Author Topic: UK based late starter  (Read 10917 times)

GordonCopestake

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UK based late starter
« on: October 04, 2014, 07:09:16 AM »
Hi everyone,
I have only recently stumbled across MMM (and ERE) and as described in the first MMM post had my eyes opened like Neo from the Matrix.

Unfortunately I'm late to the party, I'm 37 in a few weeks, married with two kids and have been living the consumerism dream for all my life. I have a mortgage, a credit card, two cars and an average job. I have no savings, no real pension and no real assets to my name other than the equity in my house. I'm in bad shape! I stumbled across MMM whilst trying to work out how to retire before I'm 70, let alone any earlier!

A few questions from this newbie:

1) Are there any UK based Mustachians here? Whilst a lot of the general advise is global in nature, the specifics are less relevant. Are there any UK based resources that people know of?

2) I've embraced the concept of anti-consumerism and plan to start saving instead of spending. I'm currently paying into a Standard Life stakeholder pension, but am I better off NOT paying into a pension fund which I can't access until i'm 55 and instead paying off my credit card debt and then putting the money elsewhere.

3) Where is the "elsewhere"? A stocks and shares ISA? Again, this is probably very UK specific as our tax laws are obviously different. Do I buy shares? How? Which sort? I've looked at iii.co.uk and they charge 10 per transaction which seems both steep and the common rate?

4) God I wish I had found this 20 years ago, how do I go back in time and shake myself awake?

Happy to provide numbers if it's of any help.

Thanks in advance for any guiding light

Gordon
« Last Edit: October 06, 2014, 05:56:43 AM by GordonCopestake »

NearlyThere

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Re: UK based late starter
« Reply #1 on: October 04, 2014, 07:21:31 AM »
Welcome Gordon. There's a few of us from the UK on here.

First 2 things I'd do in your position

1) Track your monthly expenditure for October. See what and how you spend every single penny of your wage. Try and cut this down as much as possible by understanding your spending.

2) Pay down all debt as quickly as possible. There's plenty of discussion here on mortgage repayments....actually

3) Read the entire mmm site and browse the forums.


UK based investing blog - www.monevator.com is a huge resource for us UK folk, but right this second, overpay and clear all debts.



GordonCopestake

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Re: UK based late starter
« Reply #2 on: October 04, 2014, 07:27:49 AM »
Thanks for the link MFP. I have already rescued my bank statements from the bin and am currently going over every entry. There are a lot...

Calvawt

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Re: UK based late starter
« Reply #3 on: October 04, 2014, 07:35:59 AM »
Don't get discouraged about the late start.  You will start to see some amazing process once you get a budget and start finding things to cut from it.  Get your spouse and kids involved, too.  Ask a lot of questions and remember it takes time.  Good luck!

Squirrel away

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Re: UK based late starter
« Reply #4 on: October 04, 2014, 07:43:37 AM »
The Money Saving Expert site is great for getting tips about pensions, budgeting, saving and investing and ways to slash your living costs.:)

Track all spending as others have said and then look at what can be cut or reduced and make sure you are getting the best deals for your electric, mobile phone etc...

GordonCopestake

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Re: UK based late starter
« Reply #5 on: October 04, 2014, 07:56:45 AM »
Hi Londoner, yeah i've already found MSE and bookmarked it, another one to read through after i've finished MMM!

Lots to read and digest

GordonCopestake

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Re: UK based late starter
« Reply #6 on: October 04, 2014, 09:01:10 AM »
Baby steps :- Sky TV cancelled, credit card tarted to a 0% and a standing order set up to clear it ASAP. I've dropped my pension payment to the minimum to concentrate on clearing my debt. Mortgage next...

plank

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Re: UK based late starter
« Reply #7 on: October 04, 2014, 09:04:04 AM »
What are your income, expenses, and debt?

former player

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Re: UK based late starter
« Reply #8 on: October 04, 2014, 01:47:41 PM »
You've got no entries for house maintenance, car tax, clothes, public transport, gifts or child activities.  Do you ever eat out?

Do you absolutely have to have two cars?  Do you have to use them as much?  Do you have to have such expensive ones? (You would be better off buying cheap and forking out for roadside assistance just in case)  Healthy kids should be walking a lot, including to school if it is within two or three miles, and so should healthy adults.  You can get broadband cheaper than 32 per month.  You would be better off putting the child trust fund contributions into paying off your debts.  Are you really spending 6,000 a year on holidays?  That's outrageous, even for a family of four that have to take holidays in high season. Try camping/caravanning for a cheap option - you can do this in France as well as the UK.

Otherwise, I'd say that things look pretty reasonable, in particular the mortgage payment and the groceries budget.

