AGE: 27
Spouse’s/Partner's age: Im single
Annual gross income from employment or profession: E98,000 Base salary. And E100,000+ annually on RSU Stock
Monthly take home pay: E10,000 (approx...)
Expenditure pattern: Fairly low, I save quite a lot.
Rough estimate of value of home: E340,000
Mortgage on home Remaining: E180,000
Type of mortgage: 10 year. Fixed for 4 years. Currently at the end of year 1.
Interest rate : @ 2.80%
Other borrowings: None
Do you pay off your full credit card balance each month? No credit card
Savings and investments:
E135,000
Do you have a pension scheme?
Yes, company matched. Currently over 20k.
Do you own any investment or other property? No.
Ages of children: No children
What specific question do you have or what issues are of concern to you?
I'm quite lucky with a decent job. I'm just after finishing my first year of paying off my mortgage. It's a 4 year fixed rate. The property I bought is a 2 bed apartment and I'm renting out the second room. While I've been paying this off I've been able to save a lot on the side and I'm wondering what I should be doing with it. My initial plan when I bought this place was to continue to pay off the mortgage at the fixed rate until year 4 at which point I would be able to move to a variable rate mortgage and pay it off early. However I could potentially pay it off next year (with a breakage fee) since I am saving more than I initially planned. I quite like the idea of having a second property slightly outside the city but I realise this is probably not the best idea financially.
As I see it now my options are:
a) Continue to pay this off for the remainder of the fixed term and invest / save on the side (looking for some advice on what I could do here for the next 3 years to maximise savings. Currently savings are simply sitting in my bank/savings account)
b) Pay mortgage off next year (with a breakage fee), I should be able to so this with change which I can potentially invest elsewhere.
c) Invest in a second property (next year, at which point I should have 200k in savings)
d) none of the above, let me know.
Thank you.
hi TBC, this is my first post here. You are about my son's age and I was in a similar financial position at your age. So, my advice would be more long term in nature, because if you start with the end game in mind, it is far easier to take the steps to get there. It sounds like you are still single, so if you plan on a family at some point, that is a very significant and expensive decision. Also, think about the long term, are you entrepreneurial, will you probably stay in corporate land and if so, when would you like to retire?. Echoing some advise below, hobbies etc., we are all fed this image that we must spend our whole lives working for a living, as you get older, you will realise that enjoying life (in whatever way you get enjoyment) should actually be the major objective, many people your age only realise this in their late 40's.....
As regards investments etc., I think a rule of thumb of a third in equity, a third in property and a third liquid is a reasonable approach. Include all your assets in these calculations (so find out how your pension is allocated) as well as your house. It might seem wasteful to leave a third liquid in a low interest environment, but Government/Corporate bonds offer some returns. An often forgotten advantage of liquidity is having the cash to do something when a crash hits, which will happen every decade or so. If you wanted a second property as an example, but were not in a hurry, I'd save the cash and wait to buy at the right time, which could either be another crash (might not be so far away depending on this darned virus....) or just some good opportunistic option that comes along later. I'd also recommend that your equity be aggressive (i.e. high growth) given your age, plenty of time in your 50's to get more careful there. You can play with these figures depending on you risk appetite, here is an example of a reasonably aggressive portfolio for you age
1. 20 % aggressive stocks (e..g tech etc)
2. 20% other stocks (e..g phara etc, good long term growth prospects)
3. 30-40% property, can include REITs and other property equivalents as well as your house. Stick to the higher end as the lower returns are worth it versus the risk of the second tier stuff, unless you know what you are doing in the shark infested property world
4. 20%-30% liquid, best returns you can get (includes bonds and corporate, but like property, avoid the riskier ones)
All of this depends on your life ambitions as I said, but the above is a reasonable approach for now.
Hope that helps, t