Single mum, decent salary, please help me save!

[Decentsalnotime]

Single mum
2 primary children
£65k salary (take home around £3700 a month)

After everything (and I mean everything... mortgage, bills, Insurances, car & house running costs, holidays, clothing, any beauty stuff, birthdays, school and children related stuff etc etc), I am left with Circa £1000.

What to do? Over pay mortgage? Pension? Or savings?

I have £150k on mortgage left (about £450k equity)
No debt
Small pension pot (about £50k) But currently not making any contribution other than most basic employer contribution
Savings of £15k

No family or ex Support at all

Would so appreciate guidance!

Many thanks

See an IFA. They'll sort you out in a jiffy!

I'd invest it into a Stocks and Shares ISA. Look into compound interest, this is where the bulk of your savings in a S&S ISA comes from. Vanguard are really good for beginners, they have the lowest fees and they do everything for you, you just set up a direct debit into the account and a fund manager invest it for you.

However with a S&S ISA its the norm that you cannot take any money out for 5 years to see a decent return on your investment (this takes into account riding out any recessions, brexit etc.)

Most people go for the Vanguard LifeStrategy 100. Don't bother with the other LifeStrategy options- they are made up with bonds too which have a very low ROI. Or the Vanguard Global All Cap. The only difference is that LifeStrategy has more of a UK bias.

With your S&S ISA it is better to drip feed it, put in little but often. (In your case I would probably put in £300-£500 a month or so). The rest I would probably use to overpay the mortgage

Forgot to add, most people use a S&S ISA to boost their savings, others use it for a bigger deposit on a second house, a car purchase etc. How you spend it is up to you, but ideally don't touch the money for at least 5 years (but the longer, the better)

Sorry, boost their pension!

I'll stop bombarding your post with messages now

@DonLewis

See an IFA. They'll sort you out in a jiffy!

be very careful which IFA you see. I saw one who initially persuaded me to invest in quite high risk things (Fidelity etc) and I made and lost a bit of money before switching to something with less risk as advised by an uncle.

If you don't know what you're doing don't go medium or high risk!

@optimisticpessimist01

I'd invest it into a Stocks and Shares ISA. Look into compound interest, this is where the bulk of your savings in a S&S ISA comes from. Vanguard are really good for beginners, they have the lowest fees and they do everything for you, you just set up a direct debit into the account and a fund manager invest it for you.

However with a S&S ISA its the norm that you cannot take any money out for 5 years to see a decent return on your investment (this takes into account riding out any recessions, brexit etc.)

Most people go for the Vanguard LifeStrategy 100. Don't bother with the other LifeStrategy options- they are made up with bonds too which have a very low ROI. Or the Vanguard Global All Cap. The only difference is that LifeStrategy has more of a UK bias.

With your S&S ISA it is better to drip feed it, put in little but often. (In your case I would probably put in £300-£500 a month or so). The rest I would probably use to overpay the mortgage

I have a S&S ISA now too and its good as you can't touch the money and through Vanguard too.

Also have a few savings accounts here and there and shares bought in fairly low risk companies.

How old are you OP?
Pensions are important - if you can channel more on to the pot now it will (probably) benefit you more in old age.

Mortgage - you're equity more than covers the outstanding balance. You could over pay a little to reduce it further. Interest rates may rise and impact upon your monthly spends.

Savings.. You've got a back up already. Would it be sufficient to tide you over for 6 months if you lost your job tomorrow?

Basically I don't know. Everyone's situation is different.

Perhaps get advice from an independent financial advisor.

I'd certainly make the most of your spare money as otherwise it just gets lost in random spending.

You're in a good financial position so make it work to cover your future.

This is all very helpful

IFA... won’t they charge a fee? If I was talking big bucks - then perhaps. But £1k a month? Not sure worth it.

I was just thinking overpay mortgage... given appalling interest rates atm, wouldn’t that make sense?

Oh worth mentioning

What my ex does do is save for the children. So I don’t worry about that.

I would over pay on the mortgage. Interest rates are so low, saving is pointless and if you overpay now, once you come to renew your mortgage (and interests have rocketed, which is what some are predicting) you will be delighted that the amount you owe has gone down.

Have your kids got an ISA? Put money into that too. If you've put the maximum in, I would do the mortgage thing which means you have more to put into their savings once you renew the mortgage

Didn't see the bit about your ex saving. I would do the mortgage thing if I was in your position.