You have two car payments, two personal loans and two credit cards. Congrats on getting the 0% credit card deal.  You might just have the credit cards paid off by the end of the year, if you are disciplined. 

You are not ready to invest in anything other than your pension at the moment, and unless your income goes up a lot, not being able to take your pension until you are 55 isn't looking like much of a concern.  When you have paid off all your debt, start putting money back into a pension first, as that is pre-tax money.  If you max that out, a stocks and shares ISA is the way to go, with up to 15,000 a year of post-tax income going into tax-free investments.


GordonCopestake

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Re: UK based late starter
« Reply #9 on: October 05, 2014, 01:21:19 AM »
Thanks FP,
All these come from our "savings". We rarely eat out.

We don't HAVE to have two cars but I work 7 miles away and my wife works 12 miles away, unfortunately in opposite directions so we live mid-point. We are currently changing the main "family car" to a smaller cheaper one, which should save us at least 100 / month. I'm looking at changing mine for a "banger" but then AA membership is 39 / month so it's swings and round-abouts. We run everything over broadband and dont have a land line, although I'm looking at how cheap I can get it. We dont spend 6000 a year on holidays (I wish!) that covers christmas, birthdays, house repairs etc as well. We mostly go to Wales / Scotland to caravan parks, rarely abroad.

Current plan is to trim the fat as much as I can then hammer the credit card debt. After then overpay the loans. After then over pay the mortgage. After then start building a stash, but thats going to be years away.

When you say max out a pension, what do you mean? The pension pot is a bottomless pit and has no upper limit. I can put 100% of my spare cash into that should it give the best return, but it's money I can't touch.


Polaria

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Re: UK based late starter
« Reply #10 on: October 05, 2014, 02:39:30 AM »
Hi,

Do your employer and/or your wife's employer offer a match on pension contributions?
If this the case, can you try to up your contributions to get the maximum match?

Do not forget pension contributions benefit of tax relief; this is particularly interesting for your wife as ~8,000 of her gross income falls into the 40% tax bracket. 
In my case, I sacrifice ~150 of my monthly take home to get a total monthly payment of ~750 into my pension pot.  So you can see that tax relief + employer's match can make pension contributions really interesting.


Monevator is a great UK-based ressource to learn more about investing, pensions, ISAs etc.

Another useful tool is the Salary Calculator - UK Tax so that you can see the impact of pension contributions on your take home.



Pol
« Last Edit: October 05, 2014, 03:06:21 AM by Polaria »

lizfish

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Re: UK based late starter
« Reply #11 on: October 05, 2014, 05:27:18 AM »
Another UK person here *waves*. I second MSE for cutting a variety of costs and explaining some complex ideas in a simple way. (I joke that if my DH ever divorces me I'll be propositioning Martin Lewis!) I also second monevator. He does great  posts on passive investing and avoiding high charges.

You might want to consider a budget/tracking to help with the "1346 a month for stuff I've forgotten from the above list plus frivolous spends" because that's where your easy wins might live. I use and recommend YNAB, you might choose something else. But knowledge is power and it makes it easier to decide not to spend on things once you see where else that money could be doing work.

I don't have masses of other advice but I do use iii.co.uk. When you're ready to invest, you can avoid the 10 trading fee by using their regular investment option at 1.50 per trade. (Other platforms prob have similar) Basically you decide what shares/funds you want to invest in, and how much and then they buy on a specific day (about the 23rd) each month. This can be done inside an isa too. And you can change the amount every month if you wanted to. You do have to pay a platform fee of (I think) 80 a year but this can be shared amongst family members (i.e one pays it and the other only pays for their trades) but your 80 is refunded as 'trading credit' so your 1.50 can be paid out of it as well as the odd adhoc 10 trade should you need to.

Welcome to MMM. I am by no means the poster child for mustachianism but we've learnt a lot in the past year, and you will too. Good luck! (Now go pay off those debts)

lizfish

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Re: UK based late starter
« Reply #12 on: October 05, 2014, 06:10:08 AM »
For someone who doesn't have masses of advice, I don't half have a lot to say.

My DH is 40 (I am 33) and we only found MMM this time last year. We were less consumer than you (and your debt) say you were, but we're by no means saving a massive amount mainly due to me being self employed and not earning the max I could. And I can also sympathise with you wanting to turn back the clock. If we'd saved a lot in the past, spent less, made better decisions we'd be further along right now. But you can't go back, only forward. The main benefit of mmm is a change in mindset. Knowing that the whole thing is set up to make you feel deprived unless you spend helps you notice and avoid it. Learning the true price of 'luxury'. Understanding hardship is not always a bad thing.

You might not make all the changes at once. You might not make some of them at all. But something will change, and your life will always be the better for it. Keep us updated.

