What should I do with my money?

steveledzep

more said:

I would say the consensus is to clear  your  mortgage and  other loans first .  It has been considered a good practice to keep some of  your money,  your age as a percentage, in the best  paying cash account . At the moment that easy , they all pay  nothing, but the reasoning is you need to keep some cash , in your case 40 %  in a safe place . Even if infract it is actually making a loss.  I am not an adviser ,  I can only offer what I do ,  which might prove  to be wrong . I have tried investment funds and this how it works . You  give someone some money.  They make a charge to take your money and buy shears. They will  charge an annual fee . You take all the risks and  your money  is no more  guaranteed to grow in value than if you just bought the  shears your self . You can buy shears within an Isa , so no tax to pay on any gains . At the moment  the capital value of most shears has been  on the slide , and some have deferred dividend payment . But I believe  the world  will still be here in ten years time ,  so buying  shears and reinvesting the dividends is a long term project . Divide you money over different companies and different  businesses. Industrial ,  pharmaceutical, that sort of thing . You might make some losses  , but hopefully it will be balanced out by gains . If the whole economy  goes pear shaped and you lose  the lot , we will all be in the s...t anyway.

You could use the shears on your hedge fund. 

PolarityMan

You could withdraw it alll, change it into copper and build a scrooge mcduck style swimming pool. 

chillidoggy

My IFA’s first advice to me was to get shot of the mortgage.

Stratavarious

I cleared the last 10 years or so of my mortgage off in my late 40’s.  Best thing.  I sold shares I had got as bonuses over a few years,

I could always live without a car but it secured a home and roof for the kids in case of calamity  The freedom of no big regular bills let me take more risks with startups or taking long work breaks to focus on music.

YMMV

monquixote

The mortgage is looking appealing.

A simple calculator suggests I could knock 5 years and £8k off with an extra £200 per month and then in 18 months when the car is paid I could go to an extra £400 a month which would knock off ten years and £14k.

Being mortgage free by 50 sounds good.

Barnezy

Only pay off debt that has a higher interest rate than what you could recieve elsewhere from savings. 

A FTSE tracker has consistently returned 7% pa on avg for decades. If your mortgage and car loan are less than that, put it in to a Stocks and Shares ISA. Now is a good time start too. You need to commit to regular payments for a minimum of 10 years, but in 10 years time, you'll have made more money, then paying a mortgage off with a 1.5% interest rate. 

Obviously put as much as you can in to your pension, as the tax breaks make it the best investment for retirement. 

spark240

The problems have with laying off the mortgage is it’s so difficultly to liquidate any funds if you need to quickly.

  I prefer to invest and possibly gain more than I save by paying down the Debt, then I can choose how much and when to pay lumps sums off the debt if I want.

mattdavis

Fascinating how much psychology is involved in this, similar to my thread about whether to extend my mortgage term to move to a bigger house. 

I think like the OP I get considerable satisfaction out of clearing debt. 

After sleeping on it for a few days, even though it would be illogical to many as I’m in a secure industry with minimal redundancy risk, the idea of clearing the mortgage ASAP is really appealing. More so than having bigger rooms etc. To be able to be that free, and not be beholden to a lender, and be less affected by this increasingly insane world economy, would be fantastic. I’m also pretty sure that, just as a honeymoon period of a new bit of gear wears off, the same would be a true of a bigger place. Whereas I can’t imagine financial freedom ever getting dull. 

I think it also comes down to how interested you are in money. I find financial complexities utterly dull and I immediately glaze over. Which is really fucking annoying as I’m sure it would be a useful skill to know about this subject properly!

Fretwired

Whatever you do make sure you pay something into your pension and investments like ISA's first as these are tax-efficient. You will be rewarded later in life.

zepp76

Isn’t blow and hookers always the right answer to the question what to do with my money?

Handsome_Chris

zepp76 said:

Isn’t blow and hookers always the right answer to the question what to do with my money?

Yes it is.  You can then waste the rest of your money.

RandallFlagg

Barnezy said:

Only pay off debt that has a higher interest rate than what you could recieve elsewhere from savings. 

