advice from myself, despite knowing next to nothing, I understand that if you can get a pension, you should max out your employer contributions! That's what I'm doing now that the company I work for has grown big enough to be required by the government to offer a pension at all.

Edited February 1, 2017 by Shorty

[MoogleViper]

Anyone with a Help to Buy ISA should change it into a LISA come April. The bonus is the same, but you can invest more each year, don't have to invest it in each month, and can be used towards a house with a bigger value. The Help to Buy ISA is capped at properties with a value under £250k outside London. Here that will get you a 1 bed flat and nothing more. Whereas the LISA can be used on properties up to £450k.

[Ashley]

I used to have an ISA, but moved it to Santander because they offered a better % but it has subsequently been halved (thanks Brexit) and the monthly cost has gone up (granted by only £3). Never really been one to go for a 'tied-down' ISA because my situation is often fluctuating.

 

I don't think I'll own a house and it takes me ages to make any financial decision (such as ISAs) so I'm probably not a good source of knowledge for this kind of thing! But I live within my means even now that I'm working part-time so go me!

[Jimbob]

I was looking at a Help to Buy ISA, but heard you don't actually get the bonus (unless that's changed) until you close the ISA after purchase of a property, and that you are capped at how much you can save a month.

 

I'm in the company pension they offer, paying the maximum i can put in each month out of my salary. But, with the pay cap in place at the moment (and will be for a long while yet), it's getting tougher to keep up contributions (the last year, my take-home pay has dropped by £90 each month due to increases in NI and pension contributions).

 

I've also got an ISA i've been feeding into for a long while, got a nice amount saved up (changed it to one that offers a decent % of interest, HSBC cut it down to next to nothing). Considering changing it again in April when the budget has been announced for the year.

 

I do live within my means, only ever gone overdrawn once in my life, and that was only for 24 hours.

[Raining_again]

I still have a Save to buy ISA, my bank won't close it?! (i bought a house like 6 months ago lol)

 

 

I dunno i'm not really very good at saving... well. I have money, but not huge sums. Could probably cope if I was out of work for a month or two, maybe. I have a pension and a house, so I have thought about the future. Somewhat banking on the fact my perm job stays that way lol

[Mr_Odwin]

Continuing the trend of admitting how old most of us are getting, a thread about savings, investments and monies!

 

This is my favourite subject!

 

Anyone consider themselves especially savvy in this department? Anyone willing to offer advice? For example, I've recently been considering filtering a chunk of savings into a Stocks & Shares ISA, but I don't know enough about the market to know where to start or what you can trust!

 

With a S&S ISA there are fees that are attached to them (fees from funds you invest in, and fees from your ISA supplier). Typically the advice given in FIRE circles is to just stick all your money into a cheap Vanguard fund, like their "LifeStrategy Funds", where you can pick a level of equity that aligns with your level of risk - I think a lot of people go 80/20 stocks/bonds. The fees are 0.24% per year, and you'll usually pay around 0.25%-0.45% fees to your ISA provider.

 

Some years the investment will go up, some years it will go down. Thanks to Brexit this year my ISA has returned 18.30% interest. It was higher a couple of months ago, but Trump is causing some issues. TBH, you're better investing and not looking at it for 5 years.

 

My pension through work is with AVIVA so I have my ISA with them too. It's not the cheapest (Cavendish or Charles Stanley offer better fees, I think), but it's convenient.

 

When I bought a house, one of the best things I did was get a Help to Buy ISA. If you're even slightly considering a house, you should get one of these ASAP! Or, if you have a bit more money and a bit more time, there's the LISA (Lifetime ISA) which can be used for a bonus either towards a house deposit, or withdrawn when you're 60 for a bonus.

 

Once you have a house the choice between a LISA and a SIPP/private pension is interesting. With a SIPP you get the tax rebate (which is at least equivalent to the LISA, and significantly more if you pay any 40% tax), and a SIPP can currently be accessed at 55, but will likely be changed to state pension age minus 10. However, SIPP will be taxed as income when you draw from it, whereas a LISA won't.

