To ask for your budgeting / financial planning advice

[chatenoire]

Thanks to an inheritance, our mortgage has reduced dramatically, and we're planning to be mortgage free within 5 years.

We have the peace of mind to know that we only need about £2k a month to cover all of our expenses.

That means that our annual disposable income is around 40k.

Next year we're spending around £10k on home improvements, probably around another 10k on holidays.

The idea is to have around £8k completely untouchable in the bank in case either were to lose their jobs.

Because it's an inheritance I feel like I should be able to splurge on "selfish" things one being a Peloton bike and an iPad.

I'll also put some money aside for our pensions, how much I still don't know.

So what else can I do with it?

BTW I still do all of my shopping at Lidl, rarely buy any branded groceries, and only buy clothes at TK Maxx or heavily reduced somewhere else.

Invest…. Invest so it can keep giving!

I'm fairly risk adverse, would an ISA be good enough??

I don't think a pension gives good returns. At least the one I have from work keeps losing a small amount of money etc a year which is infuriating. I would invest in land or property, or do some research into some tech firms (robotics, AI, private medical care)

Don't buy another property. Honestly the regulations just make it a nightmare now.

Pensions are a good thing to invest in dependent on your age.

Maybe worth getting some advice from a financial adviser depending how much you have to invest.

I don't necessarily have anything to invest, it would end up being the "rolling savings" which according to my projections would be at the very least around £15k per year and going up to £20k once mortgage free.

These calculations would be free to be used on something else. I'll be 44 when I'm mortgage free.

Probably still worth a chat as to where to put those savings to maximise your return?

Are you in a union? I ask because they often provide access to independent financial advisers. It's probably worth, with the lifestyle change, getting some advice aligned to what your priorities are. People can make suggestions on here, but what's right for them might not be right for you.

The UK personal finance sub on reddit has a general financial planning flowchart that provides a starting point to think things through

https://flowchart.ukpersonal.finance/

An ISA is of course a great way to save some, or a fixed bond if theres an option?
it at least gives you some interest on part of your money.

If you would get use out of it, buy the peloton. I bet there are some deals around at this time of year too.

I am unable to help with pensions but I just wanted to encourage and say you are making great plans. What a fantastic financial position to be in (despite the loss of a loved one to have the inheritance) at your age. Well done! A savings plan of the amount you say each year is fantastic

Use all your ISA allowances first. That's a no brainer

I use Nutmeg for a small nest egg. You can set your risk level for the investments.

Going through the UK Personal Finance flowchart would be a good idea. If you learn well from listening to podcasts on car journeys, dog walks etc, then there is a podcast series that walks through the UK Personal Finance flowchart plus adds a bit to it. First episode: meaningfulmoney.tv/OS1

Generally, you want:
Emergency fund.
Pay off all consumer debt.
Be in workplace pension.
Invest using Stocks & Shares ISA.
Overpay mortgage.

Paying more to one thing than another is financial balance. Initially you put lots to emergency fund and debts, then once debt free and have a good financial cushion, you tip the balance towards investing (Pension, ISA, main residence). How much you do towards pension vs ISA, depends on your situation... pension is more tax efficient but inaccessible. ISA is accessible. Generally tip towards ISA initially, then towards pension. If you want a video about investing in Pension vs ISA, let me know and I can link one.

Interesting! I do most of those things already.

Apart from the stocks and shares as they seem akin to gambling to me.

Bonds are a similar but safer option (as far as I understand them).

We have no debt, and we still have some money left from the inheritance, which sort of covers the emergency fund, although the idea is to keep making it bigger til we can pay the mortgage off.

My company doesn't match any pension payments.

I'm not part of any union, but happy to look at options!

Op did you say you have dc?

Unfortunately there is this perception of gambling re stock and share.

Open a stocks isa and put 500 into an index fund say s and p 500 which means you buy a teeny bit of the most successful companies in the world and lots of them.
If one company say macdonalds suddenly goes bust, it falls out and is replaced by another company.

Try it!

You simply won't get the sale returns elsewhere.
I'm invested in said index funds 85 % and I gamble, what I call gamble with a few funds managed by a manager and individual shares.

I took a punt on rolls Royce shares, they are up 160% at the moment.

Buying individual shares in companies is like gambling. Buying a global index fund which buys a large percentage of the market is not like gambling. The value will go up and down but long term, history shows it goes up.

Learn about investing, give it a try with a small amount of money so you can see how it works.

Book:
The Simple Path To Wealth, JL Collins
also his new book Pathfinders.
It is USA focused but the principle of investing in the whole market, not individual shares, applies.

Thanks for the suggestions!

and yes I do have two DC, so I know I should set some money aside for uni/house deposit

@nannynick I've read simple path to wealth.
. I didn't know he had a new one book out! Thanks.

@chatenoire

I've got cash 3.4 % isa and stock and shares isa for dc...

The stocks has been slow to move but was still over 10% these past few years.
It's currently 27%.

I use vanguard funds which buy a little of everything.

I keep cash so they can spend that one driving lessons and so on. And the stock isa is the it capital for future.
I also keeps both so they can see the difference for the themselves as they start to manage the funds.

Also consider a sipp for the dc..

5 grand each now into aforementioned funds and barely touched would compound over the years and be better than a poke in the eye when they hit retirement age with little effort.

That's a great idea!!