Ideas for financial goals

[Username642243]

Hello, this is a very nice problem to have but I'd not considered that it might happen (came from absolutely nothing) so I'm not sure what to do.

I've recently started back at work and we were so used to one salary that I don't know what we should do with the money for the best.
We have 150k 15 years left mortgage
Private pension dh, public sector pension me.
Potentially will inherit from elderly parents (half a house) but not guaranteed.
3.5k left after bills and living costs. Realistically 2k left after everything.
No savings (had lots of house stuff done)
Potentially looking at private schooling x2 in 6 years (although probably not).
I'm mid 30s dh early 40s. Both likely to progress a bit in careers
House is forever home, most likely needs a new kitchen in a couple of years.

Any ideas? Apologies if this is insensitive, we have always been saving, for house, kids, being sahm etc so not quite sure what to do now we're here and I don't want to be reckless.
Thanks

First direct you can over pay mortgage as much as you like, I'm sure there is fee for early redemption but you can over pay as much as you like.

Also, huge thank you to everyone for your thoughtful replies, very kind of you x

1. I would increase DH’s pensions contributions if he’s only paying 5%. That’s not enough to retire on. There are free calculators you can play around on to see how you’re doing and what changes would mean for retirement. There’s one on the Standard Life website. Will your DH’s employer match additional contributions?

1. Emergency fund. People generally say 3-6 months but with things as they are right now I’d say 6. It needs to be accessible and risk-free so either a cash ISA or premium bonds. I can’t be doing with moving my accounts for a pittance of interest every few months so I use premium bonds. I get about the interest I’d get on a bank account in tax-free prizes but with the chance to win more. I would generally put this as 1 but the pension contributions should just be part of your monthly outgoings which is why I’ve put that as 1 instead.

1. Mortgage overpayments. Most mortgages allow a 10% overpayment each year without charges. If your balance is £150,000 and you’re at the beginning of your mortgage year you can overpay £1,250 a month, which is still less than the £2k you have extra each month. Next year you can overpay less as your opening balance will be less (£150,000 - £15,000 - what you’re paying through required payments = less than £135,000. You could overpay somewhere below £1,125 each month). Check when your mortgage year starts and ends. You’ll need to decide whether to reduce your required monthly payment or keep the payment the same but pay off your mortgage quicker. If the latter, check what this means for your overpayment allowance. As PP said, the money saving expert mortgage overpayment calculator is good.

1. Other savings, perhaps a stocks and shares ISA as you’re saving long-term. This has to be long-term though to ride out peaks and troughs in the markets.

I don’t think you can afford private school. Sorry.

No I think you're right re school, it would take us from comfortable to skint

pay down your mortgage as much and as fast as you can. In six years you will be mortgage free by mid 40's.

Living mortgage-free is the ultimate freedom from financial and employment anxiety. Then you'll free up enough monthly budget to consider reducing your working week (three day weekend every week; changes your activities, your lifestyle; your physical and mental health and gives you more time with your kids ).

Thank you, although I'm very lucky to work school days at the moment and have been off with the kids for a few years so I'm definitely happy to work for a bit! Luckily Dh has a fun easy job and would probably do it unpaid!

@Sorka

1. I would increase DH’s pensions contributions if he’s only paying 5%. That’s not enough to retire on. There are free calculators you can play around on to see how you’re doing and what changes would mean for retirement. There’s one on the Standard Life website. Will your DH’s employer match additional contributions?

1. Emergency fund. People generally say 3-6 months but with things as they are right now I’d say 6. It needs to be accessible and risk-free so either a cash ISA or premium bonds. I can’t be doing with moving my accounts for a pittance of interest every few months so I use premium bonds. I get about the interest I’d get on a bank account in tax-free prizes but with the chance to win more. I would generally put this as 1 but the pension contributions should just be part of your monthly outgoings which is why I’ve put that as 1 instead.

1. Mortgage overpayments. Most mortgages allow a 10% overpayment each year without charges. If your balance is £150,000 and you’re at the beginning of your mortgage year you can overpay £1,250 a month, which is still less than the £2k you have extra each month. Next year you can overpay less as your opening balance will be less (£150,000 - £15,000 - what you’re paying through required payments = less than £135,000. You could overpay somewhere below £1,125 each month). Check when your mortgage year starts and ends. You’ll need to decide whether to reduce your required monthly payment or keep the payment the same but pay off your mortgage quicker. If the latter, check what this means for your overpayment allowance. As PP said, the money saving expert mortgage overpayment calculator is good.

1. Other savings, perhaps a stocks and shares ISA as you’re saving long-term. This has to be long-term though to ride out peaks and troughs in the markets.

I don’t think you can afford private school. Sorry.

I think that's a really good approach thank you

OP, overpaying mortgage during times of such low interest rates is bad financial advice. There are far better ways to make your money work harder. It really depends on how confident you feel about investing. The net returns have come from the US stock market in recent times. Consider investing in a fund but of course that’s always high risk but very little effort. Property is low risk, high effort and illiquid but always pays in the long term. Topping up your workplace pension has a high yield due to tax benefits but very illiquid again. Or you could spread your money across all of these - best option. But you will need to do your research first, and manage very closely.

Start firing money into private pension for you and overpay mortgage. Go see an independent financial advisor

If nhs it isnt worth topping off works pension - works own pension financial advisor said this and then was later backed up by independent - I get much better return from private pension

If you are in the realm of school fees being just out of reach, I'd consider private from year 9. Not as a given, as a back up if one or both of your DC don't thrive in the local school. Put the money somewhere you can access it at the appropriate time if you need to.
If they both like their school, you've got a holiday and a contribution to university expenses!

@Love51

If you are in the realm of school fees being just out of reach, I'd consider private from year 9. Not as a given, as a back up if one or both of your DC don't thrive in the local school. Put the money somewhere you can access it at the appropriate time if you need to. If they both like their school, you've got a holiday and a contribution to university expenses!

That's a good point. The only reason we're considering it is that the elder child is a bit of a superstar at all the extra curricular stuff so could be scholarship material, but we'd only do that if we could afford full fees for the younger one too

But I don't want to start a school debate as I know it's a divisive issue