My financial plan for the short/medium term - Any advice?

[S9JTO]

I'm 22 years old and I have started to think more sensibly regarding my finances - I have always saved a large portion of my salary since getting my first full-time job, but I mean more in terms of making my money do some leg work as well as what I actually want to spend said money on in the short/medium term.

Essentially, I plan to get a mortgage in the next 5 years or so. I'll (hopefully) be doing so with my girlfriend, we have been together for 3 years already now so I'm hoping it'll still be the case come the time... For some background, our combined income is ~£62k without bonuses and we both have excellent pensions (c26% career average schemes).

We're both planning on maxing out our LISA contributions in a lump sum (£4k) before the end of the tax year and then £333 monthly until we look to buy. Assuming this is 5 years from now, we'll have ~£50k between us in our LISA's plus interest/gains, as well as my girlfriends inheritance (c£15k) and both sets of our personal savings if beneficial. So in that regard I think that's pretty solid and the best combination of safety and profit?

We also plan on generally living during that time, I'd like to upgrade cars every 1-2 years. Therefore I'm planning to just keep my current account (Santander 123) and the remainder of my disposable income (~£1.5k) will sit there growing on it's own. Things like cars, car insurance, car parts, holidays, tech, clothes, eating out etc will come from this.

I don't have any real hobbies/interests outside of cars/football/music, maybe I should...

I'd really like someone with more life experience than I have to give me some advice/guidance and/or experiences they've had to help me with my decision making. I can't speak to any of my friends about this as they openly admit they know nothing about anything remotely financial. My parents just constantly tell me to spend it all etc.

My question/s are:
Would you do this if you were in my position? If not, what would you do?
Should I maybe open another current account or S&S ISA for a car fund for example?
Bonds?
Get a mortgage and rent the property out? (This would ruin the LISA plan though)

Edit: Re-read and realised I forgot to mention, I live in the NW, therefore property in most areas is cheap in comparison to elsewhere in the UK.

Edited by S9JTO on Wednesday 31st January 15:01

[BoRED S2upid]

Is the LISA an investment or cash one?

Sounds like a decent plan don’t listen to anyone who says spend it all they are idiots.

[xeny]

S9JTO said:

II'd like to upgrade cars every 1-2 years.

This is a fantastic way of making sure you don't build up spare money, thus solving all your financial problems. /S

[S9JTO]

BoRED S2upid said:

Is the LISA an investment or cash one?

Sounds like a decent plan don’t listen to anyone who says spend it all they are idiots.

I've not decided yet but I'm thinking of putting it in a S&S LISA and stick the balance between a couple of funds.

Agree with the spending etc - I physically couldn't bring myself to spend that much any given month (unless it's for car insurance or similar).

Edited by S9JTO on Wednesday 31st January 15:19

[S9JTO]

xeny said:

This is a fantastic way of making sure you don't build up spare money, thus solving all your financial problems. /S

You don't say mate - That's what I was getting at with the current account, allowing that to be built up/spent as and when as the house deposit will be secured elsewhere.

From the £1.5k disposable, I typically save £750-£1k of that, so the chances of me wiping out that balance on new cars every 2 years is slim. I don't plan on buying/financing any expensive cars, I plan on selling my current car (Ibiza Cupra) for c£12.5k, pay off the outstanding finance £3k, and putting that £9.5k towards my next car as well as a portion of my current savings (~£5k) + a similar amount of finance (or not). And continue to do so, incrementally upgrading cars.

Edited by S9JTO on Wednesday 31st January 15:25

[BoRED S2upid]

S9JTO said:

BoRED S2upid said:

Is the LISA an investment or cash one?

Sounds like a decent plan don’t listen to anyone who says spend it all they are idiots.

I've not decided yet but I'm thinking of putting it in a S&S LISA and stick the balance between a couple of funds.

Thats what I would do rather than cash build up your deposit a lot quicker.

Good luck.

[S9JTO]

BoRED S2upid said:

Thats what I would do rather than cash build up your deposit a lot quicker.

Good luck.

Hopefully, thanks mate.

[supercommuter]

S9JTO said:

xeny said:

This is a fantastic way of making sure you don't build up spare money, thus solving all your financial problems. /S

You don't say mate - That's what I was getting at with the current account, allowing that to be built up/spent as and when as the house deposit will be secured elsewhere.

From the £1.5k disposable, I typically save £750-£1k of that, so the chances of me wiping out that balance on new cars every 2 years is slim. I don't plan on buying/financing any expensive cars, I plan on selling my current car (Ibiza Cupra) for c£12k, pay off the outstanding finance £3k, and putting that £9k towards my next car as well as a portion of my current savings + a similar amount of finance (or not). And continue to do so, incrementally upgrading cars.

