Early 30s and not sure what's best to do for the future
Discussion
After years of failing to make the best use of my money - not spending it wisely rather than getting into any form of debt - I finally came to my senses a bought my first property in November 2015.
I scraped together the deposit from my own savings and got a fixed rate mortgage for 3 years at 2.89%. Including fees the total borrowing came to around £113K. Ever since I've become completely adverse to risk, debt and any form of fixed outgoings that can't be switched off. Getting a mortgage really has changed my outlook.
Just over 12 months on and I'm down to just £82K from £113K with another £2K to be overpaid at the end of this month. A chuck of this capital repayment came from a sum I received when I lost my job mid way through last year, and did the sensible thing instead of buying a Lotus.
Anyhow, I've really got the bit between my teeth now and want the house paid off within 6 years, basically before I'm 40.
I've no dependants and I earn £50K per year. I've chosen a lifestyle and property that's well within my means to allow for a sizeable amount of disposable income and no sleepless nights as far as mortgage payments go - I think it's around £390 a month now. I hate being tied into contracts so I've done everything I can to avoid them e.g. no SKY TV, a SIM only phone deal etc. I owe a relatively small amount on a personal loan to fund my car, but other than that, nothing.
At the moment I'm paying off an extra £1K per month in mortgage overpayments. Mortgage overpayment calculators show that if I continue doing this I can be mortgage free in around 6 years.
I'm just not certain doing this is the best use of my money. I've no savings since a lot of my spare income goes into overpayments, and my pension is worth literally nothing. As said before, I wasn't too sensible in the past so never paid more than the minimum 1% contribution.
I'm now a bit concerned for the future with having no pension.
My current line of thinking is to get the house paid off asap and then once that's done, put the same amount into a pension as I'm paying in mortgage and overpayments combined, circa £1390 a month.
I know next to nothing about pensions, other than work contribute and match up to 2.5%, though I could read up when the time comes and the house is paid off.
Any thoughts appreciated.
Thanks,
I scraped together the deposit from my own savings and got a fixed rate mortgage for 3 years at 2.89%. Including fees the total borrowing came to around £113K. Ever since I've become completely adverse to risk, debt and any form of fixed outgoings that can't be switched off. Getting a mortgage really has changed my outlook.
Just over 12 months on and I'm down to just £82K from £113K with another £2K to be overpaid at the end of this month. A chuck of this capital repayment came from a sum I received when I lost my job mid way through last year, and did the sensible thing instead of buying a Lotus.
Anyhow, I've really got the bit between my teeth now and want the house paid off within 6 years, basically before I'm 40.
I've no dependants and I earn £50K per year. I've chosen a lifestyle and property that's well within my means to allow for a sizeable amount of disposable income and no sleepless nights as far as mortgage payments go - I think it's around £390 a month now. I hate being tied into contracts so I've done everything I can to avoid them e.g. no SKY TV, a SIM only phone deal etc. I owe a relatively small amount on a personal loan to fund my car, but other than that, nothing.
At the moment I'm paying off an extra £1K per month in mortgage overpayments. Mortgage overpayment calculators show that if I continue doing this I can be mortgage free in around 6 years.
I'm just not certain doing this is the best use of my money. I've no savings since a lot of my spare income goes into overpayments, and my pension is worth literally nothing. As said before, I wasn't too sensible in the past so never paid more than the minimum 1% contribution.
I'm now a bit concerned for the future with having no pension.
My current line of thinking is to get the house paid off asap and then once that's done, put the same amount into a pension as I'm paying in mortgage and overpayments combined, circa £1390 a month.
I know next to nothing about pensions, other than work contribute and match up to 2.5%, though I could read up when the time comes and the house is paid off.
Any thoughts appreciated.
Thanks,
I paid £131K for what is a very small 2 bedroom, newish build home. It costs next to nothing to run - £30 gas/electric, Band A council tax etc.
And it's in a decent enough area of Cheshire so it's not as though I've chosen to live somewhere awful.
The neighbours put their identical house up for sale a couple of months ago for £145K and it sold within weeks. I'd be keen to see what it went for when it finally ends up on the land registry database.
That's why I live in the north. I might earn a bit more in the south but not enough to make up with gap in housing costs worth it.
And it's in a decent enough area of Cheshire so it's not as though I've chosen to live somewhere awful.
The neighbours put their identical house up for sale a couple of months ago for £145K and it sold within weeks. I'd be keen to see what it went for when it finally ends up on the land registry database.
