What to do with my money for next 3yrs - £65k + 1k/mth
Discussion
If you need the money in a few years it is difficult to know what to do.
Personally I would devote more to the stocks and shares isa and just have them in some sort of US tracker fund thing.
With inflation in the UK likely to stay low in the foreseeable, even though you earn next to nothing on deposit at least your cash value isn't getting eroded, if you don't want to take on any risk.
I would also buy a second hand lotus Elise for <£20k. Glacial depreciation and three years of fun before you have to start worrying about loads more boring financial stuff.
Personally I would devote more to the stocks and shares isa and just have them in some sort of US tracker fund thing.
With inflation in the UK likely to stay low in the foreseeable, even though you earn next to nothing on deposit at least your cash value isn't getting eroded, if you don't want to take on any risk.
I would also buy a second hand lotus Elise for <£20k. Glacial depreciation and three years of fun before you have to start worrying about loads more boring financial stuff.
Pferdestarke said:
I have an uncle who'd say otherwise. But then again I'm sure there have been casualties.
Your uncle may well be a penny share whiz, and hats off if he is but the average person's experience is the same as on the share tips thread on here. Hope springs eternal and all that. Stocks and shares ISA split among the biggest dividend bluechip payers in the FTSE.
http://www.topyields.nl/Top-dividend-yields-of-FTS...
Open a S&S ISA account at share.com and deal yourself. Or get a firm like Hargreaves Lansdowne to do it for you
Reinvest the dividends
Up to £1,250 a month up to a £15,000 maximum per year
Fire and forget for five years (although you can monitor the performance online whenever you like)
You'd have to be seriously unlucky to get less than 4 pc tax free a year.
http://www.topyields.nl/Top-dividend-yields-of-FTS...
Open a S&S ISA account at share.com and deal yourself. Or get a firm like Hargreaves Lansdowne to do it for you
Reinvest the dividends
Up to £1,250 a month up to a £15,000 maximum per year
Fire and forget for five years (although you can monitor the performance online whenever you like)
You'd have to be seriously unlucky to get less than 4 pc tax free a year.
Edited by audidoody on Saturday 25th April 17:52
limpsfield said:
It was the more the "I save a grand not even in a bonus month, b
hezz " that I loved. It's this sort of stuff that has kept me coming back for ten+ years.
Pistonheads: Bragging matters.hezz " that I loved. It's this sort of stuff that has kept me coming back for ten+ years. My e-penis is bigger than yours (Obv non-bonus month)
Personally, I'd be looking at buying a 4 bed, renting a few rooms out, if it's just a temp thing for a few years.
Good for you OP.
Going back on topic, one of the problems is you have a short savings horizon if you want to put a large down payment on a property in a couple of years. Most investment vehicles other than cash have a longer desired timeframe than this. For example, stock market general guidance is to think about being invested for a minimum of 10 years. Also, the assets are less liquid - if the market is experiencing a bit of a downturn just when you want the cash then you can loose money.
Given this, I would compartmentalise your money:
- Cash Savings
- as mentioned Santander 123 account is a good start, doubly so when the interest rules change EOY
Stocks and Shares
- get an ISA on a cheap platform (eg cavendish) then get cheap passive tracker funds. I use a LifeStrategy Fund which is fire and forget, low maintenance and most importantly low cost at approx 0.25% + platform costs.
Pension
- different stock buying vehicle. If your employers contribution/match is good take full advantage, this is free money. Make sure you are getting the tax relief
Deposit Fund
- I'm keeping this separate because you likely want to access this, but Id personally ensure I always had some cash available, and you can see your progress. I would be utilising your ISA allowance for this, and tarting your ISAs around, getting fixed rates etc to maximise. But given what you've said, keeping it in cash.
Then work out the percentages you want / need to put into each area based on your goals - aiming to save what you need for a property, but also putting away some medium term money (S&S) and some long term (pension)
Personally, I agree with your point about property, it can be a bloody hassle - I would just see it as another potential investment catagory for now and proceed accordingly given its level of risk vs your appetite.
