What to do with my money for next 3yrs - £65k + 1k/mth

What to do with my money for next 3yrs - £65k + 1k/mth

Author
Discussion

Testaburger

3,674 posts

197 months

Saturday 9th May 2015
quotequote all
limpsfield said:
okgo said:
Save about the same as op on a non bonus month
Love this
Quite.

Cringe.

UnwiseOwl

Original Poster:

9 posts

107 months

Wednesday 25th April 2018
quotequote all
Three years have passed.

Total is doing about 10% better than expected at £118k, and the 81k-5k-32k split cash-S&S-pension is very close to what I aimed for.

Life situation is unchanged except for being older (30) and earning around 50k. Single, no kids, no debts, same £5k car. Still renting a 500/mth flat, and not inclined to drop an anchor by buying a house anywhere as I thought I might have been by now - job security/flexibility, no ties or partner.

Currently saving £1800 a month, £1k of it into cash (ISA, LISA, fixeds, regular savings), £100 to S&S, and £700 gross to SIPP pension (including max matched contributions). Wondering if I should continue like this, building up the cash for that house deposit I'll eventually need, and keeping the proportion of total assets in pension flat? When the time comes, the 81k cash I already have is enough for a 66k deposit (that's 40% on a 165k house) and 5k costs, leaving a 10k cash buffer/emergency fund. Or shift the monthly a bit more towards S&S for a better medium term return and offset inflation? Another 3 years as per current, disregarding growth/loss and pay rise/fall, would put me at 117k cash, 9k S&S, and 57k pension.

I feel reasonably well off with these numbers, but I know I'm not compared to many others who earn more and/or have mortgaged houses funded with a partner or parents' help. But I'm also a bit anxious about money and financial security, as I've always been and always will be, and especially with the current political uncertainty.

Just to avoid going over old ground again - I'm not interested in the commitment/hassle of a property whether it's to live in or rent out, and my current rented place still at the same price is better value now than it was in 2015.

ghamer

602 posts

154 months

Wednesday 25th April 2018
quotequote all
Well if you'd have taken the advice when you asked 3 years ago and bought property you'd have a lot more than £120k to play with now.

jjones

4,422 posts

192 months

Wednesday 25th April 2018
quotequote all
UnwiseOwl said:
stuff
But did you pop your cherry yet??

UnwiseOwl

Original Poster:

9 posts

107 months

Wednesday 25th April 2018
quotequote all
ghamer said:
Well if you'd have taken the advice when you asked 3 years ago and bought property you'd have a lot more than £120k to play with now.
Yes, if I'd followed the advice of the majority of posters, and all had gone well, I'd be better off now.

If I'd gone for the buy to live option, with a place similar to my current one, I'd have paid net 175/mth (all costs except moving/fees) vs. renting's 500/mth. Difference of 325/mth, 4k/yr, or 12k for 3 years. 2 days a month of earnings, or 5 weeks a year. Would be 10% better off than current situation now, not that much. Wasn't prepared to make the commitment and take the risk.

ghamer

602 posts

154 months

Thursday 26th April 2018
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So what's the plan going forward?

Du1point8

21,604 posts

191 months

Thursday 26th April 2018
quotequote all
Whats the end goal?

you now have 118k in the bank and no assets.

what are you going to spend it on or just keep saving until what?


The T Boy

760 posts

239 months

Thursday 26th April 2018
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At your age I'd suggest putting more into equities as that will likely give you a much better return than cash over a long term.

As you don't seem in any rush to buy a property then there is no need to keep huge amounts of cash available. If you held enough for say a 10% or 20% deposit (should your buying circumstances change) then if the market was up you could sell some equities to increase the deposit or, if the market was down, pay a lower deposit and wait for the market to recover before selling equities to pay the mortgage down. Interest rates might stay low enough that you are happy with a smaller deposit anyway.

If you continue to rent then it sounds as though 20k would be more than enough to survive on for at least a year should you unexpectedly lose your job so maybe keep that much in cash and move the rest into equities.

