£100 extra a month - WWYD?

[baizeleaf]

I’m getting a pay rise for something I already do but is now being recognised with a minimum that bonus payment.

What to do with the money?

Split between kids’ accounts
Overpay mortgage
Buy added pension
Open S&S ISA
Let it absorb into general funds and not see the benefit

@MissSueFlay

Pension, then it will turn into £120

Actually, it’s £125! You get 25% added, because the 20% tax relief on £125 = £25, and you need to base it on the gross figure.

The money saving expert site has a calculator showing you how much you will save in interest and how much earlier your mortgage will be paid off if you overpay. Have a look at that and I think your decision will be easy.

@BashfulClam

The money saving expert site has a calculator showing you how much you will save in interest and how much earlier your mortgage will be paid off if you overpay. Have a look at that and I think your decision will be easy.

I love the calculators, but I disagree it will be easy 😉 Because she should also consider the potential growth on £125 a month (not £100, instant tax relief uplift!) if putting into AVCs. Very likely to outperform mortgage saving - though I do appreciate that the mortgage saving is guaranteed and psychologically very compelling to pay off! Very rough numbers, on a 2% mortgage of a similar size to OP I increased my payment by £70 and cut the term from 17 to 13 years! I find pension vs mortgage a constant mental tussle ☺️ Helps that I’m in my 50s though, so payback from pension is more immediate.

Vanguard stocks and shares isa

@Redwinestillfine

That would just about cover the gas price hike....so I would probably say general funds

Yes sorry to be negative but the way gas, food, council tax, fuel etc is rising, it will likely get swallowed up (Unless you already have other funds to cover these increases).

All that said, given OP’s age (35) my choice would be LISA. Great tax relief, no tax when withdrawn (unlike pension) and - though it would be a shame to lose the tax relief if withdrawn before 60 - the flexibility to access it if in dire need.

S&S isa or pension

Stocks and shares ISA then use the lump sum to pay off mortgage.

How on Earth have I never heard of a Lifetime ISA before?!

Trying to work out how to make it up to £4,000 to max out the top up.

Op I would spilt it up between stock and shares isa and savings for the dc as they get older and will need more money.

The idea being that the isa should with the correct funds earn you far more ££ to over pay for your mortgage if necessary.

Or spilt it three ways.

To over pay mortgage or save in stocks isa is a huge in going debate!

We do both.
Small amount onto mortgage and an amount into isa.

Yy to vanguard. At the very least if you have no tax free wrapped saving vehicles at the moment, in the first instance open some up.

Get them going, that's the hardest part.
Then open one each for the dc, junior isa.
Have separate bank saving for them as they get older.
Especially as time is on your side with the dc!
Even five pounds here and there will have lots of lovley time to grow for them when they need cars x lessons, tutors even!!

Since your pension is sorted I'd overpay the mortgage. Even small overpayments make a massive difference.

Always mortgage. Whilst interest rates so low it’s a no brainer not to put in there..

Overpay mortgage or pension.
I definitely wouldn't put saving for dc at the top. One of ours is a millionaire from their spouse's inheritance.

Emergency fund would be where I would put it first unless you already have a good pile of money set aside for unexpected events.

Then I would do S&S ISA to build up a pile of money which could be used to bridge any gap between when you want to retire and when the CS pension pays out.

Lifetime ISA may be an option if under age 40 but it is locking away money until age 60, as there is a penalty for early access.

Also Team Cost Of Living Increases here. Everything is going to be more expensive in 2022, you’re going to need it

Savings account seperate from any you already have. Then if something comes up you want to treat yourself to you have the money. If it doesn't put it towards your mortgage at end of the year.

I would spend the first month on something fun - a meal out or some tickets to something I really fancy.

And then assuming your current pension is already good I’d overpay mortgage

Get a cleaner

I would stash it away 'under the mattress' as an emergency fund.

In an ideal world car parts or shoes.

In a sensible world - pension or mortgage.

OMG you lot are so bloody sensible. OP you have a pension and a small mortgage. You are being rewarded for your work- spend it on having some fun. Set it aside and use it on frivolity if you have the basics covered.

I’m much older and have hindsight on my side.

Mortgage

I would get a cleaner and overpay the mortgage.

If it was me I'd always try to clear debt - in your case your mortgage. Think how much you'll save every month when that's gone, and you can then save some and do something nice each month with some :).