Life begins at 35?

Life begins at 35?

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Discussion

The Green Triangle

Original Poster:

138 posts

85 months

Thursday 23rd February 2017
quotequote all
Wasn’t sure where to post this as it touches on a few aspects… but hopefully this is the right place. Been meaning to post for a while but only got around to it now. Long-time PH member, who for the sake of anonymity have setup a new user name…

Well here goes…This summer I’m going to hopefully finish my mortgage. That’s been the target for quite a few years. Bit of background… married, 2 young kids, youngish professional, moved houses already so no plans to move again. Over the last 10 years, we have pretty much bunged everything we had into the house. Yes I have a bit of savings but most of this will get burned into the remaining mortgage balance when our product comes up for renewal this summer… It’s quite a scary feeling as I feel like we’ve been working towards this for so long now and have made some pretty big sacrifices and life choices over the years – feels like we’ve been putting life on hold for the last decade+, scrimping on most things to be mortgage free. House value is around 550K…I’m mid 30’s.

So I have a couple of life questions. What on earth should I do come summer? I have always paid into a pension and the current one is final salary, but I recognise that I will have neglected savings over the years in favour for mortgage payments…so I need to top this up to get some rainy day money again. With interest rates being so poor at the moment, I’m open to consider alternatives for future savings…e.g.stocks, bonds, a car to enjoy and also an investment. Start living my/our lives again?!

Anyone else been in this fortunate position before? What did you do re savings and how’s that working out? I think I should have around 2.5-3K per month free to invest/save after bills etc.

Other things that have been playing on me over the years are that I’m not really that happy in my current job. I work in finance (cima qualified) and 3 years ago got made redundant from a really good private company (due to global restructure we all got it) and took a new job in the public sector, which to all intents and purposes has been frustrating and isolated. But it’s close to home, pays the bills and is relatively secure and mostly stress free even if we seem to be under constant restructure here…I just don’t feel like I’m making a difference anymore and am not prepared to spend the next 30 years in this kind of stifling organisation which doesn’t work collaboratively, is pretty unfriendly and paranoid. It’s too stiff/pedantic /inefficient if you know what I mean.

So I’ve been thinking about getting into contracting potentially. Given that the mortgage will be cleared in a few months, I figured this could be a good time to consider this as starting out I should be able afford to be between roles for a bit until I find my feet…How on earth do you get into it? Is it just a case of speaking to a specialist recruitment consultancy? Set myself up as a plc? Anyone got any good advice?

So that’s it really. Sorry for the long post. Feels good to get that off my chest and would be interested to hear any views from people who’ve been in this situation and what you’ve done and any other bright ideas.

Ginge R

4,761 posts

218 months

Thursday 23rd February 2017
quotequote all
Financial planners have a phrase. Hyperbolic discounting. It's an in/ability to conceptualise, project and conceive the future. You seem to have it in spades.

Build up an emergency fund in case you decide to walk, make sure your insurance is suitable now and in the event you quit work - the little things always get overlooked when you're driving hard at a target. It'll also give you a chance to wind down from always chasing a financial target - do you really need another one so quickly? Dump your brain and just let your breath out slowly. You've achieved one hell of an objective and it has probably cost you lots in emotional capital. I'd say you're probably not best placed to make a serious set of decisions for a few months just yet so just do nothing.

anonymous-user

53 months

Thursday 23rd February 2017
quotequote all
I was in this situation a few years ago.

Firstly, expect a huge anti climax when you pay the mortgage off, it isn't half as liberating a feeling as you imagine, although over the longer term it defintely is.

Over the space of 5 years since that we've managed to expand our property portfolio so we now have a summer cottage and a buy to let all mortgage free, so the sky is the limit now.

In terms of what to do with your spare cash that's your choice, but in my situation I have paid into a unit trust/ISA feeder, it's provided a great return and the money is still available if you need it , given the state of everything with Brexit and Trmup I still think shares are the best bet, but investing in a unit trust type of vehicle spreads the risks (you need to see a financial adviser though - don't take my advice)

As for going consulting that's what I did, although in IT. In my case its a case of set up a ltd company (very easy these days) and then using the job sites and linked-in to find roles.

The other advantage of doing this is if you don't need all your income to live off then the company can pay the excess into a pension fund tax free.

Good luck though and enjoy it (my Cobra is my way of enjoying it!)

