Money Chat Series #1 - Investing For Property and Pension
The Money Chat Series documents conversations had with clients about their money goals. The Money Chat is a 35 minutes chat I have with clients who are looking to understand their money better and wanting to discuss anything from debt management to budget setting and investing.
I had a fascinating conversation with Saida Chandra* (SC). It has been documented below as an interview and hopefully gives you an insight into the money challenges people go through and also inspire you to take actions as part of your new year’s resolution or goals to get your finances into shape and achieve better living.
1. Why do you want to chat about your finances?
SC - I have a bit of cash saved up and I was just wondering if there is more, I should be doing with it other than leaving it in my savings account. I’m not getting much interest on the money, although I feel comfortable seeing it daily.
MoneyNotes - Your money is growing but unfortunately it is growing in the wrong direction. The interest from your savings account is about 0.5% a year but inflation erodes your savings at a rate of about 3.0% a year. So, the real growth is about -2.5% a year.
2. What are your money goals?
SC - Well, I’m comfortable now but there are two things I really want.
The first is to have my own property in the next few years, and
The second is not to worry so much about money when I’m older and retired
MoneyNotes - Thank you, this is clear enough. So own your property and have a good retirement plan.
3. I normally structure these sessions to help you call DIBS on better living.
SC - What do you mean by DIBS?
MoneyNotes - It simply means Debt, Investing, Budgeting and Savings. I believe having control of these are the essence of a solid financial foundation.
4. So let’s start with Debt - Do you have any debt and if so, what interest rates are you paying on them?
SC - Thankfully I actually don’t have any debt at all
5. Investing - Do you have any investments at all?
SC - No investments. Therefore, I want to make it my focus as I think I should be doing more with the couple of thousands I have in savings. I have a work place pension which could technically count as investments, but I don’t really engage with it and I don’t really understand it.
MoneyNotes - OK I will explore Investing a little bit more with you and also take a deeper look into your pension arrangement as you could be missing out on a lot of FREE MONEY
6. Budgeting - Do you have an idea of what you spend on a monthly basis and if there’s anything left at the end of the month?
SC - I live with my siblings so we share rental cost which means I am very fortunate to have quite a bit of disposable income. I have about £850 at the end of the month and I just put this into my savings.
MoneyNotes - That’s good but it is important to also look at your expenses regardless of how much you earn. This is to make sure you are getting the best deals. Loyal customers are been ripped off by providers to the tune of £4bn so it’s important to go through a process of Review, Compare, Haggle and Repeat with your household bills.
7. Savings - Finally, do you have savings?
SC - I have saved a couple of thousands over the last ten years. I’m saving towards a deposit and I really want to put this money to work so that it can grow. Can you tell me where to invest it now to guarantee growth?
MoneyNotes - First of all, no one can “guarantee” you a return. There is usually risk associated with investing. Ultimately the best approach to investing is to invest regularly and for the long term.
8. You mentioned you have a work place pension. Can you give me more details?
My employer pays 8% of my salary into a pension pot. I have chosen to invest it in the default fund as I’m not too sure what else to do
Apart from this 8%, for every additional 1% I contribute then my employer tops up with 0.6%
They stop topping up once my total pension is at 20% of my salary
9. So do you contribute the additional amount to your pension to take advantage of your employer’s generous contributions?
No, I don’t I’m trying to save up for a property first.
MoneyNotes - This is one of the major reasons people give for not saving into their pensions. You are missing out on a lot of FREE MONEY.
FREE PENSION MONEY Explained
If you contribute 7.5% of your salary, then your employer gives you 0.6% for every 1% contributed. So, you get 4.5% FREE MONEY from your employer.
These are the contributions required to bring the total to 20% which is the point at which your employer stops topping up.
Therefore, by contributing 7.5% of your salary today which is about £180 a month after tax you get the following
£287,000 when you come to retire is a lot of money. If you allow for the 8% contribution that your employer initially offer, then you may be able to build up a pension pot of almost half a million pounds
SC - Wow, that’s amazing! Where do I sign up?
MoneyNotes - Just get in touch with your human resources team and I’m sure they will be able to help you out. I will also guide you through this.
How time flies, we have come to the end of our 35 minutes Money Chat! There is so much still to cover but thankfully you have registered an interest in the MoneyNotes – Money Goals Bronze package where I will take a deeper dive int your finances.
With Money Goals Bronze I will build a personalised package for you and topics will include
Your key money habits and behavioural finance
Setting your long-term money goals
Debt and practical tips to eliminate or manage it
Monthly budgeting and allocation of money
Saving for emergencies
MoneyNotes will be your money mentor for 2 months from when you join the programme
Written materials to support your Money Education
This was an exciting Money Chat. Saida has a very comfortable income stream but was struggling to put a framework in place to really maximise those earnings and secure a comfortable future.
However, through the Money Chat and further extended sessions I can happily confirm that:
Saida now has 20% (She only has to contribute 7.5% and employer contributes 12.5%) of her salary been contributed towards her retirement
She now has a regular investing into a few diversified passive funds to help preserve the real value of her money and grow wealth
She holds a good amount of cash for emergency.
She also holds quite a bit of cash and the plan is to buy a property soon. It is quite risky to invest that money in the markets for only a short time period
New Year Goals
As we go into the new year, you may be thinking of your resolution or goals. If you need help with setting your financial goals/resolution then come have a Money Chat with me.
Best of luck as you strive to call DIBS on better living.
* Name changed to preserve anonymity.