Each to their own but I sold my decent car to get on the housing market in my early twenties. Had a 'normal' car for a few years and then incrementally started upgrading cars / motorbikes. I know this is a motoring forum but i sure as hell would rather have my money in a a house than a car at your age.

Get a house bought and over pay for the first two year fix. Then remortgage and save some money then buy your incrementally upgrading cars

Good luck either way

[Manners2001]

I'd be wary about putting your house deposit in S&S - there are rumblings that the market may be due a correction in 2018. Then again, it might not!

Disclosure - I know sweet FA other than what I read in various publications.

[S9JTO]

supercommuter said:

Each to their own but I sold my decent car to get on the housing market in my early twenties. Had a 'normal' car for a few years and then incrementally started upgrading cars / motorbikes. I know this is a motoring forum but i sure as hell would rather have my money in a a house than a car at your age.

Get a house bought and over pay for the first two year fix. Then remortgage and save some money then buy your incrementally upgrading cars

Good luck either way

Thanks mate and I see your point. However, I'm thinking my above plan is kind of a 'best of both worlds' approach by ensuring a fairly substantial amount will be saved as well as the freedom of purchasing whatever my seperate savings can afford on cars etc - I don't think I stressed strongly enough how those savings in the Santander account will probably grow more than my LISA pot, as I mentioned I don't typically spend too much each month.

I'm in no real rush to get a mortgage and neither is my girlfriend. However it is in the back of both of our minds'. So my approach seems sensible (in our eyes).

[BoRED S2upid]

Manners2001 said:

I'd be wary about putting your house deposit in S&S - there are rumblings that the market may be due a correction in 2018. Then again, it might not!

Disclosure - I know sweet FA other than what I read in various publications.

Have to be some correction if funds can’t beat the interest available on cash isas! The city would be decimated with job seeking fund managers walkingthe streets and selling their fancy suits.

[S9JTO]

Manners2001 said:

I'd be wary about putting your house deposit in S&S - there are rumblings that the market may be due a correction in 2018. Then again, it might not!

Disclosure - I know sweet FA other than what I read in various publications.

Interesting... Maybe a 50/50 split of 2 funds and cash may be sensible?

[NickCQ]

BoRED S2upid said:

Manners2001 said:

I'd be wary about putting your house deposit in S&S - there are rumblings that the market may be due a correction in 2018. Then again, it might not!

Disclosure - I know sweet FA other than what I read in various publications.

Have to be some correction if funds can’t beat the interest available on cash isas! The city would be decimated with job seeking fund managers walkingthe streets and selling their fancy suits.

Not sure that's right. Equity investment is not necessarily suitable if you know you will have to take the money out again in the short term (<=5 years). Cash ISA is near as dammit guaranteed to give you at least 0% over a five year period. It would not be at all unusual for equity markets to dip 5-10% in that timeframe, even though there is high confidence that across the economic cycle you should realise at least high single digits.

I say this as someone who is 75-80% invested in equities (excluding my flat).

[sidicks]

BoRED S2upid said:

Have to be some correction if funds can’t beat the interest available on cash isas! The city would be decimated with job seeking fund managers walkingthe streets and selling their fancy suits.

Eh?

Equity markets could quite easily be down 10% or more over the next few years, nothing to do with poor performance from the underlying fund managers, so your comment is pretty misleading.

[xeny]

Manners2001 said:

I'd be wary about putting your house deposit in S&S - there are rumblings that the market may be due a correction in 2018. Then again, it might not!

Disclosure - I know sweet FA other than what I read in various publications.

Rule of thumb is don't use S&S for money you expect to need within 5 years.

[sidicks]

NickCQ said:

Not sure that's right. Equity investment is not necessarily suitable if you know you will have to take the money out again in the short term (<=5 years). Cash ISA is near as dammit guaranteed to give you at least 0% over a five year period. It would not be at all unusual for equity markets to dip 5-10% in that timeframe, even though there is high confidence that across the economic cycle you should realise at least high single digits.

I say this as someone who is 75-80% invested in equities (excluding my flat).

A less polite answer would be that “it’s bks”...!

[sidicks]

xeny said:

Rule of thumb is don't use S&S for money you expect to need within 5 years.

[xeny]

S9JTO said:

Interesting... Maybe a 50/50 split of 2 funds and cash may be sensible?

If/when the market drops, you'll do well to have found 2 funds that don't both drop.

Someone a couple of weeks ago posted a copy of the ukpersonal finance subreddit's flowchart - that may be well worth a look.

[S9JTO]

xeny said:

Rule of thumb is don't use S&S for money you expect to need within 5 years.

Even with a 50/50 split? I'm willing to take a risk of 10% in all honesty.

[sidicks]

S9JTO said:

Even with a 50/50 split? I'm willing to take a risk of 10% in all honesty.

If both funds have a similar risk / exposure then they are both likely to fall a similar amount.