Rate my financial situation

[Juniperberry55]

Everything finance wise on Mumsnet seems to be very polarised, either those on £100k+ income with tens of thousands in savings and a holiday home, or not having 2 pennies to rub together

I'm quite curious to see how people would rate my financial situation on average for my age

So I'm 33, live alone
I own a house worth roughly £220k with around £45k mortgage left to pay
Around £14k in debt on 0% credit cards and a low interest loan all due to be paid off in around 2 years
Income around £42k a year
Almost no money in savings, currently trying to build up an emergency fund of a couple of months pay
£0 retirement

I'm guessing there will be the odd comment about this being a stealth post. It is not, I am in debt, I think my finances are not great in some areas, in others I think they're not too bad

Score me 0-10 on how you think my financial situation is for my age 0=awful 5= average 10=Jeff bazos level 😂

I live in a semi detached house with 2 other people full time and a third person part time (uni student) our dual fuel amount is £130 pcm.

In your shoes I’d be looking at cutting that bill down. Economising slightly on your food bill and slicing £20-£50 quid off savings to find a way to pay for pension.

Please also check the details of your actual contribution. It might not be as much as you think. Plus if you pay 7% how much does that “release” from your employer?

depending on the way your company pension is set up it might actually reduce taxable and NI-able pay. I did some thinking (thanks chat!) and you could pay 7% into your salary with only a monthly drop of £169 in take home.

if that released an equivalent 7% or more from your employer it’s really worth it. Plus your pension scheme might have other benefits associated with it.

Your retirement savings are a complete and utter disaster. You need to start contributing to a pension as soon as possible. If you are 33 and want to retire in 30 years time for 20 years where do you think you'll be the money from?

I’d rate you 5/10 just for that.

I'd say very good for your age, that's a lot of equity for 33yrs wondering if you had help with the deposit.

I'd say you're doing well really you have a lot of equity which is a good start.
The sooner you can get rid of 14k debt the better. A few years ago I was in a similar situation and for 2 years I prioritised paying off 11k over 2 years to be debt free apart from mortgage. During that 2 years I had no holidays, outings or treats, also I didn't buy any clothes or shoes. I was shocked at how much I could get away without buying but achieved my objective. After that I overpaid my mortgage and knocked 3 years off that. Then I concentrated on topping up pension funds.
It's achievable but all in the planning.

Start paying into a pension OP, and delay the debt repayment if you can flip it to another 0% card

Hi op,

anything happen to your income and you are on the street 😳 so I will say 0.

You are 33 and don’t talk about your retirement which is really something you need to do something about.

‘Unfortunately, the way you are going, you will have paid the bank all your life so that they can take your house in your old age to cover your care needs. You can do better! Speak to a financial advisor.

Yep aware my retirement position is bad for my age but planning on starting to pay into my pension by the time I'm 35 once I have emergency fund and debt paid off so should have 32/33 years of pension contributions by time I'm retirement age and house will be paid off in 9 years even if I don't overpay so got at least 20 years of no mortgage payments where I can funnel the extra money into savings for retirement so I shouldn't be in dire strates

Nope, no help with the deposit

Please do make sure you’re not distracted from that goal. Remember the power of compounding in investment, so the earlier you start the better.

it’s just like steering a super tanker, the further away from the obstacle you are, the less effort it takes to steer round it. The closer you are, the harder it is.

To be fair I won't be paying the bank for all my life, debt should be cleared in 2 years, I should have a decent emergency fund built up in that time. I have spoken about my plan for retirement in previous comments. Will start paying pension at 35 and will finish paying mortgage in 9 years ( if I don't overpay) . So in theory I'll have a state pension, work pension 32-33 years of contributions, paid off house and 20+ years of savings from not having to pay rent/mortgage once it's paid off and I can invest and save that money instead. I feel like it could be a lot worse

I know probably better than the average person how care charging works. If we're going by current legislation they can't take your house into account for home care, they do take into account savings over £23250(automatically self funding) and if you have less than that in savings then it depends on your income to how much you pay towards it, so having an occupational pension actually increases how much you'd have to pay towards care in your home.
If I had to going into residential care, I'd be happy to use the equity in my house to pay for it and I can choose which care home I want to live in, not just the cheapest the council can find to cover my needs.

That's basically how I plan to do it too.
How does it feel now you're debt free, I imagine that's a weight of your shoulders, well done 😊
Do you regret prioritising paying off the debt before working on pension funds?

3-4 maybe. Not having a pension and having so much short term debt, no emergency fund or other savings- it’s very precarious. You have a decent amount of equity in your home but that’s obviously illiquid so can’t actually help much if anything goes wrong and won’t grow in value as much as shares in a pension or ISA would.

