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September 21 2020 10.01am

Financial Guidance Thread

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View Goal Machine's Profile Goal Machine Flag The Cronx 11 May 20 9.46am Send a Private Message to Goal Machine Add Goal Machine as a friend

The importance of budgeting

This week’s article isn’t rocket science, but an important one to raise, nonetheless. This is a simple one to tackle, but my experience tells me that many clients I meet have no idea how much they are spending each month or on what.

The biggest culprits are often those pesky millennials (it’s always their fault! – p.s. I am one too), many of whom have developed the mindset of living for the moment and not planning for tomorrow. This lifestyle is admittedly great fun whilst it lasts, but ultimately could contribute towards future financial stress and worry. I am sure we all have those friends who can barely afford to buy lunch the day before payday….

It’s fair to say that it is not just millennials who have difficulty budgeting. More often than not, I speak with prospective clients who are at the point of retiring and have no idea how much income they actually need to maintain their standard of living. Sadly, for these individuals they don’t have the time to make up any shortfall.

One day, we’d all like to be in a financially secure position that gives us the option to reduce the working week, retire early or be able to afford that around the world trip you’ve always dreamed of. Unless you win the lottery, this won’t happen by chance. Saving and investing from a young age will help you dramatically in the future.

The exercise of budgeting properly will take a few hours, but I’m certain you will find it worthwhile. It will give you peace of mind and confidence in your financial position. Dare I say it, you will probably find that you have more spare money available than you realise.

Tips for budgeting:
• Use several bank accounts to separate your finances. For example, separate your house bills from your food account and holiday account.

• Take time and care to go through all your individual direct debits and factor in any annual subscription or membership fees.

• Try to gauge roughly how much money you spend on social events each month. This will vary, so leave yourself a buffer in case you go over.

• Look at where you can reduce outgoings – being organised with your food shopping and taking last nights leftovers for lunch will save a huge amount each month.

• Build yourself an emergency cash fund equal to 3 months’ salary. You never know when your boiler or a kitchen appliance will break, or even worse you could find yourself out of work short term.

• PAY YOURSELF FIRST. Once you have calculated your surplus income each month, transfer this to your savings the day you receive your salary. The same goes for sending a standing order to pay for your house bills, food account and holiday account. The money left in your current account is your spending money for you to enjoy.

Should you like an expenditure questionnaire to help with your budgeting, or some help investing that surplus money, please send me a PM.


Edited by Goal Machine (11 May 2020 9.46am)

 

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View Badger11's Profile Badger11 Flag Beckenham 11 May 20 10.12am Send a Private Message to Badger11 Add Badger11 as a friend

Originally posted by Goal Machine

The importance of budgeting

This week’s article isn’t rocket science, but an important one to raise, nonetheless. This is a simple one to tackle, but my experience tells me that many clients I meet have no idea how much they are spending each month or on what.

The biggest culprits are often those pesky millennials (it’s always their fault! – p.s. I am one too), many of whom have developed the mindset of living for the moment and not planning for tomorrow. This lifestyle is admittedly great fun whilst it lasts, but ultimately could contribute towards future financial stress and worry. I am sure we all have those friends who can barely afford to buy lunch the day before payday….

It’s fair to say that it is not just millennials who have difficulty budgeting. More often than not, I speak with prospective clients who are at the point of retiring and have no idea how much income they actually need to maintain their standard of living. Sadly, for these individuals they don’t have the time to make up any shortfall.

One day, we’d all like to be in a financially secure position that gives us the option to reduce the working week, retire early or be able to afford that around the world trip you’ve always dreamed of. Unless you win the lottery, this won’t happen by chance. Saving and investing from a young age will help you dramatically in the future.

The exercise of budgeting properly will take a few hours, but I’m certain you will find it worthwhile. It will give you peace of mind and confidence in your financial position. Dare I say it, you will probably find that you have more spare money available than you realise.

Tips for budgeting:
• Use several bank accounts to separate your finances. For example, separate your house bills from your food account and holiday account.

• Take time and care to go through all your individual direct debits and factor in any annual subscription or membership fees.

• Try to gauge roughly how much money you spend on social events each month. This will vary, so leave yourself a buffer in case you go over.

• Look at where you can reduce outgoings – being organised with your food shopping and taking last nights leftovers for lunch will save a huge amount each month.

• Build yourself an emergency cash fund equal to 3 months’ salary. You never know when your boiler or a kitchen appliance will break, or even worse you could find yourself out of work short term.

• PAY YOURSELF FIRST. Once you have calculated your surplus income each month, transfer this to your savings the day you receive your salary. The same goes for sending a standing order to pay for your house bills, food account and holiday account. The money left in your current account is your spending money for you to enjoy.

Should you like an expenditure questionnaire to help with your budgeting, or some help investing that surplus money, please send me a PM.


