Best way for a modest earner to plan some savings for Future
Discussion
I’m getting on for my late twenties now and me and the Mrs have started to think seriously about finances and our future.
I do okay. Not great, but okay. We’ve just put our things in to storage and moved in with her parents to speed up saving for a mortgage deposit.
I do worry about once we have a mortgage and at some point children etc, how we will go about saving enough, and making our future more comfortable.
Some people say you should buy the most expensive house you can afford, and it’ll pay off down the line. Personally I’d like to get a more affordable house and over pay.
I suppose i’d just be keen to hear some opinions on that, and also how best to save or invest a fairly small amount of money there after, say 2-400 pounds per month, be it overpay the mortgage or S&S ISA, put more into a pension....
Any advice appreciated and listened to, as until now I have been hopeless with money, but as an hourly paid contractor on decent money, it didn’t really matter. I’m now full time and need to be a bit more shrewd!
Thanks
John
I do okay. Not great, but okay. We’ve just put our things in to storage and moved in with her parents to speed up saving for a mortgage deposit.
I do worry about once we have a mortgage and at some point children etc, how we will go about saving enough, and making our future more comfortable.
Some people say you should buy the most expensive house you can afford, and it’ll pay off down the line. Personally I’d like to get a more affordable house and over pay.
I suppose i’d just be keen to hear some opinions on that, and also how best to save or invest a fairly small amount of money there after, say 2-400 pounds per month, be it overpay the mortgage or S&S ISA, put more into a pension....
Any advice appreciated and listened to, as until now I have been hopeless with money, but as an hourly paid contractor on decent money, it didn’t really matter. I’m now full time and need to be a bit more shrewd!
Thanks
John
Do you already pay into a pension? Have you maxed your employers contribution? That is a no brainer if they are putting money in.
Having some emergency cash is good - in case a car needs replacing or you lose a job etc... You can still afford to eat for a few months!
I fairly regular chuck a small amount at over paying my mortgage, I could at face value get slightly higher by investing in my ISA but it had the benefit of getting me below the 75% LTV band and consequently on a better rate come remortgage time, result! It also feels much better seeing the balance drop slightly.
Having some emergency cash is good - in case a car needs replacing or you lose a job etc... You can still afford to eat for a few months!
I fairly regular chuck a small amount at over paying my mortgage, I could at face value get slightly higher by investing in my ISA but it had the benefit of getting me below the 75% LTV band and consequently on a better rate come remortgage time, result! It also feels much better seeing the balance drop slightly.
Personally, I threw every penny I could spare at the mortgage till it was gone. My theory is that any money you use for other things while you have a mortgage is effectively borrowed money. So the question was always ‘would I borrow money to buy/do this?’
As to your other point. I bought a modest house, cleared the mortgage and got on with life. It’s just a house.
Always remember being at school with a boy who’s parents had modest jobs. They had a really lovely house but lived like church mice, no car, no proper holidays, and every summer the poor kid would have to move into the garage so they could let his room. They lived their whole lives like that and then died. Just for a big house.
Okay, that’s probably an extreme example, but what a waste...
As to your other point. I bought a modest house, cleared the mortgage and got on with life. It’s just a house.
Always remember being at school with a boy who’s parents had modest jobs. They had a really lovely house but lived like church mice, no car, no proper holidays, and every summer the poor kid would have to move into the garage so they could let his room. They lived their whole lives like that and then died. Just for a big house.
Okay, that’s probably an extreme example, but what a waste...
My advise, don't scrimp on a house.
We bought a 2 bed semi in our early 20's as we got told the wife may not be able to conceive easily. We thought small house, cheaper to run.
5 years later it was on the market as we needed a bigger house for our second child.
New house cost us £60k more than the old house, which we could have probably afforded 6 years earlier but we would have avoided moving, mortgage costs, and the new kitchen bathroom and boiler would have been used.
We bought a 2 bed semi in our early 20's as we got told the wife may not be able to conceive easily. We thought small house, cheaper to run.
5 years later it was on the market as we needed a bigger house for our second child.
New house cost us £60k more than the old house, which we could have probably afforded 6 years earlier but we would have avoided moving, mortgage costs, and the new kitchen bathroom and boiler would have been used.
strain said:
My advise, don't scrimp on a house.
We bought a 2 bed semi in our early 20's as we got told the wife may not be able to conceive easily. We thought small house, cheaper to run.
5 years later it was on the market as we needed a bigger house for our second child.
New house cost us £60k more than the old house, which we could have probably afforded 6 years earlier but we would have avoided moving, mortgage costs, and the new kitchen bathroom and boiler would have been used.
I somewhat agree - but things change. ie wages increase, mortgage LTV improves. I took a similar approach to you. However, the move from our first purchase was funded by a move of company and included relocation costs. However, my wife did not have a job immediately so our second house budget was restricted so a three bed semi was purchased. Finally, we both had better jobs with greater wages and some additional savings to pay for it - so our third and current house is a four bed semi (converted Stable House).We bought a 2 bed semi in our early 20's as we got told the wife may not be able to conceive easily. We thought small house, cheaper to run.