That's why I live in the north. I might earn a bit more in the south but not enough to make up with gap in housing costs worth it.
Thanks.
The thing is I'll never realistically be able to downsize, unless I moved into an apartment and even then it wouldn't really free up too much cash.
Ref. marriage, yep, I'm with you on that one, having just seen my dad who's in his 50s divorce for the second time and the impact it had. What's mine's mine. Even if I were to meet someone who has more than I do, if it were to go tits up I wouldn't try to take what isn't mine on principle.
The thing is I'll never realistically be able to downsize, unless I moved into an apartment and even then it wouldn't really free up too much cash.
Ref. marriage, yep, I'm with you on that one, having just seen my dad who's in his 50s divorce for the second time and the impact it had. What's mine's mine. Even if I were to meet someone who has more than I do, if it were to go tits up I wouldn't try to take what isn't mine on principle.
CaptainSlow said:
Apt user name OP. If I were you I'd be wacking far more into the pension...you need to aim to bring your net position down to the standard tax rate.
You should also easily afford to make £500 per month over payments.
Do you mind me asking why?You should also easily afford to make £500 per month over payments.
If I had a 'spare' £1250 a month and had to chose between a mortgage overpayment or big pension contribution, what would you do and why?
Thanks,
Thanks guys.
I owe £6.5K on a personal loan I used for the car. It has 3.5 years to run. I'll pay this off first before any mortgage overpayments.
I'll also up my pension to the 2.5% contribution. I still need to get my head around putting earning past £45K (£5K in this case) into a pension. As I understand it, if I continued as I am then I'd lose 40% of the £5K through tax, so I'd only benefit £3K.
This way I'd benefit from putting the full untouched £5K into pension.
Will my tax code change? And how does the government contribution work?
Ref. savings, you're right, I've always had a bit put away for a rainy day but I've always had it in my mind that if I lose my job I'd probably get PILON. Or if worst came to worst I'd flog the car as the loan isn't secured.
I also thought about getting a second property once this one's paid off too. But for now I'll clear my loan and up my pension to 2.5%, then take further advice once I'm free of the debt.
Thanks for your input.
I owe £6.5K on a personal loan I used for the car. It has 3.5 years to run. I'll pay this off first before any mortgage overpayments.
I'll also up my pension to the 2.5% contribution. I still need to get my head around putting earning past £45K (£5K in this case) into a pension. As I understand it, if I continued as I am then I'd lose 40% of the £5K through tax, so I'd only benefit £3K.
This way I'd benefit from putting the full untouched £5K into pension.
Will my tax code change? And how does the government contribution work?
Ref. savings, you're right, I've always had a bit put away for a rainy day but I've always had it in my mind that if I lose my job I'd probably get PILON. Or if worst came to worst I'd flog the car as the loan isn't secured.
I also thought about getting a second property once this one's paid off too. But for now I'll clear my loan and up my pension to 2.5%, then take further advice once I'm free of the debt.
Thanks for your input.
I appreciate all the responses. Just a few bits to update on as of today.
I got reimbursed circa £4K worth of expenses through work today. The expenses were funded with an existing credit card. Last week my application for a zero % balance transfer credit card lasting 36 months was approved.
I've transferred the £4K balance from the existing card to the 0% one now. I will keep chipping away at this as and when, but since it's 0% for 3 years I'm not too fussed.
I've then used the £4K I've been reimbursed through work to take the personal loan from £6.5K to £2.5K. I reckon I could clear the balance in 2 months and that's what I'm aiming for.
Paying this off also means I'm £175 per month better off, net the small amounts I'll be chipping off against the card.
I also looked into my pension from the job I left part way through last year. Until now I'd not looked at what I'd built up. It turns out I've £4.2K in there.
I also have £600 with my current employer's pension.
I was thinking about transferring it over, however I don't know enough about how well 'The Peoples Pension', my current employer's provider, perform. In my first statement from May to July of last year the value was less than I'd paid in, albeit only by £3!
I also made a mistake with the employer's contribution - it's up to 3.5% and not 2.5%, so slightly better. I'll ask HR to do the necessaries and go from the current 1%.
I'll wind the overpayments on house down a bit. If I half them to £500 then it'll still be done in 10 years and I'll be 43.
And of the remaining £500+ I'll have spare I'll look into putting it into an ISA and private pension that might perform better than the current provider.
I got reimbursed circa £4K worth of expenses through work today. The expenses were funded with an existing credit card. Last week my application for a zero % balance transfer credit card lasting 36 months was approved.
