28, little late to the party, help me get my priorities straight (UK)

[CrabbitDutchie]

Hi guys,

The background:
I'm a pretty recent 'convert' and have been reading and lurking around for a few months. Before MMM my life was naturally quite frugal (others may say stingy) and I've always been good at saving. When I was a teenager my first job started at £2.50 an hour (one day per week), 3 years later I was still only on £3.50ph but by the time I finished school I'd saved enough to take a gap year, to put myself through driving lessons and test and to go travelling round the world for 5 months.

I went to university in Scotland, with nice free tuition, but did take out the maximum possible loan  for my situation. During university (5 year undergrad degree) I did some seasonal work, but only enough to supplement loans and stop me from having to move back in with my parents over summer. Realised in year 4 out of 5 that I really did not want to go into the area my degree was in (veterinary medicine), so spent a year after finishing just kind of subsisting, working just enough to meet basic outgoings, but no more. Got my act together and found a Masters degree I was really interested in that came with a tuition fee grant. Didn't take out any loans in this time and simply worked to survive. This was genuinely paycheck to paycheck stuff and serious budgeting, self restraint and some creativity were needed. Loved the course and lined myself up a decent if not hugely lucrative gaduate job in biostatistics, giving me my first 'real job' at the age of 26.

Since I stopped having to worry about where money for rent and food were going to come from I've only really budgeted in the loosest term of the word. I'm living well within my means (in fact current savings rate is about 50%), but really need to start putting a strategy in place to put those little pounds to work for me and would love some input.

My situation:
28yo female, living with boyfriend, but we keep all our finances separate, no dependents. Only 'complicating' factor in the current climate is that we're both EU citizens. I've been in Scotland for so long that all my finances are completely done through the UK system (including my student loans, ISAs, pensions etc.) but it definitely creates additional uncertainty in the long tem plan.

Living situation:
We rent a 3 bedroom flat in a big city in Scotland, moderate cost of living (split all costs equally). Had a flatmate until 2 months ago and after the last one I'm enjoying having my own space so much I'd rather not entertain the thought of having to share again.

Salary: has just increased to £34, 000 pa (gross)
March 2017-September 2017 £30, 000 pa
July 2016 - February 2017 £22, 500 pa
= essentially my total gross for 2017 will be just under £30, 000

Monthly:                 £2833 gross
pre-tax deductions:  - £170 (6% pension contribution, employer match worth 8% is added too)
taxable income:      £2663
tax and NI:              - £579
student loan :         - £106 

take home pay: £1978

Current expenses:
Here is where I don't have the detail (well I suppose I do, maybe next rainy day I'll sit down with all 5 accounts I've spent money from and work out the exact details) so I'll give a high level overview of overall spending and 'fixed' cost within this.

Calendar year to date I have spent £10,697 (a smidge under £1000 per month)
I'm fairly happy at this level of spending and know that there's a fair amount of fat to be trimmed if needed. Happy to elaborate here (some of it is truly ridiculous).

'Fixed' costs per month
rent             £312.50 (my half)
council tax      £75 (my half, paid over 12 months)
electricity        £30 (bit of a guess, boyfriend's department)
TV licence and internet : £12   
mobile phone: £7.50
car                  £40 - belongs to my boyfriend 2005 renault clio 110K miles , this number represents my half of insurance, tax, MOT and other maintenance to date this year)
petrol              £80 (the commute and travel to the horse. Working on the former, little stuck with the latter)
horse             £150 (he's old, I'm a sucker, won't be forever...)
food                £60

and then the rest is pretty much variable non-essential but involves holidays, christmas, socialising etc. This year I've been the Greece, Denmark, Switzerland and Italy as well as visiting family in Holland, Belgium, France and popping over to visit the Boyfriend's parents in Ireland. 

So assets:
cash:  £17 000 (earning an average of just over 2%)
S&S ISA: £917 (well it's a start?)
pension: £6200 (again better late than never)

liabilities:
No debts.
just the good old student loan, £13 923 left, currently at 1.25%, paying £106 a month back. It's coming directly out of my pay and the only reason I'm mentioning it at all is that my new employer's pension scheme is a salary sacrifice scheme...


Currently my 'saving' set up is as follows per month:
6% into pension (8% employer contribution)
£200 into HTB ISA
£250 into 5% regular saver (cash)
£500 (just upped) into S&S ISA - within this holding Vanguard VLS just now with a pretty high equity % as lets face it, I currently have a pretty low risk 'portfolio' overall.
any extra leftover (most months) excess floats around for a while earning very little interest before I periodically put it somewhere with marginally higher interest.