Going back on topic, one of the problems is you have a short savings horizon if you want to put a large down payment on a property in a couple of years. Most investment vehicles other than cash have a longer desired timeframe than this. For example, stock market general guidance is to think about being invested for a minimum of 10 years. Also, the assets are less liquid - if the market is experiencing a bit of a downturn just when you want the cash then you can loose money.
Given this, I would compartmentalise your money:
- Cash Savings
- as mentioned Santander 123 account is a good start, doubly so when the interest rules change EOY
Stocks and Shares
- get an ISA on a cheap platform (eg cavendish) then get cheap passive tracker funds. I use a LifeStrategy Fund which is fire and forget, low maintenance and most importantly low cost at approx 0.25% + platform costs.
Pension
- different stock buying vehicle. If your employers contribution/match is good take full advantage, this is free money. Make sure you are getting the tax relief
Deposit Fund
- I'm keeping this separate because you likely want to access this, but Id personally ensure I always had some cash available, and you can see your progress. I would be utilising your ISA allowance for this, and tarting your ISAs around, getting fixed rates etc to maximise. But given what you've said, keeping it in cash.
Then work out the percentages you want / need to put into each area based on your goals - aiming to save what you need for a property, but also putting away some medium term money (S&S) and some long term (pension)
Personally, I agree with your point about property, it can be a bloody hassle - I would just see it as another potential investment catagory for now and proceed accordingly given its level of risk vs your appetite.
Right I think I have a clear idea of what I'm going to do now. Thank you all.
I already have a nice and fast car, £7k was enough for that and was a big upgrade from the £1k cars I've had previously. No prospective women in my life at the moment, not a huge amount would (should?
) change financially if one came along either.
Aim for 60k house deposit plus an emergency/buffer fund in cash in 3 years time. So no S&S sells for the deposit. This to remain in best variable/fixed ISAs, and new money to continue being lumped up in high rate regular savers before being dumped into an ISA (or maybe a 123 account, more likely after the tax free interest changes make it more worth it).
This means saving more of my new money into my S&S ISA and pension. I needed to up the pension anyway, and I'm already taking max advantage of matched contributions and tax relief. Both are already in cheap tracker funds on cheap platforms, pension 60:40 stock-bond, and S&S all in UK(45%)/developed world(55%) equity.
Percentage each month to cash-S&S-pension will change from around 75-5-20 to 55-15-30. This will gradually take my total allocations from around 80-1-17 to around 70-5-25.
I'm happy with the pension asset allocation, any thoughts on that for the S&S? Remain 100% in equity but add a bit of developing world? I'll have flexibility to add more funds when I increase my contribution.
I already have a nice and fast car, £7k was enough for that and was a big upgrade from the £1k cars I've had previously. No prospective women in my life at the moment, not a huge amount would (should?
) change financially if one came along either.Aim for 60k house deposit plus an emergency/buffer fund in cash in 3 years time. So no S&S sells for the deposit. This to remain in best variable/fixed ISAs, and new money to continue being lumped up in high rate regular savers before being dumped into an ISA (or maybe a 123 account, more likely after the tax free interest changes make it more worth it).
This means saving more of my new money into my S&S ISA and pension. I needed to up the pension anyway, and I'm already taking max advantage of matched contributions and tax relief. Both are already in cheap tracker funds on cheap platforms, pension 60:40 stock-bond, and S&S all in UK(45%)/developed world(55%) equity.
Percentage each month to cash-S&S-pension will change from around 75-5-20 to 55-15-30. This will gradually take my total allocations from around 80-1-17 to around 70-5-25.
I'm happy with the pension asset allocation, any thoughts on that for the S&S? Remain 100% in equity but add a bit of developing world? I'll have flexibility to add more funds when I increase my contribution.
UnwiseOwl said:
Right I think I have a clear idea of what I'm going to do now. Thank you all.
I already have a nice and fast car, £7k was enough for that and was a big upgrade from the £1k cars I've had previously. No prospective women in my life at the moment, not a huge amount would (should?) change financially if one came along either.