I've transferred the £4K balance from the existing card to the 0% one now. I will keep chipping away at this as and when, but since it's 0% for 3 years I'm not too fussed.
I've then used the £4K I've been reimbursed through work to take the personal loan from £6.5K to £2.5K. I reckon I could clear the balance in 2 months and that's what I'm aiming for.
Paying this off also means I'm £175 per month better off, net the small amounts I'll be chipping off against the card.
I also looked into my pension from the job I left part way through last year. Until now I'd not looked at what I'd built up. It turns out I've £4.2K in there.
I also have £600 with my current employer's pension.
I was thinking about transferring it over, however I don't know enough about how well 'The Peoples Pension', my current employer's provider, perform. In my first statement from May to July of last year the value was less than I'd paid in, albeit only by £3!
I also made a mistake with the employer's contribution - it's up to 3.5% and not 2.5%, so slightly better. I'll ask HR to do the necessaries and go from the current 1%.
I'll wind the overpayments on house down a bit. If I half them to £500 then it'll still be done in 10 years and I'll be 43.
And of the remaining £500+ I'll have spare I'll look into putting it into an ISA and private pension that might perform better than the current provider.
I've opened a Hargreaves Lansdown Lifetime ISA and put 2 lots of £500 into different funds. I'm aiming to stick the maximum £4K a year to earn the government bonus.
I've also opted to join the work's pension scheme, Aegon, and have opted to stick 9% gross in there per month. So on my workings, that'll be:
£375 - my contribution
£145 - work's 3.5% contribution
£150 - government contribution @40%
£670 in total
Property is something I definitely want to look at in 3-5 years though.
I've knocked the mortgage overpayments down a bit to around £400.
An income tax rebate of £1K (I've been on the wrong code since May) plus my expenses reimbursed means I should be able to clear my personal loan in a week, so I'll be £170 a month better off too.
I'm enjoying watching what happens to the money I've stuck in the funds and definitely want to learn a bit more about how it all works.
I've also opted to join the work's pension scheme, Aegon, and have opted to stick 9% gross in there per month. So on my workings, that'll be:
£375 - my contribution
£145 - work's 3.5% contribution
£150 - government contribution @40%
£670 in total
Property is something I definitely want to look at in 3-5 years though.
I've knocked the mortgage overpayments down a bit to around £400.
An income tax rebate of £1K (I've been on the wrong code since May) plus my expenses reimbursed means I should be able to clear my personal loan in a week, so I'll be £170 a month better off too.
I'm enjoying watching what happens to the money I've stuck in the funds and definitely want to learn a bit more about how it all works.
CaptainSlow said:
Assuming the £50k in the OP is gross pay:
The £375 and £145 are both gross contributions, there's nothing more for the Govt. to add....(you're grossing up the gross!!)
That's based on gross £50K.The £375 and £145 are both gross contributions, there's nothing more for the Govt. to add....(you're grossing up the gross!!)
I thought I'd get 40% tax relief - 20% paid straight into the pension and then claim the other 20% through a tax return?
Condi said:
No, because you're paying out of your gross salary; ie before any tax has been taken.
A pension is tax free in that you either pay into it before tax is paid, or if you have already paid the tax you can get tax relief when you do put money in. You can't pay into it before tax is paid and then also claim tax relief for tax you've not paid.
Makes more sense now. I'd read a bit about it and still couldn't work out why I'd be getting what appeared to be the benefit twice over.A pension is tax free in that you either pay into it before tax is paid, or if you have already paid the tax you can get tax relief when you do put money in. You can't pay into it before tax is paid and then also claim tax relief for tax you've not paid.
Thanks.
Olivera said:
You've made no reference whatsoever to any hobbies, pursuits or what you enjoy. So, what's the point of overpaying so much? What are you going to do with the additional money in 6 or more years? I say use at least some of the money doing what you enjoy, and now not in 6 years.
I didn't know I was obliged to do this. I'm sorry.I enjoy cars, so I bought a brand new one last year, then spent some more money on giving it some more power. I enjoy track days, holidays and keeping fit. I'm taking part in another Ironman in France later this year too. So yes, money does go on stuff I enjoy, and none of those interests are especially cheap.
Why not overpay if I can afford to and still maintain a decent quality of life? Why choose to spend money on the interest on a mortgage? Why choose not to have the security of owning a home as soon as possible, and enjoy the choices it'll afford Vs having debts and commitments?
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