32/self employed contractor/ in need of direction

Personal details

Your age: 32
Your spouse's age: NA
Partner's age if not married: NA

Number and age of children: NA


Income and expenditure
Annual gross income from employment or profession: take salary approx 72k( turnover 150k approx)

Annual gross income of spouse/partner:na

Monthly take-home pay: 4k

Type of employment - e.g. Employee or self-employed. : Company director
Employer type: e.g. public servant, private company. : Private

In general are you:
(a) spending more than you earn, or
(b) saving?
Currently Saving approx 6k per annum personally. Gathering approx 15k per annum in company.


Summary of Assets and Liabilities
Own home value: 550k
Mortgage on own home: 320k
Net equity:230k

Cash: 5k personal, 100k in index fund personal, 80k in company account

Defined Contribution pension fund: contribution of 1500/month from company

Company shares : 100% sole director
Buy to Let Property value:na
Buy to let Mortgage:na

Total net assets:


Family home mortgage information
Lender
Interest rate 2.5%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? Fixed (3 more years)
If tracker, what is the margin e.g. ECB + 1%

Remaining term: 32 years (Original term is not relevant)
Monthly repayment:1350

Other borrowings – car loans/personal loans etc: none personally ( 4k left on a company vehicle loan )

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Pension information

Value of pension fund: 60-70k

Buy to let properties : none
Value:
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments: none


Other information which might be relevant

Life insurance: yes


What specific question do you have or what issues are of concern to you?

My business seems to be doing ok, i dont have any cashflow issues or major overheads. I however personally am reliant on my credit card on a monthly basis. It doesn't seem to quite make sense. I dont particularly want to increase my salary. I understand i am paying the ‘singles’ tax but any suggestions as to what to aim for would be appreciated or tips to reduce my tax liability or take money from my business without paying 50%+ in tax.

Should I aim to build capital in my business over the next few years and then liquidate and claim entrepreneurs relief? I have heard of people doing this.

Should I look to buying a second property?

MarkSh said:

Family home mortgage information
Lender
Interest rate 2.5%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? Fixed (3 more years)
If tracker, what is the margin e.g. ECB + 1%

Click to expand...

This is confusing - maybe you can clarify?

MarkSh said:

I however personally am reliant on my credit card on a monthly basis.

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Why is that a problem if you are clearing it each month?
A credit card simply used as a cashflow management mechanism is not a problem in and of itself.

If necessary you should sit down and analyse your spending to see where the money is going.
If most or all of your spending is via cards then this should be a simple case of downloading the statements in Excel/CSV format and categorising the expenditure into logical headings.

MarkSh said:

Should I look to buying a second property?

Click to expand...

Why? That would simply be concentrating even more of your net worth into a single asset class and geographic region.

You have savings that might be better used to pay down your mortgage or the car loan (unless there are company related benefits to keeping this outstanding or something?).

You might want to look at increasing your pension contributions?

I agree with Clubman. On the personal side of things, I would consider putting aside a rainy day fund and then using the rest of your personal cash to pay down your mortgage when your fixed rate ends.

On the business side of things, maybe keep whatever you need for working capital and then pay off the car loan and increase your pension contributions.

Of course if you plan on getting married and having kids, that changes everything.

ClubMan said:

This is confusing - maybe you can clarify?

Why is that a problem if you are clearing it each month?
A credit card simply used as a cashflow management mechanism is not a problem in and of itself.

If necessary you should sit down and analyse your spending to see where the money is going.
If most or all of your spending is via cards then this should be a simple case of downloading the statements in Excel/CSV format and categorising the expenditure into logical headings.

Why? That would simply be concentrating even more of your net worth into a single asset class and geographic region.

You have savings that might be better used to pay down your mortgage or the car loan (unless there are company related benefits to keeping this outstanding or something?).

You might want to look at increasing your pension contributions?

Click to expand...

Thanks for the reply. On the mortgage i took out a 35 year mortgage almost 3 years ago at 2.5% fixed for 5 years. Almost 3 of that have since elapsed. Does that clarify?

Re the credit card i think we are on the same page. I don't mind using it. What i mean is my personal account is always drained at each month end so i constantly feel under pressure when i probably shouldnt feel like that.

My spending is simply 2250e mortage+ bills+investment fund contrib(500).
That leaves 1750 for everything else.

Why property? Im looking to create another income source but point taken.

I looked into paying off the car loan it was nearly costing more with the penalties its up in feb which will free up 800 a month.

Open to increasing pension contributions but Im keen to find something to generate some short/medium term capital

MarkSh said:

Thanks for the reply. On the mortgage i took out a 35 year mortgage almost 3 years ago at 2.5% fixed for 5 years. Almost 3 of that have since elapsed. Does that clarify?

Click to expand...

Thanks. The stuff that was copy and pasted about tracker rates confused me.

MarkSh said:

Re the credit card i think we are on the same page. I don't mind using it. What i mean is my personal account is always drained at each month end so i constantly feel under pressure when i probably shouldnt feel like that.

My spending is simply 2250e mortage+ bills+investment fund contrib(500).
That leaves 1750 for everything else.

Click to expand...

Yes, but if you want to know exactly where your money is going then you need to analyse your spending and clarify what your realistic annual budget is under all of the relevant headings. That can then help with looking at whether/where you can economise if necessary. Or just to understand where the money is going so that you can plan ahead.

MarkSh said:

Open to increasing pension contributions but Im keen to find something to generate some short/medium term capital

Click to expand...

For what specific use?

Also maybe check that your pension charges are reasonable and that your pension savings are invested in an appropriate way - e.g. most likely a low charges, maybe passive index tracker, equity fund and not something too conservative for your age.