 

Nobody needs to talk about their salaries or anything, but with what you do have, are you smart with your finances? Do you bother budgeting, do you save at all, or are you blowing your paycheck every month?

 

There's also the concept of FIRE which I believe has been discussed before. Financial Independence / Retire Early (may be paraphrasing, don't remember it exactly). The idea of that is to live frugally and save/invest smartly to reach a magic number so you can retire early. @Mr_Odwin I believer has talked about it here.

 

FIRE is all about your saving %. If you can invest 50% of your net income, you can retire in 16.6 years, and live off your investments. https://networthify.com/calculator/earlyretirement?

 

You don't have to live frugally; frugality will get you to FIRE earlier, but maybe that is a miserable life.

 

My saving % is 24%, which I'm quite happy with right now. The situation is complicated by the fact that in 20 years I will no longer have a mortgage, so I will need less income to maintain our current lifestyle, and in 30 years I will have access to the state pension. My wife is currently not working and is a stay-at-home mother. When the kids are both at secondary school in 4 years the plan is that she's going to get a job and we plan to invest 66% of her income each month. That will accelerate our path to FIRE. If this all goes to plan we should be able to retire in our early 50s.

 

Something I've never touched on at all is actual, proper investment, as in, monitoring the market and buying and selling. It's a lot like gambling, and takes expertise I'll never have. But does anyone here dabble? Doesn't @ReZourceman work advising in this department?

 

Not my area of expertise at all.

 

And to close on a bit of advice from myself, despite knowing next to nothing, I understand that if you can get a pension, you should max out your employer contributions! That's what I'm doing now that the company I work for has grown big enough to be required by the government to offer a pension at all.

 

It's like getting a payrise, but you can't access it for another 20/30/40 years. I'm in. If you pay any 40%+ tax it's a massive return.

[bob]

This is my favourite subject!

 

 

 

With a S&S ISA there are fees that are attached to them (fees from funds you invest in, and fees from your ISA supplier). Typically the advice given in FIRE circles is to just stick all your money into a cheap Vanguard fund, like their "LifeStrategy Funds", where you can pick a level of equity that aligns with your level of risk - I think a lot of people go 80/20 stocks/bonds. The fees are 0.24% per year, and you'll usually pay around 0.25%-0.45% fees to your ISA provider.

 

Some years the investment will go up, some years it will go down. Thanks to Brexit this year my ISA has returned 18.30% interest. It was higher a couple of months ago, but Trump is causing some issues. TBH, you're better investing and not looking at it for 5 years.

 

My pension through work is with AVIVA so I have my ISA with them too. It's not the cheapest (Cavendish or Charles Stanley offer better fees, I think), but it's convenient.

 

 

 

Once you have a house the choice between a LISA and a SIPP/private pension is interesting. With a SIPP you get the tax rebate (which is at least equivalent to the LISA, and significantly more if you pay any 40% tax), and a SIPP can currently be accessed at 55, but will likely be changed to state pension age minus 10. However, SIPP will be taxed as income when you draw from it, whereas a LISA won't.

 

 

 

FIRE is all about your saving %. If you can invest 50% of your net income, you can retire in 16.6 years, and live off your investments. https://networthify.com/calculator/earlyretirement?

 

You don't have to live frugally; frugality will get you to FIRE earlier, but maybe that is a miserable life.

 

My saving % is 24%, which I'm quite happy with right now. The situation is complicated by the fact that in 20 years I will no longer have a mortgage, so I will need less income to maintain our current lifestyle, and in 30 years I will have access to the state pension. My wife is currently not working and is a stay-at-home mother. When the kids are both at secondary school in 4 years the plan is that she's going to get a job and we plan to invest 66% of her income each month. That will accelerate our path to FIRE. If this all goes to plan we should be able to retire in our early 50s.

