Changing Room Chats: Managing Your Money 101 with Allie R Investing - Part 2

Join us for part 2 of Managing Your Money 101, where we take a deeper dive into finances, discussing debt, credit scores, student loans, pensions and mortgages. 

From wondering 'Do I really need a private pension?' and 'Will I ever be able to pay off my student loan?', to exploring easy ways to improve your credit score, and how to keep your head in the world of mortgages and renting, we cover oh-so-much ground in this episode.

Friend of the Pod, Allie, who's worked in finance for over 10 years, shares her top tips to help you better manage your money, while The Pantry Underwear's General Manager, Jess,  asks all the juicy questions you never knew you had.

We hope you enjoy this episode - and if you haven't already listened to part 1, catch up now!

Follow The Pantry Underwear on Instagram and TikTok.
Follow Allie on TikTok. 

Transcript

00:00:07:15 - 00:00:42:00

Hi, it's Jessie from the pantry. Underwear. You're listening to part two of a Managing your money 1 to 1 series with finance expert Ali. If you haven't listened to part one yet, you may want to start there. You don't need to listen in order, but it's a good place to begin. In this episode, Ali and I take a deeper dive into pensions, mortgages and more so going next level here, but that stocks and shares the other way that a lot of people are kind of saving, especially for the future pensions.

00:00:42:01 - 00:01:14:05

PENSIONS

Yeah, absolutely. So pensions, I feel like a sort of investing unloved sibling in that investing. Very exciting, yet not surprisingly sassy, partly because being a pensioner is not sexy. Like it's not something we like to think about every day. I think we I mean, personally, I just like it. I put off the idea of, of being that old, that I'll be taking my pension and then I also that I feel like there's a lot of worry about government pensions and whether they'll actually be worth anything.

00:01:14:07 - 00:01:41:22

Unknown

Yeah. So there's, there's two different things that I write. So the first one is that there's a state pension. There's lots of talk about people saying the state pension won't exist. We just don't know. Yeah, it's very at the moment is very unaffordable. People in society and there's what's called a massive pension gaps, the state pension. Fundamentally you would be in poverty living on just the state pension alone and that's something that I think people don't realize.

00:01:41:22 - 00:02:12:22

Unknown

The state pension even I wouldn't pay you enough to live not even comfortably, but to live and survive properly. So that is not designed to be something you live off on. It sounds. Yeah. So you need to have some sort of private pension and because of the compounding that we talked about earlier, the early start, the easier time you have because you can do really small amounts when you're very young and they will have much longer to grow than they will have if you start later.

00:02:13:03 - 00:02:35:08

Unknown

So the first thing to do is not opt out of your pension, it comes out full before tax income. And so if it's provided by your employer, you can claim the tax back if it's now. But the point to make is that if it's coming out before your paycheck is ever paid out to you, then hopefully you won't notice it.

00:02:35:10 - 00:02:52:20

Unknown

It's like it was never really yours anyway. It was never any yours anyway. But the beauty of that is that that is going to afford you a much happier life later on in your life. And I think people don't realize that when you take your pension, you still have to pay income tax. You might not fully own your home yet.

00:02:52:22 - 00:03:13:00

Unknown

You might still be a renter. But many people think that you sort of end this mystical retirement. The world of retirement, where you become a billionaire and you might not. All Yeah so you know this is the thing is you might not enter this world where you've got lost property where else or where you have a massive inheritance or whatever.

3:24 WHEN DO I NEED TO START SAVING / HOW MUCH MONEY SHOULD I SAVE

00:03:13:00 - 00:03:39:17

Unknown

That just might not be a reality for you. And so this is about protecting your future self. I guess two pressing questions that people have. When do I start saving? Like if I'm going to save beyond in the pension fund, sorry, if I'm going to save in a pension fund beyond my employer pension, if I'm going to have a private pension or when when do I need to start thinking about this and how much how long is a piece of string?

00:03:39:17 - 00:04:01:06

Unknown

How much money does one need for one's pension? Yeah, I mean, you put it say, well, how is a piece of string? I mean, I as with everything in this episode, is completely dependent on your personal circumstances. So of course it depends on how much you can afford. We've talked a little bit about reframing your money mindset and thinking about affordability as looking after your future self.

