If you are a sole breadwinner, how do you protect the status quo?

[forinborin]

Hi all

Not an AIBU as such (or maybe it is), just need some collective wisdom, from people in a similar situation. Especially interested to hear from someone who has extended family to support abroad.

I find myself in a situation where I need to support two minors (my children) here in the UK and two late middle age people (parents) abroad. No substantial assets or debts, apart from a mortgaged house. I earn well, but not in secure employment - mainly project work. No other income in the family. Especially in the light of recent news, it started dawning on me that all future major expenses - children's higher education fees or potentially contribution to getting on the property ladder, my parents living and medical expenses, my own retirement - is only my sole responsibility.

What are the sensible financial steps to take now to build some cushion against future unexpected events? My main worry is obviously something "bad" happening to me, so I have life and critical illness insurance, but maybe there are other things to consider?

E.g. release equity from the house and get a second property as BTL? Or any other safe passive income sources?

I had a consultation with a financial advisor, but it wasn't money well spent at all, they mainly tried to hard-sell a couple of very overpriced financial products.

Do your parents not have pensions, or a support network where they are? From what you said I am guessing there may be cultural expectations around your financial support of them?

I wonder if it might be worth trying another IFA. They're not all pushy. I would probably look at e.g. stocks and shares ISAs and tracker funds over a single BTL, which is not the moneymaker it used to be and a whole heap of hassle besides. We looked into it previously and were advised the only real way to make money on it now is to have a property portfolio and manage it through a ltd co. It's also putting all your eggs in one basket, financially speaking, and if it all rests on you then you want to diversify your risk as much as possible.

1. On the topic of life insurance, it would also be a good idea to talk to friends/family and nominate someone to look after your kids in the event of the worst happening.
2. Pension, depending on your age & pension balance you might need to start increasing your percentage, especially if you're a higher earner, to reduce tax paid. At least make sure you're matching what your company puts in. You can also look into a SIPP to have more control of your investments.

3, start considering goals that you may have for the future either for you or the kids, and start saving up for them. It would be good to also start a JISA for them for when they go to uni.

1. Being a landlord is not passive income, unless you have a company managing the property. It can be a very time-intensive way of making money and the government has reduced the benefits greatly over the past few years. You may want to do some research and look into how that may affect you and the money you could make.

Oh and start looking into investing too, nothing risky, maybe an index or tracker fund for consistent passive growth.

Do your parents not have pensions, or a support network where they are? From what you said I am guessing there may be cultural expectations around your financial support of them?
No, no pensions to speak of, I.e. nothing they would be able to live on, it is a notional amount (say, enough to buy a bottle of milk and a loaf of bread per day in local prices).
Not only cultural expectations, we are also very close and I obviously won't let them starve. They helped me a lot too - paid for my education, for example, instead of saving for themselves.

Good point about the lack of diversification with BTL. It just feels like such a good option on the surface (especially in the light of what looks like another property boom), but you're right.

Do you have a partner who may work at some point? If they are a SAHP then that can be a luxury you might not be able to afford with elderly parents to financially support as well, very few people earn enough to manage on one income for four adults and two children.

Pension, depending on your age & pension balance you might need to start increasing your percentage, especially if you're a higher earner, to reduce tax paid. At least make sure you're matching what your company puts in. You can also look into a SIPP to have more control of your investments.
Oh yes, also a fair point. No pension contributions so far outside of NI (there's no pension scheme in the company). Burying my head in the sand there.

@PragmaticWench

Do you have a partner who may work at some point? If they are a SAHP then that can be a luxury you might not be able to afford with elderly parents to financially support as well, very few people earn enough to manage on one income for four adults and two children.

No, a single parent here unfortunately, so no second income.

@strivingtosucceed, all very valid points overall, taken with gratitude!

That's a heavy burden to bear, financially speaking, for you. I hope you have good social support for yourself at least. Take care of yourself.

Maxing what you can pay into your pension is certainly a good idea for the long term as it is the most tax efficient way to invest. However, you might want to check Ts and Cs of when you can draw down, as I'm imagining your parents may want or need help before you get to a pensionable age yourself. Using all your ISA allowance annually is also a good idea, and making some of it stocks and shares for the longer term. I use Cushon for S&S ISA and investment fund, partly because I get a 50% discounted platform fee as a work benefit. Vanguard gets recommended a lot on here.

Are you self-employed? I really think a good IFA could help you. I'm sure someone on here or in your local area could give you a good recommendation. Also if S/e, it may or may not be feasible but unless your business has a lot of growth potential, I might consider looking for an employed role for additional security and pension and financial benefits long-term. I wouldn't want to have all that riding on me on a s/e basis with no cushion. But that's probably a personal comfort thing.

