Hi there, I apoligise for the extremely long post, I didn't realise I had so much information to write!
I've recently discovered this blog/website/forum and it has literally changed my life for the better. I have been reading everything I can do get a better understanding of this whole concept.
My girlfriend and I would love to be FI in 15-20 years and be earning at least £1500 per month from investments (that 4% figure).
At the moment my girlfriend and I currently live at home and starting from January 2017 we will be able to put away £1000 per month each over 5 years to reach £120k which will go down towards a cash payment on a house.
Now:
1. I don't know a whole lot about stocks and shares ISA's but from what I can see, each year I can put in up to £15k in a stocks and shares ISA, and for example split the money between:
HUKX.L x 25%
HMCX.L x 25%
IGLT.L x 20%
IWRD.L x 30%
What kind of returns would this net me annually on average? 4%? 7%? I have no idea and would appreciate some kind of rough estimates. I have never invested before and only today discovered this kind of ISA.
This article
http://moneyfacts.co.uk/news/isas/stocks--shares-isas-continue-to-perform/States it was 7.4% recently, is that a good guide?
Also inflation, the current UK inflation rate is 0.5% which sounds low so anything above 5% return should cover me nicely for that 4% withdrawal living allowance?
2. Also, I have read that financially it may not be wise to pay for a house in full with cash as I could perhaps make more money over 15-20 years by putting a 20% deposit down and investing the £96k into stocks and shares ISA (putting in £15k per year to max it out and then putting the rest into Vanguard LifeStrategy 80% for example). What are your opinions on this? I personally would prefer to be mortgage free but is that the best plan?
3. When we do get a house we hope to be on a combined salary of £60k, which is £4000 per month after tax combined. If for example we pay for the house in full then we don't have a mortgage to pay to begin with and our living costs should be less than £500 per month.
Which would mean we can save 87.5% of our income every year which would total £3500 per month x 12 = £42k, after 15 years that should be £630k alone in just our contribution. But assuming we get a steady 5% return on investments through stocks and shares ISA's and Vanguard LifeStrategy accounts then that would be higher (no idea what it would be but I would love to know).
But for now let's say £630k is what we have after 15 years of saving, if we get 5% return and live of the 4% recommended allowance that would give us £25k per year/£2k per month (not sure how much would be taxed though).
So 15 years should be more than enough to reach our goal of £2000 per month to be FI.
Anyway..sorry for that long post..
But what is the thought here on my plan and assumptions? Remember I am a total beginner and have never saved properly before and only just recently started looking into stocks/shares/ISA's/retirement/houses etc
I would love some help please,
Kind regards