Greetings everyone, new here, from the UK and I need a bit of help please! :)

[rossuk89]

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

[Spruit]

1. To give you an idea of a realistic average return of your portfolio, you can play with this calculator: https://portfoliocharts.com/portfolio/annual-returns/. And please realise that inflation is variable, it is extremely low at the moment, it was considerably higher in the 80's. Don't count on it staying as low as it currently is.
2. What is best has two sides: the numbers side and the emotional side. A strategy is only a "good" one, if you feel secure enough to keep going even if the market crashes. If you'd rather be mortgage-free, if that let's you sleep better at night, than go for it.

[dreams_and_discoveries]

Hi welcome to the forum.

I love your plans, you are much further ahead than I was in your position.

I'd just caution that some seem very optimistic, and some pessimistic. Depending on your type of work and location, it's likely your salaries would increase over 15 years with some promotions or moves.

On the other hand, whilst I'm sure you can run a household and feed 2 adults on £500 a month, that's very frugal and leaves no funds for any luxuries, house repairs etc. To put this into perspective, this is the current value of JSA for a couple, after housing benefit pays the rent. After bills such as council tax, electricity, gas, water, phones and insurance, you'd need to be very careful with food, clothes, transport and leisure pursuits.

It's certainly do-able if you never eat out, like cheap meals like porridge, rice and beans etc, do all DIY yourself, keep the thermostat down, no holidays, second hand clothes and no car and walk /bike to work.

Mortgage rates are at a record low, so if you aren't comfortable taking a mortgage out now and investing, you never will be. The truth is no-one can tell you what rates of return will be in the future, life isn't that black and white. The past has shown us that investing outperforms over the long term.

[rossuk89]

1. To give you an idea of a realistic average return of your portfolio, you can play with this calculator: https://portfoliocharts.com/portfolio/annual-returns/. And please realise that inflation is variable, it is extremely low at the moment, it was considerably higher in the 80's. Don't count on it staying as low as it currently is.
2. What is best has two sides: the numbers side and the emotional side. A strategy is only a "good" one, if you feel secure enough to keep going even if the market crashes. If you'd rather be mortgage-free, if that let's you sleep better at night, than go for it.

Thanks for that calculator I will check that out and see. Yeah I understand, nothing is set in stone I guess it is better to put inflation near the higher end just to be safe when looking at returns over 15-20 years.

Well I have never invested before and so I wouldn't feel 100% comfortable using that much money to invest in, however I would be totally fine with investing whatever remaining cash we have each month (after buying the house in cash) into a stocks and shares ISA and slowly doing the drip tactic and invest that way. Sure the gains won't be as much but £30k a year would still be a nice amount to play with each year right?

Do you think my plan is unrealistic at all? Cheers :)

[rossuk89]

Hi welcome to the forum.

I love your plans, you are much further ahead than I was in your position.

I'd just caution that some seem very optimistic, and some pessimistic. Depending on your type of work and location, it's likely your salaries would increase over 15 years with some promotions or moves.

On the other hand, whilst I'm sure you can run a household and feed 2 adults on £500 a month, that's very frugal and leaves no funds for any luxuries, house repairs etc. To put this into perspective, this is the current value of JSA for a couple, after housing benefit pays the rent. After bills such as council tax, electricity, gas, water, phones and insurance, you'd need to be very careful with food, clothes, transport and leisure pursuits.

It's certainly do-able if you never eat out, like cheap meals like porridge, rice and beans etc, do all DIY yourself, keep the thermostat down, no holidays, second hand clothes and no car and walk /bike to work.

Mortgage rates are at a record low, so if you aren't comfortable taking a mortgage out now and investing, you never will be. The truth is no-one can tell you what rates of return will be in the future, life isn't that black and white. The past has shown us that investing outperforms over the long term.

Hello & thank you!

Ha, I keep thinking why didn't I do this a few years ago! It is so incredibly simple in theory. I'm amazed I don't know anyone who's followed a plan like this before. All of my friends have gotten mortgages recently and have large mortgages and for them retiring in their 60's is just part of the plan like many others.

That's true. Well I'm training to become a Software Developer in the next 3 years. My girlfriend is looking to become a Dental Nurse. Hopefully we can achieve that.

We are currently doing an Asia backpacking trip. Which was kind of spontaneous. We left January 2nd 2016 and due back in England December 2016. This backpacking trip has taught us how to manage money properly, how to be frugal when needed and to live very simply but still enjoying ourselves so I can see us carrying this lifestyle when we're back home. Valuable lessons have been learned!

I have never run a house before so I haven't specifically calculated all the costs but I assumed £1000 would of been an ok amount to live on but since I'm planning to get a house mortgage free then the living costs are almost halved. It could be £400-£600 a month for all the costs but if we've got those careers & no mortgage then we can at least save a nice amount each month no matter what.

Food won't be a problem, we are both decent cooks and have learned many low cost healthy tasty recipes over this year. I can't see this being a huge cost for us, especially bulk buying from Costco and other stores.

The thing is, it's not that we don't want a mortgage at all. If we had too we would but we're in the position where we can live with our parents for a few more years and save hardcore. Leaving us with at least £100k+ in cash between us. And because I wouldn't be confident investing £80k of that (£20k going on a house deposit) as a beginner I would rather pay a house full in cash and slowly invest the savings we get each month into a stocks and shares ISA.

Using various interest calculators it wouldn't take more than 15 years to reach £600k+ in the bank. That would be a great target.

I would love to know what you think of this.

Thanks once again!