GordonCopestake

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Re: UK based late starter
« Reply #13 on: October 05, 2014, 09:34:12 AM »
Polara,
Fortunately my wife is a teacher with an excellent pension scheme, she has paid 9% into a final salary pension from day 1.

I'm not so lucky. My employer has had no pension scheme until recently being forced by the government (auto enrolment) and even then they will only contribute the bear minimum 1% rising to 3% over the next few years. My pension pot is currently only 10k, but I know I need to pay off my debt before I start putting cash into my pension pot.

GordonCopestake

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Re: UK based late starter
« Reply #14 on: October 05, 2014, 09:40:38 AM »
Hi Lizfish,
I'll let Martin know!

There are definitely some "easy wins" to be had and belts to be tightened. I've not seen YNAB before, i'll have a look.

I have seen III but the 10 per transaction put me off, but I havn't seen the 1.50 version, so more investigation needed. However current priority (Emergency!) is to pay off debt. Credit cards, loans and mortgage in that order. All whilst tightening the belt to breaking point. Subscriptions cancelled, every bill analysed, every penny not let go without a hug and a sad farewell.

My mindset has truly been changed, and I guess thats the biggest battle. I just need to convince the other half which is a harder job.

Squirrel away

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Re: UK based late starter
« Reply #15 on: October 05, 2014, 09:52:32 AM »
That's great. :) Just wanted to say that some people don't want to pay off their mortgage early as the rates are low at the moment, well unless you still have a fixed rate from years ago. There are some discussions on here and MSE about this subject. We were overpaying our mortgage for almost two years but have stopped that now as a result of reading the advice from people on the two forums.

GordonCopestake

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Re: UK based late starter
« Reply #16 on: October 05, 2014, 10:01:47 AM »
To be honest we have what I think is a good rate of 1% above base rate for the term of the mortgage (1.5% for now). This is cheaper than any other debt so is last on the list. However it should in theory be easy to beat so perhaps it's worth just leaving it. I'm always looking at the scare stories though about the base rate rising which sends shivers down my spine!

former player

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Re: UK based late starter
« Reply #17 on: October 05, 2014, 12:07:46 PM »
For your pension, it's a question of whether you are better off putting in pre-income tax money now which is taxed as income when you take it out, or putting post-income tax money into an ISA and having the tax-free income later.  If you were paying 40% tax, it's a no-brainer to put as much of your 40% income into the pension as possible, on the assumption that you will be a basic-rate tax payer as a pensioner.  As you are in the 20% rate, it's less clear-cut for you, but I would certainly suggest it is worth your paying as much as you can into the pension, as soon as you have cleared your credit cards and personal loans, until you will end up with an income which will at least be equivalent to the tax-free allowance from it (so 10,000 per annum, or whatever it is likely to be when you retire): that way you get it tax free going in and coming out. 

Even after that, by investing tax-free in the pension you are investing an extra 20% over what you could put into an ISA, and will be getting investment growth out of that 20% from the time the money goes into your pot.  Will the gains from that extra 20% outweigh the eventual tax you would pay on pension income as against paying taxed money into an ISA which then comes out the other end tax-free?   Not something I've thought about, and I don't know the answer. It might depend a bit on the investment choices and costs for your pension as against an ISA.  There are also the benefits of diversification: I do like having more than one income stream in retirement.

Congratulations on your new-found mustachianism: it looks to me as though you will do fine.

GordonCopestake

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Re: UK based late starter
« Reply #18 on: October 05, 2014, 12:10:12 PM »
Thanks FP, great clear advice

lizfish

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Re: UK based late starter
« Reply #19 on: October 07, 2014, 02:15:32 AM »
Yes the mortgage question is a good one. From what I understand, the returns are much better from the market than you would 'gain' from paying off a low rate mortgage. But mortgages are much more than just a debt. It's a very personal choice and some find it easier to sleep at night having paid it off. We're in the latter camp I think.

GordonCopestake

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Re: UK based late starter
« Reply #20 on: October 07, 2014, 02:17:56 AM »
I Think I lean the same way, once the mortgage is gone it's a weight being lifted. That's got to be the goal. Plus the base rate won't be at 0.5% for eternity!

GordonCopestake

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Re: UK based late starter
« Reply #21 on: November 13, 2014, 12:06:43 AM »
Just a quick update (Mostly for my own reference). This month I have managed to pay off over 900 of my credit card debt. I have no idea where the money has come from but by simply cutting out a few non-essentials and fripperies I'll easily be able to pay the outstanding balance with my next pay check. Next is the personal loan, on my plan thats 6 months before it's gone. I may take a break as Christmas needs paying for, but I can really see the light at the end of the tunnel.

theadvicist

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Re: UK based late starter
« Reply #22 on: November 13, 2014, 04:52:01 AM »
Hi, I'm in the UK too! Welcome.