My long term goals are definitely FI and probably RE.
Medium term I'm facing quite a lot of uncertainty and with the whole Brexit thing we are not sure we want to tie our money up in a house just now. Job is pretty secure and boyfriend has a project with funding for 2 years at the university, so short term we're ok.
However not ruling out buying property in the next few years so the cash cushion is probably here to stay (and possibly get a bit fatter although we definitely have more than enough for a decent deposit in the area we currently live in and for what we'd want - a 2/3 bedroom flat in the city to keep the option of renting it out open).

So in short I'm looking how to optimise the pension and S&S contributions going forward, hoping to be FI well before I can access the pension pot (can always dream right). 

[elementz_m]

Does the £10,697 include your rent and council tax? What are your plans for the next year, 5 years, 10 years? Want to buy a house? Where are you shoving your savings at the moment?


Oh, hang on. Looks like you're still editing the original post. I'll be back later in the evening.

[CrabbitDutchie]

Oh, hang on. Looks like you're still editing the original post. I'll be back later in the evening.

Should be pretty much there now.

Did I mention that my aversion to buying things means that I have a 10 year old laptop ;)
(actually the problem was me trying to line up the numbers, 2 'tabs' and an enter and bang I'd posted)

[elementz_m]

So assets:
cash:  £17 000 (earning an average of just over 2%)
S&S ISA: £917 (well it's a start?)
pension: £6200 (again better late than never)

Currently my 'saving' set up is as follows per month:
6% into pension (8% employer contribution)
£200 into HTB ISA
£250 into 5% regular saver (cash)
£500 (just upped) into S&S ISA - within this holding Vanguard VLS just now with a pretty high equity % as lets face it, I currently have a pretty low risk 'portfolio' overall.
any extra leftover (most months) excess floats around for a while earning very little interest before I periodically put it somewhere with marginally higher interest.

Looks like your spending is very low at the moment, even with the horse, so well done on that front.

You and your boyfriend both have secure jobs, and you're renting, so I don't think you need an 18 month emergency fund in cash. I'd recommend shifting it over to a S&S ISA instead.

I would recommend sticking with the h2b ISA for now, and only switching to a LISA if you'll definitely be buying property. The exit penalties for the LISA are much worse.

[poppydog]

Sounds like you're doing all the right things CD.  You might want to consider putting some of your savings into a SIPP, if you're investing for the long term, especially if you find yourself earning enough in a couple of year's time to pay higher rate income tax.

Also, make sure you know what funds your contributions into your employer's pension plan is invested in - it may be too conservative or aggressive for you.

Good luck

PD

[poppydog]

p.s. we also live in a large city in Scotland, it's largest in fact.......

[CrabbitDutchie]

Looks like your spending is very low at the moment, even with the horse, so well done on that front.

You and your boyfriend both have secure jobs, and you're renting, so I don't think you need an 18 month emergency fund in cash. I'd recommend shifting it over to a S&S ISA instead.

I would recommend sticking with the h2b ISA for now, and only switching to a LISA if you'll definitely be buying property. The exit penalties for the LISA are much worse.

Thanks, I find it difficult to see my spending as low so it's nice to get some perspective. I think the problem is that a couple of years ago as a fulltime Masters student my budget was generally £300-£350 a month (but no council tax, extra flatmate and had the horse on loan to someone who was paying for all of his maintenance). That level probably wasn't sustainable long term, but when I look at just how much now seems essential and how much I'm spending now I feel a little embarrassed.

Property still very much a maybe, but with rent under 1/5 of take home pay and the flexibility it gives it's not our first priority to get on that ladder. It's one of those where we might consider it if the landlord terminated our lease and it so happened that the right property in the right location was for sale at the right price and nothing in the rental market came close.

My cash cushion is more than just an emergency fund to me. It's my flexibility fund and FU money pot. This money means I should be ok whatever happens in the short term. I could walk out of a rubbish job, have no additional income and be ok for up to 2 years (current job is ok, but once bitten and all that). Basically I don't really want to forego short term financial independence solely for the long game (which would likely be better in the long run, but for now I'll feel much more comfortable with stock market fluctuations knowing that I don't need to sell at a bad time).

You're right that I don't really need any more just sitting around in cash and I can fund the Help to Buy ISA and regular saver from cash accounts that pay lower interest. So I think I should look to fund my S&S ISA with the 'full' £950 and any additional bonuses should also go in. Then I can evaluate my total additions towards the end of the tax year and decide if to add any more of the cash pile.

Sounds like you're doing all the right things CD.  You might want to consider putting some of your savings into a SIPP, if you're investing for the long term, especially if you find yourself earning enough in a couple of year's time to pay higher rate income tax.