Edited by Goal Machine (11 May 2020 9.46am)

It's not just them I have loads of friends in their fifties and sixties they are self employed earn a decent wage, rent and have no savings or pension. They will be working until they drop dead. It's their money so they can spend it how they like but you know they will be bitching about the state pension when it's time to retire.

You advice is pretty much what I have done since I started work and into retirement. Pay the bills first save a little and then whatever is left is mine to pay with.

Edited by Badger11 (11 May 2020 10.12am)

 


One more point

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View chris123's Profile chris123 Flag hove actually 11 May 20 10.39am Send a Private Message to chris123 Add chris123 as a friend

Originally posted by Badger11

It's not just them I have loads of friends in their fifties and sixties they are self employed earn a decent wage, rent and have no savings or pension. They will be working until they drop dead. It's their money so they can spend it how they like but you know they will be bitching about the state pension when it's time to retire.

You advice is pretty much what I have done since I started work and into retirement. Pay the bills first save a little and then whatever is left is mine to pay with.

Edited by Badger11 (11 May 2020 10.12am)

The self employed still qualify if they've paid Class 2 stamp don't they??

 

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View Badger11's Profile Badger11 Flag Beckenham 11 May 20 11.51am Send a Private Message to Badger11 Add Badger11 as a friend

Originally posted by chris123

The self employed still qualify if they've paid Class 2 stamp don't they??

They are paying their stamp but they are relying on their state pension and nothing else. At which point they will be moaning that they are a poor pensioner forgetting they have money now and choose not to save it.

 


One more point

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View Goal Machine's Profile Goal Machine Flag The Cronx 11 May 20 2.35pm Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by chris123

The self employed still qualify if they've paid Class 2 stamp don't they??

They do, but the level of State Pension provision is very low. £175.20 per week. This requires 35 full years of National Insurance contributions.

Many rely on the State, but £175.20 per week is no way to live. No season ticket out of that.

Try to work out how much income you'll need in retirement to maintain your lifestyle, then have a guess at how many years you might live, then add in inflation. Retirement is expensive!

Have a look at my previous article on the generous pension tax relief available on contributions. It really is the best way to save money.

 

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View Goal Machine's Profile Goal Machine Flag The Cronx 11 May 20 2.44pm Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by Badger11

It's not just them I have loads of friends in their fifties and sixties they are self employed earn a decent wage, rent and have no savings or pension. They will be working until they drop dead. It's their money so they can spend it how they like but you know they will be bitching about the state pension when it's time to retire.

You advice is pretty much what I have done since I started work and into retirement. Pay the bills first save a little and then whatever is left is mine to pay with.


Edited by Badger11 (11 May 2020 10.12am)

I'm pleased for you Badger. Being sensible whilst you are earning and putting some away each month is the way to go. I bet you're grateful for it now.

The self-employed can find themselves in this predicament due to missing out on employee benefits. Pension provision is often put off until its too late. It's important to invest savings early in life to benefit from the compounding effect.

 

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View cryrst's Profile cryrst Flag Chatham 11 May 20 5.43pm Send a Private Message to cryrst Add cryrst as a friend

Originally posted by Goal Machine

I'm pleased for you Badger. Being sensible whilst you are earning and putting some away each month is the way to go. I bet you're grateful for it now.

The self-employed can find themselves in this predicament due to missing out on employee benefits. Pension provision is often put off until its too late. It's important to invest savings early in life to benefit from the compounding effect.

Employee benefits with respect come from earning less and having no choice whether to invest or not.
Self employed also pay less tax and NI. there is no excuse I'm afraid.

 

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View Goal Machine's Profile Goal Machine Flag The Cronx 12 May 20 9.45am Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by cryrst

Employee benefits with respect come from earning less and having no choice whether to invest or not.
Self employed also pay less tax and NI. there is no excuse I'm afraid.

I agree. The trouble is that a lot of people spend all their money each month, regardless of how much they earn, and get themselves into bad habits. Bad habits are not always easy to break.

With employee benefits, you now must legally be enrolled (subject to certain age restrictions and earnings) into the company pension scheme and contribute a minimum of 8%, of which at least 3% must come from the sponsoring employer. The employed therefore have an advantage in that their pension contributions are made before it reaches their bank account. I personally don't feel that this level of contribution is sufficient for most people either.

It is my opinion, that the State pension will gradually be phased out over the next 40-50 years as the ageing population is too expensive for the government. The introduction of auto enrolment into the company pension scheme was the first step in moving the onus from the state to private sector employers. I hope I’m wrong though.


Edited by Goal Machine (12 May 2020 9.47am)

 

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View chris123's Profile chris123 Flag hove actually 12 May 20 10.04am Send a Private Message to chris123 Add chris123 as a friend

Originally posted by Goal Machine

I agree. The trouble is that a lot of people spend all their money each month, regardless of how much they earn, and get themselves into bad habits. Bad habits are not always easy to break.

