Large investment pot but not saving anything else is this wrong?

[FusionChefGeoff]

I am 46 and been with DH for 15 years. 2 kids. £100k left on mortgage.

We’ve saved / inherited and have approx £140k invested which is growing nicely. Also have healthy pension pots and share schemes maturing every year from DH work.

I also have a flat with approx £50k equity which is tentatively earmarked for the university years / deposits for kids houses.

I use YNAB which is zero budgeting so every penny that comes in (approx £5k per
month) is allocated including towards annual bills / holidays / car repairs / Christmas etc so a lot of what other people count as ‘savings’ is considered as ‘spends’ if that makes sense?? Plus an £8k general emergencies fund.

However, a while ago it was getting a bit tight monthly to cover all of the annual contributions, daily living AND contribute a chunk every month towards unspecified ‘savings’ and I decided that was bonkers to be refusing kids days out / new clothes etc when we’re sat on such a huge pot.

Is it mad that we don’t ’save’ any money so we can spend more freely in day to day life?

It’s a little mad, everyone needs some cash savings for day to day spends. It may be worthwhile for you to speak to a financial advisor so they can look over things for you.

We have over £10k in ‘savings’ though for holidays / annual / Christmas etc but via YNAB they are all
allocated.

Will the mortgage be paid off by the time you want to retire?

Are you happy your pensions will provide you with a good retirement at whatever age you're planning to retire?

You have 25k to give to each of your kids to cover uni or house deposits

You have 8k emergency fund

You have £140k invested which doesn't have a purpose (or is this to bridge early retirement?)

You budget for annual costs

I do think you might have gone too far into a save don't spend mindset and need to find a balance. You're in a really good situation. How much are you saving each month?
Why not look at how much your £140k investments are growing each month? That's probably a much higher number than your savings contributions. If you're making £1400 a month on your investments and are 'only' saving 10% or 20% of that figure a month, let the compounding do its work and spend the money on living now.

Imvestments dont have a purpose yet. Could be for early retirement but don’t feel ready to make those kind of decisions yet just in case kids need more eg having to move schools and find private. Also planing a new kitchen soon.

Currently, there’s nothing going to ‘savings’ but there’s a lot going to annual expenses and holiday pots.

I do think we’re in an amazing position and am happy spending a bit more now but just wanted to check I wasn’t going too far the other way!

I don't see annual expenses and holiday pots as savings either, that's just spreading your major spending dumps throughout the year.

It sounds like you've worked hard to get where you are, it's fine to take a break and enjoy spending money. You can reassess later if either of you get a promotion, or the kids leave home. Consider then if you'd like to aggressively save again or indulge in a bit of the lifestyle creep, or something in the middle.

I think this feeling is partly a consequence of the YNAB system - ie most people would have a bigger discretionary spending fund per month that can make it feel easier to be spontaneous, but then fall short of big ticket expenses like Christmas. But that’s to some extent the nature and strength of YNAB!

We are in a not dissimilar position, decent investments/savings and running a monthly expenditure that sometimes feels tight. But I always want my ‘running costs’ to be met by our income. I don’t mind spending some savings on genuine one off costs like a new car or kitchen but not to inflate monthly lifestyle, that’s an easy way for it to gradually get frittered away. You might need to be more flexible in your monthly budget allocations to allow yourself to be spontaneous on days out or handle unexpected expenses like clothes.

If it really feels like you’re missing out on experiences as a family, I’d take a moderate one off lump sum out of your long term savings and have it available as a longer term sum for family fun money - but keeping it separate and being mindful on what you choose to spend it on. Still in line with the YNAB mindset!

Surely tucking stuff away for holidays etc is savings? Where would you put it if not there? Would you have another pot just of 'savings' just sitting there, while the kids sit at home all day for the school holidays?

You sound as if you have planned a financially secure future, what's the problem in spending on days out? Sounds like you have let the app take over your life tbh

I don’t think it’s the app - it’s just my general incredibly tight mindset. My parents are incredibly frugal - but as a result retired at 55, have travelled the world and have given us 2 very sizeable financial gifts so I suppose a bit of it is that some of this I still see as ‘their’ money and I need to be careful with it.

Ironically as @MiniMidiMaxisays, now I allocate my money specifically for ‘eating out’ I feel more comfortable saying ‘let’s go out for dinner we’ve got money in the pot’ rather than just looking in the freezer to avoiding spending anything that feels frivolous!