 

 

 

Not my area of expertise at all.

 

 

 

It's like getting a payrise, but you can't access it for another 20/30/40 years. I'm in. If you pay any 40%+ tax it's a massive return.

Do pension contributions count towards the FIRE percentage?

[Ashley]

It's like getting a payrise, but you can't access it for another 20/30/40 years. I'm in. If you pay any 40%+ tax it's a massive return.

 

My current employer just dumped me on this kind of scheme and I've been too lazy to do anything about it. I know its good but whats depressing is seeing my student loan being about 300% bigger per week than my contribution.

 

That's a point. I looked at my last annual SLC payment (which would have been through to April 2016) when doing my tax return and apparently I'm down to 16k which I think means I'm about half way there. Not that I'm in a rush to pay it off.

[Mr_Odwin]

Do pension contributions count towards the FIRE percentage?

 

I would say so. The fact they're locked until you're 55 (or older) is something to be aware of though.

 

Some people even include anything that increases your net worth in the saving % i.e. the capital part of mortgage payments. But to me that's doesn't make sense as you'll still need a place to live when you retire, unless you liquidate and move somewhere cheap.

 

The FIRE theory is that after fees and inflation you should be able to spend 4% of your portfolio each year and it will probably still be at its original value (adjusted for inflation) after 30 years. If you need more than 30 years then maybe you need to take less than 4%. With 4%, take your annual living expenses and divide by 0.04 (or multiply by 25) and that's what you need your portfolio to be at when you retire. As I said above though, it's complicated by the state pension kicking in, as maybe that means you could safely withdraw 5%? But maybe the state pension will be abolished in 20 years?

 

My current employer just dumped me on this kind of scheme and I've been too lazy to do anything about it. I know its good but whats depressing is seeing my student loan being about 300% bigger per week than my contribution.

 

That's a point. I looked at my last annual SLC payment (which would have been through to April 2016) when doing my tax return and apparently I'm down to 16k which I think means I'm about half way there. Not that I'm in a rush to pay it off.

 

When I paid off my student loan I added that amount to my monthly saving. I never had it so I never missed it.

[Ashley]

When I paid off my student loan I added that amount to my monthly saving. I never had it so I never missed it.

 

It's a fair idea. I'll try and remember to do that in a decade

[Iun]

I need to move my savings out of China, but there's a cap on how much exchange you can do at one time and in a one-year period.

[Charlie]

Anyone with a Help to Buy ISA should change it into a LISA come April. The bonus is the same, but you can invest more each year, don't have to invest it in each month, and can be used towards a house with a bigger value. The Help to Buy ISA is capped at properties with a value under £250k outside London. Here that will get you a 1 bed flat and nothing more. Whereas the LISA can be used on properties up to £450k.

 

Unless you want to buy a property prior to April 2018. An important distinction to make.

 

 

I currently contribute the full amount to my H2B ISA and then save more to a savings account. The interest rate is awful but As I'm planning on buying soon the stock market is too risky for short term. I really should save more money than I do. I did really well tail end of last year and need to get back into that mentality again.

 

My SIPP is held entirely in funds.

Edited February 3, 2017 by Charlie

[Charlie]

Saving money for retirement is so important and the earlier the better. Someone who saves £1000 a year between 20-30 will end up with more money at retirement than someone who saves £1000 a year from 30-50. Compound interest is the greatest thing in the world.

 

Most people say that if you're new to saving for retirement and have nothing in the pension pot to take your current age, half it, then contribute that amount in % of your salary for the rest of your working career. The % never changes as you grow older.

[Eenuh]

Hmm, can anyone recommend what to do about pensions?

 

I still don't have a pension anywhere (work doesn't offer it) and really should start saving... but I have no clue where to start with this. I've tried looking into it but it was all a bit confusing.