Beetnik

502 posts

183 months

Thursday 23rd February 2017
quotequote all
Perhaps invest in some therapy and sort out some deep seated issues? You've given up 10 of the best years of your life, 10 years you can't get back, scrimping and going without for some bricks and mortar. Make sure you don't set yourself a similar target and do the same again.

TSCfree

1,681 posts

230 months

Thursday 23rd February 2017
quotequote all
Book a once in lifetime family holiday which might enable you all to reflect on the efforts of achieving a lifetime goal and enjoy all the many options that now lie ahead. I suppose you might feel overwhelmed with all the possible choices, but now the hard work is done, it's time to restore some balance IMO. I'd personally want some time to enjoy before pilling into the next life project.

Edited by TSCfree on Thursday 23 February 19:02

anonymous-user

53 months

Thursday 23rd February 2017
quotequote all
Beetnik said:
Perhaps invest in some therapy and sort out some deep seated issues? You've given up 10 of the best years of your life, 10 years you can't get back, scrimping and going without for some bricks and mortar. Make sure you don't set yourself a similar target and do the same again.
really?

He's in his mid 30s with a family and a roof over his head, doesnt seem like he has deep seated issues, or given up 10 years of his life - what he has is security for him and his family for the rest of his life.

Speaking as someone who is now 55, your 20s and early 30s certainly arent the best years of your life, well they weren't mine, my 40s have been much more fun, and I expect my 50s and 60s to be even better because I have nothing to worry about.

Good luck to him in whatever he tries to do, but personally I think making sure your family is secure is a great thing to do

indestructible focus

389 posts

87 months

Thursday 23rd February 2017
quotequote all
Live life stop thinking about saving money and buying assets, you cant take it with you... Surprise your wife, road trip through Italy, trip to santorini. Fanily trips, Florida theme parks, centre parks, west coast tour, mexico, thailand, Oz etc.

We are 5 to 8 years younger but have a mortgage on 2% interest. Both happy that our income has been well spent throughout past 10 years living life, while in full health, no child or caring for parent responsbilities.

Collect memories not things.
Lastly hats off for the determintion to see it through to mortgage free living.

Whistle

1,393 posts

132 months

Thursday 23rd February 2017
quotequote all
I was in pretty much the same position at 36 mortgage almost paid, so I remortgaged my house and bought a holiday let in the Lake District, we use this place a lot and rent it out enough to cover its costs. I then bought a small industrial unit in witch to run my business from my business pays me rent on this. At 43 cleared the mortgage on these and saved up.

Just last week I had an offer accepted on a local terraced house at a great price that I intend to rent out, I am going to pay cash for this with a small loan from my dad.

That's it for now.. I am 47 this year.

Don't get me wrong I have worked my nuts off for years for the above and intend to pack in at 55.

The Green Triangle

Original Poster:

138 posts

85 months

Friday 24th February 2017
quotequote all
Thanks for the views, there’s some really good ideas here and some obvious stuff I hadn’t really considered, like “Do nothing” and take a couple of months off! And even Therapy? sessions – I do love that band :-) .…That’s never occurred to me…

I’ll definitely take a look into unit trusts/ISA feeder and possibly shares, so thanks for that. Buy to let is another good one with the current rate of borrowing being so good. I’m well aware of the benefits of taking advantage of leverage – owning the home outright and giving the family security was always the priority, but now I’m ready to start taking a few more calculated risks..…With B2L, I might be able to help a family member out at the same time as I know they’re struggling to get a foot on the property ladder.

Restoring a bit of balance is definitely going to be on the cards and a holiday is planned don’t worry. Just glad that the kids will hopefully have a much more comfortable upbringing compared to what we had…

NickCQ

5,392 posts

95 months

Friday 24th February 2017
quotequote all
The Green Triangle said:
With B2L, I might be able to help a family member out at the same time as I know they’re struggling to get a foot on the property ladder
I am by no means an expert on this, but when I looked into whether BtL would work with a family member / partner as a tenant, getting a mortgage looked challenging if it were to be all declared properly.

XMT

3,779 posts

146 months

Friday 24th February 2017
quotequote all
Whistle said:
I was in pretty much the same position at 36 mortgage almost paid, so I remortgaged my house and bought a holiday let in the Lake District, we use this place a lot and rent it out enough to cover its costs. I then bought a small industrial unit in witch to run my business from my business pays me rent on this. At 43 cleared the mortgage on these and saved up.

Just last week I had an offer accepted on a local terraced house at a great price that I intend to rent out, I am going to pay cash for this with a small loan from my dad.

That's it for now.. I am 47 this year.