My thoughts on your situation and budget are thus:

Petrol #1 40 / month
Petrol #2 50 / month

How are you only spending 90 a month on petrol with those commutes? Not that they are especially long, but petrol ain't cheap. I wonder if some of your unaccounted for money is going on this? It's easy to say, oh I only fill up once a month, but really, do you? Or do you go and visit the in-laws and fill up and think, oh it's a one off, but really it's every six weeks, on top of your usual fill up?

Can you save on your insurances by paying yearly? I never pay monthly because it is almost always more expensive (I'm hoping you just broke down the cost for the sake of budget clarity). Even our life insurance is about 9 a year cheaper because we pay annually, although this is an option I had to specifically request.

Personally, I am focussing on paying off our mortgage, because rates aren't fixed for the whole term as they are in the US (one major difference you will notice, and the reason so many here are anti-paying off mortgages). I remember my parent's rates going up to 15% in the 90s.

I currently have a 2 year deal at 2.49%. There is no way I'm going to be able to continue that rate into the future. I'm aiming to pay it all off before the end of the term. Yes, mortgage borrowing is cheap borrowing, but the length of time you borrow for makes it expensive (compound interest works both ways, you know?).

But I know a lot of people think you are better to invest the money. For me, personally, the peace of mind is worth it, and since I can get it done in 2 years (only because I've joined MMM and now save 50% of my income! In 2009 I was in major debt, btw, so it totally can be done) I will start aggressively investing in 2 years, when I own my home outright.

Also wanted to reiterate that your broadband seems high. We need some super-duper VPN connection or something for my husbands work, and we 'only' pay 25 for a ridiculously high level of service.

Finally, don't fall into the 'Christmas needs paying for' trap. It doesn't need paying for. You make it sound like a passive thing - it's going to happen to you, and you just have to foot the bill. That is not true, nor is it the MMM way. Christmas costs however much you spend.

Hope I've not been too harsh. Love seeing other Brits here!

GordonCopestake

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Re: UK based late starter
« Reply #23 on: November 13, 2014, 05:57:35 AM »
advicist, thanks for your reply! As you say, always nice to see other Brits here :)

To reply to your points:

Petrol: Both our cars are very good on MPG, we chose them for that reason, I can get over 60 mpg out of mine and my wifes is a a little lower but still in the 50's. I accept these figures are not 100% accurate, but they are on average correct.

Insurance is one thing that I do need to look at, we dont currently take advantage of "multicar" insurance that can save us some money. We do pay annually to save a few %.

I'm going through all of our debt and my plan is to overpay each one in succession in the order of interest rate. Credit cards first, then loan then mortgage. After that everything else goes into savings. However, in my plan I can clear my mortgage in just over 6 years. Whether I can stick that is another matter! But I hope I wont be far off. My mortgage is 1% above base rate for the term of the mortgage so 1.5% at the moment, which I think is a good deal. Yes I could in theory invest my money and make more than that, but having the mortgage gone is more a psychological thing than a financial one, and I agree with you in that it's peace of mind.

Regarding the broadband, it is high but we run everything through it, including our landline and most of our TV (through netflix, iplayer etc). We recently cancelled Sky TV so we have no commitments in that area other than broadband. It's 60Mb from Virgin so 30 isn't too bad. I could reduce it but when both kids and the wife are streaming TV programs and I'm trying to get on with some work it does seem worth it!

Christmas is one of those family traditions that has historically been very expensive. We are hosting our family this year (parents and in-laws) and there is an expectation there that is hard to change. Something like turning a supertanker as they say, and thats just my wife! I plan on doing my best to reduce costs as much as possible but it's an expense that invariably is higher than a normal month and has to be paid. I accept 100% what you say and in my ideal world my entire (extended) family would embrace the MMM way of doing things and we would STILL have a great Christmas, however I don't live in my ideal world (yet) so have to make compromises. I'm working on it for 2015 though!

Never too harsh when it comes to slapping me around the face and shouting "WAKE UP!", I have very thick skin and am always willing to learn. I am not at black belt level yet and the more advise and opinions people give me the better off I will be.

Thanks

Gordon
« Last Edit: November 13, 2014, 07:55:34 AM by GordonCopestake »

theadvicist

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Re: UK based late starter
« Reply #24 on: November 13, 2014, 06:57:04 AM »
Ah, didn't realise the broadband includes phone as well, that makes sense. (We do pay 25 just for broadband! I don't like it, but it's necessary...).

Good work on the fuel efficiency!

I do understand about Christmas, when you come from a big-spending family it's hard. We're lucky in that our house is too small to be used to host Christmas! So I totally get why you 'have' to spend money, feeding and getting everyone drunk isn't cheap. But do be mindful with the gifts - especially the kids - they love it all anyway, the cost of the item isn't usually the important bit, it's the opening of the gift and the excitement.