 

Also, my previous work did have a pension scheme near the end of my time there, and I made 2 or 3 contributions to it... so what happens to that money now? Is there any way for me to access it or do I leave it and I get it paid out when I'm at pension age? It's only a little amount, but every little helps! :P

[Charlie]

Hmm, can anyone recommend what to do about pensions?

 

I still don't have a pension anywhere (work doesn't offer it) and really should start saving... but I have no clue where to start with this. I've tried looking into it but it was all a bit confusing.

 

Also, my previous work did have a pension scheme near the end of my time there, and I made 2 or 3 contributions to it... so what happens to that money now? Is there any way for me to access it or do I leave it and I get it paid out when I'm at pension age? It's only a little amount, but every little helps! :P

 

Starting very soon all employers will have to offer a workplace pension. It depends on size of company when this will happen.

 

Contact your precious employer, or dig through your paperwork, and find out the name of the pension provider. Get in touch with them and they'll let you transfer it elsewhere if you want.

[Eenuh]

Starting very soon all employers will have to offer a workplace pension. It depends on size of company when this will happen.

 

Contact your precious employer, or dig through your paperwork, and find out the name of the pension provider. Get in touch with them and they'll let you transfer it elsewhere if you want.

 

I looked at the staging date before on the workplace pensions website (assuming this is right) and I'm supposed to get it in August... I feel like I've been waiting ages already!

 

I know the pension provider from my previous job, but have no clue how to actually access the account. Will have to look into it. Though wouldn't they charge a fee to take the money out? Might not be worth it if they do.

 

 

As for savings, we had been very good to save up for our house, putting in the maximum every month in both of our Help to Buy ISAs and then some extra in a normal savings account. Now that that is gone, I'll have to look for somewhere else to start saving our money. Normal savings accounts don't seem to give any interest anymore, and I'm assuming it's the same for normal ISA accounts. So will have to dig around to see what is worth it.

[bob]

 

Contact your precious employer

 

My PRECIOUS!!!

[MoogleViper]

Unless you want to buy a property prior to April 2018. An important distinction to make.

 

True. If you're not sure when you want to buy it's probably a better idea to wait until around Feb 2018 and change it then. You'll still have 2 months to top up the difference (£2400 max per year for H2B compared to £4k per year for LISA).

[Mr_Odwin]

Also, my previous work did have a pension scheme near the end of my time there, and I made 2 or 3 contributions to it... so what happens to that money now? Is there any way for me to access it or do I leave it and I get it paid out when I'm at pension age? It's only a little amount, but every little helps! :P

 

There are various fees that get charged moving pensions, and it's different company by company. You'll have to keep track of it, so that you can access it in 30 years, so it's best getting on top of it now.

 

What @Charlie said about pensions is right. Start saving as soon as you're able, with (Age/2)% of your income. It sucks, but it's necessary. If the state pension keeps getting pushed back and back, it would be awful to have to work until you're in your 70s.

[Eenuh]

Where do you save for your pension though? Just through your work pension scheme or do you have a separate pension savings account as well?

[Will]

I've always been good at saving, but I've also always had a target for the money and spent it all after a few years. In London I saved up and then made some lucky investments when the banking crisis hit and ended up with a decent amount of money. I spent it all on buying a car. In San Francisco I saved up so I could move to Japan to study Japanese and not need to worry about work.

 

I'm not 100% sure how much life is going to cost here but I do like to set a budget across Rent, Savings and then spending. My current plan is Rent - 36%, Savings 29% and the rest I'm free to spend as I like. Ideally I'd like the rent and savings to be the other way around but I'm not sure how practical that will be. Hopefully I spend less and can top up the savings each month.

 

I'd like to buy a house/apartment at some point this year. Something I can rent out back home just to have my foot on the ladder and start building up from there. I had been trying to buy in Tokyo before moving here but just wasn't feasible at the time. Had I of stayed another year or two it would have been pretty easy to do.