Aim for 60k house deposit plus an emergency/buffer fund in cash in 3 years time. So no S&S sells for the deposit. This to remain in best variable/fixed ISAs, and new money to continue being lumped up in high rate regular savers before being dumped into an ISA (or maybe a 123 account, more likely after the tax free interest changes make it more worth it).
This means saving more of my new money into my S&S ISA and pension. I needed to up the pension anyway, and I'm already taking max advantage of matched contributions and tax relief. Both are already in cheap tracker funds on cheap platforms, pension 60:40 stock-bond, and S&S all in UK(45%)/developed world(55%) equity.
Percentage each month to cash-S&S-pension will change from around 75-5-20 to 55-15-30. This will gradually take my total allocations from around 80-1-17 to around 70-5-25.
I'm happy with the pension asset allocation, any thoughts on that for the S&S? Remain 100% in equity but add a bit of developing world? I'll have flexibility to add more funds when I increase my contribution.
You should definitely be maxing out a 123 account, even after tax you'd have to find an ISA rate of 2.4%, which I don't think will be happening in the next couple of years. Cashback from household bills will help too.I already have a nice and fast car, £7k was enough for that and was a big upgrade from the £1k cars I've had previously. No prospective women in my life at the moment, not a huge amount would (should?
) change financially if one came along either.Aim for 60k house deposit plus an emergency/buffer fund in cash in 3 years time. So no S&S sells for the deposit. This to remain in best variable/fixed ISAs, and new money to continue being lumped up in high rate regular savers before being dumped into an ISA (or maybe a 123 account, more likely after the tax free interest changes make it more worth it).
This means saving more of my new money into my S&S ISA and pension. I needed to up the pension anyway, and I'm already taking max advantage of matched contributions and tax relief. Both are already in cheap tracker funds on cheap platforms, pension 60:40 stock-bond, and S&S all in UK(45%)/developed world(55%) equity.
Percentage each month to cash-S&S-pension will change from around 75-5-20 to 55-15-30. This will gradually take my total allocations from around 80-1-17 to around 70-5-25.
I'm happy with the pension asset allocation, any thoughts on that for the S&S? Remain 100% in equity but add a bit of developing world? I'll have flexibility to add more funds when I increase my contribution.
If you know you're not buying for the next couple of years, it makes sense to ensure you're ISAs are fixed products to get the best rates.
I'm not sure where the stocks and shares fit into your plans. If you know you're buying in a few years time, I'd be aiming to max out the deposit to get the smallest mortgage, or stretch to a more expensive property. I guess it comes down to your attitude to risk, if you're relying on part of the shares to form part of the deposit, there's a chance the market may be down when you find your dream house. Personally I'd be all in cash other than the pension but I'm pretty cautious.
limpsfield said:
okgo said:
Well just in the context that many people have a flat wage, I don't so it's a bit different.
It was the more the "I save a grand not even in a bonus month, bhezz " that I loved. It's this sort of stuff that has kept me coming back for ten+ years. 
I only get one bonus month per year 
McFsC said:
Condi, that's my point, he's missing it.
You are paying for your mortgage, just for someone else. Total waste. Use all of your money to put a deposit down, small mortgage, pay it off in not many years ( mortgage will be no more than your rent, so no extra outgoings ) then sell the flat when you want to move for more than you bought it ( you said more than 5 years, it will not have gone down ).
Simple economics, if you don't want to do that, then keep doing what you are.
But what if it does go down? Then he has just tied himself to a crappy flat with the associated hassles for no reason.You are paying for your mortgage, just for someone else. Total waste. Use all of your money to put a deposit down, small mortgage, pay it off in not many years ( mortgage will be no more than your rent, so no extra outgoings ) then sell the flat when you want to move for more than you bought it ( you said more than 5 years, it will not have gone down ).
Simple economics, if you don't want to do that, then keep doing what you are.
The "paying someone elses mortgage" bit also ignores the significant amount of interest associated with a mortgage = paying rent to the bank.
The OP is effectively saving the repayment part of a mortgage (with little/no associated capital risk), but paying rent instead of mortgage interest.
Your "simple economics" only works if flats go up in real terms (rather than nominal) forever.
