Help with planning... disposable wages just significantly up

[CoffeeGuy]

Hey Everyone,

So with zero bragging I need some help. I realise we are lucky to be where we are and am looking for useful replies.

I am in a situation where our mortgage is paid off 15 years early thanks to SAYE scheme. Compounded by the fact I just got a 37% payrise over the last twp years plus additional income from side gigs I am in a situation. My partner similarly got 25%. We have never been in this situation before. Household income has hit over £100,000 but we live in one of of the most deprived areas of the UK so living is relatively cheap.

After my 30% pension contribution (wife is NHS upper band so is non negotiable) we are left with around £2500 in free liquid cash. The question is WTF do I do now...

We have no debt other than last years holiday at 0%.

The main aim is flexibility. If we want to spend on something occasionally it shouldn't be a problem. I do have the SAYE option that on (historical) average is returning 20% + per year but what options are available for the rest that are actually worthwhile.

[asfault]

You are on PH so i presume you have a fun car? If not get one. Petrol fun cars could be done for in 20 years.

[dimots]

Just put it all in ISAs if your pension is maxed out.

[Scootersp]

CoffeeGuy said:

Hey Everyone,

We have no debt other than last years holiday at 0%.

This would imply that you don't have huge savings?

So perhaps just initially save a buffer in an ISA as someone else said, then plan things that in the previous day to day would be extravagances?

Sporting events, theatre, shows, concerts, festivals, experiences (track day, posh hotel murder mystery whatever is your cup of tea) that might previously have been too much you can now do just because you want to?

Upgrade/do more of what you do/have already, so more holidays, old bike upgrade, powertools upgrade, that antique you always fancied, night school course on something, better gym/golf/health club membership, house renovations, man shed?

Overall enjoy the comfort of it all, you don't have to do anything with it! but if you want to, do some relaxed planning with a view to making you both happier.

[h0b0]

CoffeeGuy said:

Hey Everyone,

Household income has hit over £100,000 but we live in one of of the most deprived areas of the UK

Doesn’t sound like a boast in isolation.

[GT03ROB]

The general wisdom is to build a cash buffer of around 3 - 6 months wages, with your mortgage gone I'd say closer to 3 than 6 would be in the right region for you. I'd then look at an equity based ISA in a simple global tracker.

[Alex Z]

Are you going to want to move to either a better house or better area, or is the plan to stay where you are?

[Fonzey]

Get some ISA allocation used, feels good to see it steadily tick along (or not )

Sounds like you're in a healthy position pensions wise, but no reason why you can't back that up with some healthy ISA deposits between now and later-life, may give you options around 50-55 to have nice steady ramp down.

But definitely buy a car.

[Sheepshanks]

Spend it in the local area so it's a bit less deprived.

[Philvrs]

As others have said its time for a nice car, assuming you have somewhere safe to store it if the area you live in is as deprived as you say.
If not, time to get another mortgage and move, being mortgage free, whilst great, might not be correct situation for you.

[bitchstewie]

Emergency fund.

ISA.

Cash or consider stocks and shares if you're looking at the long term - you can mix and match it doesn't have to be one or the other.

[MitchT]

In your position I'd be moving to a nice area. If you already live in a nice area, albeit within a deprived wider area, but are happy there and feel safe, then I'd be releasing a bit of equity and spending it on an interesting car. I'd rather spend my money and live rich than save my money and die rich.

[Jules Sunley]

Short term money (0-5 years want full access and may spend), deposits/premium bonds.

Medium term money (5 years plus), Equity ISA.

Longer term money (depending on your age and how long before you could access, currently age 55 minimum but increasing in the future), pension.

Also, as others have said, don't forget to include an allocation for fun - cars and holidays etc or whatever floats your boat.

[anonymous-user]

Work fewer hours?

I recently went part time and the additional free time means much more to me than money.

[pete_esp]

I'd say don't rush into anything, a similar thing happened to us a couple of years ago but we're still mortgaged and have young kids at home so that income doesn't go as far as I thought it would. For instance, when I got my first new pay check I traded in my Merc E-Class for a SEAT Tarraco. That's not a typo.

We didn't change our lifestyle at all even though income rose by quite a bit and I'm glad we took this approach as I didn't appreciate how long it would take for the additional income to start making a difference.

So I'd say, stay as you are for a few months. Build a cash buffer, then you will know how you want to adjust your lifestyle to your new situation, and you will be able to enjoy splashing some cash guilt free.

And congratulations! Well done, it's no easy getting to that financial milestone.

[princeperch]

Just have a couple of kids and buy a bigger house.

All your money will be gone.

Job jobbed.

[CoffeeGuy]

Thanks for the input everyone... On reflection I can see I could have worded it better...

The question really was "How to invest it flexibly", so if I wanted to I could take a break and just do whatever. To explain a bit... My 5 yr SAYE matured (and I put the max in every month) but it was a long and rough journey (as in cash flow). Yes it was very worth it but its put me off SAYE a little bit because whilst you can take a year out, you cant just do a month or two, so can affect planning quite a bit. You also cant jump ship (employer) and keep your SAYE gains. You cant exit early and keep it either.

I mean with my SAYE cash and mortgage cash now back in my pocket, there is money there that wasn't there two months ago, along with the general increase in household income.

Talking of savings, I do have some but I do need to increase that. Increasing that every month for several months should give me enough to do whatever it is I am wanting to do. I suppose answering my own question if I put several thousand aside, we can have "screw it" money to hand. But then, what happens if I lose the plot and suddenly want to buy an EV.. They cost money and I just detest owing money to people!

It's not that we are wanting to spend it, more invest it flexibly and wisely.

[xeny]

CoffeeGuy said:

It's not that we are wanting to spend it, more invest it flexibly and wisely.

Think about timescales and goals, as they drive this kind of decision making.

Short term money or emergency fund in a high interest savings account. Consider putting this in a cash ISA if you anticipate paying tax on the interest and have spare ISA allowance.

Longer term money, say 5+ years, (for my taste at least) regularly going into a low fee global equity tracker in an ISA. Some people seem to like doing BTL with this, but I can't deal with the time/hassle they involve.

Longest term money (for my taste at least) going into a low fee global equity tracker either as pension AVCs or a SIPP, ideally salary sacrificed to save NI.

Typically equities will beat inflation in the long term, but go all over the place in the short term.

Up to you how you allocate money (both capital and extra amounts going in) between the three pots. I keep a spreadsheet at least partly so I can trivially see what fraction of my £ is allocated to which category.

[bitchstewie]

Go buy a copy of Smarter Investing by Tim Hale and Morgan Housel's Psychology of Money.

A combined £40 that will help a lot

[okgo]

Reading up on compound interest has managed to stem the outflow of money even from my wife who used to spend money like water. Perhaps if you feel urges to buy things understanding the power of compounding will help.