TOPPING UP YOUR PENSION

00:04:01:07 - 00:04:22:01

Unknown

That's a thing. But in terms of topping up your pension, the employer contribution that is made at the moment that is mandated by the government is 4% and sorry, it's 3% actually. And I think it's the employee pays for plan might have gone up a little bit and it's still around 7%. Yeah. And actually that is still too small.

00:04:22:03 - 00:04:44:00

Unknown

That's way lower than you'll need even if you've been saving since you were 21. So in terms of topping it up as soon as possible, and there will be times in your life when you will find it hard to top up. I've mentioned it before, it's a bit of a cliche, but when you have small children and you're paying nursery fees, you will probably find that any extra money you have doesn't exist anymore.

00:04:44:00 - 00:05:12:03

Unknown

It goes up in like a piece of nice retreat slide. So it's thinking about, even though you love going on holiday in your twenties, is thinking about maybe cutting out one city break and topping up your pension through the year or whatever it is. But it's so valuable because you will make so much money over your lifetime. Any talking topping up that employer pension or having a different pension or so with your employer pension titans depend on the rules of your pension scheme, so you have to look into it.

00:05:12:03 - 00:05:35:22

Unknown

So a lot of employees will match you if you put in a little bit more that it's so valuable that it's free money. Yeah, do it if you can because it's just wasting it without. Otherwise, if you're with an employer that just that's the statutory minimum and sometimes there are schemes where it allows for voluntary top ups, in which case you can open something called a self invested personal pension CIT.

05:40 SELF INVESTED PERSONAL PENSION

00:05:35:24 - 00:05:57:06

Unknown

You hear people talking about sick stock, that's what they mean. You like open them with the same people we talked about earlier sizes so you could actually have it sitting next to Isa. And what happens is if you pay basic rate tax, say 20% tax, then it automatically adds your tax back in for you. In the end, the provider reclaims up from the government.

00:05:57:12 - 00:06:21:06

Unknown

If you're a higher rate taxpayer, you'll have to do a tax form at the end of the year, a tax return, and reclaim that money. But the point being, I think people also forget that pensions are tax relief. So you're getting free money from the government, you're getting free money from your employer. That's called a deposit. Yes. So if you don't say something that's siphoning out of your.

06:15 PENSIONS ARE TAX FREE / CONSOLIDATE PENSIONS

00:06:21:07 - 00:06:42:24

Unknown

Yeah. It's not just me being placed for it. It's actually that you're getting all these incentives and bonuses from the government and from your employer. So it's worth it is worth thinking about. And if you've been kind of if you've had a few different employers over the years, should you be consolidating those pensions into one pot or should you leave them where they are?

00:06:43:00 - 00:07:02:20

Unknown

It's going to be most cost effective to consolidate them. So partly that's tracking them. JOB Yeah, the government was meant to introduce a centralized pension tracker system years ago. They still happen, but there are a few places that you can let. There are companies that can help you with it if you truly have lost track of your past and pensions.

00:07:02:22 - 00:07:28:15

Unknown

But you should be able to remember and actually you should be able to email out payroll from an old company if you need to to find out who they do their pensions with and then contact that pension provider. It's all done on postcodes in your name and your national insurance number is obviously massive, so it's absolutely worth tracking down those pensions from any previous employers and thinking about putting them consolidating them into one slightly more manageable place.

00:07:28:16 - 00:07:49:20

Unknown

Probably worth thinking about it if you think you can manage it appropriately. Whether that's getting advice, whether it's putting it, you understand what you want to put it into. It depends how young you are as well. The older you get, the more you need to adjust the mix of investment in your pension. So you will be 100% in stocks and shares because of what we discussed.

00:07:50:01 - 00:08:13:20

Unknown

That's about investing as is, and that's about riskiness being able to take more of a risk when you're younger. Absolutely. And then becoming we all become a bit more risk averse. But yeah, and you should with your pensions tick. Yeah so when you self invested, if you're not confident with that you just need to make sure that you're you're taking the right advice from the right places and that means professionals.

00:08:13:22 - 00:08:41:13

Unknown

It doesn't mean tick tock as much as I talk about finance. So yeah. Okay, brilliant. All right. So we've covered banking, we've done a bit of savings, savings, the future, pensions, stocks, ISAs. So I spoke back to the day today and debts cause it's as it's a reality. I was going to say it's an unfortunate reality, is it not?

