Where to start?

[CPHB2021]

Myself and are (quite!) young 25 and 29 and really want to be sensible with our savings. We have two young DC and one on the way ( surprise ) our main concern is finances so we want to ensure we're doing the best we can whilst they're young and cheap!
Please any advice with how to get starting in investing? Many, many thanks.

@CPHB2021

Myself and are (quite!) young 25 and 29 and really want to be sensible with our savings. We have two young DC and one on the way ( surprise ) our main concern is finances so we want to ensure we're doing the best we can whilst they're young and cheap! Please any advice with how to get starting in investing? Many, many thanks.

Myself and DH **

Start by learning about what sort of investments can be made.
Also you need to be in a position where you can invest, so a starting point may be your family budget, having an emergency fund, not having consumer debt.

Some books:
The Meaningful Money Handbook - Pete Matthew
The Simple Path To Wealth - JL Collins
The Behavior Gap - Carl Richards

I am unclear as to what you want to invest towards... what is the goal?

Children - they could invest for when they are age 18.
You could invest for something you need in say 10 years time, or for retirement (30+ years away) or both.

@nannynick

Start by learning about what sort of investments can be made. Also you need to be in a position where you can invest, so a starting point may be your family budget, having an emergency fund, not having consumer debt.

Some books:
The Meaningful Money Handbook - Pete Matthew
The Simple Path To Wealth - JL Collins
The Behavior Gap - Carl Richards

Have just ordered a few of the books. Thank you!

@nannynick

I am unclear as to what you want to invest towards... what is the goal?

Children - they could invest for when they are age 18.
You could invest for something you need in say 10 years time, or for retirement (30+ years away) or both.

The goal, I suppose is to feel secure financially. And be mortgage free with a decent pension. We are not high earners and unless one of us decides to re train and have a career change we will always be 'mediocre' our combined income is roughly 65k although will go up when DC are all full time as I will resume full time work.

Do you both have workplace pensions to which you and your employer contribute?

If they are an autoenrolment scheme, then you may be paying in 5%. Aim to increase that to 15% each.

If you have any consumer debt, such as an overdraft, car loan, credit card, then have a look at the Ramsey Show (YouTube and there is a podcast, plus a book: Total Money Makeover, classic edition),
It is American so needs a little adaption for the UK.

meaningfulmoney.tv/2019/03/15/dave-ramsey-uk-baby-steps-5mf

Ramsey Baby Steps

1. Be able to pay all minimum payments on debts, have no overdraft.
2. Starter emergency fund, £1000
3. Pay off all consumer debt, smallest to largest.
4. Increase emergency fund to 3-6 months of expenses.
5. Invest 15% in to retirement - workplace pensions, ISA, SIPP.
6. Build a pile of money for children's higher education needs.
7. Pay off home mortgage.

Steps 4, 5 & 6 are done at the same time.

@nannynick

Ramsey Baby Steps

1. Be able to pay all minimum payments on debts, have no overdraft.
2. Starter emergency fund, £1000
3. Pay off all consumer debt, smallest to largest.
4. Increase emergency fund to 3-6 months of expenses.
5. Invest 15% in to retirement - workplace pensions, ISA, SIPP.
6. Build a pile of money for children's higher education needs.
7. Pay off home mortgage.

Steps 4, 5 & 6 are done at the same time.

Thanks so much. Really helpful. When you say these are done at the same time, assuming you mean over the course of years. It seems an awful lot to try and do in one go. Really appreciate your advice! Thank you

Yes, Baby Steps 4, 5 & 6 may take 5-7 years.
The steps 0-3 are done one after the other. That process will take some people a a couple of years, others may have little to no debt so would do it much faster.

To get an idea of how long it has taken various people, watch some Debt Free Screams:

m.youtube.com/watch?v=o_8ebac0ZWc

Another good one if you aren’t struggling with debt and are more looking at how to put your money to work is the Money Guy show. They’re American but I still find the advice really helpful. Their financial order of operations is similar (but a little bit different) to Dave Ramsey, who I think is second to none for helping people get out of debt, but whose advice is I personally find less helpful the further down the steps you go. The Money Guy team says that ideally you should be working toward saving 20-25% of your gross income, working in the following order:

1. Basic emergency fund. They say ‘deductibles covered’, which I take to mean enough to cover small to medium things going wrong—things like an urgent car repair, the washing machine breaking, a surprise vet bill, etc. It’s different for every person, but for me this basic amount was about 2k. For some it will be less, others more.

2. Employer match. If your employer will match contributions you make on your pension, contribute at least enough to get the full match on that as it’s free money.

3. Pay off any high interest debt (not your mortgage, for example, but certainly any lingering consumer debt you have)

4. Build up your emergency fund to 3-6 months of expenses

5. Max out ISA contributions (they say Roth and HSA, but those are just are the American cousins of the S&S ISA: after-tax investment products that grow and can be drawn on tax-free).

6. Max out pension contributions

NB: I think the ISA and pension steps can be worked toward concurrently or even swapped, depending on what sort of income bracket you’re in.

6. Hyper accumulation/pre-pay future expenses (this is where you start socking extra funds away for children’s university, early retirement, etc)

7. Pay off low interest debt like housing (but only after maybe mid-40s when you have less to gain from compounding growth of savings in your 20s and 30s).

I really enjoy the Money Guy show because they are very good at helping beginners to wrap their heads around what to do with money as it comes in.

pmk