Don't know how to handle money

[plumpootle]

Hi all

I've seen really good advice on here so hoping someone can help me untangle my thinking a bit.

I've just secured a new job in a new sector. It is a big promotion so am earning well (£90k + bonuses)

DH earns 1/3 of this in a secure public sector job.

We have one DD who we do not plan to educate privately.

We live in London and have a big mortgage (300k) and would not invest in any more property and do not plan to move.

I don't know where to put the extra money I'm earning. DH strongly thinks we should plough it into the mortgage as he is stressed about our debt level. I am less stressed as we are both v career orientated and neither of us want to stop working for the foreseeable (we are mid 40s).

Could put into our pensions but that ties it up away from DD.

Could start saving in some serious way for DD - but no idea where to start as interest rates are so low.

I appreciate that this is a very lucky problem to have but money makes me nervous!

I could see a financial advisor but do they just want to get investment for their clients?

Any thoughts very very much appreciated

If your bonus takes you over £100k then you start to lose your personal tax free allowance. That means for every £1 you earn over £100,000, you lose 60p of that in tax (the dreaded 60% tax rate). There is a strong incentive to reduce your taxable earnings by paying as much as you can into your pension, bearing in mind that there is an annual limit of £40k you can pay in.

Other than that I tend to put money into a stocks and shares ISA, diversified over a number of different funds . This is for long term saving, the sort of thing we might use for the kids one day.

Lots of food for thought here. Those saying not to put in DDs name, yes I agree. Everything is for her really now and in the future but I was about 30 before I could be remotely trusted with money and even now I want to spend everything I earn...

I would like to see a financial advisor but how does one go about this? I am very wary of trusting people about money things.

Side note 300k on your salary is not a huge mortgage

1.Definitely make sure you have very good life insurance for death and critical I jury, in both names. That protects your lifestyle should one of you need it.

1. Overpay on your mortgage whilst you can easily afford it. I have overpaid for almost 9 years now. My mortgage will be repaid in just over 3 years time. If I had not overpaid I would still have over 7 years to go. Low rates will not be around forever. Make the most of them.
2. Use all of your allowance in stocks and shares ISA's. If you don't feel confident in choosing your stocks there is always option to let find manager pick for you. You can ask for a broad mix of shares do not all of it invested in 2 or 3.
3. You might want to have ISA for you dd.
4. Keep s slush fund of 3- 6 months living expenses just in case of job loss.
5. I invested in property, buying one house for each child and letting out until they are old enough for to transfer across to them. I have made a decent profit on renting them even though rent below market value to tenants I like and care for property. Houses are now worth over 27 percent more than when I bought them and I did repayment mortgages do about 50 percent of mortgages left on first property bought and 63 percent on last one bought. I bought 3 for children and 3 for DH and Me from inheritance when my Mum died.
6. Pay into pension. I have always paid more than I had to as paid into Teachers Pension for 24 years and also into a personal Stakeholder for 15 years. In 15 years I have managed to accrue £56k. When I get Teachers Pension layer this year I shall also draw down Stakeholder over 7 years. Then when that depleted I can draw my State Pension. Dopension income will be between £16k - £17k from later in year and I still have btl income and I work as well ATM. You cannot know the relief that brings as you get older and less able to work but still want nice holiday, hobbies, meals out and go be able to gift your DC and dgc when you want to without having to worry about money. All the sacrifices I have made to keep paying additional pension is worth it ten fold.

Make sure you enjoy life as you go along.

@OnlyFoolsnMothers Ha! My
parents are absolutely horrified at the
size of our mortgage and I've found it hard not to feel panicked. But you are right of course in London terms.

No no no ... do not waste your precious money with a financial advisor!

Firstly, understand that you cannot take anything for granted. Your circumstances can change overnight, so first have some emergency savings (I'm risk averse so would say at least 6 - 12 months as it's not always that easy to pick up high earning jobs).

Then I would dribble some into your mortgage and some into your pension - as a higher rate taxpayer, this is particularly beneficial and you can carry forward unutilised allowance.

In your position I probably wouldn't put away too much for your DD. I've invested quite a bit for my DC but only when I'd cleared the mortgage and had enough savings/pension for myself.

You definitely don't need a financial adviser for a salary rise.
As you are already in your mid 40's, i would be depositing most of the extra into your pension.

I'm a fan of the offset mortgage - we have technically cleared our mortgage off in our mid 40's - the same age you are now.

£300K mortgage is quite large - how many years have you got left?
How old is your DD?

Private sector jobs have much less security - especially in a pandemic. I would advise you to save as much as possible (pension/mortgage/ISA in that order) - make hay whilst the sun shines. It's not hard considering we've been in lock down/under restrictions for most of the year.

www.unbiased.co.uk/ to find an IFA in your area.

Thanks all - great advice

I've got 20 years left on mortgage and DD Is 4 (so we have a long way to go on that score!).

I am going to split between mortgage, pensions (DH and mine I think) and the rest in savings, some for holidays, house stuff, some in stocks and shares ISA.

also please think life and possibly critical illness insurance, especially as you have a dependent. Think what happens if one (or both) of you could no longer work, then cover yourselves for it.

I'd plonk it all in S&S ISAs - Vanguard Lifestrategy fund 80 and leave it there. You've got more than enough savings, mortgages don't bother me as long as the interest rates are low and your jobs are secure. Pensions... depends on what the deal is with those atm but I don't like going too heavy on those as you can't access them for ages.

Check out Dave Ramsey on YouTube, a financial advisor. He teaches 7 baby steps you can follow.