08:30 DEBT

00:08:41:13 - 00:09:05:00

Unknown

Certainly. I don't know. Like we're all in and out of work or a lot of us are in us for overdrafts. Yeah, you know, is that a bad thing? Is that going to negatively impact our finances in the long term? Yeah, it's an interesting question. And and I think there's a sort of interesting answer in the sense that there's a way to think about money, and that is that money can be expensive, money can be cheap.

OVERDRAFTS / KLARNA = EXPENSIVE MONEY

00:09:05:03 - 00:09:28:05

Unknown

That's when you borrowing it and overdrafts, all the most expensive type of money other than high interest last minute loans, a cloud, or if you miss a payment, is the most expensive type of money. But but fundamentally, I draw in your day to day spending is the most expensive money. So what it's like, are you kind of classifying overdraft?

00:09:28:05 - 00:09:53:16

Unknown

I was on arranged or arranged or normally buys because in the sense that unless you're student you tend not to have an interest free overdraft. Some people do, but it doesn't tend to be lots. And basically you start getting charged interest as soon as you go into it. We've all had that tax lot. You've gone to an unarranged is worse because unarranged can affect your credit score, so it can have more impact in that sense.

00:09:53:16 - 00:10:15:06

Unknown

But in terms of just the cost of your finances, overdraft, Interesting. So popping into your unarranged overdraft, is that an automatic black mark on your credit score? So that's a very black mark, but it's a sort of smudgy red one. It's not a great thing to do. You know, over the longer time. And so it's not something you want to regularly do.

10:00 if you go into an unarranged overdraft will this affect you long term?

00:10:15:06 - 00:10:34:23

Unknown

Absolutely not. And actually it would be preferable to put it on a credit card, make the minimum payment than it would be to go into an unarranged overdraft. Obviously, you would prefer not to either, but if you're going to cheat one or the other, the credit card is normally preferable and would normally attract maybe a lower interest rate.

KLARNA

00:10:35:00 - 00:10:57:19

Unknown

That's something to think about, maybe not lower than an arranged one, but certainly the knife is on a range one. Okay, So so I mean, it's okay to use them, but it's not ideal. Is not ideal. Okay. You mentioned Klarna. Yeah, it's a lot. You see a lot of websites. Most websites now have that payment method, PayPal later.

00:10:57:21 - 00:11:18:14

Unknown

Yeah, absolutely. So what? And I think it's it's becoming quite a popular ways of paying definitely what are what are the dangers of of those of all the dangers I mean I'm making I'm putting it out there dangerous. Is it dangerous? I mean it is dangerous in the sense that you're taking on debt that isn't actually what you're doing.

00:11:18:14 - 00:11:41:20

Unknown

And although it won't affect your credit score when you first take it out, if you miss a payment, it will. So although you will see it quite often flagged as minor, it doesn't affect your credit score that So yeah, in the taking out I think the other things about it with Klarna is that you just pushing the pain down the road so like you'll still paying for those goods and you still start paying the same amount.

00:11:41:20 - 00:12:03:19

Unknown

And just because the payments smaller for a couple of months, ultimately you've still paid the same amount. So you've got to think about that. Affordability thing is coming back to the same thing we said about like Netflix and stuff. It's like, is there a way that you can stretch your spending differently? Do you need that thing right now, as it were, sitting on it and taking the money away and seeing if we still want it in two months time?

00:12:03:21 - 00:12:22:18

Unknown

So there's two sides to it, which is one, it's bad habits get into it because it does become a habit. And then also that you are risking ultimately your credit score if you can't keep up with that. And are you paying more when you put something on Klarna you're not, if you might, your interest free payments so you don't pay any extra fees.

00:12:22:20 - 00:12:38:24

Unknown

They make money from you. If you miss payment, you have to pay credit on it and they make money from vendors. It's worth saying it's right that they're just fleecing people. Okay. So if you if you you know, if you know that you can make those payments or if you feel very confident you can make those payments, there shouldn't be a risk.