UnwiseOwl said:
Also I don't want to have much commitment here because I don't really want to be here, and also if I lost my job I would have to move elsewhere to find a comparable one.
OP - you are doing the right thing by renting IMO.Don't be swayed by all the posters stating that buying your own home is the be all and end all.
- You are currently paying your landlord a very slight spread on his mortgage, which his is paying to a bank. He might be paying 1-4% interest on his interest only mortgage and the yield is 6 odd%, take off his service charges, voids, maintenance, legal fees etc. Capital appreciation is not a given, some areas have declined or stayed flat over last few years.
- If you buy now, in an area you don't like and want to move, you have thousands in fees, legals, estate agents and possibly months of stress until you move. You may have to take a hit if you need to sell in a hurry. You find a dream house elsewhere, and your buyer drops out last minute etc etc.
- Interest rates could rise, meaning your repayments may go above what you are paying in rent. People have very short term memories, it wasn't long ago people were taking out mortgages at 7% all day long.
- Opportunity cost of having your deposit tied up in a property where the yield (or in your case rent saved) is lower than your money would have earned elsewhere.
http://monevator.com/a-mortgage-is-money-rented-fr...
http://monevator.com/a-landlord-is-someone-who-bor...
http://jlcollinsnh.com/2012/02/23/rent-v-owning-yo...
http://jlcollinsnh.com/2013/05/29/why-your-house-i...
http://www.jamesaltucher.com/2011/03/why-i-am-neve...
Here are some alternatives for you to think about:
- You could however buy now, something cheap with good potential for rental, live in it for a bit on a cheap mortgage deal, then when you want to move to your "forever home" you can ask for consent to let. You may also get primary residential capital gains relief for another couple of years because you lived in it. I would avoid any flats with massive service charges etc. Ex council flats usually have quite low service charges that amount to not much more than a buildings insurance policy (£250-500 per annum all in)
- You could continue to rent, and buy some buy to let properties. I have just completed on an ex lha flat yesterday, purchase price of 50k and will rent all day for £495 pcm. You could buy one outright, or use your cash spread across multiple higher value properties at 25% deposit on each. I would personally be happy with 10% + gross yield, my area is Manchester. If you are going to be using mortgages, your real ROI on your deposit will be much higher.
- Lets say you move to a lovely leafy area, and rent a nice property worth 250k for 750pcm. That property is earning the LL 3.5% yield. In theory, if your BTL or even S&S portfoilio is earning you anything over this it could make sense to rent.
- You could also take some more risk and switch your cash isas to S&S - 60% global equites 40% bonds is pretty safe as per your pension. This fund has returned 9.4% for me in the last 12 months (http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ACFDQ) average over time should be 5-9% p/a long term.
- Most risky, you could use all your cash and buy a franchise/business (subway franchise for example). Most risk by far but also most reward if all goes well.
jdw1234 said:
McFsC said:
Condi, that's my point, he's missing it.
You are paying for your mortgage, just for someone else. Total waste. Use all of your money to put a deposit down, small mortgage, pay it off in not many years ( mortgage will be no more than your rent, so no extra outgoings ) then sell the flat when you want to move for more than you bought it ( you said more than 5 years, it will not have gone down ).
Simple economics, if you don't want to do that, then keep doing what you are.
But what if it does go down? Then he has just tied himself to a crappy flat with the associated hassles for no reason.You are paying for your mortgage, just for someone else. Total waste. Use all of your money to put a deposit down, small mortgage, pay it off in not many years ( mortgage will be no more than your rent, so no extra outgoings ) then sell the flat when you want to move for more than you bought it ( you said more than 5 years, it will not have gone down ).
Simple economics, if you don't want to do that, then keep doing what you are.
The "paying someone elses mortgage" bit also ignores the significant amount of interest associated with a mortgage = paying rent to the bank.
The OP is effectively saving the repayment part of a mortgage (with little/no associated capital risk), but paying rent instead of mortgage interest.
Your "simple economics" only works if flats go up in real terms (rather than nominal) forever.
Gassing Station | Finance | Top of Page | What's New | My Stuff