- April 23, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Seeking Advice on Personal Finance
Hi, I’m seeking advice on what to do next with personal finance. I earn £3.5k/month after tax, from which I save £1.1k/month. I have a promotion coming this year but also my first kid. I’ve built a £20k emergency fund I keep in a cash ISA. My partner has similar earnings/savings. We bought an apartment together in London last year using HTB priced £590k and we have a low (2.71%) interest rate on our mortgage until 2028 (we’ll possibly sell by then).
Our current cash ISAs will drastically drop their interest rate this month, and we can nearly max out our year ISA allowances for this tax year. What would be the wise thing to do? I had a conservative strategy of just increasing the cash ISA fund (provided interest rates keep at ~5%), and a slightly more risky one of opening a S&S ISA and invest in global index funds. I considered overpaying the mortgage but with the low HTB interest I don’t think that would beat interest until at least after 2028.
Any advice much appreciated, love reading this sub and how much I’m learning. Thank you!
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Hi /u/LordAdelberth, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/emergency-fund/
* https://ukpersonal.finance/savings/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Absolutely no point in overpaying at your current rate. If you think you could save enough to cross an LTV boundary by 2028, it might be worth saving in cash to make a lump sum overpayment when you remortgage. Of course, if you plan to move before then this becomes irrelevant.
Otherwise, it comes down to whether you want more than £20k available in your emergency fund. With a baby being a double whammy of increased costs and reduced income that might not be the worst idea, but it comes down to how you and your partner feel about job security, what your plans are for childcare, etc.
Whereas if you are happy locking the money away for the long term, then S&S is the way to go (and with that caveat, shouldn’t be thought of as “the risky option”).
“Both of the above” is an option too. You could put another £10k into the emergency fund for peace of mind, and the rest into an index fund.
Generally people favour overpaying their mortgage more than it makes financial good sense.
Most people should be aiming to pay off their mortgage around the time they retire, and not ages before.
It’s time for you to read thoroughly about investing IMO – watch Lars Kroijer’s [short video series](https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK) and read his book or Tim Hale’s [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401). Read the wiki thoroughly.
Personally I tend to see it as wasteful to squander ISA allowance on emergency funds, and I reserve it for investing – the returns on index funds are higher than the returns on cash, so it’s my index fund returns that I want to tax-shelter. However this only matters if you have enough money that you can fill your ISA allowance all the time – if you are investing less than £20,000 a year then I suppose you might as well keep your emergency fund in an ISA.