Some advice

Discussion in 'Finance, Property, Law' started by Alpha72, Dec 26, 2009.

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  1. I've been in the army a year now and have just finished my phase 2 and I have been promoted to the dizzying heights of Lance Jack on the higher pay band. Going to my first unit in January and the worlds my oyster!

    However, Not to brag but I have next to no out goings and was living comfortably on my 1000 a month never mind the 1300 or so I'll be getting when my pay catches up.

    I have no intention of pissing this money away, however I have no idea what to do with it :x
    I've been told an ISA is next to useless right now and when I went to see a financial advisor from the bank of scotland (my bank) he kept insisting that "low risk" investments were the thing for me. I know very little about money and investments and I'm very aware that the he was most likely looking out for his banks interests and not mine.

    Any advice for a highly confused Lance Crowpal would be appreciated!
     
  2. Give it to me?
     
  3. squeekingsapper

    squeekingsapper LE Reviewer

    Speak to an IFA. You have to pay for the advice, but if you get a decent one they pay for themselves.

    The return on ISA's (indeed any investment) are low at the moment, however this will slowly turnaround and they are tax efficient.

    If you really do not want to go down this route, either buy property (buy to let) or buy shares (but you should speak to a financial advisor for this really), as the market is low and it's only 10% tax.

    A lot of it is dependent on your attitude to risk, which comes back to my first statement of speak to an IFA.
     
  4. ISAs may not be giving great returns right now, but at least they're safe, and tax free status boosts the return. Worth putting some there, not least as you can then have a get-at-able cushion. When you've got a sum that you can tie up for a bit longer, then look at other options. Don't overlook Natioal Savings (info on line or from Post Office) - some are tax free, index-linked, and again they're safe. Take and read bumf from the bank's advisor -look to see if returns are taxed and whether you could lose capital if shares go down - sounds scary, but if you have got long term savings they typically perform well.

    Or for safe gambling try Premium Bonds, returns uncertain, obviously, but again capital is safe.
     
  5. Excuse my ignorance but what is an IFA?
    I would like to "buy to rent" but I believe you need something in the order of 10% deposit on a mortgage right now? I could save such funds up but it would take a year or two. The fact that i'm going on tour next year will no doubt help that.

    There must be a more efficient way to save up for this deposit than simply leaving 300-400 aside in my account a month.
     
  6. It's an Independent Financial Adviser - try unbiased.co.uk, or ask around for a recommendation. As name implies, they're not tied to products of one bank and they are regulated, and should be clear about their charges. If you are happy to tie your money up for say 3 years, you can get better rates, but there will be penalties for early withdrawals, which is why it's worth keeping a cushion in something easy access. Never put money into something you don't understand, and remember that if it sounds too good to be true, it isn't. And if the rate is way above the norm it's high risk or fishy.
     
  7. First of all, I am an IFA, but anything mentioned here is not advice , but for discussion only.

    You should remember there are 2 types of ISA - cash and stocks and shares.

    Cash ISA interest rates are at historical lows, and although they benefit from tax free status this is often outweighed by the low rates on offer. You can often do better on a standard account at the moment.

    Stocks and shares ISA is different in that you put money into it and use it to buy, surprisingly, stocks and shares. Go to your bank and the choice of funds available can be low ( or entirely their own offerings ) but go a better route and you can put the money into any one of thousands of funds.

    You certainly should think hard before buying to let - the returns are low and you need to tie up a big lump of capital to get started.

    With all savings & investments you have to weigh up the risk and return. Thats to say in general those investments with very low risk ( savings accounts etc ) offer low or modest returns. Shares, while offering greater risk, have historically produced better returns.

    A few things for you to consider...

    1. It's great that at your stage in life you are thinking about the future... but dont rush in just yet.

    2. Look at establishing an emergency fund, usually about 3-6 months pay, for anything unexpected that may come up.

    3. Once you are out in your unit, you may find your expenses go up a bit, get yourself settled before deciding how much you have available to save/invest.

    4. When you do get to the stage where you want to commit, you dont have to go all or nothing. ie: If you have 400 per month you could put half in easy access savings account, half in an ISA for example.

    5. Buy To Let is for the long term. I have come across plenty who have regretted it - think long and hard if it is what you want.

    6. You are ( I imagine ) still pretty young and anything could happen in the next few years ( marriage, kids maybe ). With this in mind I would suggest that access to your money is important. ( Some products are designed to tie up your capital for years taking it out of reach ). Again I have seen first hand the result of people who did not take account of changing circumstances and were not able to get money when they needed it.

    An IFA will be able to talk through all of these options with you and will only recommend a product if he or she feels it fits with your needs.

    unbiased.co.uk is a good source for locating an IFA near to you.

    Good Luck!



    I am an IFA however all post on this forum are for discussion only and should not be taken as a recommendation of a particular product or provider. If in doubt always seek advice from a suitably qualified professional.
     
  8. As another IFA, I have to complement lewiscollins on his summary and his disclaimers!

    Buy-to-let is currently a bit of a minefield as the late jumpers onto this bandwaggon are getting their fingers well burnt. If the property is very cheap and the rent you actually get is high, then this is a great earner of passive income, BUT it's not as simple as it looks.

    You will need at least 25% of the property purchase price to get a loan and a tax accountant is very, very useful. Rules on gas certificates and tenants deposits have landed a few "casual landlords" in Court, which could be career-limiting for service personnel. Treat it as a business and plan for void periods, (no tenant and no rent coming in), repairs and management, aiming for a return of say 7% overall.

    For service personnel with tied accomodation, the tax relief for Principal Private Residence can make one rental property a real money spinner, so the idea cannot be dismissed out of hand.

    Save yourself an emergency fund, possibly in an instant access ISA, first then talk to an IFA, ideally one recommended to you by someone you trust.
     
  9. RiflemanTom

    RiflemanTom Old-Salt Book Reviewer

  10. I think the advices above look good. I will just make some comments on buy-to-let.

    1) The best profits are being made by people buying run-down property, spending cash to renovate, and that is a minefield unless you have the trades yourself or know trusted "proper" trades guys to do it.

    2) You are not going to be ten minutes down the road if something goes wrong and your agent doesn't sort it!

    3) Get some good advice on the legal issues of letting, agents will advise but get some from elweshere as well.

    4) When you are working out what you might make from it, allow for some weeks between lets, and don't commit yourself to needing the income from it in case you get a tenant who doesn't pay, and you have to go though a long legal process to get the tenant(s) out, restore the property and start again.


    If I were your age I wouldn't consider it at all, there will be more to spend your money on and enough excitement in your life without worrying what's happening to your house!







    .