Basically, at 30 years old with no commitments and enough emergency cash already saved, your money would be better off in higher growth and risk assets. The main bulk of your savings is probably getting reduced by inflation. Your portfolio mix is closer to that of someone trying to reduce risk as they near retirement age. You've made a great foundation at a relatively young age so take some risk now to maximise the chance of growth - you've got 35 years to ride out any market falls!




princeperch

7,911 posts

246 months

Thursday 26th April 2018
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The other issue is leverage. And the fact you can't live in a share.

Scootersp

3,107 posts

187 months

Thursday 26th April 2018
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UnwiseOwl said:
I feel reasonably well off with these numbers, but I know I'm not compared to many others who earn more and/or have mortgaged houses funded with a partner or parents' help. But I'm also a bit anxious about money and financial security, as I've always been and always will be, and especially with the current political uncertainty.

Just to avoid going over old ground again - I'm not interested in the commitment/hassle of a property whether it's to live in or rent out, and my current rented place still at the same price is better value now than it was in 2015.
I get your anxiety but I'd say you've got the money side of things covered and will never be really reckless or let things go too far south!

What are your passions in life? Hobbies or goals, family thoughts etc, this is where I'd focus your time ie making them happen, if you are happy as you are 100% fine but if there is something you want to do/pursue do it, maybe have a year where you spend a good chunk of the monthly saved cash, or take a sabbatical from work if that's an option?

As with all anxiety's don't let them rule your life.

Dr Mike Oxgreen

4,101 posts

164 months

Thursday 26th April 2018
quotequote all
At the moment you’re being “recklessly prudent”. In other words, you’re being so cautious that you’re throwing away the chance to be substantially richer in the future.

You really shouldn’t be keeping such a lot in cash, and throwing such a lot of new money into it. I don’t know what interest rate you’re getting, but I’d be willing to bet it’s less than inflation - and therefore your cash is shrinking, not growing. Just because you’re seeing an interest payment go into the account every year/month doesn’t mean you’re getting richer in real terms.

It sounds like your goals are quite indistinct, and therefore probably long term. Equities are what you should be putting a lot of your money into. IMHO people erroneously talk about “risk” in relation to equities when really they’re talking about volatility, which becomes an irrelevance over the long term. Over a long enough period of time the stock market is unlikely to lose you money if you hold your nerve and keep your holdings during downturns.

If I were you, I’d be putting at least half your money into a global equity index tracker, sheltered within an ISA.

Saleen836

11,061 posts

208 months

Thursday 26th April 2018
quotequote all
UnwiseOwl said:
Three years have passed.

Total is doing about 10% better than expected at £118k, and the 81k-5k-32k split cash-S&S-pension is very close to what I aimed for.

Life situation is unchanged except for being older (30) and earning around 50k. Single, no kids, no debts, same £5k car. Still renting a 500/mth flat, and not inclined to drop an anchor by buying a house anywhere as I thought I might have been by now - job security/flexibility, no ties or partner.

Currently saving £1800 a month, £1k of it into cash (ISA, LISA, fixeds, regular savings), £100 to S&S, and £700 gross to SIPP pension (including max matched contributions). Wondering if I should continue like this, building up the cash for that house deposit I'll eventually need, and keeping the proportion of total assets in pension flat? When the time comes, the 81k cash I already have is enough for a 66k deposit (that's 40% on a 165k house) and 5k costs, leaving a 10k cash buffer/emergency fund. Or shift the monthly a bit more towards S&S for a better medium term return and offset inflation? Another 3 years as per current, disregarding growth/loss and pay rise/fall, would put me at 117k cash, 9k S&S, and 57k pension.

I feel reasonably well off with these numbers, but I know I'm not compared to many others who earn more and/or have mortgaged houses funded with a partner or parents' help. But I'm also a bit anxious about money and financial security, as I've always been and always will be, and especially with the current political uncertainty.

Just to avoid going over old ground again - I'm not interested in the commitment/hassle of a property whether it's to live in or rent out, and my current rented place still at the same price is better value now than it was in 2015.
Each to their own but taking rent/bills and the amount you save out of your monthly salary doesn't leave you a great deal, have you enjoyed life over the past few years or just dedicated yourself to work and save?