Don't get me wrong I have worked my nuts off for years for the above and intend to pack in at 55.
This is exactly my plan and I am 31 (just turned). Plan is house purchase this year (hopefully) at around 280k-320k. Have a chunky deposit now and hope to have it all paid off by 35, plan after that is to get a small holiday home, then two properties to let out and pay it all off and wind down around 55.

Not looking to make millions, just have a comfortable stressfree life, leave enough for the kids to have a jumps start in life when I go.

The Green Triangle

Original Poster:

138 posts

85 months

Friday 24th February 2017
quotequote all
NickCQ said:
I am by no means an expert on this, but when I looked into whether BtL would work with a family member / partner as a tenant, getting a mortgage looked challenging if it were to be all declared properly.
Thanks I'll take a look at this if I go down this route.

paul789

3,676 posts

103 months

Friday 24th February 2017
quotequote all
Well done OP - impressive skills!

DonkeyApple

54,923 posts

168 months

Friday 24th February 2017
quotequote all
Beetnik said:
Perhaps invest in some therapy and sort out some deep seated issues? You've given up 10 of the best years of your life, 10 years you can't get back, scrimping and going without for some bricks and mortar. Make sure you don't set yourself a similar target and do the same again.
What a daft comment.

DonkeyApple

54,923 posts

168 months

Friday 24th February 2017
quotequote all
The Green Triangle said:
Wasn’t sure where to post this as it touches on a few aspects… but hopefully this is the right place. Been meaning to post for a while but only got around to it now. Long-time PH member, who for the sake of anonymity have setup a new user name…

Well here goes…This summer I’m going to hopefully finish my mortgage. That’s been the target for quite a few years. Bit of background… married, 2 young kids, youngish professional, moved houses already so no plans to move again. Over the last 10 years, we have pretty much bunged everything we had into the house. Yes I have a bit of savings but most of this will get burned into the remaining mortgage balance when our product comes up for renewal this summer… It’s quite a scary feeling as I feel like we’ve been working towards this for so long now and have made some pretty big sacrifices and life choices over the years – feels like we’ve been putting life on hold for the last decade+, scrimping on most things to be mortgage free. House value is around 550K…I’m mid 30’s.

So I have a couple of life questions. What on earth should I do come summer? I have always paid into a pension and the current one is final salary, but I recognise that I will have neglected savings over the years in favour for mortgage payments…so I need to top this up to get some rainy day money again. With interest rates being so poor at the moment, I’m open to consider alternatives for future savings…e.g.stocks, bonds, a car to enjoy and also an investment. Start living my/our lives again?!

Anyone else been in this fortunate position before? What did you do re savings and how’s that working out? I think I should have around 2.5-3K per month free to invest/save after bills etc.

Other things that have been playing on me over the years are that I’m not really that happy in my current job. I work in finance (cima qualified) and 3 years ago got made redundant from a really good private company (due to global restructure we all got it) and took a new job in the public sector, which to all intents and purposes has been frustrating and isolated. But it’s close to home, pays the bills and is relatively secure and mostly stress free even if we seem to be under constant restructure here…I just don’t feel like I’m making a difference anymore and am not prepared to spend the next 30 years in this kind of stifling organisation which doesn’t work collaboratively, is pretty unfriendly and paranoid. It’s too stiff/pedantic /inefficient if you know what I mean.

So I’ve been thinking about getting into contracting potentially. Given that the mortgage will be cleared in a few months, I figured this could be a good time to consider this as starting out I should be able afford to be between roles for a bit until I find my feet…How on earth do you get into it? Is it just a case of speaking to a specialist recruitment consultancy? Set myself up as a plc? Anyone got any good advice?

So that’s it really. Sorry for the long post. Feels good to get that off my chest and would be interested to hear any views from people who’ve been in this situation and what you’ve done and any other bright ideas.
What you need is a new target to beat. Seems obvious that maxing the pension is the obvious. Max lifetime contribution is £1m. Job done. No thing betters a spot of competitive saving. biggrin

Conversely, as you have a final salary set up and if you are planning to continue working etc then you probably want to run something modest in th background that will be either a golden handshake when you retire or a parachute if something disasterous happens with the final salary scheme etc. Work out what annual income you would need it to be and multiply by 25 to give you the pot target.

Bit of cash and balanced equity savings in a tax efficient but accessible wrapper is logical at the same time. Work out how much cash you'd need to not work for 6 months and make that your cash target and the balance in non cash investments etc.

