Invest now or keep saving?

[V 02]

TLDR: Do I buy a flat and rent or continue to save?

21 years old


I’m 21, still at uni, but working full time.

I’m the main breadwinner in a single parent household although my mum does contribute a lot too. I consider myself as definitely doing well for my age. I’ve applied for a promotion at work which if I am successful will see around a 20% increase in my pay initially and after 2 years I will be earning another 20% on top of that.

I am quite a savvy spender apart from on cars (this is PH). For example I don’t go out clubbing or drinking much and if I do i go to student areas to spend little and save the fine dining etc for special occasions.


I have about £20,000 saved, of which about half is from an inheritance and half from my own savings.

My job gives me a personal transport allowance as I travel from outside London, so I leased a Mercedes EQC. Man maths pays for the insurance which is a big bill.

I’m selling my existing BMW 330e for around £12,000 in cash and putting that into savings. I should get a circa £3.5k refund on the car insurance once it’s been sold. I’ll keep £1k to supplement myself, so thats £14,500 going back into savings.



So I should have around £34.5k deposit


Salary, about £27k right now , yes its not a lot but I supplement any difficult months with student loans (which I invest into other forms) so I don’t have to borrow, I also don’t think its too bad for a first proper job. My mum earns a bit less but is tied down with other bills. I


Existing bills:

To help out my mum, I took on all of her debt, which was around £8000-9000 and being dragged out for years. This was primarily in the form of credit card debt, I can’t recall how exactly I managed to balance transfer it into my name but I did. It’s mutually beneficial as it allowed me to build my own credit history as I am not a spender, and has allowed her to rebuild her own credit history. I pay around £300 a month at the moment, and as a result of never missing a payment I have decent history. About a year left now.


£404 a month on the EQC is the bill but the actual impact on the wallet is less.


£290 a month on a new Fiat 500 I got for my mum and sister, but my mum pays me £100 a month for it, my sister £75

£500 a month total in insurance for both the EQC and the 500 as it’s in my name.

I lend my best friend £200-300 a month which she has been reliably repays, usually with interest. Although I have told her to get her finances in order as she earns about £35000 a year and has no bills. But we’ve been friends for donkeys. Sometimes she pays it back in a day or a week and other times she pays it back in a month. Im assuming this doesn’t count towards declaring?


My own bills due to a big spend on fixing gubbins with the BMW - £150 a month on a 22 month Barclaycard 0% interest card , mor e reason to get rid as I don’t have time to be fixing endless crap on unreliable cars.


Rent - only £100 a month as I made my mum debt free. She rents the home so we are not homeowners.

I can clear existing a lot of debts with SFE loans in order to improve my record to buy a flat..

That would leave around £1200 a month in bills.




I live in the home counties so houses here are expensive. I saw a 1 bed flat in St Albans for £175,000.

1) Am I better off buying a flat and renting it out to supplement my income or continuing to save?

2) should i buy cheaper and further?


3) should i spend less?

Edited by V 02 on Wednesday 14th February 10:21

Edited by V 02 on Wednesday 14th February 10:22

[mike13]

The first thing to do is stop lending money to a so called friend who earns more than you, you say they're reliable, they're not.

[V 02]

mike13 said:

The first thing to do is stop lending money to a so called friend who earns more than you, you say they're reliable, they're not.

I just told her she needs a reality check and that I won’t be paying her any more money after the end of the month when she gives me her final bill owed for this month.

I mean its nuts she doesn’t even have £5 to her name for lunch and she’s £1,000 in overdraft on an income of £2.3k/mo with no bills to pay. (A £10 giffgaff bill doesn’t count)

Pissed me off when she went to Hakkasan for a girls’ night straight after her pay day when she couldn’t even afford the tube to work the day before.


But that’s a story for another thread

[mike13]

V 02 said:

I just told her she needs a reality check and that I won’t be paying her any more money after the end of the month when she gives me her final bill owed for this month.

I mean its nuts she doesn’t even have £5 to her name for lunch and she’s £1,000 in overdraft on an income of £2.3k/mo with no bills to pay. (A £10 giffgaff bill doesn’t count)

Pissed me off when she went to Hakkasan for a girls’ night straight after her pay day when she couldn’t even afford the tube to work the day before.


But that’s a story for another thread

You should have got your money back before telling her she's not getting anymore, you're now bottom of the list of people she owes.

[okgo]

mike13 said:

You should have got your money back before telling her she's not getting anymore, you're now bottom of the list of people she owes.

She’s not a mate, she’s just using you.