[Mr_Odwin]

Where do you save for your pension though? Just through your work pension scheme or do you have a separate pension savings account as well?

 

Make the most out of your employer/employee contributions that you can in your work pension. So if they offer 1:1 matching up to 10%, then put in 10%.

 

After that it doesn't matter if it's with your work pension or a SIPP with a different company - you still get a tax rebate. The only differences are in the fees that you'll be charged for funds and the service provider.

[Space]

With employer contributions pensions make sense. But as soon as I left full-time employment to freelance I stopped paying into mine, I'd rather have access to the money - you never know what crisis may happen where it would be useful, plus there's value in spending it now on things like paying off the mortgage quicker. I'm just taking the risk that I'll have enough assets to live comfortably when I retire.

 

Property seems the best bet these days. In my Hertfordshire town prices have gone up 50% in 10 years. I felt like we overpaid at the time, but it seems like a good deal now, and demand is only increasing.

Edited February 3, 2017 by Space

[Mr_Odwin]

With employer contributions pensions make sense. But as soon as I left full-time employment to freelance I stopped paying into mine, I'd rather have access to the money - you never know what crisis may happen where it would be useful, plus there's value in spending it now on things like paying off the mortgage quicker. I'm just taking the risk that I'll have enough assets to live comfortably when I retire.

 

Property seems the best bet these days. In my Hertfordshire town prices have gone up 50% in 10 years. I felt like we overpaid at the time, but it seems like a good deal now, and demand is only increasing.

 

Everyone's situation is different, so there's no rule that fits all.

Everyone's handling of risk is different too. My mortgage rate is so low, that I've taken on some risk and am paying into a S&S ISA instead of overpaying the mortgage.

 

Property is great because there's an instant replacing of rent with something that actually adds to your personal wealth. Having said that, something like the FTSE 100 has on average, after inflation, increased about 5% each year for the last 20 years (taking into account the dotcom bubble and the 2008 banking crisis) so for the last 10 years you'd have made 63% on any investment you made then.

[ReZourceman]

Something I've never touched on at all is actual, proper investment, as in, monitoring the market and buying and selling. It's a lot like gambling, and takes expertise I'll never have. But does anyone here dabble? Doesn't @ReZourceman work advising in this department?

 

Not quiiiite right. I've worked at a stockbrokers for nearly 6 years. Started off in Customer Services (well, I'm still there) as a call taker, but got promoted to Contact Team Manager a while ago. My "day-to-day" is now, really, people manager and answering escalated queries, so that means I know a good amount about it.

 

Yeah. And tings.

 

Dem markets etc.

 

I suppose the pertinent things to mention;

 

- Equities are shares in a company.

- Funds are groups of shares, usually with a common goal. For example, you could have a technology fund that invested in 50 tech firms. Because of the spread risk they're less risk (and thus less reward) but obviously, safer. They're for the more longer term.

- You can make a lot of money. You can buy and sell in the same day, same...minute and make dem monies, or lose dem monies.

- I've seen companies delisted/go bust/enter administration, and people with those shares literally lose everything.

- A common one is people buying football team shares, but they either, just sit there...doing nothing, or just..banter vybez.

- Typically, in stocks and shares accounts, brokers will charge for the actual account (some places charge a percentage, some people charge a flat fee) and then charge for the actual purchase and sale of shares too.

- Dividends - these things are cash payouts from companies, to the share holders, usually made from profits that the company makes. Usually they are regular, and they can be varying amounts of money. This is a "good" way to make money in some cases...like...super well off people can just have a portfolio of shares and live off of the dividends.

- Etc.

- Yawn.

 

I guess I'm not too great at saving. I've got a lot of hobbies, don't live in a cheap area, and don't want to have a depressing life so go on the odd holiday/buy the odd console etc, but I'm pretty happy with my choices. Of course, it's a shame that we don't have money for a house, but it's just one of those things.