Higher salary - how to use extra money to be financially secure

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I have just accepted a new job which is over double my current income, but involves moving and will increase stress levels. Think going from the Civil Service to promotion in the private sector. However I am not in the UK.

I am concerned I may get burnt out in the new job, and/or may just not want to keep working at that intensity from now (age 43) until retirement (guessing 60 for the sake of the post).

Therefore my goals are to try and not use the salary increase to also ‘lifestyle increase’ but to try and put myself in a good financial position so that if something happens, I am ok, as I am single, with no partner (and no children), so no financial help.

My current financial position (including all car loans, credit cards etc) is:

• £3,500 loan
• £5,000 credit card
• £15,000 loan
• £365,000 mortgage

I have spent all my savings on moving costs, so also need to build up an emergency fund again.

After paying my mortgage, rent (as need to move), bills, and money for me, I think I will have £4500/month can go towards the above.

I would also like to prioritise self-care and my health, to make sure I don’t burnout. So perhaps money for that too.

So my questions - if this was you, what would you do?

Firstly clear your credit card unless it's zero interest, then the smaller loan, then the larger loan - once all are clear overpay your mortgage and build up savings

I’d seriously consider changing your mortgage to a BTL if you have more than 25% equity and making your property make some money for you rather than costing you. Take it as interest only too which will reduce current cost but whatever you do put away the capital amount. I’d aim to pay your unsecured debt in 6 months, then save £4K/month towards paying off the mortgage. Possibly more as your mortgage costs would be less. If you could make it £5k you’d have enough to pay the mortgage off in 6/7 years. That's then financial freedom in a relatively short time.

Agree life insurance is not a priority as you have no dependents but critical illness abs income protection may be.

1. Look at your pension provision - it may be that an increase in your % contribution will make a significant difference to your outcomes.
2. move credit card to 0% if available. Check if you can consolidate your loan onto a cheaper rate, or 0% credit card.
3. check the terms of your relocation - does the company pay for costs for you renting out your house? Consider getting an Assured Shorthold tenancy or corporate let for your house.
4. start dripping additional income into cash plus into a tax-efficient investment account (appropriate to your country)
5. pay off non-mortgage debt starting with most expensive
6. take out critical illness cover

And/or see a financial advisor. Again check if this is part of your relocation package.

Oh sorry if I misunderstood. I thought Op had said she was currently with the Civil Service in her opening post.

Thank you for the advice. To answer some more questions:

Debt/Money Management: Just to address this, as I consider myself fairly good with money. Until recently, the only debt I had was the £15,000, which is an interest free loan from my parents to renovate a bit of my house. I had intended to save up and do it, but they approached me and suggested they pay for it and I pay them back as they wanted me to get the enjoyment from the renovation now, rather than in 2 years when I had saved to get it done. In hindsight, that’s been good, as I am now leaving and have enjoyed the use of it.

The £3500 loan and £5000 credit card have almost entirely been incurred in getting the job (flights and accommodation for interviews and to find new accommodation), outfitting a second small apartment with basic furniture, fridge, washer/dryer etc. Due to the short time frame between jobs, I made the choice to spend money where possible to make life during this stressful transition easier. This includes rental deposit and first month’s rent on the new flat.

I am also expecting a payout of £3500 from my old work for leave etc.

I don’t consider myself bad with money, but perhaps others still might.

Retirement Fund: is currently above average for my age. However my new job will contribute the maximum amount allowed by law, so even if the fund was very low or very high, I can’t contribute more. I have calculated that by aged 60 the interest alone will earn higher than my current (lower) salary, not including any draw-down figure. I also won’t have a mortgage or rent payments then. You have to assume inflation on the money, and also ‘lifestyle creep’, so o would like some extra investments to complement this, but overall I am in good shape, and the new job will make certain of that.

Hi Everyone,
it has been about 7 months since I post, and I thought I would update. Obviously since I post, things have changed abit in the world - home interest rates have risen and the cost of living crisis - it’s been interesting as I wanted general advice 6 months ago to put me in the best financial position possible to whether any scenario. These ones weren’t anticipated, and if I write the same OP now, I might have got different advice.

in any event, I did knuckle down and have just paid off all the debt except my mortgage. I am now putting that same money used to pay off debt into creating a 6 month Emergency Fund, and then I am going to move to pay more off my mortgage. I am currently on a very low fixed rate, and can only pay off an additional £10,000 now, but I intend to keep saving and when the fix expires in 2 years, it will be good to be able to pay off a chunk from that.

One thing I learnt from this is that whilst I didn’t think my financial position was dire (with the exception of the £3500 loan and the £5000 loan - which were both incurred in getting the new job and moving for the new job (ergo I wouldn’t have had them if I didn’t also have my higher income)). I know that some people did think my financial position was a bit worrisome. I now agree. It took my longer than I thought to pay it all off (7 months) earning a very good income. Plus cost of living increases came out. I now see that ANY debt other than a mortgage is living beyond your means and can put you in a difficult situation should things that are out of your control change (divorce, interest rates, cost of living increases, emergency repairs etc).

I feel very glad I was able to knuckle down and pay the debts off before something happened that might have caused me serious problems. And I’m working on the emergency fund and mortgage repayment buffer to safeguard the future.

Thank you for coming back to update! I often wonder what happens to people. Great news the debt is gone, 7 months is really good going. Wishing you lots of success with your savings and paying down the mortgage. Very inspirational.

I agree, it's very interesting. I bet you feel a lot more secure now you don't have that debt?

I am in the lucky position where I have had a promotion this year, and while it's no where near as much unassigned cash as you have ended up with, I am umming and ahhing about how much of it to enjoy and how much to commit to savings to keep created a buffer for cost increases. I think I have landed on 50-50, and I'm aware it's a nice problem to have of course.

@whereeverilaymycat thank you. I am really pleased the debt is gone (last payment was last Friday). I haven’t shared it with many people, as it feels like boasting, especially in this cost-of-living crisis. But I started this plan before any of that was an issue, so it’s nice to have completed what I said I would.

Interestingly, @Augend23 Paying off all the debt has made me feel a bit ‘empty’ ! Like I haven’t achieved anything, as I should have always had no debt! Perhaps like someone who loses weight, and suddenly is within a normal BMI again and people don’t notice them, because they are ‘normal?’

in any event, I am pleased to have no debts and I can’t wait for my next pay cheque, which will be the first one where I don’t have any debt payments to make. Meaning all the money is mine to spend on whatever if I want!

I won’t go crazy - I’ve outlined my plans to build an emergency fund, but I do want to start to enjoy some of the money too. You make a good point. @Augend23 about deciding how much to save vs spend. At the moment I am still living off my old salary, so I have some room to spoil myself! My focus will be on emergency fund, laying down mortgage and doing things that benefit my long term health and fitness……then some lifestyle inflation!

I always like to pick something "fun" (like a new coat...maybe not everyone's definition of fun) to do with a first month's payrise so I have something to remember my career progress by.

Re empty, I can see that. I think your point about spoiling yourself might be what makes you feel as though you have achieved something - because spoiling yourself is now a "legitimate" use of funds?

My DH was in a similar position so we prioritised pension so he could retire at 55 which he did and also regular proper holidays which he really did need to be able to do the job.