Also agree with the fact that I do work it so that our monthly / annual running costs are met from our income. With all bonuses going towards future holidays generally. House improvements or new cars for example would need to come from the investment pot but we very very rarely do that (1 big holiday from inheritance and a new patio in the last 8 years).

So far it feels like we’ve got a good balance based on replies so that’s reassured me!

Is your £8k emergency fund in an accessible account? If so, then I’m doing the same as you. I have a bigger emergency fund, but I don’t save anything over and above that. I invest and put money in accounts for specific purposes (new car, holidays, home improvements). If you think your investments are enough, then I think it’s relatively normal not to be adding to it. Although I would challenge it is enough, depending on your life goals.

You need to have a look at the Financial Flow Chart, I can’t link but is easy to find.
I also do zero accounting but we have an emergency fund that sort of sits outside the day to day budgeting. This has six months living costs and enough for a new roof in it.
And we have a clear plan of needing our full living costs for the years between being too knackered to work and pensions kicking in.
This money is also outside of the living costs budget.
Not sure this makes sense to anyone but me, but it does for work for us and we are almost ready to stop working

That all looks good to me except I think it makes sense to have a bigger emergency fund. I assume you are thinking that if one of you was unable to work for a while through illness, redundancy etc then you would just sell some investments. But if the market is down when you do that, you take a big hit to your long-term investment prospects, which is undesirable.

My understanding is that most people who can afford to invest as you have would first put six months to a year of spending into emergency savings. Might depend how secure you think your jobs are and how employable you both are, of course.

Also, owning the flat means you need to be prepared for the possibility of losing all income from there if you have problems with tenants or the flat itself, and/or needing to shell out a lot of money if there is an unexpected major maintenance issue. So that's another potential emergency which most people don't have to allow for.

I agree you need more than 8k in cash savings if you are a family of 4 with a mortgage still to pay. In the event of illness or redundancy you wouldn’t want to be forced to immediately cash in a load of your investments as it might not be the optimum time to do that.

Assuming that you are still continuing to add to your “pot” of investments each month, then I’d redirect that money for a while until you have 20k or 6 months of expenses (whichever is the larger) in cash savings (you probably don’t need to use an isa as your interest on that amount won’t exceed £1000 a year, and you could split the savings between yours and DHs accounts anyway).

I’ve just reread your OP though and it sounds like actually you aren’t saving any money each month anymore and you’re just spending it all, albeit sometimes via sinking funds. Is that correct? If so then 5k is quite a lot to be spending/sinking each month if none of it is for long term savings. In your shoes I would still be putting aside at least a few hundred each month towards increasing my emergency fund, as above.

Also bear in mind that the £50k in the flat will either give you 2 x £25k house deposits (which still isn’t enough in some parts of the country) OR it will subsidise you during the university years, not both. My DSIS is currently supporting two kids at uni and they both only receive the minimum loan which doesn’t even cover half of their rent let alone other living costs. So she is spending over £1k per month topping them up.

So do you have a budget for days out and a budget for new clothes...but you want a bigger budget for them? And reduce the budget/savings elsewhere?

I think what you do is fine. You have some savings/investments for the future by way of investments, flat, pension etc etc and you have an emergency fund and money for holidays etc. So using the bulk of your income for lifestyle is fine. We retired at 58 using mainly pension and stocks and shares isas to cover the years between retirement and state pensions kicking in and saved a whole chunk of money once our kids had left Uni and the mortgage was repaid so in the last 10 years prior to retirement. You do not say your age but I am guessing 40s which means you have a good 15 years to go to continue adding to pensions etc. If your income is £5k how much of that goes to essential expenditure and how much to savings for holidays etc and lifestyle?

Maybe allocate something to ´fun money’?

Thanks everyone - I’ll start adding to the emergency fund.

We do actually also have a large cash pot but that’s currently earmarked for kitchen and garden renovations so I didn’t include it as soon as that starts happening it will disappear very quickly!!

But yes I take the point that we need a larger cash buffer so we don’t end up having to cash in investments should there be a crisis. Was going to move the £20k allowance into S&S this year but I’ll put it into cash ISA instead.

Cashflow planning would help you quite a lot

https://www.saltus.co.uk/the-financial-planning-blog/cash-flow-planning-everything-you-need-to-know

Any decent IFA would offer this.