Anyway, what is the end goal here for you? Buying properties as businesses can work well of course but usually isn’t the only answer, and often isn’t the correct one IMO

[Pent]

i think martin lewis tells everyone to pay debts first and then save / have savings.

buiyng a flat to rent out has all sorts of headaches attached to it.. and then when you want to buy a house for yourself , your not a first time buyer anymore? im sure there are other things to consider too

[V 02]

okgo said:

mike13 said:

You should have got your money back before telling her she's not getting anymore, you're now bottom of the list of people she owes.

She’s not a mate, she’s just using you.

Anyway, what is the end goal here for you? Buying properties as businesses can work well of course but usually isn’t the only answer, and often isn’t the correct one IMO

It’s a bit more than just that we have been close friends for 10 yrs long before we got into the world of work and we have been through loads of up and downs but she has never let me down

I always get daily updates on status and I have borrowed from her before including large amounts. It is profitable for me because usually she will give large amounts of interest eg last month i got an extra £30 on the £200 she owed but I’ve only started doing that to discourage her from borrowing.


But I don’t need to lend her this money and I had a proper go at her when I found out she was borrowing money off me so she could then immediately lend to her friends to help them out , she basically got scammed by her “bestie” who begged her for money (for £300) and then had to pay me all of that back days later. (Because I am not a charity). It’s insanity - if you can’t afford to lend then you don’t!


She’s got a good heart but she’s very naive and silly and she has got a load of growing up to do. She did cry when I dug into her but it had to be done because her lifestyle is far too lavish and stupid so I couldn’t feel too guilty.


If I demand the money (which I have done before when I’m extra hard up) she has gone and got it from her mum. But I basically try not to let money get between us and affect our friendship as she’s done a lot for me.

Thats also why I am choosing to end borrowing to her and instead will only offer her financial advice. I told her and she agreed to it.

Edited by V 02 on Wednesday 14th February 13:38

[V 02]

Pent said:

i think martin lewis tells everyone to pay debts first and then save / have savings.

buiyng a flat to rent out has all sorts of headaches attached to it.. and then when you want to buy a house for yourself , your not a first time buyer anymore? im sure there are other things to consider too

I did consider that, but I am only really considering buying a place that I can then live in the future, so not too worried about the first time buyer implications

I don’t plan to move out until I’ve finished master’s degree and settled in to a higher level job, so at least 5yrs. If i leave too early it would also cause financial stress for my mother due to having siblings.


I would really just let the estate agent do all the work.


The end goal is just to pad my income at the moment as I cannot reasonably contribute to savings and I am in a weird position where I am not able to save much due to taking on an increased influence over the family home and the necessary bills and don’t want to see it dwindle. I thought I’d better invest it into an asset like a home before I see it disappear, and also make passive income at the same time

Edited by V 02 on Wednesday 14th February 14:02

[The Cardinal]

OP: I think you would do well to post this, perhaps with a little more detail on expenditure, on a Money Saving Expert forum. It's great to hear that you have savings and are thinking about how to make future plans.

There are undoubtedly opportunities to boost your finances. From the little you've shared it seems obvious that you could consolidate your car costs. If I've read the above correctly you are committed to £1.2k (?) per month on car payments and insurance alone, which must be >50% of your post-tax income.

The thing that stands out for me is how interwoven your finances appear to be with your Mum, sister and friend. I don't know whether that's something expected of you, and / or you consider negotiable? These dependencies would seem to limit your ambitions at any income level really, but especially at the present level.

[V 02]

The Cardinal said:

OP: I think you would do well to post this, perhaps with a little more detail on expenditure, on a Money Saving Expert forum. It's great to hear that you have savings and are thinking about how to make future plans.

There are undoubtedly opportunities to boost your finances. From the little you've shared it seems obvious that you could consolidate your car costs. If I've read the above correctly you are committed to £1.2k (?) per month on car payments and insurance alone, which must be >50% of your post-tax income.

The thing that stands out for me is how interwoven your finances appear to be with your Mum, sister and friend. I don't know whether that's something expected of you, and / or you consider negotiable? These dependencies would seem to limit your ambitions at any income level really, but especially at the present level.

Sadly yes, that’s how it would look to the bank manager, even though the actual implications on my wallet is much less than £1.2k, but I am in financial contracts to “pay” this much


The friend is being removed from the equation

The mum and sister cannot, my mum has been financially ruined by my dad and now relies on me to supplement her income. This in turn is making my financial situation appear more complicated.

