The Money Thread...

[Ecno]

I think this is a form of stoozing.

The main issue is that you have to basically take on monthly payments similar to if you had a small mortgage for five years who's got £5k going disposable each year and thinks it's worth sacrificing that spending power for five years of your life to come out the other end of it with maybe an extra £2k?

It doesn't work.

Where do you get the money to pay the repayments if not from the principal you've put in an ISA?

Also £20k is the limit to put in an ISA.

Edit: I understand, Run the maths on what happens if you just put the £446 into an ISA each month instead of taking out and repaying the loan.

[Lagamorph]

Yeah that seems a lot of hassle and expense for really not much reward at all.

[Oblomov Boblomov]

I think this is a form of stoozing.

The main issue is that you have to basically take on monthly payments similar to if you had a small mortgage for five years who's got £5k going disposable each year and thinks it's worth sacrificing that spending power for five years of your life to come out the other end of it with maybe an extra £2k?

It doesn't work.

Where do you get the money to pay the repayments if not from the principal you've put in an ISA?

Also £20k is the limit to put in an ISA.

Yeah that's what I mean. You'd be taking on a huge monthly bill that would have to be paid from your own existing money (i.e. to never include what you've gained from the loan), sacrificing your ability to spend it during those five years, so that you can come out of the other end with an extra amount that isn't exactly going to change your life.

[Oblomov Boblomov]

Edit: I understand, Run the maths on what happens if you just put the £446 into an ISA each month instead of taking out and repaying the loan.

Well, the benefit of this would be that you immediately start earning interest on a large chunk of money, instead of only £446 monthly increments.

It would obviously be nice to have a big wad of cash with the interest bonus at the end of the five years, but I think you'd look back on those years as time you could have spent living your life at a rate of £446/month extra fun! Not to mention that the upcoming terrifying levels of inflation will possibly wipe out your interest bonus altogether anyway, so your money could even be worth less than it was at the beginning.

[Curls]

Well, you can play it safe as well, and keep money back. You put 1 year worth of payments in the best instant access savings account you can get and then withdraw from there each month to pay, keeping the lump sum in the 1 year lock in. After 1 year, reassess with current updated interest rates. Catch my drift?

The finance world is crazy, with unlimited money you can make unlimited money. I guess that's how banks and loan brokers get their profits.

I would LOVE to just have access to unlimited loans and do stuff like this all the time. Sadly credit records are there for a reason and coporations don't like individuals like myself. My experian credibility is 999 out of 999 with a 93% chance of being accepted, but yet, no company will accept me. They must see my previous loan* and realise what I'll do with there money.

(in 2019 I took a loan out and made profits with it).

[Ecno]

I've done the maths. If you put £416.67 away at 2.2%, interest paid monthly (it makes the CF workings quicker/easier to do). You end up with a total balance of £26,470.48 i.e. £1,470.48 more than £25k.

[Curls]

It works just fine but I forgot about the ISA limit. But in that sense it makes your problem even easier. Cash in 20k into Isa at 2.2% for one year.

Keep the 5k back in instantly access savings at 1.5% per year.

Use that 5k to pay off the Monthly payments. None of it goes out of your pocket. Reassess in a year with hopefully higher interest rates.

And the inflation argument is exactly what this is trying to fight. You save up 25k over 5 years off your own back it will be worth less than what it would have been 5 years ago. If you've gôr 28k at the end of it...then well well. More moolah.

[Curls]

Anyway as I said, I'm just playing with numbers as I find it really interesting and fun. So I enjoy the counter arguments, each obstacle you throw means a new way of thinking. As per my post above

The question is, year 2 and year 3. Do you need to take out money then to fund them years? If the interest rate has gone up. Perfect you're still good. But if its level or the same maybe not. I personally believe they're just gonna keep climbing and it's a clever little loophole. But again you have to enjoy the numbers of it all. For most people money and finances is an effort, for me I enjoy scraping every free pound so its not work and worth my time.

[Drumstick]

Can't remember the exact monetary drop but my ISA has gone from being 80% up to about 55% up lifetime to date.

Seems like most of the big tech stocks have taken a beating (and pseudo tech stocks like Peloton) and stocks that benefit from WFH ending have recovered.

How is your Vanguard scheme performing at the moment with the insane price increases of everything?

[Dual]

I'll let GD answer for himself but mine to be polite, is strawberry floating gooseberry fool.

[Tomous]

I'll let GD answer for himself but mine to be polite, is strawberry floating gooseberry fool.

Mine is currently 0.01% up after over a year

To be honest I'm just glad it's green

[Grumpy David]

Can't remember the exact monetary drop but my ISA has gone from being 80% up to about 55% up lifetime to date.

Seems like most of the big tech stocks have taken a beating (and pseudo tech stocks like Peloton) and stocks that benefit from WFH ending have recovered.

How is your Vanguard scheme performing at the moment with the insane price increases of everything?

My lifetime to date returns are roughly 47% having restarted my regular monthly payment in June 2018 vs being at 80% Lifetime To Date in January 2022. A drop but still massively more beneficial than having stuck with just cash savings.

There's a few months in March 2020 onwards where I bought more than my normal monthly amount so got shares on the cheap slightly distorting the lifetime to date return but still very much in the positive even if I'd not done that.

[Curls]

ANDDDD it's just gone up to 1.75%, a 0.5% jump, and a 0.75% jump in the last few months.

If you're the sort who is still able to save £500-£1000 a month, my Loan/ISA trick really isn't too bad, them 2.8% loans will be gone in a few days, and the saving accunt rates will go up, and hopefully ISA rates with them.