Finally, simply revel in being 35, with a family and without the single biggest millstone, pressure that hampers so many families. Use the uplift in effective net income to do more with the kids and wife and simply live a far superior quality of life.

CaptainSensib1e

1,432 posts

220 months

Friday 24th February 2017
quotequote all
Don't wish to derial this thread, but I don't get why you'd want to pay off your mortgage at all. Borrowing is so cheap at the moment, makes far more sense to use the money to invest is assets that will grow far more quickly than your mortgage will accrue interest.

So, to answer your original question, in your postion I would remortage for as much as I could borrow at sub-1.5%, and invest in in high yielding income funds (which pay in thee region of 4%) and enjoy the difference as free income.

Ginge R

4,761 posts

218 months

Friday 24th February 2017
quotequote all
With the introduction (from this April) of an additional 'residence nil-rate band', it can make sense for some. The benefits are potentially far greater than a saving on interest payments, especially if the clients' circumstances make it more appealing.

An allowance of £100,000 residence nil-rate band per person is being introduced, which effectively takes the IHT threshold to £850,00 for (family) beneficiaries. It doesn't stop there, either. The threshold increase to £125,000 in 2018/19, £150,000 in 2019/20 and to £175,000 in 2020/21.

So.. in 2020/21 a house worth £1,000,000 could be passed on tax free - if you use up your entire nil-rate band allowances for both spouses or civil partners (plus the additional residence nil-rate bands for both). So, those with houses worth c£750,000 - £850,000 right now, could be maximum beneficiaries, if you take into account growth.

https://www.gov.uk/government/publications/inherit...

DonkeyApple

54,923 posts

168 months

Friday 24th February 2017
quotequote all
CaptainSensib1e said:
Don't wish to derial this thread, but I don't get why you'd want to pay off your mortgage at all. Borrowing is so cheap at the moment, makes far more sense to use the money to invest is assets that will grow far more quickly than your mortgage will accrue interest.

So, to answer your original question, in your postion I would remortage for as much as I could borrow at sub-1.5%, and invest in in high yielding income funds (which pay in thee region of 4%) and enjoy the difference as free income.
What's the income yield after risk is taken into account? wink

That's your problem. The post implies the comparing of apples with apples but the reality is very different. You have to factor in the capital risk for starters and once you start just looking at that basic metric the actual comparable yield plummets.

CaptainSensib1e

1,432 posts

220 months

Friday 24th February 2017
quotequote all
DonkeyApple said:
What's the income yield after risk is taken into account? wink

That's your problem. The post implies the comparing of apples with apples but the reality is very different. You have to factor in the capital risk for starters and once you start just looking at that basic metric the actual comparable yield plummets.
Dividend yield is actually reasonably stable, and tends to rise over time.

Capital value will fluctuate, but if you don't need to access it then that isn't really a problem, share prices normally recover if you can hold for long enough. A bit like it doesn't really matter what your house is worth if you are living in it, it's only when you need to sell that it becomes relevant. And over the long term share prices usually rise.

All I'm saying is that paying off your mortage as soon as possible isn't always the best decision if your long term goal is financial freedom. You need to think in terms of making the most of what you have. That's my strategy anyway.

DonkeyApple

54,923 posts

168 months

Friday 24th February 2017
quotequote all
CaptainSensib1e said:
DonkeyApple said:
What's the income yield after risk is taken into account? wink

That's your problem. The post implies the comparing of apples with apples but the reality is very different. You have to factor in the capital risk for starters and once you start just looking at that basic metric the actual comparable yield plummets.
Dividend yield is actually reasonably stable, and tends to rise over time.

Capital value will fluctuate, but if you don't need to access it then that isn't really a problem, share prices normally recover if you can hold for long enough. A bit like it doesn't really matter what your house is worth if you are living in it, it's only when you need to sell that it becomes relevant. And over the long term share prices usually rise.

All I'm saying is that paying off your mortage as soon as possible isn't always the best decision if your long term goal is financial freedom. You need to think in terms of making the most of what you have. That's my strategy anyway.
But that's the point, to smooth out the capital risk (bty divividend yields are not historically stable at the moment) you need a long time horizon. Conversely, the sub 2% (after fees) mortgages are very short term, typically two years at present. So, straight away you have a big risk mismatch on that example.

I'm afraid this concept of yield arbitrage that keeps being touted on PH is a fallacy. No one ever correctly risk adjusts the return in the yielding investment. It's just man maths at best, borrowing to go speculating at worst.