IFO shouldn't charg too much just for advice, of course they'll charge more if you buy products through them

I’m 40

I just love the thought of blasting through mortgage! But wondering if actually not the best route to take

Mortgage or pension.
Or half to each annually?

50/50 mortgage pension.

You are currently a higher rate tax payer. If you put additional contributions into your pension then this is probably the most productive use of your savings because you will get tax relief on anything you put in. If your employer offers salary sacrifice contributions then you will also save the NIC.

Eg say you decide to put in £100 a month. If this is deducted at source via salary sacrifice the net cost to your take home pay will actually only be around £58. This is because you currently pay tax @ 40% on that income and NIC @ 2%. If your employer also matches any payments into your pension scheme then even better.

But pension is a long term investment that you cannot access until you reach the required age. So you should also make sure you have some savings that you could access if needed.

I would probably look at a mixed approach:

• put some towards paying down your mortgage early - say £250 a month - check your mortgage terms about whether this can be monthly or done just once a year
• put some towards your pension - say £250 a month - if possible via salary sacrifice with your employer
• put a regular contribution into a stocks and shares ISA - the remaining £500 a month

£50000 pension pot won't last you five mins. I'd be boosting pension by 800 a month and over pay mortgage by the rest. Then if there a months you need a bit extra you can stop the overpayment

Honestly I would keep it very simple ... make your savings up to £25 k and then over pay your mortgage and try to reduce / clear as quickly as possible.

Just my personal opinion but I would not invest in anything else during current times eg ISA s, pension funds etc ..
Heaven knows what will happen to the value of those types of things given the prediction of the economy .
Pay into what you know .

Single parent here too and that’s my strategy ... clear mortgage , some savings after that look at options

50/50 mortgage and pension after you have rainy day money (e.g. 3-6 months expenses) stashed away somewhere you can get at it quickly.

NS&I is the best for savings returns.

have a look at www.reddit.com/r/UKPersonalFinance/

they have an excellent flow chart to follow:
flowchart.ukpersonal.finance/

Also the www.reddit.com/r/FIREUK/ thread is great for inspiration.

@Decentsalnotime

I just love the thought of blasting through mortgage! But wondering if actually not the best route to take

OK, my DM (single DM for most of our lives since i was 5) overpaid her mortgage by the time she was in mid 40s and then had no mortgage - any spare cash she had went on mortgage.

She also saved but had other investments etc and help from her DM.

Overpaying mortgage and being mortgage free she said was so great for financial freedom.

as someone else says here though you can get penalties for overpaying mortgage so see if they're worth doing. then pay what you can.

Penalties on our mortgage for overpaying are quite high and not worth it unless you pay it all off. Currently penalty for us is £8k (if we overpay over a certain amount). Maybe check first how much you can overpay.

I would put some in your pension pot and small junior ISAs for kids. Even if your ex does save - do you have proof of that?

I also have a Vanguard ISA, it's held up so far but obviously that could change in the next few months/years. I also am boosting my pension as much as I can (or at least I was until CV struck) and overpaying mortgage a little, so a mixed strategy.

I'm early 50s and I wish I'd put money into everything more than I have, although I'm a LP, DD's dad is pretty much AWOL and I've never earned as much as you.

Things I don't think I accounted for were (a) the possibility of being ill and having to take significant time off work, reduce hours/responsibility, or even retire before official retirement age - that has happened to various of my friends; and (b) starting to experience ageism and feeling I'm not sure whether I can carry on doing what I'm doing for much longer and wanting to take "easier" work, though that may also be because I'm caring for my DM. Having secure housing seems particularly important to have the choice to reduce income, I want to downsize when I retire so I have some more cash, but also knowing that I can sell my house and buy something outright in the same area if I was forced to beforehand. So I'm thinking about having more emphasis on paying down the mortgage than I have at the moment, as I think having a lump sum from the sale of my house might make more of a difference than what I can do contributing to my pension, but I'm also in the same "difficult to choose" position as you!

I think it can be helpful to consider what you’ll need if the sh1t hits the fan and you don’t have any income due to redundancy, ill-health et cetera.

For someone on your level of income I think you need a lot more in accessible savings, like six month’s-worth as an absolute minimum.

If you become unable to find any employment to cover essential outgoings, in an absolutely dire emergency you could sell up and go into rented accommodation but that would take time, so you need to have enough to bridge that gap.

Once you’ve set aside suitable savings in your place I would stash as much as possible into your pension, like half of that grand a month at least.