As stocking fillers, we used to get things like shower gel and socks, which our parents would clearly have bought for us anyway, but it was still fun to unwrap them!

worms

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Re: UK based late starter
« Reply #25 on: November 13, 2014, 07:02:16 AM »
I am UK too and from my perspective your figures look pretty good ... and our take home is a good bit less than yours!

I'm paying 550 to mortgage, but that is a major overpayment as I didn't reduce the monthly sum after the peak of interest rates on black Wednesday in '92!

Electricity is 56/month, but probably an underpayment at present.

Oil central heating is about 175/month (old rural property in North Scotland)

Car insurances 100/month for two cars and including taking one of them to the continent in summer and also with children driving on the policy.

Petrol for me alone is in the 320/month range.

Phone & broadband is 56/month for unlimited.

Council tax is 192

I recently discovered that I am being ripped off for House and contents insurance at 75/month (small detached property in a very low crime area...thanks Aviva, don't expect a renewal!)

I am still managing to put away 10% of take-home per month on top of the 300 or so overpayment on mortgage.  Short-term the 10% goes to premium bonds (gives you a monthly urge to save more and increase your chances, but is safely out of reach of casual spend and it is no worse than cash in a current account), longer term directly invested in shares - I'm currently getting out of a nominee account with a broker and plan to buy certificated shares in my own name in future.

I found it helped to set up a separate account for the money towards the bills and set up an automated payment into that account on the 1st of the month for the monthly equivalent of each bill. It takes a few months to complete, but once done it means that all the bills are covered when they come due and it is easy to keep track.  Also means that I see just how little actual disposable income I have, which helps curb the urge to spend!

GordonCopestake

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Re: UK based late starter
« Reply #26 on: November 13, 2014, 07:24:27 AM »
I heard a great rhyme for Christmas gifts:

"Something you want, something you need, something to wear and something to read"

I keep saying it to my wife and kids and with any luck they will get the hint!

One of the best presents I ever bought for my youngest was a box full of balloons! Hours of fun and virtually free.

Regarding the phone, I bought a little voice over ip box off amazon and signed up to sip gate, a free service, and transfered our BT number to them. No more 15 / month line rental.
« Last Edit: November 13, 2014, 07:26:53 AM by GordonCopestake »

theadvicist

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Re: UK based late starter
« Reply #27 on: November 13, 2014, 07:25:25 AM »

I'm paying 550 to mortgage, but that is a major overpayment as I didn't reduce the monthly sum after the peak of interest rates on black Wednesday in '92!

I am still managing to put away 10% of take-home per month on top of the 300 or so overpayment on mortgage.  Short-term the 10% goes to premium bonds (gives you a monthly urge to save more and increase your chances, but is safely out of reach of casual spend and it is no worse than cash in a current account), longer term directly invested in shares - I'm currently getting out of a nominee account with a broker and plan to buy certificated shares in my own name in future.


Hi Worms! (and sorry for the thread hijack Gordon), but I couldn't help but say that premium bonds are generally considered a bad investment. Detailed explanation: http://www.moneysavingexpert.com/savings/premium-bonds

And if you've been overpaying your mortgage since 1992, how are you still paying it off? Even a 10% overpayment would bring a 25 year mortgage down to 22 years. Did you start with a very long term?

LadyMustache

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Re: UK based late starter
« Reply #28 on: November 13, 2014, 07:41:23 AM »
Another Brit here, though we are currently living in the US.

Re: broadband. Ditch Virgin and check out Eclipse. Super high speed and great service for 23 a month.

Car insurance: that is high IMO. Double what we were paying. Have you got points or turbo cars? Can you switch to a motorbike? Really cheap! That is what DH ended up doing.

I too have a Standard Life stakeholder but am looking into other options. Both here and in the UK ( as I'm still entitled to 20% tax relief in UK). Will let you know when I've done the maths!

Definitely support advice on Money Saving Expert. Check out the threads on there on food budgeting. Seriously good advice for cutting food shopping bill.


LadyMustache

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Re: UK based late starter
« Reply #29 on: November 13, 2014, 07:45:07 AM »
Re where to stash. Yes, step 1 is to max out S&S ISA, or a combination of cash and S&S.

Didn't do any other UK investing, so can't advise further on that, but I would say don't stop investing in your pension plan for now. The tax relief alone is worth it.

GordonCopestake

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Re: UK based late starter
« Reply #30 on: November 13, 2014, 08:09:23 AM »
My plan is to put 50% into a SIPP based index fund and 50% into an ISA based index fund. That way I can access some of my stash before 55 if needed and can't touch the rest.