Also, make sure you know what funds your contributions into your employer's pension plan is invested in - it may be too conservative or aggressive for you.

Good luck

PD

Thanks Poppydog. I'm pretty happy with how my previous employer's plan is invested, but still waiting to get all the information on the plan (and options) from my new employer. If it's rubbish I'll be looking at SIPPs sooner rather than later. Otherwise was going to revisit when/ if I hit higher rate income tax or I max out my yearly ISA allowance (will probably more or less co-incide). If I hit higher rate income tax there's also additional contributions to my employer's pension to consider as that's a salary sacrifice scheme?

As for the city, yup that's the one! Nice to find someone local. We're just northwest of the centre in the St Georges Cross/ bottom of Maryhill area. It's pretty handy for everything except my job which is still about 12 miles away (a massive improvement from the 27 miles each way to the previous one).

[poppydog]

Hi PD, we’re a couple of miles to the west along Great Western Road, at Anniesland. Small world!

[May2030]

food                £60

First hi from the Southside.

Can I ask what typical things you eat for that? Find it hard to get below £150.

[shelivesthedream]

food                £60

First hi from the Southside.

Can I ask what typical things you eat for that? Find it hard to get below £150.

Ditto from London Town. We've let ourselves go a bit lately but even on our previous tighter budget it was £100/month and we did have to make some hard choices (mainly cheese-related).

[elementz_m]

food                £60

First hi from the Southside.

Can I ask what typical things you eat for that? Find it hard to get below £150.

I think a vegetarian Aldi shop wouldn't be too difficult to keep under £2 per person per day. Porridge for breakfast, lots of veg and tinned food in the evening?

[May2030]

Further investigation required as spoiled for choice which supermarket to go to.

I should maybe start another a thread as don’t want to thread hijack. :-)

[CrabbitDutchie]

Further investigation required as spoiled for choice which supermarket to go to.

I should maybe start another a thread as don’t want to thread hijack. :-)

Don't worry about the hijack, eating well cheaply is one of my favourite topics!

We're really lucky to have a Lidl and Iceland at the end of our road with chinese supermarkets about the same distance in the other direction and I pass a Morrisons on my way hom from work so stop there about once a week to pick up reduced bread and vegetables (just bread today, but can't complain at 3 nice wholemeal loaves for 15p).

I eat very little meat or meat substitutes, but do like cheeses and nice fish and often buy my eggs from the farm next to where the horse stays. Like elementz_m suggests breakfast is indeed porridge. I have mine with cinnamon (59p per 100g from the chinese supermarket) and frozen raspberries (free - still got most of a freezer drawer full from this summer's foraging) or when they run out, sultanas. Lunches and dinners - I tend to buy veg that's in season or reduced and build my week's meals around that. I'm just about over roast pumpkin soup now having bought 4 pumpkins for £2 from Morrison's just before Halloween, but generally love a nice warming, earthy, root vegetable soup on nights like tonight. Other include veggie chillies, pasta dishes, curries and soups.
Fruit it tends to be seasonal again so just now it's apples and oranges.
On top of that I buy anything that takes my fancy, just try not to go over the top as I hate wasting food.

[May2030]

Further investigation required as spoiled for choice which supermarket to go to.

I should maybe start another a thread as don’t want to thread hijack. :-)

Don't worry about the hijack, eating well cheaply is one of my favourite topics!

We're really lucky to have a Lidl and Iceland at the end of our road with chinese supermarkets about the same distance in the other direction and I pass a Morrisons on my way hom from work so stop there about once a week to pick up reduced bread and vegetables (just bread today, but can't complain at 3 nice wholemeal loaves for 15p).

I eat very little meat or meat substitutes, but do like cheeses and nice fish and often buy my eggs from the farm next to where the horse stays. Like elementz_m suggests breakfast is indeed porridge. I have mine with cinnamon (59p per 100g from the chinese supermarket) and frozen raspberries (free - still got most of a freezer drawer full from this summer's foraging) or when they run out, sultanas. Lunches and dinners - I tend to buy veg that's in season or reduced and build my week's meals around that. I'm just about over roast pumpkin soup now having bought 4 pumpkins for £2 from Morrison's just before Halloween, but generally love a nice warming, earthy, root vegetable soup on nights like tonight. Other include veggie chillies, pasta dishes, curries and soups.
Fruit it tends to be seasonal again so just now it's apples and oranges.
On top of that I buy anything that takes my fancy, just try not to go over the top as I hate wasting food.

Thanks, think I need to get more creative and you have given me the direction to go. I have always quite rigidly built meals around meat or fish which is a bit old fashioned. I am a porridge and grapes guy but will try cinnamon tomorrow.