Do you think I’m in a poor position?

[Pogodogo18]

Here’s my situation. I’m a 50 yr old single parent with one still young child (10)

I’ve got a reasonable job that earns me £48k pa and I get £6k child maintenance a year.

But my outgoings are high and I can barely afford to save anything. Less than £100 a month usually. I have a mortgage of 200k on a house worth 460k but 18 years to go 😔😔

No pension to speak of. About £5k in cash savings. Old car but okay for now.

I’m very fortunate in some ways (don’t mean that in any boasty way at all, just grateful for what I have). But I wake up at night and I think I’m in a pretty precarious position financially. The lack of pension scares me the most.

I’ve worked bloody hard to reinvent myself career wise after my divorce, and I spent years married to a careless spender, which has taken me a long time to recover from. Despite all the graft, it all feels too late to catch up.

I live in an expensive area and wonder if my view is clouded by seeing lots of people better off than me. But however I cut it, I feel very vulnerable financially. Am I?

@Dallasdays

I would suggest paying any spare cash into a pension (particularly if your employer will match but even if not). Mortgage interest rates are so low, it isn't worth paying that down in priority to building up your pension which has significant tax advantages

^THIS^......... and this:

A £200k mortgage now is useful information from an overall balance sheet perspective but doesn't make immediate sense of why your costs are so high. My usual recommendation is to do a "statement of affairs" which there's usually a good load of help on the MSE forums with.

www.lemonfool.co.uk/financecalculators/soa.php

@Pogodogo18 - you are probably spending more than you need to because, on paper, you should be quite well off. But without further details about where your money goes, it's hard to advise.

Might not be possible but could you downsize or relocate? Do you have a spare room for a lodger?

What job do you do?

As oters have said, you need to look closely at your outgoings. Based on less than 50%LTV, you can get a 5 year fixed rate at just over 1%, which would make your monthly mortgage payments around £1000, leaving around £2500 for everything else, which should be enough to cover day to day costs, childcare and have some left over for saving.

Re your pension aren't you enrolled in one via your employment, as you should have been under auto enrolment rules, unless you opted out? if you haven't then around 8% of your salary will be going in to a pension each year for you.

Have you done a state pension forecast, if not, do that, that will give you an idea of what state pension you could expect

All is not lost, you have time, and better to do something now than in 5 or 10 years time

I’d consider moving, maybe not yet but in future. Although I’m presuming you live in a large property, with space you may not need…

I wouldn't sell your house either. Presumably you are on a cheap rate and downsizing in the future can form part of your income when you retire. You can get a nice place in plenty of parts of the UK for £250k, leaving 200k towards your pot.

As soon as your child is in secondary you can save the childcare savings as pension.

I can't see how you are struggling on that salary. Where is the money bring spent.

Thanks for your replies. I’m going through them all, it’s so useful to get people’s different perspectives.

My outgoings are here:
DVLA car tax £13
Aviva £152 - income protection, critical illness etc
mortgage £1038
Cat insurance £11
Gas/electricity £75
Loan interest free 12 months left £22
AXA buildings insurance £9
Amazon Disney £8
dental insurance £20
national trust £6
Sainsbury £30 - paying off zero % carduntil March
Netflix £6
Now Broadband £22
Savings DD £40
£10 giffgaff mobile sim only
Cat flea subscription £4
RAC car insurance £30
Total £1495

Then:
£600 spend - travel, day to day costs, DD tutor, any day trips/outings, unexpected costs in month.
£250 put into different pots - petrol, Xmas savings, haircuts, school uniform, clothes, school stuff.
£50 house overpayment
£100 savings
£300 food
£350 childcare - sometimes a bit less
£130 council tax
Sub total £1730

Grand total OUT of salary £ 3275

Net salary plus child maintenance IN £3300

Looking at it, the areas with leeway to cut down are food and the spend? But we live pretty carefully- rarely eat out and so on. Maybe I just need to reorganise things!