I consider myself much more comfortable than the actual figures suggest, at no point do I consider myself to be struggling


The insurance is the biggest thing that affects me, Yes i am running a brand new £80k 400bhp car but the price of just insuring a Ford fiesta was £1k less… its madnesss and im sure you can see the man maths involved in going for this instead



I am discouraged from talking on MSE for that reason - I’d get bullied off due to choosing to spend on stuff like a nicer car


I fell out with my dad after telling him to get a job (he used to earn a 6 figure sum) and the fact that before i started working my arse off to provide for my family and to build my own assets and life, we were penniless with a £1k st box and eating reduced bread from aldi for dinner, he used to give my mum a paltry £75 a month in child support (while earning a 6 figure sum remember), and now he pays us £0 for the last 3 years

He has done good things for me (e.g he got me my first car) I don’t hate him, but he can be a bit of a tosser and he definitely does take my mum for a mug

Edited by V 02 on Wednesday 14th February 14:05

[beambeam1]

From the outside looking in, I would split that pot into something like a Help to Buy LISA and the rest in some form of easy access savings. That way you won't be over committed until you tidy up everything else going on around your financials. You certainly have done well by 21 to be where you are but a lot of your month to month finances also depends on people paying you or paying you back - if you didn't have the savings you'd very quickly and easily come undone should they all stop. Illness, losing a job, falling out... it happens to the best of us.

And make sure those around you are not mistaking kindness for weakness!

[V 02]

beambeam1 said:

From the outside looking in, I would split that pot into something like a Help to Buy LISA and the rest in some form of easy access savings. That way you won't be over committed until you tidy up everything else going on around your financials. You certainly have done well by 21 to be where you are but a lot of your month to month finances also depends on people paying you or paying you back - if you didn't have the savings you'd very quickly and easily come undone should they all stop. Illness, losing a job, falling out... it happens to the best of us.

And make sure those around you are not mistaking kindness for weakness!

I have £17,000 in a LISA, £3000 used to be in a high interest bond but now it is in with Chase savers.


I think I have £2k tied up in an ETF with Hargreaves but to be honest with you I had forgotten about it and ever since I got a new phone i never bothered signing in.

£14.5k is obviously tied up in this BMW which is a great car but a pain to sell.

And good comments thank you.

Edited by V 02 on Wednesday 14th February 14:12

[The Cardinal]

V 02 said:

The Cardinal said:

OP: I think you would do well to post this, perhaps with a little more detail on expenditure, on a Money Saving Expert forum. It's great to hear that you have savings and are thinking about how to make future plans.

There are undoubtedly opportunities to boost your finances. From the little you've shared it seems obvious that you could consolidate your car costs. If I've read the above correctly you are committed to £1.2k (?) per month on car payments and insurance alone, which must be >50% of your post-tax income.

The thing that stands out for me is how interwoven your finances appear to be with your Mum, sister and friend. I don't know whether that's something expected of you, and / or you consider negotiable? These dependencies would seem to limit your ambitions at any income level really, but especially at the present level.

Sadly yes, that’s how it would look to the bank manager, even though the actual implications on my wallet is much less than £1.2k, but I am in financial contracts to “pay” this much


The friend is being removed from the equation

The mum and sister cannot, my mum has been financially ruined by my dad and now relies on me to supplement her income. This in turn is making my financial situation appear more complicated.

I consider myself much more comfortable than the actual figures suggest, at no point do I consider myself to be struggling


The insurance is the biggest thing that affects me, Yes i am running a brand new £80k 400bhp car but the price of just insuring a Ford fiesta was £1k less… its madnesss and im sure you can see the man maths involved in going for this instead



I am discouraged from talking on MSE for that reason - I’d get bullied off due to choosing to spend on stuff like a nicer car


I fell out with my dad after telling him to get a job (he used to earn a 6 figure sum) and the fact that before i started working my arse off to provide for my family and to build my own assets and life, we were penniless with a £1k st box and eating reduced bread from aldi for dinner, he used to give my mum a paltry £75 a month in child support (while earning a 6 figure sum remember), and now he pays us £0 for the last 3 years

He has done good things for me (e.g he got me my first car) I don’t hate him, but he can be a bit of a tosser and he definitely does take my mum for a mug

Edited by V 02 on Wednesday 14th February 14:05

It's certainly not your typical MSE case study! I agree your savings suggest some higher or additional income sources at some (earlier?) stage.

Taken together with a re-look at your costs, you might find yourself with more options for making investment and property commitments - which in turn are future gifts, with interest, to yourself and those close to you... if you choose.