00:12:39:05 - 00:13:06:10

Unknown

But it's when you start making those payments for you and your credit score can be. That's exactly the circumstances. Limits risk. Yeah. Okay. That is good to know. So if you're not, you said that one alternative to using overdraft, and particularly an unarranged overdraft, is to use credit cards. Yeah, I think people's use of credit cards sometimes, again, you can think of them as a bit of a negative thing.

CREDIT CARDS | NEGATIVE / POSITIVES

00:13:06:10 - 00:13:30:11

Unknown

Are there any positives to using credit cards? Yeah, I guess the number one positive is that if you pay off the credit amount at the end of every month, then you obviously don't actually pay interest on it. So that's different to an overdraft where as soon as you go into overdraft, that money is attracting interest payments that you have to pay a credit card, you can pay on it through the month and then just pay it off at the end of the month.

00:13:30:11 - 00:13:50:22

Unknown

So a lot of people use it like that. It's like a flight before their next payday. So there's a certain amount where it's an easier use for day to day spending to be a bit more flexible. The risk, again, of a credit card is it can impact your credit score and so that's something to be aware of and that they can attract very high interest rates.

00:13:51:03 - 00:14:21:22

Unknown

So you've got to look at your credit card and know your interest rate. Shop around when you take one out. And so, yeah, those are those things for credit cards to really think about. And just using using your credit cards, paying it off just does not negatively impact. Well, how does that impact your credit score? So using credit in any way, so taking out fines and taking out a car loan, using credit card positively affects your credit score as long as you're paying it off to a degree.

00:14:21:24 - 00:14:42:24

Unknown

And the thing to remember with credit cards and any kind of credit accounts, your PayPal credit, your Monzo, flex, your traditional bank credit card all together. Bill, do you get a credit limit that you've got across all your accounts? So if you add up all the credit limits, that rule and what you want to do is keep your utilization rate.

00:14:42:24 - 00:15:05:11

Unknown

So how much of that credit is below 25%. Otherwise, that can actually negatively impact your credit score. Although if you've got a £4,000 limit on your credit card, you should be able to use no more than 20%, 25, £25,000. Yeah. And although I mean it depends. So that's kind of the sweet spot is it. That's the sweet spot.

00:15:05:11 - 00:15:26:07

Unknown

So you can your accounts will report to the credit ratings agencies towards the end of the month. So if you're clearing it mid-month and that tends to be fine, but it's like it's just not having that rolling close to your max amount on that because that will affect your credit score over time because you're using a lot of your credit.

00:15:26:11 - 00:15:47:13

Unknown

So it's a bit like kind of training wheels on a bike, is it? You're kind of you're showing that you you're kind of playing around with credit and saying absolutely good. So this money, I can pay this, but you're showing your really can be trouble with it. Absolutely. That's fine that you can be trusted. So if you can't pay it back, that's where you might start to examine the impact.

00:15:47:15 - 00:16:18:11

Unknown

And what they worry about with this utilization rate is that, you know, you're getting near to the limit. That they've decided is is your limit. So they're concerned that you're pushing it, you're taking too much risk yourself, that it may be a risk taker and that's when they worry. So that's something you should be aware of. Okay. Another thing that I have heard about, credit cards, maybe this is true, is that you should use them for bigger purchases because then maybe, maybe you can get at your purchases and maybe more.

CREDIT CARD CHARGE BACKS

00:16:18:11 - 00:16:43:04

Unknown

Are the insured again? Yeah, it's cool that it's called the chargeback scheme and it basically means that you all protected against kind of loss on significant and see if request a chargeback onto your credit card and that tends to be an easier process. And when you use that is that if you've been a victim of fraud or is that it tends less to be fraud or that you are more protected in fraud cases?

00:16:43:04 - 00:17:21:06

Unknown

In spite of that, as we've mentioned earlier, you will money in even in a debit account is then protected by the Financial Services Compensation scheme. So that tends to be a bit easier, less it's more like this type of fraud where you send accounts that get or where you disagree with the salar y by about whether they mis listed something or if your flight gets canceled and the airlines refusing to pay you out and you think that's unfair, quite often you can raise it with your credit card company and they'll pursue it on your behalf, which your debit card provider wouldn't even if it was the same people, which they do, it's technically their money that

00:17:21:06 - 00:17:49:07

Unknown

they've had is in order. Okay. Okay. Yes, I'm going to answer. Yeah, yeah, yeah, yeah. So. So bigger purchases then. It's a bigger patch of holiday TV's fridges, anything like that. Do it on the air. Absolutely. But pay off that. How. Okay. Absolutely. Pay off and actually you can buy it on there. Be protected and still pay the credit card of the next day.