It's pointless saving these small amounts until those debts are cleared even if they are not large. But I suppose they are zero interest. And I would look again at the £600 a month for extras. Could any of that be trimmed down. And another £250 for extras. That might be able to be cut. And you are saving quite a bit. £190 a month from my calculations. Including the house overpayment. Which is a good idea.

Are you making pension contributions out of your salary? It seems a little less than I would expect if not. Do you get child benefit?

I would stop the mortgage overpayment and put that £50/mo in a pension.

The £600 spend, I would try and be more frugal each month and take whatever is left over each month, put it in pension instead of rolling over to next month.

On council tax, double check you are paying single occupancy rate as that is lower than the usual rate based on two adults living there

Where is your child benefit income? You should be getting some...I think it is £80 or so per month for one child. That’s more money you can put away for your DD.

Your Aviva £152 income protection insurance seems high. I’d shop around. Also check with your employer because some of them have disability retirement benefits linked to their workplace pension...ie if you are working for NHS and paying into their pension for example. And so you might not need a gold plated income protection plan.

Childcare- most of time I did have to pay for after school care, but for a few years one of my DC went to a friends house after school until I finished work. The friends mother offered as she was home anyway and my DC helped her DC with homework every afternoon. So I had no childcare cost those years and she had no tutoring costs. I did give the family gifts by way of thank you quite frequently. Not sure if any opportunity for that for you, but worth thinking about.

£600 spend - travel, day to day costs, DD tutor, any day trips/outings, unexpected costs in month.
£250 put into different pots - petrol, Xmas savings, haircuts, school uniform, clothes, school stuff.
This is where you can review? This is £850/month, it needs separating into essential and discretionary, then you can see what you could do with the discretionary spending to improve finances. It is hard to say but that seems high amount to be spending.

Savings DD £40 Doesn't seem sensible to save for your DD before saving for your own pension or paying down debts?

@rrhuth

£600 spend - travel, day to day costs, DD tutor, any day trips/outings, unexpected costs in month. £250 put into different pots - petrol, Xmas savings, haircuts, school uniform, clothes, school stuff. This is where you can review? This is £850/month, it needs separating into essential and discretionary, then you can see what you could do with the discretionary spending to improve finances. It is hard to say but that seems high amount to be spending.

Savings DD £40 Doesn't seem sensible to save for your DD before saving for your own pension or paying down debts?

THIS - plus the £300 on food. That's a huge amount of spending that could potentiate trimmed. Christmas spending is largely pointless. Save money on haircuts by being a model. Buy fewer clothes and second hand whenever possible (incl. school blazers). Save money on food by reducing meat consumption and other high value foods (£300 a month for 1 adult + 1 child??!). And what are 'day to day costs'?

It seems to be the case that you are haemorrhaging £££ in multiple directions, without a clear idea of why and how.

I think you still get tax relief on pension contributions, might be better to invest in pension rather than overpaying mortgage.

I would question the value of the Aviva CI policy, it looks expensive and the small print on that type of insurance is worth checking as they sometimes exclude things you would expect to be covered. If that was cancelled you could invest that money and perhaps DD savings money in a pension.

You have a quarter of a million pounds in equity Op!! You’re not in a terrible position at all! Maybe in mumsnet world you are if you don’t have a million pound pension pot but as a single parent you have more than many dream of. Take a few of the tips on here but don’t despair too much or waste precious energy feeling down about this!!

That seems high for a 200k mortgage, ours is closer to £250k and £900 a month, can you shop around for a fixed rate deal? Your spends seem high too especially at you don't seem sure where it actually goes. Do you have any pension at all? That's not clear

Why haven't you got a pension with a salary like that? A pension provision is required from all employers even if it is just a NEST pension.

So I doubt you could trim your mortgage payment given that you can probably only do it over 17 years.

Agree with everyone else, get rid of any debt before you overpay anything.

That £1200, travel, extras, food, and pots of cash is a lot of money, I am sure that you could cut that back.

I never pay car/house insurance monthly, they usually charge 10% to allow you to do that.

Where are your car costs ?

There's just me and DS (15) here but my budget is much simpler - house, car, utilities, memberships, gym, netflix/now tv, prescription season ticket.