With employee benefits, you now must legally be enrolled (subject to certain age restrictions and earnings) into the company pension scheme and contribute a minimum of 8%, of which at least 3% must come from the sponsoring employer. The employed therefore have an advantage in that their pension contributions are made before it reaches their bank account. I personally don't feel that this level of contribution is sufficient for most people either.

It is my opinion, that the State pension will gradually be phased out over the next 40-50 years as the ageing population is too expensive for the government. The introduction of auto enrolment into the company pension scheme was the first step in moving the onus from the state to private sector employers. I hope I’m wrong though.


Edited by Goal Machine (12 May 2020 9.47am)

Lots of lost/forgotten final pensions too.

[Link]

 

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View Goal Machine's Profile Goal Machine Flag The Cronx 12 May 20 5.25pm Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by chris123

Lots of lost/forgotten final pensions too.

[Link]

Good article, Chris. 800,000 missing pensions in the UK worth an estimated £10 billion is quite astonishing.

An equally worrying statistic in that article is that the average defined contribution pension by state pension age is £28,000. For a healthy individual, this would buy a no frills guaranteed income, known as a lifetime annuity, of just £1,100 (£92 per month). This really highlights the pension income shortfall problems we are facing in the UK.

Here is the link to the governments lost pension tracing service: [Link] For those who have worked with several different employers and are not monitoring their pension savings, I’d strongly recommend using this. You could be in for a nice surprise.

Generally, it is good practice to transfer your old pensions to your current employer scheme, where possible (excluding final salary pensions). This makes it easier to keep track of your pension and often your current employer will have negotiated discounted charges, so this may reduce your overall ongoing fees.

 

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View cryrst's Profile cryrst Flag Chatham 12 May 20 8.33pm Send a Private Message to cryrst Add cryrst as a friend

Originally posted by Goal Machine

Good article, Chris. 800,000 missing pensions in the UK worth an estimated £10 billion is quite astonishing.

An equally worrying statistic in that article is that the average defined contribution pension by state pension age is £28,000. For a healthy individual, this would buy a no frills guaranteed income, known as a lifetime annuity, of just £1,100 (£92 per month). This really highlights the pension income shortfall problems we are facing in the UK.

Here is the link to the governments lost pension tracing service: [Link] For those who have worked with several different employers and are not monitoring their pension savings, I’d strongly recommend using this. You could be in for a nice surprise.

Generally, it is good practice to transfer your old pensions to your current employer scheme, where possible (excluding final salary pensions). This makes it easier to keep track of your pension and often your current employer will have negotiated discounted charges, so this may reduce your overall ongoing fees.

Ironically if you smoke you get more. How can they prove you dont?

 

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View cryrst's Profile cryrst Flag Chatham 12 May 20 8.55pm Send a Private Message to cryrst Add cryrst as a friend

Originally posted by Goal Machine

Good article, Chris. 800,000 missing pensions in the UK worth an estimated £10 billion is quite astonishing.

An equally worrying statistic in that article is that the average defined contribution pension by state pension age is £28,000. For a healthy individual, this would buy a no frills guaranteed income, known as a lifetime annuity, of just £1,100 (£92 per month). This really highlights the pension income shortfall problems we are facing in the UK.

Here is the link to the governments lost pension tracing service: [Link] For those who have worked with several different employers and are not monitoring their pension savings, I’d strongly recommend using this. You could be in for a nice surprise.

Generally, it is good practice to transfer your old pensions to your current employer scheme, where possible (excluding final salary pensions). This makes it easier to keep track of your pension and often your current employer will have negotiated discounted charges, so this may reduce your overall ongoing fees.

My plan at 55
Draw 25% tax free on a pension I have which isnt live in respect of paying in atm. and pay a debt plan off ( hopefully at a discount as theyve been sold on a few times) that will save 5k over 5 years from the administration costs as that's how long will be left. Have a few quid left to do a bit around the house a nice holiday and a bit on a newer car (even on the tick as they will want sales at interest free payments after this bug). Hope still have a bit of dough about me for a few luxuries. All being well carry on working. My mortgage ends 5 years later when I'm 60 and a half.
Again as long as I can work I prob will. The bonus is knowing that if needs be I can draw down on what's left. Hopefully I can work till pension age then if I can jack in work or downgrade my wages and be comfortable then I will only pay 20% tax not 40% on any drawdowns. Although I also have a work place pension ongoing. Once I get to 55 and paid debt plan some of the spare ages I might put into that. I dont fancy getting an annuity as you only get 30 days to change your mind and any receipts count as earnings anyway. I know it can all be deferred but how much extra do you really need.
I know it's not the best plan financially but I feel at least I've got a goal to aim for.
Having been through the wringer of repossession 30 years ago and making ends meet to most degree from then I am truly looking forward to having some dough about me. Not having to look at the price tag for general things is something I've never been able to do.
Amen.

 

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