A FTSE tracker has consistently returned 7% pa on avg for decades. If your mortgage and car loan are less than that, put it in to a Stocks and Shares ISA. Now is a good time start too. You need to commit to regular payments for a minimum of 10 years, but in 10 years time, you'll have made more money, then paying a mortgage off with a 1.5% interest rate. 

Obviously put as much as you can in to your pension, as the tax breaks make it the best investment for retirement. 

If you can guarantee that you will have employment for the duration of the mortgage it makes financial sense. If there is any risk that you may lose your job then paying off the mortgage is the more secure thing to do.

Personally, I wouldn't recommend a FTSE tracker, certainly not the FTSE100, it's full of stale old oil and banking giants. There's some innovation in the 250 and smallcap though but I prefer a mutual fund with a good track record of stock picking from the smallcaps.

either way getting invested for the long term is a good thing.

DrCornelius

As @Barney said , if the interest rate on the loan is lower than the return on investment of whatever you decide to do I’d personally leave the loans and put the money into something easily liquidated if you need it.

FTSE trackers are cheap to set up, with the ftse looking soft I’d be drip feeding money into that and of it gets down near 5000 I’d up my payments .  The ftse will come back at some point and I’d say risk reward at 5000 is in your favour 

chillidoggy

I once calculated that paying a mortgage over 21 - 25 years would cost nearly 4 times the amount of the original home loan. Then the house value needs to be taken into account to determine whether it's a win or a lose.

boogieman

My wife told me the other day that one of a group of women she knows has never trusted banks. She’s apparently got thousands of pounds stashed away under the floorboards in her house. Sweet baby Jesus! I wonder how much insects or mice have eaten? What if there’s a fire?  

ToneControl

worth putting a lot into a pension if you are on higher rate tax, not so much otherwise
ISA is good and lets you get cash out easily if you need it

HL is OK

Clearing the mortgage is a very traditional simple way of dealing with these issues, but rarely employed by wealthy people with professional advisors. The reason is that mortgages are very cheap now, and you can do a lot with your cash elsewhere

Many people have a thing about fully owning their house. If you can deal with more complexity, lots of doors open

e.g.
A common tactic for those on higher tax rate used to be to remortgage the house shortly before retirement, then sink all that cash into the pension, effectively doubling it, then cash in the pension soon afterwards, being able to pay off the mortgage if desired. this loophole has been made smaller, there is now a limit per year on contributions, and you have to leave it 2-3 years before claiming the pension if you have remortgaged like this.

ToneControl

btw this looks like a very good time to invest in the stock market, many major UK stocks are cheap today
This can be done in an HL ISA in minutes: transfer in cash and invest. It is more complex though

crunchman

spark240 said:

The problems have with laying off the mortgage is it’s so difficultly to liquidate any funds if you need to quickly.

  I prefer to invest and possibly gain more than I save by paying down the Debt, then I can choose how much and when to pay lumps sums off the debt if I want.

If you need funds quickly then you can always get a loan.  I did an online loan application a couple of years ago and had £10k in my account inside 15 minutes.  It's scary how easy it is.

If you do run into financial problems, then overpaying the mortgage reduces futures outgoings anyway.  Just go back to the repaying by the end of the original term, and your payments will be significantly lower.

At the moment, interest on savings is pitiful and other investments could be very risky.  There are headlines this morning about markets being down because of the resurgence of Covid.  In the position @monquixote is in, I would look at paying £200 a month extra off the mortgage for a year.  In a year's time, the climate for investing might look a bit better, and you can rethink at that point if necessary.

chillidoggy

PSA

If you’re a higher-rate tax payer, and in a company pension scheme which taxes pension contributions at source (20%) then you’re entitled to claim the 40% tax back. You can go back up to 4 years. I’ve done this every year for the last 4 years, and HMRC paid me back around £4K each time. Not a lot of people are aware of this, and funnily enough HMRC don’t publicise it. Check it out.

Handsome_Chris

@chillidoggy , you have just blown my mind!  I am now going on a Google-a-thon for how to do this.