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What are the fundamentals I should be doing to make money work better for me. I earn a steady wage have savings no mortgage car paid work pension. But I do nothing to get better return on my money. Is it just about a best interest current account and a decent savings account and putting a bit more into my pension? Not looking for complicated and time consuming just some straightforward sensible suggestions to get a bit more out of what I’ve got?
Age?, family dependents?, earnings? Etc. too many variables and even then there’s no right answer. It will be different for you versus A.N.other.
As a starter it’s getting max tax benefits whatver you do. Which for me points towards ISA/pensions. Still depends are you saving for long term and retirement or for something sooner you want to spend on.
No advice other than these thoughts.
Start by building an emergency fund. Something like 3-6 (or even 12) months of normal expenditure, to be used if something goes wrong. Stick that in a high interest (but instant access) savings, ISA or premium bonds (note that premium bonds arent quite instant access though).
Throw a set amount each month into a stocks and shares ISA and let it build up over a number of years. Choose a FTSE250 tracker or a similar managed fund - unless you are a financial whizz I wouldnt bother trying to pick your own stocks, If you want to do this later then set aside a small amount within your ISA and see if you get lucky. Otherwise stick with a tracker or managed fund and forget it for 12 months at a time. There is a max amount per year you can pay into an ISA.of £20,000,
but you can also open a LISA and add £4000 a year (which counts towards the 20k max) if you are under 40. Note that a LISA is just like an ISA, except the government will give a generous bonus each year, but you can only use the money on buying a <span style="text-decoration: underline;">first</span> house or in retirement.
Dig out your pension paperwork - probably all on line these days. There are 2 kinds of pension:
- a defined benefit (you get a set amount paid every year in retirement, usually increased by inflation, and this is based on some fraction of your salary and the years you have worked). These are common n the public sector, and very rare anywhere else. If you have one of these then look to see what the projection is for your retirement. You can usually either pay more in, or have another pension alongside.
- a defined contribution scheme - you pay some % of your salary, your employer pays some % and this money is invested into somehting to give you a sum of money to see you through retirement. This is what most people have. Check how this is invested - if you are still relatively young it may be worth investing sum of it into higher risk investments (the idea being higher risk=higher reward, but as you are young you can recover if the risk doesn't pay off). If you are older it makes sense to have it in lower risk investents to protect your money. YOu can usually top up your %, and often your employer will match this. This is free money, is taken before tax (so can reduce your liability for 40% tax, isnt counted toward the child benefit tax etc).
For most people there is a max amount per year you can pay into all pensions of £40,000 which includes emplyer contributions.
If you still have cash left after this, look to pay off your mortgage earlier.
You dont say if you have kids, but obviously that would change things - university isnt cheap for example, and housing etc - start saving for this early. Kids get their own allowances forpensions and ISAs etc, so you can put things in their name...but remember that this means the money is legally theirs.
Start by opening the teaser accounts with banks and building society's. Only takes 30 mins and you can get decent returns, but only on c1k to 5k. Add them up it's a decent risk free return.
Averages c 5% for v little effort, some are more
Start with this guy;
And this guy;
Start by building an emergency fund. Something like 3-6 (or even 12) months of normal expenditure, to be used if something goes wrong
I've never understood this. It's just money doing nothing. My emergency fund is £0.
If I need money, I'll just sell some shares from my ISA.
Agreed FF, but you're not the typical audience for first time financial advice. Apart from ( despite?) your unfortunate dalliance with Musk your finances are in an excellent state.
This place isn’t what it used to be. Can’t believe half a dozen posts in and not one single suggestion to invest in Coke and Hookers.
Next we will be giving out sensible advice on best way to mount an e-bike to an Audi Thule rack 😉
Thanks all. JI really useful and pitched perfectly.
The only thing I find with much financial advice, and the first of those two videos is perfect example of it, is that the advice is often given from people who earn £100k+ a year.
He starts saying that 'others earn more than him', that he's a one income house, he's got big mortgage and kids at uni....
...yet has £20k a year to save into ISA and / or £25k a year into his pension, and ability to extend his mortgage to invest.
And then goes on to suggest how to set up a portfolio based on his income and hundreds of thousands invested. I know the principles are applicable, but rarely do they suggest strategy for those who earn the national average and live in the national average house.
Index tracker funds (passive) consistently do well over several years, and outperform most managed funds.
https://www.bbc.co.uk/programmes/m001jby6
"How should I invest? New research looks at active and passive investing, we'll speak to co-author Professor Crawford Spence of King's College London."
https://www.bbc.co.uk/programmes/b006qjnv
"Data shows that Active fund managers hardly ever ‘beat the market’. Evidence supports the
view that the Active fund management industry consistently underperforms its relevant
benchmarks and that index investing offers a better solution for investors. "
https://www.evidenceinvestor.com/wp-content/uploads/2023/01/Epistemic-Opportunism-public-version.pdf
"..... with many active investors acknowledging passive generates better results....."
https://www.etfstream.com/features/active-managers-engage-in-hopeful-fantasising-over-decline-research-warns/
https://www.bbc.co.uk/programmes/p054414c
’ve never understood this. It’s just money doing nothing. My emergency fund is £0.
If I need money, I’ll just sell some shares from my ISA.
Firstly that assumes you have an ISA with some funds in it 🙂
But as the last 12 months shows you might be selling at a loss - if your portfolio is large you can probably just absorb this (it is an emergency after all), but if you only have a small amount it can be a real hit. Premium bonds are an OK return, have the 'fun' of a lottery type win each month (or not), and are very safe - would be my choice for at least a couple of months of money.
yet has £20k a year to save into ISA and / or £25k a year into his pension
no one on >£100,000 outside London who does not already have the emergency fund already described would do this? Surely it’d be £40,000 in pension and £5,000 in ISA. Otherwise you’re not making the most of tax relief on pension contributions.
Index tracker funds (passive) consistently do well over several years, and outperform most managed funds
Indeed. In the long term no one can beat The Market.
And this guy;
Damien Talks Money. Thanks for the link to that, his Youtube channel has a lot of useful short videos with practical to advanced financial tips. I've watched four this morning, very useful, especially "Richer than you think" with the Dawn Wall analogy - I'd encourage a lot of people to watch that.
Surely it’d be £40,000 in pension and £5,000 in ISA. Otherwise you’re not making the most of tax relief on pension contributions
£40k limit includes tax relelief