NRS

22,080 posts

200 months

Thursday 26th April 2018
quotequote all
I'm actually in a pretty similar position to the OP, but more asking the same question as the start of this thread. 30yo, and single. Recently moved and sold my place, so have no apartment/mortgage. However to buy/sell it costs about £15-17k total, and between that and the interest on a mortgage it is around 3-4 years to break even, assuming a flat housing market. I'm almost pretty sure I'll be here 2-3 years. So it rules out buying a house.

No debt
Have around £63k in "high" interest savings accounts (3.2%) in which you are only allowed to spend it in the future on a house (or pay a 5% cost)
£4.5k in open cash savings account in case I need it
£3k in normal account. Looking at where best to put this. Probably will use some of it on holidays etc.
£17.5k in company share saving
£11k in some other individual company shares
£7k in several funds (cheap global index, tech, dividends and a 50/50% shares-interest)
£10k cash for buying shares if I see a company I like/ market drops/ putting into funds above.
£18k in pension (plus government pension separately - being in Norway this might actually survive another 37 years!)
£15-20k in whisky!

Currently moving more free cash into the funds as I just got my house money, but cost averaging as the market here is at an all time high, and it's a bit late in a economic cycle to go all in IMO. Plus don't want too high an exposure to shares as I'd likely buy soon after moving when I do. Don't think there is much else than I am doing currently. Probably could improve the allocation in terms of risk though.


Edited by NRS on Thursday 26th April 19:01

NickCQ

5,392 posts

95 months

Thursday 26th April 2018
quotequote all
NRS said:
£15-20k in whisky!
eek

Seems like a big allocation in the context of your total assets?
I'd say the same about how much money you have tied up in your employer's shares. I am part of a similar scheme and I sell as much as I can - the way I see it is that I am already massively exposed to my employer (i.e. job risk), so I want to diversify away from that as much as possible.

On the other question I don't think it makes sense to put your cash in the equity market if you are potentially buying <5 years from now.
The £10k fun money to play the stock market is fine but by the law of averages that money will probably underperform a low cost index tracker, especially with retail customer trading costs. 3.2% interest actually seems pretty good (depending on where in the world you are).

NRS

22,080 posts

200 months

Thursday 26th April 2018
quotequote all
NickCQ said:
NRS said:
£15-20k in whisky!
eek

Seems like a big allocation in the context of your total assets?
I'd say the same about how much money you have tied up in your employer's shares. I am part of a similar scheme and I sell as much as I can - the way I see it is that I am already massively exposed to my employer (i.e. job risk), so I want to diversify away from that as much as possible.

On the other question I don't think it makes sense to put your cash in the equity market if you are potentially buying <5 years from now.
The £10k fun money to play the stock market is fine but by the law of averages that money will probably underperform a low cost index tracker, especially with retail customer trading costs. 3.2% interest actually seems pretty good (depending on where in the world you are).
The whisky's not supposed to be an investment, but quite a few of the bottles have gone crazy in price, so much so it's like you see. Whisky has basically turned into an asset bubble like cars, and so almost everything has gone up in value. One of my bottles has increased around 10x original purchase cost, which is just silly. So it certainly wasn't what I spend on it, but where it is now. I sell some of them if they just get too silly.

I thought there might also be a comment about employer share saving. Buy 1 share, get one free if you hold it for 2 years. Large company that's over 50yo, so less risk of it going completely bust. It's also oil, so I sold 50% that I got awarded this year, but have kept the rest due to predicting oil would recover more this year. So far it's up 16% since the bonus shares were awarded at the start of the year, including the quarterly dividend. So waiting to sell was worth the extra risk, as I have cash available to survive for a while in the worst case. It's also Norway, so it's pretty hard to fire here. We got voluntary packages during the oil downturn, but nothing forced.

So far in the last few years I have done better than the market here. Obviously that's still quite short term. I don't really trade though, more just invest for certain periods if there is something that looks good. I've just been slowly price averaging in funds, but the mis-weighting is due to a lot of money coming at once from house sale, so I'll increase the funds payments.