Younger experiences do indeed shape our attitudes. Perhaps another forum for inspiration would be one of the sub-forums over at Mr Money Mustache.

[V 02]

The Cardinal said:

It's certainly not your typical MSE case study! I agree your savings suggest some higher or additional income sources at some (earlier?) stage.

Taken together with a re-look at your costs, you might find yourself with more options for making investment and property commitments - which in turn are future gifts, with interest, to yourself and those close to you... if you choose.

Younger experiences do indeed shape our attitudes. Perhaps another forum for inspiration would be one of the sub-forums over at Mr Money Mustache.

The additional income sources came from claiming home students living at home Student Finance and profiting from it. I moved back from Uni as even though I loved it the impact of my mum’s finances and the stress of having to look after the house from 200 miles away became to much to bear and I became depressed and at some points worse than depressed.

So I took the SFE, got a job (declared to them) and then invested the student finance into other forms such as savers and tracker funds. I also invested in sneakers (anyone from the Sneakerheads thread?) and resold for profit. I also used that money to clear my mum’s debt so I can have more spare income. This is after calculating that i would be better off claiming it than not claiming at all. And ive been fighting tooth and nail for more and more pay at work, I’m now at the maximum of my pay band and working hard to become a scientist and gain more expendable income.

[BoRED S2upid]

Quite a lot to unpick there. Most been done so all I will add is to concentrate on your career you don’t want to be a landlord so young. (Landlord of 20 years).

[superlightr]

BoRED S2upid said:

Quite a lot to unpick there. Most been done so all I will add is to concentrate on your career you don’t want to be a landlord so young. (Landlord of 20 years).

yep. I would add make sure you pay into a pension and get your employer to max out if you can.

£6k on car insurance? ECQ Merc? do you get taxed BIK on that? Cars are great but blimey the BIK + Ins is going to be a large drain on your disposable income - better uses of it I would have thought to help secure your own property perhaps.

The friend you are lending too - as others have said - that will bite you. As its a regular thing then you are likely to be classed as an Unregulated credit provider /loan shark which is illegal - dont do any more. Criminal offence.

[V 02]

superlightr said:

yep. I would add make sure you pay into a pension and get your employer to max out if you can.

£6k on car insurance? ECQ Merc? do you get taxed BIK on that? Cars are great but blimey the BIK + Ins is going to be a large drain on your disposable income - better uses of it I would have thought to help secure your own property perhaps.

The friend you are lending too - as others have said - that will bite you. As its a regular thing then you are likely to be classed as an Unregulated credit provider /loan shark which is illegal - dont do any more. Criminal offence.

I don’t pay BIK as I don’t have a car allowance as such. So i did a personal lease. A trasnport allowance which other colleagues use for trains. Believe me I would rather commute by Tube but my office is on the Northern line which is a right pain in the arse as I don’t live anywhere near a station on that line. If i was a sole trader the BIK would have only been 2% anyway and only paying effectively 10% VAT.


I contribute 5.45% to pension and employer near to 28%


I am stopping lending to the friend.

[V 02]

BoRED S2upid said:

Quite a lot to unpick there. Most been done so all I will add is to concentrate on your career you don’t want to be a landlord so young. (Landlord of 20 years).

My friend (different one)’s dad is a property manager and the mum is a mortgage advisor. I can get preferential rates on full management of the property. Any reason why this wouldn’t be a good idea?

[Hustle_]

OP you haven’t said anything about wanting to buy or live in the flat, only that you’d do it as an investment. However, you don’t have funds to buy it so it’s a mortgage. Not an investment but another liability. It’ll probably end up costing you money each month even if it’s constantly tenanted.

You’ve already taken on a lot of responsibilities. Your liabilities already match or exceed your savings and are out of step with your salary.

Those two consecutive 20% pay rises aren’t in your hands yet. In fact you should consider that there is always a risk that you could lose your job. No, I didn’t think it’d happen to me at your age either.

IMO steady the ship, pay down the CC debt, sell the BM, save diligently. Your personal savings so far amount to £10k (you have another £10k from an inheritance).

At 21 you don’t want to burden yourself any further. Literally anything could happen. You could be working on the other side of the world a few years from now. I didn’t think that’d happen to me either.

[asfault]

Don't regret that car. Many will say run a runabout when younger but some of my best memories were with wildly inappropriate cars for my income level.
Mr2 turbo at 19.
Noble m12 at 24 and laps round monza in it.

Yes that money bunged in the stocknmarket then or a house would be 3 4 5 or 6x but I don't regret it one bit.
So your man maths on insurance is perfectly sensible.