Thanks Steven!
Get your renovations done first and wait and see how much cash you have after that.
I think that is very pragmatic advice. We have about 400k with cash+stocks today, but even the rough estimates here, imply we might need 600k. (Writing down 600k for a renovation just sounds so ridiculous, I have trouble believeing it). But that means I likley need to accumulate another 150k over the next 12 months, i.e. I dont need to make a decision on where to put my money today, I just need to keep saving it.
Arguably I should sell all my stocks today (and as they arrive for the next year), as if the stock price fell, I might be forced to wait longer before we could do the big renovation, or sacrifice some of the renovation.
Max out your pension each year.
Build up a cash reserve that you are comfortable with.
Pay down your mortgage asap
Build up an investment portfolio with the rest.
Pension is Maxed, cash reserves in place, and this should hold through our renovation.
The future question becomes about timing on paying down mortgage vs investing more. I think I am leaning towards doing both at the same time with future money, paying down mortgage a bit, and investing a bit, with a view to maximising time in market, rather than paying down mortgage first, and then investing further.
For your last step, How do you suggest to hold the portfolio? Direct shares like Brendan? What do you think of overpaying it into pension? I am strongly considering putting it into pension.
Don't be in a hurry to buy a property. Those high prices that first time buyers are complaining about apply to investors too. There is plenty of time to buy a property and if you wait, you can buy it in cash.
I take your point that I don't need to rush. But, don't the current yields imply the prices are not crazy? And don't I get a better return on cash if I take mortgage with it. There is also the point, that I could potentially buy a house as PPR, lock in PPR rate, live there during renovation, and then rent it out afterwards. This set's it up with a nicer mortgage rate for the future, and also allows us to avoid paying rent for an unknown period during renovation.
Working for a tech firm, you won't get a gold watch for 40 years service, so make hay while the sun shines. Put a plan in place to automate savings each month and watch your wealth grow.
I think that's true for most jobs these days! And yes, I strongly agree, I have automatically saved and invested all my life. And my mortgage max contributions will continued. Recently the priority was paying down the Mortgage, but now that is reasonable, next it will be renovation, and then within the next year, I need to have a good automatic plan for where and how to save the additional 12k per month.
Remember, there is a difference between having a large income and being wealthy. There are lots of people with incomes similar to yours who are not wealthy as they have spent it on expensive houses and lifestyle. Build wealth and you will have lots of options.
Strongly agree, we live well below, and arguably too far below our means, Our outgoing are something like 25% of our after tax income, that includes mortgage payments, but not pension payments. That is partially just our habit and values, but it also with an eye on reaching Financial Indepennce, and having options for the future.
The PPR+renovation is the main splurge, with a median house and no big renovation project, we would already be Finacially independent.