You've certainly got a point about the house purchase and stock exposure. My thought was I have enough for a deposit based on the money in the cash savings. So in the worst case I can still buy, and wait out a crash without needing to sell the stocks that were smashed. The 3.2% interest accounts are full now, so I would have around 1.6% elsewhere max in cash.

I'm probably a lot more risky than some would be - perhaps because I haven't been invested over a proper collapse, just corrections so far.

UnwiseOwl

Original Poster:

9 posts

107 months

Thursday 26th April 2018
quotequote all
ghamer said:
So what's the plan going forward?
Unsure and undecided, hence resurrecting this thread!

Du1point8 said:
Whats the end goal?

you now have 118k in the bank and no assets.

what are you going to spend it on or just keep saving until what?
Good question. Sometimes I'm not sure if I know, but the answer is it'll all be needed (and much more) for a paid-off house and retirement. I don't think I'm in danger of dying with a fortune, more likely to lose it through unemployment/illness or divorce. But those apply to assets just the same.

The T Boy said:
At your age I'd suggest putting more into equities as that will likely give you a much better return than cash over a long term.

As you don't seem in any rush to buy a property then there is no need to keep huge amounts of cash available. If you held enough for say a 10% or 20% deposit (should your buying circumstances change) then if the market was up you could sell some equities to increase the deposit or, if the market was down, pay a lower deposit and wait for the market to recover before selling equities to pay the mortgage down. Interest rates might stay low enough that you are happy with a smaller deposit anyway.

If you continue to rent then it sounds as though 20k would be more than enough to survive on for at least a year should you unexpectedly lose your job so maybe keep that much in cash and move the rest into equities.

Basically, at 30 years old with no commitments and enough emergency cash already saved, your money would be better off in higher growth and risk assets. The main bulk of your savings is probably getting reduced by inflation. Your portfolio mix is closer to that of someone trying to reduce risk as they near retirement age. You've made a great foundation at a relatively young age so take some risk now to maximise the chance of growth - you've got 35 years to ride out any market falls!
Thanks. I'm considering equities, would need to be a gradual shift though to avoid going in at an all-time market high like NRS pointed out. Interest on my cash is just over 1k a year, I'd need another 1.7k just to stay still with the RPI inflation currently at 3.3%. Add my renting premium and that's 5.7k a year or 475/mth gone. I'm think my pension mix of 60:40 equities:bonds is ok, but my overall mix is off as you say - it's ended up this way as I've always thought I'd be ready to settle on a house in the next 2-3 years.

princeperch said:
The other issue is leverage. And the fact you can't live in a share.
True. Even though I don't really want to be in property, some of these numbers might force me.

Scootersp said:
I get your anxiety but I'd say you've got the money side of things covered and will never be really reckless or let things go too far south!

What are your passions in life? Hobbies or goals, family thoughts etc, this is where I'd focus your time ie making them happen, if you are happy as you are 100% fine but if there is something you want to do/pursue do it, maybe have a year where you spend a good chunk of the monthly saved cash, or take a sabbatical from work if that's an option?

As with all anxiety's don't let them rule your life.
Thanks. Into cars and travelling. 5k buys an ok old car, and 2k a year gives me two weeks away. Not expecting to have a family, given the way I am this is part choice and part involuntary. Could spend more, I'd need to make sure it'd be worth it though and avoid getting used to it. Sabbatical not an option, frowned upon by employers and cost a lot more in lost earnings than spent cash.

Dr Mike Oxgreen said:
At the moment you’re being “recklessly prudent”. In other words, you’re being so cautious that you’re throwing away the chance to be substantially richer in the future.

You really shouldn’t be keeping such a lot in cash, and throwing such a lot of new money into it. I don’t know what interest rate you’re getting, but I’d be willing to bet it’s less than inflation - and therefore your cash is shrinking, not growing. Just because you’re seeing an interest payment go into the account every year/month doesn’t mean you’re getting richer in real terms.

It sounds like your goals are quite indistinct, and therefore probably long term. Equities are what you should be putting a lot of your money into. IMHO people erroneously talk about “risk” in relation to equities when really they’re talking about volatility, which becomes an irrelevance over the long term. Over a long enough period of time the stock market is unlikely to lose you money if you hold your nerve and keep your holdings during downturns.