I should be able to save 1k a month once all my other debt is gone, which still isn't a huge amount given my late start but I think I'll be fine

theadvicist

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Re: UK based late starter
« Reply #31 on: November 13, 2014, 08:16:20 AM »

Re: broadband. Ditch Virgin and check out Eclipse. Super high speed and great service for 23 a month.


Ha ha, when I was talking about the gold-plated amazing service we pay for for my husband's work? It was Eclipse! You're the first person I've ever 'met' who has heard of them! I would highly recommend their customer service, but for standard home use I would be tempted to go for something cheaper (should it exist. I don't know the market well at all).

GordonCopestake

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Re: UK based late starter
« Reply #32 on: November 13, 2014, 09:05:06 AM »
I'm kind of stuck with Virgin as any ADSL supplier can't get over 2Mb as we are so far from our exchange :(

worms

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Re: UK based late starter
« Reply #33 on: November 14, 2014, 12:27:20 AM »

I'm paying 550 to mortgage, but that is a major overpayment as I didn't reduce the monthly sum after the peak of interest rates on black Wednesday in '92!

I am still managing to put away 10% of take-home per month on top of the 300 or so overpayment on mortgage.  Short-term the 10% goes to premium bonds (gives you a monthly urge to save more and increase your chances, but is safely out of reach of casual spend and it is no worse than cash in a current account), longer term directly invested in shares - I'm currently getting out of a nominee account with a broker and plan to buy certificated shares in my own name in future.


Hi Worms! (and sorry for the thread hijack Gordon), but I couldn't help but say that premium bonds are generally considered a bad investment. Detailed explanation: http://www.moneysavingexpert.com/savings/premium-bonds

And if you've been overpaying your mortgage since 1992, how are you still paying it off? Even a 10% overpayment would bring a 25 year mortgage down to 22 years. Did you start with a very long term?

Mortgage is an old endowment-based interest-only loan one and ends next year. With the collapse in endowment values it made sense to pay down the principal. Loan will be negligible by end but endowment will payout about 50k.  With hindsight it was not the most efficient savings scheme but provided the discipline needed.

Premium Bonds are used as the slightly out-of-reach place to save for the next share purchase. Still accessible but a hassle to cash in, so no temptation.  Gives that, have-I-won-big-this-month interest that others get from a lottery ticket, without loss of capital.  My returns have been better than average, so I am beating most instant access accounts.  The MSE advice is good but it does recognise that that with low interest rates the product may have its place for some people.

former player

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Re: UK based late starter
« Reply #34 on: November 14, 2014, 02:42:50 AM »
Congratulations on paying off the credit card so quickly - that is a massive and very speedy turn-around on your pre-MMM life, and bodes extremely well for your financial future.  Well done.

GordonCopestake

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Re: UK based late starter
« Reply #35 on: November 14, 2014, 02:44:23 AM »
Thanks FP, i just have to keep it up!

mjb84

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Re: UK based late starter
« Reply #36 on: January 07, 2015, 04:16:33 AM »
Hi Gordon,

I also have just stumbled across MMM (from here in the UK) and with my desire to reach FI, I have digested an lot of content on the main site and blog to change my habits.

I do struggle to translate between investments here in the UK as what I've mainly been reading from US posts. Have you started independently/passively investing in the UK? what are your goals and do you recommend any particular platform? I need to find the UK investing thread! Thanks for the link to monevator.com

You say you wish you discovered this blog 20 years ago... As I'm 8/9 years your junior, do you have any good advice/pitfalls to avoid to pass on? My only sound financial decision thus far is maxing out my workplace pension and taking advantage of my employer topping this up.

regards


ScroogeMcDutch

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Re: UK based late starter
« Reply #37 on: January 07, 2015, 05:23:17 AM »
Great start Gordon. I am also a late starter @ 34.

Not sure why noone mentioned this before, I scanned the thread in case I missed it. Why are you commuting 7 miles by car? That seems like a very expensive commute and one that I would switch to cycling if possible. I can see how 12 miles may a bit too far, but 7 miles should be 35-40 minutes at most.


GordonCopestake

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Re: UK based late starter
« Reply #38 on: January 07, 2015, 08:02:00 AM »
MBJ,
Welcome and congratulations! Finding MMM is like winning the lottery in my mind. You are especially lucky having found it earlier than me!

As I'm a beginner I can't offer much advise however I can relate what I have done which may help.

I have opened a SIPP and an ISA with Best Invest which are the cheapest I have found and have a good write up.

I have transferred my Standard Life stakeholder pension into the SIPP and invested the money into Vanguard index funds at 0.3% which is a damn sight less expensive than the 1.5% I was being charged by Standard Life, plus get better returns.

I have paid off my credit cards much faster than I expected and am now paying off my loans. My main piece of advise is to not get into any new debt as the "drag" on your finances is considerable.