You know the lack of emergency fund is an issue because it has caused you problems before.

https://ukpersonal.finance/flowchart/

You might find this flowchart helpful.You are at step 2- getting a basic emergency fund in place should
be your priority now, then joining the pension.

I own a house worth roughly £220k with around £45k mortgage left to pay
Excellent
Around £14k in debt on 0% credit cards and a low interest loan all due to be paid off in around 2 years
not great but okay
Income around £42k a year
not great but okay
Almost no money in savings, currently trying to build up an emergency fund of a couple of months pay
Bad
£0 retirement
Bad

if your place is more than 1 bed I’d consider a lodger. As long as you screen correctly it’s easy money….
the money is excellent and tax free in the main.
i was sniffy about it but bought a place (my name) then broke up with my boyfriend so was mortgaged up to the tits and needed the cash… I did it for 8 years way longer than I “needed” to. Company was cool and the money was about £8k pa

Yep agreed. Will definitely feel better once my emergency fund has grown to a decent amount to last a few months if I lost my job or had a large house repair.

Most people inherit something????????
????????
Disagree entirely

Unfortunately years of pension contributions backloaded are not worth the same as years front loaded or made evenly across a career. I see you understand compound interest and others have mentioned matched employer contributions; there’s also tax advantages/ni advantages. If you work for an employee with a modeller you could try visualising different options. I think private pension providers also have these available if you try a few sites. I get you know conceptually but these modellers really bring it to life.

re: spending: my cat gets by on a fraction of that. Is there a special diet involved? The overall food spend/cleaning supply spend is quite high too. It’s 3/4 of what I spend for my family of 3.

re: income, understand you can’t work more but given your biggest asset is the house, would a lodger work? I have a single relative who does this periodically with mixed experiences from the ones who make little impact to the ones who feel like they impose.

Indeed! To compensate for no pension you would need to inherit a huge amount so make sure you are the sole beneficiary! And as for the OP having few outgoings in her 70’s! Well, if it’s Hobsons choice, she clearly won’t have outgoings but the 70’s for most people are the travel and spend years of reasonable health. Obvs you could go tomorrow or conversely live to over 100 however, most pension planners say plan for 10 years active retirement with a big spend on leisure and 10 years ‘quieter’ when health may restrict activities.

The one thing that would make a huge difference is whether or not you have an income protection, critical illness or sick pay at work.

What would happen if you had an unfortunate event, put your back out for 6 months or something, would it all come down like a house of cards etc.

If you have that covered, I really would start a pension, even £100 p/m. It will accumulate more over the loan term that any savings in interest but pushing the short term debt out over 1 year if you can at all.

Not paying into a pension is literally throwing away free money. Madness not to be contributing.

Admittedly it’s been a while since I looked at this however, late 90s when I was single and buying a home, these policies seemed prohibitively expensive and the circumstances they’d pay out in seemed very narrow. I looked again about 15 years ago when my partner became self employed so slightly different circumstances and drew the same conclusion. Again, it’s something you often see suggested but not something that is either affordable or worth having in terms of what would be paid out.

I feel like even if it made £200 a month (it wouldn't be that much tbh) difference by me starting to pay into my pension 2 years earlier than planned it wouldn't be enough for me to prioritise it over debt repayments and emergency fund if I'm honest.

In regards to the cat spending, there's 2 of them, yes special diet and also cat litter because they're house cats
Food spend I set it at that amount because I know I can stick to it without missing out on nice food and ending up ordering takeaway. But I am looking into batch cooking to see if I can bring down some food waste, still eat nice food and hopefully bring it down a bit. I've only been strictly budgeting the last few months, sometimes I don't spend the whole lot and any left over can get chucked into savings at the end of the month. But it does give me enough to cook something nice if friends come over

In regards to getting a lodger, I really hate the thought of a stranger in my home if I'm honest. If I felt that desperate to increase my income I'd rather work at a second job and burn out. I'm hoping I can turn around some of the worse areas of my finances without resorting to that

I'm not saying I won't pay into a pension, I'm just delaying contributions until I'm 35

I do have a very good sick pay policy at work I believe 6 months full pay, 6 months half pay.
I don't think I've got enough room in my budget to clear the debt in one year, so the plan is 2 years, hopefully closer to 18 months depending on potential pay rise and if I have anything extra left over in my account at the end of the month after the planned bills/savings

How about a lodger to help increase finances

OK, given you have good sickness benefits the situation isn't too bad.

Sorry I mean pushing the debt out by 1 years- i.e.3 in order to start the pension sooner. You'll also get tax relief on the contributions etc.