Would it be possible for your parents to move in with you? That way you would only be paying for one house so the burden would be lighter. Obviously that arrangement would not work for everyone but it might be worth considering if you have a good relationship with them.

Thanks @BuffySummersReportingforSanity. Not self-employed, but working a variety of FTC / temping through umbrellas, so no specific employment benefits as such. Hmm... maybe I should try another IFA then.

@JonahofArk

Would it be possible for your parents to move in with you? That way you would only be paying for one house so the burden would be lighter. Obviously that arrangement would not work for everyone but it might be worth considering if you have a good relationship with them.

No, unfortunately they are abroad / third country nationals and can't move here - and I can't move there, my children are British. That would be an ideal scenario for me though, yes.

How old are your children? I would focus on your own financial future with a pension rather than thinking about their university fees. Do you pay childcare now?

@HollowTalk

How old are your children? I would focus on your own financial future with a pension rather than thinking about their university fees. Do you pay childcare now?

5 and 7. Yes, paying around £1K / month in childcare at the moment.

Are your parents currently working? I don't at all intend to challenge the principle of supporting them, but out of curiosity, does their home country make any provision for those who simply don't have DC able to support them in age and/or infirmity?

I'm sure you've explored all legal immigration options that would allow you to combine into one household so I won't insult your intelligence by suggesting that.

Ps. I'm assuming that being a contractor doesn't give you access to certain financial employee benefits - pension match, death in service benefit?

@BuffySummersReportingforSanity

Are your parents currently working? I don't at all intend to challenge the principle of supporting them, but out of curiosity, does their home country make any provision for those who simply don't have DC able to support them in age and/or infirmity?

I'm sure you've explored all legal immigration options that would allow you to combine into one household so I won't insult your intelligence by suggesting that.

Mum lost her job over the lockdown (the company closed down, she was working in the same place for 20+ years) and really struggled to find anything (she's close to the pension age, so quite hard to persuade anyone to hire her over a 30 year old). Dad has a (relatively recent) disability preventing him to work, and same age concerns apply.

I mean, they both are educated to a postgraduate level and worked hard all their life, not scroungers. Just the situation they are in now.

Yes, it is in general the society where the typical scenario is grandparents helping with the childcare, while being financially supported too. Very common for multiple generations to live together too.
The basic provision exists, but is not enough to live on. My great aunt, for example, did not have children, so used to live with us too in a "granny" capacity when retired, as she could not (genuinely) survive on her pension.

It is not even the usual daily living costs I am most concerned about, but additional expenses that come from the aging. For example, one of my parents had a health scare earlier this year that was investigated for possible malignancy (thankfully all was ok). And then it hit me like a brick that good standard treatment for that would realistically be in £10'000s, and that is not a level of savings or income they have.
I realise that sounds stupid, I am promise I am not really! Just always thought of my parents as something absolutely solid and "always there", and just realised how fragile they actually are.

I know mumsnet is quite diverse, so was just wondering what other people in similar situations do.

@BuffySummersReportingforSanity

Ps. I'm assuming that being a contractor doesn't give you access to certain financial employee benefits - pension match, death in service benefit?

Yes, but I do buy some of that myself (such as life and health insurance). I think I actually need to talk to a decent IFA again, ideally someone independent and able to think outside of the box. Any recommendations would be very welcome - I presume all consultations are virtual anyway, so the location does not matter.

If you look at the government website moneyhelper there is a tool where you put in your postcode to find regulated advisors in your area. Ring a few up to see what they charge and could offer you. Some offer a free 30 or 45 minute session to see if you can work together.

Look on Money Saving Expert website for out of the box money making suggestions like; renting out a room in your home, renting out a car parking space if you live in a commuter town, renting out your home if you are out at work, renting your loft space etc

Paying into a pension for yourself is tax efficient, but you would need to check the earliest that you could access the money, which may be 55, 56, 57, 58.
If you worked for a company (not contractual work) they would probably pay contributions into your pension & provide a death in service payment too.

BTL as a tax payer, you would need to pay, maintenance, agency fees if you don't manage it yourself, tax on the income, tax when you sell & pay council tax & other bills if it is empty & not rented out.

You have 2 children, 2 parents & yourself to support
Goodluck

I can't advise on the financials but we've always kept an eye on what house we could buy outright, for our current equity. A couple of times a year we look up our house price on Zoopla (I know!) and subtract what's left on the mortgage. It's very approx but does relieve the mental pressure a bit, knowing that we could buy a roof over our heads, mortgage free, if we had to. Obviously not so reassuring in the first few years.