I plan on saving into my ISA once my loans are paid off to build an emergency fund, invested in the same or similar Vanguard index funds as my SIPP, perhaps the 80% Lifestrategy fund as it already has a good asset allocation with no work. Once I have a good stash of backup cash I then plan on putting the majority of my cash into my SIPP as you get 20% tax relief and in my case is probably better than the ISA, but it's marginal to be honest and in my case it makes sense for me to not touch my cash until 55.

I look forward to seeing your posts as i'm always ready to learn new things!

Scrooge: 7 Miles should really be a bike ride, but I also pick up my kids from School  which is about 3/4 mile from my house and whilst this is also walkable it's much easier to bundle them into my car rather than having to walk them home, especially when it's throwing it down with rain / sleet / snow / wind which we regularly get in the UK. I have considered cheaper alternatives though but the convenience factor tends to win out with me. My car is relatively cheap given it's 100 / month but still one of my larger outgoings.

frugledoc

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Re: UK based late starter
« Reply #39 on: January 07, 2015, 12:41:06 PM »
I wonder if we could get a UK forum on MMM because there are a lot of differences.

I would stop paying into the child trust funds and use that money to max out your own ISA.  That way you still get the tax benefits and can give it to your kids when they are older rather than them automatically getting control of it.

You are almost a higher rate tax payer.  It is worthwhile paying any pay rises/extra income that put you into a higher tax bracket into a SIPP.  That way you get the automatically added 20% from government and also can claim back the other 20% through  a tax return. 

Try and max out your ISAs every year.  If you need the money you can always take it back out again.  10 pounds dealing charge is peanuts as minimum per investment should be around 2,500 and you will be buying and holding so not dealing very often anyway.  I use Hargreaves Lansdowne for SIPP, ISA and non ISA holdings for my wife and I.

Finally, totally disagree that premium bonds are a bad investment.  They are not an investment at all.  Premium bonds are a place for higher rate tax payers to park cash that would otherwise sit in a bank account.  Prizes are tax free.





mjb84

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Re: UK based late starter
« Reply #40 on: January 08, 2015, 02:10:53 AM »
Thanks Gordon,

Really is nice to be welcomed by a friendly bunch. Thanks for your advice! Also being a beginner, for me at least, there is a confidence issue when it comes to investing savings as there seems to be a never-ending number of different ways/products. I have spent some time reading threads here but seem to confuse myself about what is most suitable starting out (possibly over-reading american threads).

Congratulations on the credit card debt, I am also hammering mine with about 1500 left at 0% (feels like free money - care needed). I'm also focussing on my student loans which stands at about 8k at 3% plus inflation. I would like to split up savings that I make between paying off debt, opening stocks/shares ISA and saving cash for a deposit. My exact split on this I'm not sure as of yet. My only commitment thus far is maxing my workplace pension, would you recommend opening a SIPP on top of this?

My largest expense is the dreaded car... my commute is 50 miles round trip and I spend roughly 25 a week on fuel on it... However, I get paid more their than I would for the equivalent job in my town. Besides, I enjoy it and do the majority of my activities at my point of commute and I'm able to save living at home. Just from reading MMM I have cut down use of the car to a minimum on weekends, dusted the bike off and car sharing with friends for recreational trips.

My biggest lifestyle change is not doing things for the 'hell of it'. I'm actually saving not only money, but a significant amount of time!

I'm going to read up on Bestinvest and Hargreaves Lansdowne (thanks frugledoc) and look into opening an ISA/possible SIPP and try and figure out the how much I can dedicate and how to split that up into specific funds. I've not heard of Vanguard or Lifestratergy so I'm a real novice in this world.

Regards

GordonCopestake

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Re: UK based late starter
« Reply #41 on: January 08, 2015, 02:34:04 AM »
MJB, it would probably be worthwhile starting your own thread to get better advise than from me! My own thinking though would be to pay off any debts before you start saving as usually they have a higher interest rate than you can achieve through savings. Although if you have 0% on your credit card, others would advise to save money then pay off the CC in a lump sum. Similar for student debt, as the interest is so low you can usually get better via savings, however personally I think it's a load off your mind to be debt free so i'm paying off everything apart from my mortgage.

Also, a 50 mile commute is a lot, some would argue that you could save a lot by moving closer to where you work (to walkable distance if possible), but thats personal preference. I live closer to work than you and still drive as it's much more convenient for me.

Lots of info on which funds to invest in at monevator and bogleheads, http://monevator.com/cheapest-pension-diy/ and http://www.bogleheads.org/wiki/UK_investing

There is NO difference between an ISA and a SIPP as you invest in the same funds, the difference is the "wrapper", the ISA your interest is tax free and you can access the cash whenever you like. The SIPP you get 20% tax relief (40% if you are a higher rate earner) but are taxed on your income when you draw it. Plus you can't access the cash until you are 55 (currently).