5 years later it was on the market as we needed a bigger house for our second child.
New house cost us £60k more than the old house, which we could have probably afforded 6 years earlier but we would have avoided moving, mortgage costs, and the new kitchen bathroom and boiler would have been used.
Life is a balance and when younger (and without kids!) holidays, cars and pension should take precedence over a house, in my opinion. A larger house can come later.
Mike
<For context ..... First house was 2 bed semi and owned for three years. Second house was owned for seven years. Third house now owned for 11 years....>
The fewer times you need to move house the better. Once you’re into the realms of expensive stamp duty, the purchase and sales % fees also bite harder.... as above, unless you go new build there’s also the potential for multiple kitchens and bathrooms along the way too.
I love our house, but I’d like somewhere on it’s own with no pain in the arse neighbours. I’m completely put off moving by the costs involved though - 5 figure stamp duty for a start.
If I were you, I’d be going for a 3 bed if you can stretch to it, so that you’re future proofed for kids if it happens.
I love our house, but I’d like somewhere on it’s own with no pain in the arse neighbours. I’m completely put off moving by the costs involved though - 5 figure stamp duty for a start.
If I were you, I’d be going for a 3 bed if you can stretch to it, so that you’re future proofed for kids if it happens.
Depends when you think you're likely to want the money.
Pensions - Probably the best option for long term as you get the tax you've already paid back, but you're not getting your hands on it until you retire so no use if you're looking to buy a house.
Overpaying mortgage - Check the rates, you may be able to get better returns on long term investments (not forgetting you're paying tax on the income) than you're paying in interest on the mortgage, in which case keeping the money out gives you more options. You're also not going to get that money back without remortgaging or moving house which may or may not be an issue.
Monthly saver ISA's make some sense as you're getting a decent interest rate right from the start, but watch when the rate drops off, some only give the headline figure for a year.
However as you don't have a mortgage yet it'd be worth looking at the Help to Buy ISAs, basically the government tops up your savings by 25% up to £3000 if you use it as a deposit on a house.
Pensions - Probably the best option for long term as you get the tax you've already paid back, but you're not getting your hands on it until you retire so no use if you're looking to buy a house.
Overpaying mortgage - Check the rates, you may be able to get better returns on long term investments (not forgetting you're paying tax on the income) than you're paying in interest on the mortgage, in which case keeping the money out gives you more options. You're also not going to get that money back without remortgaging or moving house which may or may not be an issue.
Monthly saver ISA's make some sense as you're getting a decent interest rate right from the start, but watch when the rate drops off, some only give the headline figure for a year.
However as you don't have a mortgage yet it'd be worth looking at the Help to Buy ISAs, basically the government tops up your savings by 25% up to £3000 if you use it as a deposit on a house.
I'd caution agaisnt just ploughing all your money into your mortage for a couple of reasons. Firstly, once you've paid it in you can't easily get it back out. Secondly when you can borrow for less than 2%, it would make more sense to invest a couple of hundred a month (preferably via a S&S ISA). Not only can you get your hands on this money at any time for an emergency, if you take long term view your money is likely to grow a lot more quickly than 2% p.a.
CaptainSensib1e said:
I'd caution agaisnt just ploughing all your money into your mortage for a couple of reasons. Firstly, once you've paid it in you can't easily get it back out. Secondly when you can borrow for less than 2%, it would make more sense to invest a couple of hundred a month (preferably via a S&S ISA). Not only can you get your hands on this money at any time for an emergency, if you take long term view your money is likely to grow a lot more quickly than 2% p.a.
I'm with you on this. Defo get as decent a place as you reasonably can, but remember to be able to live...you are only young once, & what's more, life can take interesting turns.If you want a longer term thing, S&S ISA (likes of Vanguard LifeStrategy looked good to me, just got our 'kids' (20's) to open that & I will help contribute whilst I can)
gibbon said:
Why pay off a debt that you are borrowing at below inflation?
Stay liquid, save money, invest / save as your risk appetite dictates then use the money to adjust should the rate scenario change.
This is fine for people who are extremely strict with themselves. For me, having the temptation of easy access cash is a bad thing. Man maths would very quickly lead to a 205 GTi - I don’t need 3 cars, never mind 4.Stay liquid, save money, invest / save as your risk appetite dictates then use the money to adjust should the rate scenario change.
For that reason, I prefer having my overpayments locked away against the mortgage.
rossub said:
This is fine for people who are extremely strict with themselves. For me, having the temptation of easy access cash is a bad thing. Man maths would very quickly lead to a 205 GTi - I don’t need 3 cars, never mind 4.
For that reason, I prefer having my overpayments locked away against the mortgage.
It works for me!For that reason, I prefer having my overpayments locked away against the mortgage.
Then again, I'm a complete miser when it comes to my own pleasure
rossub said:
Well let’s hope you don’t regret it later in life if you’re no longer physically able to enjoy the money you’ve built up 
My own mother said the same thing just last weekend. At some point there will be a car or something that I really want and then I'll probably loosen up!I should probably work on it before it's too late though. I find myself skimping on basic foods unless I keep myself organised
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