00:17:49:07 - 00:18:27:20

Unknown

You still get that protections. That's like being aware of. Okay. That's that's a good thing to know and PayPal do you get that is is that similar like I feel like I've been told that if you pay with PayPal somehow you will your payment online is more secure. Yeah, PayPal certainly in the past used to be much more protective of your money That's been it's sort of moved the dial up a little bit more recently when credit card companies attempted to catch up a little bit in terms of if you want to use cash balances to pay, it would be safer to use your debit account through your PayPal account than it would be to

00:18:27:20 - 00:18:57:00

Unknown

just use your debit account directly, giving you another little buffer of financially tuition that perhaps moving may be inclined to help you. Absolutely. Okay. And so we touched on credit scores and credit like credit rankings. Credit history. Yeah. So how do they work? What is is that there's an overall credit agency that keeps that. So there are three agencies.

CREDIT SCORES

00:18:57:02 - 00:19:20:22

Unknown

The one that you'll see most people talk about is Experian. When they show their lovely rainbow colors on their TikTok, their Instagram, and they're talking about how that 999 out of 999, then they are saying that their experience score is pretty good, actually, that the three agencies are Experian and TransUnion and Equifax, and they are all as equally valid as each other.

00:19:20:22 - 00:19:43:10

Unknown

And you need to have a high school with all of them because you will never know which agency a credit issuing company, someone who wants to loan money to you, whether that's for a car, a mortgage, insurance product, whatever it is, which one they will check. Can you check that? You can check them. Yeah. So there's free websites to check each of them in own experience.

00:19:43:10 - 00:19:59:11

Unknown

You check it with them directly. You have to pay a subscription to get offers for products and things like this. Don't do that. You can still check your score just by looking in for free on the website. They provide you with that, but they won't necessarily provide you would not tell them why a score is low for them.

00:19:59:13 - 00:20:18:15

Unknown

Then it becomes progressively easy as a credit. Karma is the account that you use to check TransUnion and that is again a free account. But they push a lot of products onto you. And if you want to get any more in-depth insight into your pool, you have to pay premiums to get certain types and experience. And then Credit Karma.

00:20:18:15 - 00:20:38:03

Unknown

Credit Karma. And then the third is clear score. Clear score is probably the most accessible. That's for your Equifax score. So that's with three Playskool, Credit Karma, Experian. And you will have a different scoring page. And actually the most helpful thing is to see each of them will show you benchmark against other people. Clear score in particular is great.

00:20:38:03 - 00:21:00:03

Unknown

So show up in your area, people like you. But the point is you want to know that you're good or excellent and that will be what means you can take money out, buy good, good enough. Good is good enough. Good is good enough in the sense that you would be able to borrow money if you needed to in a pinch, but you're going to be getting excellent.

HOW TO GET AN EXCELLENT CREDIT SCORE

00:21:00:05 - 00:21:24:21

Unknown

Okay. You want to be type A is possible in this area and so being excellent, how do you how do you become excellent? There are kind of three main things. One is having a really reliable identity. That sounds weird, but it's you want to have not too many housemates on there. And so if you've moved a lot, then then that can that can affect your school and the way they check.

00:21:24:21 - 00:21:53:16

Unknown

That is the time you spent on the electoral roll at your current address. So get on the electoral roll as soon as you move, because that really helps the credit score is not a super high scoring thing, but it's just a little easier you can get yourself. The second thing is the credit utilization. We talked about to use too much of your credit at time and the third thing is to pay all of your bills on time because as soon as you get a late payment, then that can seriously do graduate school.

00:21:53:16 - 00:22:10:23

Unknown

And that's the thing that's most going to impact it and that's going to be flat to those three Credit healthy, select them all and they all know the one thing you do want to check. They've got your details correct, because also it's a really helpful tool to check whether you've had any accounts taken out in your name that you don't know about.