[Grumpy David]

ANDDDD it's just gone up to 1.75%, a 0.5% jump, and a 0.75% jump in the last few months.

If you're the sort who is still able to save £500-£1000 a month, my Loan/ISA trick really isn't too bad, them 2.8% loans will be gone in a few days, and the saving accunt rates will go up, and hopefully ISA rates with them.

I think your idea works better if instead of the cash ISA you make a mortgage overpayment instead.

Most of the 5 year fixed rates seem to be around 3.5%. If you take a personal loan at 2.8% and then overpay the mortgage you are making a saving but the trade off is that you're forcing yourself into mandatory higher outgoings for however many years the personal loan lasts for. You'd want to have a lot of job security to do something like that plus a decent level of confidence that other outgoings aren't suddenly going to increase further reducing cash flow.

Also, we've technically got negative interest rates (the inflation rate exceeds the interest rate) and anyone in the position to do the above is probably able to do something like increase the salary sacrifice percentage on the pension, if you take a HRT payer who also has a student loan, the effective marginal rate on earnings is over 50% (income tax + NI + health and social care levy + student loan) so you can choose to sacrifice less than £500 of take home pay but in doing so end up with £1000 deposited into the pension before decades of tax free compounding begins.

[Curls]

True true, that all depends on what mortgage rate your on. Anyway I shan't be doing this as the loan companies hate me so I can't be a guinea pig.

Pension stuff is all very good, but I must admit, I do want access to my money before my 60's. I usually pop a bit into my pension each year to keep me on the lower tax rates though.

[Captain Kinopio]

I have an investment account with Fidelity that I’ve had for 6 or 7 years now. I’ve got a lot of money saved up in it, a bit less than half the money I have saved in total. It’s up 12% since I’ve had it, though this year it’s dropped a fair bit. My total savings are ideally to be able to buy a place some day, hopefully in the next year to 18 months. It’ll be a struggle because I live in the south am single and earn a pretty average salary which is unlikely to rise substantially for a while.

Though I have a lot of savings and live at home so am not exactly struggling I worry a lot about my ability to afford a place and my savings being eroded by inflation or strawberry floated by recessions as well as the ever increasingly out of reach goal of the climbing average house price where I live or work.

I don’t want to cash out of my full investment fund as even if there a recession this year and next I’m happy to ride it out as it’s for the long term to an extent. That said, if I do find myself in a position to buy a place I will want to use a large chunk of the money in there as a deposit. With that in mind I’m wondering if I should take a portion out now to save it from any coming dips in the winter and beyond. Appreciate you’re not financial advisor’s but wonder if that makes sense at all?

[Dual]

I have an investment account with Fidelity that I’ve had for 6 or 7 years now. I’ve got a lot of money saved up in it, a bit less than half the money I have saved in total. It’s up 12% since I’ve had it, though this year it’s dropped a fair bit. My total savings are ideally to be able to buy a place some day, hopefully in the next year to 18 months. It’ll be a struggle because I live in the south am single and earn a pretty average salary which is unlikely to rise substantially for a while.

Though I have a lot of savings and live at home so am not exactly struggling I worry a lot about my ability to afford a place and my savings being eroded by inflation or strawberry floated by recessions as well as the ever increasingly out of reach goal of the climbing average house price where I live or work.

I don’t want to cash out of my full investment fund as even if there a recession this year and next I’m happy to ride it out as it’s for the long term to an extent. That said, if I do find myself in a position to buy a place I will want to use a large chunk of the money in there as a deposit. With that in mind I’m wondering if I should take a portion out now to save it from any coming dips in the winter and beyond. Appreciate you’re not financial advisor’s but wonder if that makes sense at all?

You got a Lifetime ISA for the house purchase? You could leave the investment fund for now and start putting away into one of them.

[Captain Kinopio]

I have a help to buy ISA that’s maxed out but am still paying into and a cash ISA, so can’t open another ISA this year.

[gaminglegend]

As interest rates continue to rise some good saving accounts, fixed accounts and ISAs are popping up and may go higher.

Barclays Easy Access Saver (Existing Barclays Blue Reward Members Only) 5.12% on up to £5000
https://www.barclays.co.uk/savings/instant-access/rainy-day-saver/

4.11% AER, 1 Year Fixed saver with minimum £50 deposit (Existing UK Current Account Required) @ Atom Bank
https://www.atombank.co.uk/fixed-saver/

4% 1-Year Fixed Savings Account (Existing UK Current Account Required) @ Virgin Money
https://uk.virginmoney.com/savings/products/1_year_fixed_rate_e_bond_issue_500/?clickref=1100lwbgH9ug

Limited access cash (Transfers in) ISA 2.25% from 7 October 22 - max 20,000 deposit @ Coventry Building Society
https://www.coventrybuildingsociety.co.uk/member/product/savings/cash_isa/limited-access-isa-online-3.html

NatWest / RBS Digital Regular Saver - 5.12% AER/ 5% Gross PA - Saving between £1pm to £150pm (Existing NatWest Account Required) @ NatWest
https://www.natwest.com/savings/digital-regular-saver.html

[Grumpy David]

Curls idea of getting a big loan out (2.8% rates still kicking about) and putting it into a savings account earning a higher interest rate (or several if the savings is capped) now works quite well.

Stoozing also looks to make the effort worth it now. Get a 0% credit card and do all expenditure on this. Save the money you'd otherwise have spent and then repay balance in full before the introductory period ends.