If I were you, I’d be putting at least half your money into a global equity index tracker, sheltered within an ISA.
Thanks. I was aware of the inflation aspect but hadn't worked out how much it was costing me until earlier in this post.

Saleen836 said:
Each to their own but taking rent/bills and the amount you save out of your monthly salary doesn't leave you a great deal, have you enjoyed life over the past few years or just dedicated yourself to work and save?
Put a lot into work and self-improvement related to work, which has paid off. I've been enjoying some things, car weekend trips, 8k on holidays in 3 years. Not dedicated, but not living it up either. I'm leaving myself 300 a month for anything-goes guilt-free, carrying forward unless spent, otherwise I'd probably save even more!

NRS said:
to buy/sell it costs about £15-17k total

£15-20k in whisky!
eek x2

Huff

3,141 posts

190 months

Thursday 26th April 2018
quotequote all
Unsexy but a very long-term view - one of several possible:

You've obviously no problem saving at a very high rate, and building liquid savings.
You've got a monster deposit vs many, and could easily buy property well with much less.
Return on cash savings on deposit is lousy compared with other uses for cash; it actually costs you, long-term: esp if you do not actually need instant liquidity.
Your outgoings, even the planned-fun pot, is easily covered and obvs under control.

So - the unpopular idea - shovel a chunk of your savings into the pension pile now, and let compound gains do the rest for ~30yrs. You can contribute up to 50K in one year without issue.

Logic: If/when you buy - that pot will already doing its thing, if you need to flex (ability to save overall vs outgoings/mortgage pay-down) later.
It doesn't affect your rate of 'saving' meanwhile at all. It's money spread likely upon wider markets than you look at, so low-risk. It'll help secure a fine future long-term, whatever happens.

Edited by Huff on Thursday 26th April 22:01

Condi

17,089 posts

170 months

Thursday 26th April 2018
quotequote all
Ffs go and enjoy your youth....


Each to their own, but Im not a dis-similar age, bought a house 4 years ago and its increased in value by £130k or so. Granted I spent 40k improving the place, but my housemates essentially paid for that. I dont save, other than maxing out the company pension, and basically spend what I want, on what I want, and save anything left over.


What fun, or use, is money in the bank? It only every has 1 use, and that is to be spent eventually. You can save for a rainy day, but having had 2 or 3 friends/acquaintances pass away over the last year, each at a much too young age, your rainy day might never come. Dont turn into scrooge waiting for tomorrow, one day tomorrow wont come and the last thing you will care about will be money in the bank, but what might bring you a smile is the good times you had and the places you went.

Scootersp

3,107 posts

187 months

Friday 27th April 2018
quotequote all
UnwiseOwl said:
Thanks. Into cars and travelling. 5k buys an ok old car, and 2k a year gives me two weeks away. Not expecting to have a family, given the way I am this is part choice and part involuntary. Could spend more, I'd need to make sure it'd be worth it though and avoid getting used to it. Sabbatical not an option, frowned upon by employers and cost a lot more in lost earnings than spent cash.
Well to me you sound 'content' which imo is no bad thing! It's often seen as lacking ambition or drive but those things can be stressful for some and we are all different, you are happy with your lot and don't 'want' much.

I sort of see it as refreshing! someone is into cars, but only has a £5K one with the often quoted backdrop of people financing new cars and not having much if any savings, but I do agree with some re the live a little mantra in that if you want to do something one year that's a bit extravagant, just do it, at your age a year of breaking even and no savings made isn't the end of the world, neither would be a larger car purchase on a personal loan (the loan might help credit rating/mortgage wise ultimately?) if you fancied it.

NickCQ

5,392 posts

95 months

Friday 27th April 2018
quotequote all
Yes, seems like OP has managed to step off the hedonic treadmill that gets most of us working ever harder to satisfy ever more ridiculous standard of living expectations!

If everyone did that the consumer economy would crash overnight biggrin. So OP, it’s your patriotic duty to report to your nearest shopping centre and start buying tat you don’t need, preferably using a 30% APR storecard.