The vanguard lifestrategy is a set of index funds designed to make passive investing cheap and easy, http://monevator.com/vanguard-lifestrategy/
« Last Edit: January 08, 2015, 02:42:30 AM by GordonCopestake »

GordonCopestake

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Re: UK based late starter
« Reply #42 on: January 08, 2015, 02:46:42 AM »
frugledoc, regarding the child trust funds, this was free cash at the time, I plan on converting these into junior ISA's in April when I'm allowed. I'll put the money into 100% life strategy and forget about it for 10 years. The logical separation works well for my wife and I.

poorboyrichman

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Re: UK based late starter
« Reply #43 on: January 08, 2015, 06:00:10 AM »
Hi Gordon,

Happy to see another UK member here.

As others have said, Monevator is a great resource for investing in the UK. If you want to get clued up on index investing, start with reading Tim Hale's Smarter Investing. While it's a little dry for bed time reading, it will tell you everything you need to know about obtaining the perfectly balanced portfolio. Vanguard Life Strategy funds are a great start, but you need to add in some other elements to make it perform as best it can.

Sounds like you have got things well under control now, and with your income you could easily be retired within 10 years! Just think about every penny you spend, and is that really going to help you in the long run, almost all bills can be paired back if you put in the effort, even when you think there is no room for maneuver, calling up customer services and demanding a discount because someone is doing a better deal else where works 9 times out of 10! Be polite and explain your a loyal customer but don't appreciate being 'ripped off'. If you fail, hang up and speak to someone else! This has been successful for interenet, car/pet insurance, mobile phone tarrifs and so on. I saved 120/month on cutting bills alone when I went all out on FIRE!

The stakes are high if you are hoping to retire soon as it's all about compounding interest and starting sooner rather than later, even if you are just investing a little at this stage! Just make sure your expensive debts are gone first and shift everything else to 0% if it makes sense (sometimes with just a little balance to go the transfer fee's spoil this)

It sounds like your car usage is low, but I note you only drive a few miles to work. Pick up a cheap bike and ride it to work. You will be surprised how much money you save on fuel, insurance, maintenance etc. All this will add extra 'UUMPFFF' to your investment accounts. Fuel prices won't stay low forever and cars are a big drain on resources, if you can live with just  one in the family, do it! All the bullshit about "I can't cycle because I need to drop by the supermarket" is ecactly that, bullshit. Organise you life and you can do this with one car at the weekend. Cycling this distance to work will get you fit and will keep you away from expensive gym memberships, if you do like to lift weights, buy the equipment second hand and use it at home!
« Last Edit: January 08, 2015, 06:07:07 AM by poorboyrichman »

GordonCopestake

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Re: UK based late starter
« Reply #44 on: January 08, 2015, 06:28:18 AM »
Thanks poorboyrichman,
My saving rate is currently 43% but this will go up to 50% in April when I've paid off one of my loans. I still have 16 years left on my mortgage, but I could get this down to 6 if I concentrate on clearing that rather than saving. I think I'm going to let my mortgage run though as 16 years puts me at 53 which is close to my target retirement age of 55. I dont think I can do it any sooner as If I pay off my mortgage in 6 years I wont have anything saved up, so other than the equity in my house I would have nothing else to my name (although these days, having just nothing is more than most!).

If all goes to plan I'll hit 55 with a pot just short of 450k which is more than enough for me. To be honest I'm surprised at just how high this is as before I found MMM I was looking at 100k @ 65! Of course plans very rarely work out as intended but I'm confident I'll be fine, which is more than I was before I started down this route.

frugledoc

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Re: UK based late starter
« Reply #45 on: January 10, 2015, 01:44:29 PM »
If all goes to plan I'll hit 55 with a pot just short of 450k which is more than enough for me. To be honest I'm surprised at just how high this is as before I found MMM I was looking at 100k @ 65! Of course plans very rarely work out as intended but I'm confident I'll be fine, which is more than I was before I started down this route.

Hi Gordon.  I assume you will also be eligible for the state pension when the time comes as well.

450k seems like a low amount for a total retirement pot.  How much income are you planning on drawing each year from that? 





GordonCopestake

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Re: UK based late starter
« Reply #46 on: January 10, 2015, 03:17:03 PM »
I'll get a full state pension at 67 of around 200 a week (at my guesstimate). I'm only planning on drawing 15k from my pot, depending on returns. My wife has a final salary pension of a similar amount so between us we should be able to draw 30k plus state pension. Not a huge amount given inflation, and I always have the option of working past 55 should the need arise but that's the plan
« Last Edit: January 19, 2015, 03:28:03 AM by GordonCopestake »