Starting to Save

Age: 30
Spouse’s/Partner's age: 32

Annual gross income from employment or profession: e43,000
Annual gross income of spouse: e32,000

Type of employment: Both full-time employed in Private Sector

In general are you spending more than you earn or are you saving? Saving now, but only just in a position to.

Rough estimate of value of home: e280,000 (I'll have a better idea if a house on the street for sale, actually sells)
Amount outstanding on your mortgage: e220,000 (around 28 years left)
What interest rate are you paying? 5.1% fixed rate. around 14 mts left

Other borrowings – car loans/personal loans etc: e1000 personal loan

Do you pay off your full credit card balance each month? yes

Savings and investments: e7,000 savings

Do you have a pension scheme? I do. 5% of salary matched by company. Husband does not have one

Do you own any investment or other property? no

Ages of children: none and no plans in the short run i.e. next 5 years or so.

Life insurance: yes


What specific question do you have or what issues are of concern to you?

We are saving for a biggish holiday in February. After that we should be in a position to save about e1,000 a month on average between us.

We over pay the mortgage by about e250 a month.

I don't think there is any immediate threat to either of our jobs but we both work in industries which are struggling at the moment and I wouldn't dare assume what may happen in the next 24 months.

My question is about what should we do now with whatever money we can save to help in the short but mainly long run.

Should my husband start a pension? I know conventional wisdom would say yes, but I've also read some people here advise not getting on if you are not on the higher tax band.

Should we overpay the mortgage and clear it down earlier? We're unlikely to stay in our current house for longer then the next 3-4 years (economic conditions depending)

Should we save what we can in as high an interest account as available? This seems like the most obvious and safest option, gives us access to cash in an emergency but I'm not sure if it's the best long term decision.

I appreciate that in comparrision on some of the posts here on Money Makeover we're in a good position but now that we are saving I want to make sure we're doing it as smartly as possible.

All opinions and advice appreciated.

P

picaresque said:

Other borrowings – car loans/personal loans etc: e1000 personal loan
...
Savings and investments: e7,000 savings

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Can you pay off this remaining personal loan in a lump sum? There is no point keeping it if you can.

picaresque said:

Should my husband start a pension? I know conventional wisdom would say yes, but I've also read some people here advise not getting on if you are not on the higher tax band.

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Regardless of the tax benefits (which do indeed exist), it is advisable for your husband to put at least some money away for his retirement. The earlier a pension is started, the less that needs to be put away each month for it.

picaresque said:

Should we overpay the mortgage and clear it down earlier? We're unlikely to stay in our current house for longer then the next 3-4 years (economic conditions depending)

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It might be a good idea and a smaller mortgage would give you more leeway when trying to trade up in a few years.

Thank you. I plan to have the e1000 paid off in early January.

Start a pension as well, no time like the present and the tax relief is good too,

If there is a company pension scheme available to your husband, with employer contributions, then I would think it madness for him not to join it. I agree with CGorman that it is better to start providing now for a pension than to defer it further.

People whose pension plans are maturing now are taking a hit because equities are generally low. But this is an exceptional circumstance. It might actually be a good time to get into a scheme that invests in equities, because it is a fair bet that they will not be low in the long term. [I don't promise that I will be right about this, but I think there is a good chance that I will.]

I suggest that whatever you save over and above that you invest in the best-yielding deposit you can find, at least in the medium term. While you seem not to be greatly worried about job security, you imply that there is at least a little uncertainty, and you might not want your savings to be out of reach.

Hi Padriahp, thanks for your comments. His company do not have a company scheme, he would have signed up if they did but organising it independently means that simple laziness on both our parts has become the issue.

Your point about saving is where my gut is. I think we should have easy access to our money in case of the worst...which might happen yet.

Sorry to ask, but I was under the impression that you could not overpay on a fixed term mortgage. Does that ean that the overpayent reduces the mortgage at the end of the fixed term as opposed to real time.

I also didn't think you could overpay on a fixed term? Is the overpayment sitting in a seperate account to be taken off the capital when fixed term expires?

the mortgage statement suggests it's coming off the capital in real time. i.e. the loan balance reduces by 1400 - the interest amount and that was my understanding when I spoke to the bank about it at the time.