00:22:11:04 - 00:22:33:03

Unknown

So you do want to go through those reports and see the detail, not just to seem they've got it right. But yes, you financial companies that you do with a feed in your details to those credit agencies back to late payments. Yeah. So if you do feel that you were in danger of making a late payment. Yeah. And you don't know what to do, like what would you do in that situation?

00:22:33:05 - 00:22:56:13

Unknown

So there are a few things. The first thing is to take advice and take sensitive advice with two places to get. Those are the Citizens Advice Bureau is amazing that information about your finances in general, life in general. So if you ever stop, always like reaching out to them, if you've got more debts in multiple maybe accounts where you're missing payments, Stepchange is the debt charity.

00:22:56:15 - 00:23:20:09

Unknown

They will help you do things like consolidate your debts into one loan, if that's appropriate for you though that can be quite high cost. They'll also talk about repayment plans with the companies. That's if you've really slipped into proper debt. But would you like if if you were going to make a credit card payment or if you just didn't have the money, can you call your bank?

00:23:20:09 - 00:23:40:15

Unknown

Can you or your creditor can you say this is going to be a problem? Is there any grace in that or you actually can and it actually worth doing? There's no promise that they will do anything for you. They tend to leave that when people are further into debt, otherwise they'll just go, It's just going to be a Yeah.

00:23:40:15 - 00:23:58:12

Unknown

And I mean, I missed a payment about 18 months ago, not through not being inspired, but just by forgetting to pay it. I've done the same and they don't panic. You know, it makes how it impacts your score. There's nothing you can do about that usually. And the thing is to just get back on track and stop paying things.

00:23:58:14 - 00:24:22:15

Unknown

So if you if your credit rating drops, you can build it back up, you know? Yeah. I'd say those tips that you mentioned about like borrowing in a in a in a controlled way, in a sensible way up to the 25% and paying paying of making your payments on time. Yeah. I'm sure you're on the electoral roll, which seems like a no brainer if that can you know that's I mean that's an easy one to do that.

STUDENT LOANS

00:24:22:15 - 00:24:49:12

Unknown

That is a really easy one to negotiate. Yeah, absolutely. Okay, fantastic. And student loans, everyone's favorite form of debt or the one that keeps us all awake at night. Yeah. Should it should that you know, is is the reality of life now student loans while student loans are funny on in the UK because I think culturally we could be impacted a little bit by marakwet student loans, which is massive.

00:24:49:12 - 00:25:20:23

Unknown

And they all know that and they really will make you bankrupt, make you live in your car in the UK as you know, don't pay them below a certain level of earning. You don't have to pay back any at all. Even if you do pay it back, you know, it's a small bit of your earnings. Now the other thing that's attracting a lot of attention is the interest rate on student loans at the moment, because that's going up massively because it tracks interest rates by the central bank and those have obviously got up massive in the last couple of years.

00:25:21:04 - 00:25:59:04

Unknown

And so I think people have seen that debt balances get a lot bigger. The thing about student loan, regardless of which on your own is it does get written off after a certain period of time. And so I think the best way to think about it is like a graduate tax. You are basically being taxed for having gone to a at some point unless you've paid off, which some people do, and in which case if you get near paying it off, maybe by not putting money into savings and accelerating repayments, you're not attracting that debt so that you can just let it be sooner than you would.

00:25:59:06 - 00:26:23:02

Unknown

But otherwise, actually it's paying itself off in the background is coming off pretax income. Yeah, try not to worry about it. A lot of that's all debt is so big that we will never pay off. It's worth being realistic with yourself and thinking, Am I going to end up in a job that pays me 100 grand or am I going to stay in, you know, the subsidies to earnings bond?

00:26:23:02 - 00:26:45:14

Unknown

If you sub 60, then you're probably not going to pay off. Fine. Just let it be. Yeah. And then let it write itself off. But, you know, I mean, that doesn't say mean say policy can't change, but I highly doubt policy would change to change backward looking students and just flat student loan it's not part of your overall debt profile or is that somehow exempt or separate.

00:26:45:15 - 00:27:10:01

Unknown

Yes. So fortunately, student loans do not affect your credit score in the UK unless you take them out for like a master's or something. But your normal basic undergraduate student loan doesn't affect your credit score. It will affect mortgages only in as much as it's a cost per month. So when you get a mortgage, your bank will look at all this understanding and see what you spend your money on and what your outgoings are, and therefore whether your mortgage is affordable.