I then spend between £500 and £750 a month on everything else including clothes, one off things, food, petrol, eating out once a month, school lunches and DS pocket money. Some months are worse than others spend wise like when I pay annual rugby subs or music tuition for the term, etc..

I halved my hair cut cost by changing hair salons, whereas I was paying £75 for a hair cut, loved my hairdresser but he kept getting promoted and the cost kept going up, I now pay £37 at a different salon, perfectly decent cut but not quite the same swanky experience!

Do you definitely want to keep that critical illness cover? Personally I would save it instead, especially if your child has an involved father and/or grandparents who could step up if you did become ill. Once you have 3-6 months outgoings in savings I would focus on your pension. It's never too late to start. On the whole though I don't think it looks too bad. Your salary will be likely to increase over the years and some of your outgoings will stay the same or decrease (mortgage, childcare, debts) which will mean you're in a much better position in 5 years time.

What do you need a tutor for? Are you sure that isn't something that readtheory, IXL or general 11+ booklets wouldn't cover?

So you are sorted - once childcare is over (next year) then you can put 350 plus tax in a pension. Then you can also add the tutoring fee (how much is this per month? DIY! She is 10, not an undergraduate!).

Your house equity of 200k can be taken at 4% = £8k pa on top of hopefully a full pension = £17kPa. Sorted from 68plus.

So you only need to save now for early retirement, which will be your 350plus tutoring fund plus tax.

That seems ok. I wouldn't be panicking.

Lots to digest. I really appreciate all the suggestions and ideas, thank you.

To answer a couple of the Qs, I have a NEST pension with work which is fairly new and has barely anything in it. £5k or so, if that. Employer contributes minimum amount, about 3%. I think my gross contribution is around £120 a month.
If I’m honest, my understanding of pensions is pretty poor . I have one from many years ago which has around £15k in it.

My car was bought outright 6 years ago and was 7 yrs old at the time. It’s becoming expensive now (MOT fails and repairs) and I need to change it soon. Probably for another oldish car but I’ll need to finance it somehow. If I can get one with lower CO2 emissions, I can get rid of the tax cost every month.

Life cover, CI and Income Protection is expensive, but worth it for peace of mind I feel. I went through a broker and chose it all very carefully. Basically if I can’t work, I’m pretty screwed as have minimal savings, an irresponsible ex and distant/unhelpful family. It’s very much down to me!!

I’d be asking how well your savings are performing. If it’s in a savings account you are massively losing out. Look at something like the Vanguard 80% Life Fund (through an ISA) - easy to sign up for through their app, you put a DD amount in every month and can do random top ups as well, it’s knocking the socks off anything you could get from a savings account and the power of compound interest is huge

I think you really need to break down that £600 and understand where it’s going. What are “day to day costs” outside what you’ve listed?

£300 for food is on the high side.

The lack of pension would really worry me to be honest. I would do whatever you can to increase your contributions.

Early retirement is not going to be an option anyway with such a low pension, so if you have to work until 67, put a good amount into your pension each month from now and you should end up with a reasonable amount at 67.

I started contributing just a bit to my retirement about 6 years ago. After 2 years I started maxing out. My company contributes also (and I’m not in the UK.). As of now I’m up to the equivalent of £190K.

In your position I would start putting whatever possible into your pension. And really consider how taxes impact the pay you receive vs. the good that same amount can do if you put it towards your pension.

Ah, so you do have the beginnings of a pension; that’s great.

I agree with others - in a year or so you’ll have an extra £350/month from childcare savings that you can whack in to your pension to boost things (and with tax efficiencies it’ll be worth over £400/month). Otherwise whack it into Premium Bonds until you’ve built up an emergency fund of 6 months expenses which should help you feel like you have some breathing space.

In the meantime really look at that £600/month figure and be honest with yourself about where it’s going - that’s a hell of a lot of money to just group together as “day to day spends” - I’m willing to bet there’s £100/month at least you could probably tuck away from that without feeling it too badly.