No mortgage.. savvy money people advice please

[Alc56]

Good morning all.

Downsized and purchased a house outright last year. For info… I’m early 30’s DH late 40’s. One DC another on the way. No debts, cars paid for etc. Few thousand in savings for safety net. He is employed £60k, I’m self employed, earn around 10k. I have just opened a stocks and shares ISA for myself and JISA for DC.

DH is very relaxed now and just enjoying the luxury of no mortgage. I however have a niggling feeling that we should be doing more than paying into savings. I’m just looking for advice as to what others are doing/would do please? Investment, property etc? Or would it be worth finding a financial advisor to have a proper meeting with?

As you can tell, extremely new to this situation so any advice at all is greatly appreciated.

Many thanks 😊

you don’t mention pensions?

do you have life assurance? private health?

Morning @TheNewDeer sorry I knew I’d miss something! Yes both pensions, DH has great pension, I set up a private one when I went self employed around 3 years ago.

This is an interesting one. DH cancelled the life insurance for both when we bought the house outright. So we have none at the moment. That’s a good point. DH has private healthcare/benefits through work, funnily enough he goes for a private scan next week paid for through work. This policy doesn’t cover me and DC though. So that’s definitely a thought. Thank you.

You’re mad to cancel life insurance. If DH died you’d be reliant on your salary. You need life insurance for DH even if not for you

If I were you I would focus for now on increasing your savings - six months income is generally recommended - then start ploughing money into individual pensions (unless your pensions are already looking good).

Edited to say I didn’t read your reply.

Some parallels to our situation.
We are putting money into a personal penson for me. Yes, it's more tax efficient to put it into DHs name, but I need the security given my drop in salary post babies.

Life insurance
Private health care
Pensions

In that order.

i’d hazard a guess that your pension is a fraction of your DH’s?

so in that case, priority should be your pension

and how old is your child?

Thank you all re life insurance. First job on the list to sort today!

Yes pension is a fraction of DH’s, so that needs sorting. DC is 9, baby due October.

Thanks again @TheNewDeer

I would open a lifetime isa (stocks and shares) as you are under 40 and use as part of your pension plans . You can put a max of £4k in pa and government adds max of £1kpa.

You can't access before 60 but mine will be a useful cash sum in a tax free wrapper to bridge the gap before state pension age

ok so focus on your pension, big time. Will be interesting to see DH’s response to that suggestion

And junior ISAs to the max

Critical illness cover as well as life cover.

1. rainy day savings, accessible or in a notice savings account
2. pension
3. savings for the DC, particularly as your DH will possibly be retired when they are uni age.

Your DH may have death in service benefit through work mine is much more than my life insurance would pay was so I cancelled it when the mortgage was paid off. I I just had to complete a nomination/ expression of wishes form to say who should get the monies if I do die.

You really should speak to a financial advisor. You have a slightly unusual situation (big age gap, big earnings gap, small children, money available to invest) and I'm not sure all the posters here are taking those into account.

Eg. If you decide to pay into your own pension, you get no pension relief since you're not paying tax, but your DH would get 40%. It seems to make financial sense to put it in your DHs pension for the tax relief, but you do want to be sure it would be fairly split if you divorced (I don't know how the law plays out). If you want it in your name you could put it in an ISA instead. The big advantages of pension over isa are a) the tax relief when you put the money in b) the tax free lump sum from age 55. But if you don't pay tax neither of those apply, so maybe an ISA is better (and you could use that money later to put earnings into your pension if you do start paying tax). There are probably some subtleties I don't know, which a financial advisor would.

Likewise somone mentions death in service benefit for your DH. That's definitely worth having and knowing about, but that will go if he changes job (likely in the next 15 years). If you take out life cover later on then you may end up with exclusions for existing conditions you find between now and then.

You do also need life insurance for you, given that you have young children. Don't underestimate your contribution! If the worst happened to you, 8am-6pm childcare for your kids would take a pretty big chunk of his 60k salary.

My mistake: it seems you'd get pension relief at 20% for up to £2880 per year, so long as it's the type of pension where the pension provider claims the relief rather than a workplace pension where they deduct it from your pay (and you did say that you're self employed).

late 40s?
means his children may be heading off to uni when in late sixties

i am surprised by his chilled laissez faire attitude tbh

you’d think he’d be keen to explore making the most of money available given he’s no spring chicken and he has a very young family

when to say you downsized…. what from and what to? with a growing family seems an odd time to downsize unless you were rattling around a very large house

Agree that your pension should be the focus. The financial flow chat is something useful to work through.

https://ukpersonal.finance/flowchart/

With no housing costs, on paper you should have a decent amount of spare money, so it would be foolish to pass up the opportunity to make it work for you. As well as your pension, you should save some in S&S ISAs. Aim to save at least 20% of your income just as savings/investments, on top of money for annual/irregular costs like holidays, christmas, insurance, car repairs, tax bill, etc etc.

Life insurance and critical illness insurance for you is also important - your DH might have good life insurance through his work, so something to check, but he should also think about whether he'd be able to continue to work if anything happened to you and he found himself as a widowed parent of a baby (horrible to think about but that's the sort of thing you need to consider protecting yourself against).

Yes, definitely also save towards DC university costs. The threshold above which parents are expected to contribute is quite low, although at least you won't have 2 going at the same time. If they don't go to university they have the money for a house deposit, or for a business start up, car and driving lessons or other useful start in life costs.

OP says she’s earning £10k, she could put £8k into her pension and get £2k tax relief on top. The £2880/£3600 limit isn’t relevant here.
I earn £7k (DH employs me for book keeping his business) so I’m putting £460 a month into my Sipp, it will get tax relief added, so £6900 in total plus I get NI credits.
Life insurance is essential,
enough to pay the bills for 10-15 years minimum. We’ve got life insurance to carry us through to age 70.

Once you have a decent emergency fund and life insurance, look at pensions and maxing out your annual ISA allowance of 20k each.

A lot of people would pull some equity out the house and buy an investment property. I’m not financially savvy but I have heard that a fully paid off house isn’t the best use of money.

Where are people putting their pension?

In that case “a lot of people” are mad! It’s a huge comfort to have paid off our mortgage. I wouldn’t immediately want to leverage my house to buy more property!

I second the comments above - ensure you have the rainy day savings first. Then focus on upping your pension savings.