00:27:10:03 - 00:27:34:17

Unknown

And of course your student debt is part of that because it goes out every month. Yeah, but it's not like they're saying, well, you've got whacking great student debt. I would not give you a mortgage. Is it. This is the reality I suppose, isn't it. I mean, I don't know what the percentage of the population are with student loan student debt, but I know well well over 50% going to say right about, you know, certainly the population below 30,000 if it's going to be a Yes.

27:48 MORTGAGES

00:27:34:21 - 00:28:13:06

Unknown

Exactly. So, yeah, you know, the vast majority of people, certainly as is now would be would be graduates so so last up mortgages. Yeah. And then a mortgages versus renting is I think it's not it's not the given that we all thought it might be that we would just be able to hop onto that mortgage ladder. Yeah. Speaking from personal experience, I think I bought for the first time having lived in London for almost 20 years and I bought just for my 40th birthday and that was not the dream that I had in mind and that was a scrape to get there.

00:28:13:06 - 00:28:31:23

Unknown

And I was very lucky that my partner had managed to save much more of a deposit than I could. I mean, is it is it reality for most people is a sensible reality to think that most people are going to be able to be able to afford to buy? Yeah, well, especially in London. Yeah. So this is the thing.

00:28:31:23 - 00:28:48:03

Unknown

Obviously London is a totally mad place and it is particularly mad when it comes to house prices. So the situation depends on where you are in the UK. So in the north of England you meet people you bought 25 and you'll be like, Wow, if you were there. And then you realize what their house cost them 250 grand.

00:28:48:03 - 00:29:10:03

Unknown

And that is a different kettle of fish. You can't buy a room for that. I had the entry so, so high. The exactly that is crazy. I think the other thing is that we don't talk about enough in our chats about this, or certainly some people do, some people don't. Is that a lot of home ownership for people under the age of 40 now is due to parent input.

00:29:10:03 - 00:29:35:15

Unknown

So unfortunately, no, no, unfortunately it's very kind of them. And the wealth transfer from the boomers to the millennial and young Gen-X and old Gen Z age group is going to be massive. It's going to be the biggest ever in history. So you know that that's just cascading down earlier for some people. But fundamentally, like the banks, mum and dad, all the mortgage lenders talk about it, all the biggest mortgage borrowers in the country.

00:29:35:21 - 00:29:54:00

Unknown

So, you know, that's the thing is like there are lots of factors involved. I think the number one thing about houses, though, that really comes up is I think people worry that they're not getting that financial uplift from having a mortgage. And that's why you talk about houses as they can be your home or they can be an investment.

00:29:54:02 - 00:30:18:11

Unknown

They can kind of be both, but that can be quite hard to marry. So if you want to have a solid home, definitely worth thinking about becoming a homeowner. It's very valuable in a lot of ways. You know, it gets you, I'm sure you would say, just a feeling of security and you all building as a financial and now to your walls without having usually you paint a nice color.

00:30:18:13 - 00:30:38:04

Unknown

The ultimately is an investment that can actually be more sensible investment for your money. And so it's worth thinking about what works for you. And renting is so flexible it can be really beneficial for some people. So think not despairing of your financial situation just because you're not a homeowner yet. So it doesn't seem like it's going to be on the cards for a long time.

00:30:38:06 - 00:31:00:17

Unknown

That's where other assets like stocks and shares can really come into play. Here is something to think about and then it's not putting all your eggs in one basket in the way your parents generation did. Yeah, absolutely. And I think the other thing that is a really good analogy in the sense that the other thing that people can quite often do is try and get as much mortgage as they can with their money when they do go for it.

00:31:00:17 - 00:31:24:08

Unknown

And in London, that can be unavoidable because it could be the only way you could buy a house. But I think with interest rates going up so much over the last couple of years, people have learned why that can backfire, because if your costs go up, more than that could be really issue. So it's worth giving yourself financial headroom even when it comes to buying a house, maybe buying a bit less house, able to have that flexibility or whatever is.

00:31:24:10 - 00:31:51:03

Unknown

But I think home ownership in this country, something we really hold off as the ultimate saying, yeah, don't see it's not. But if you want to do it it's the same principles. So gradually over time when you're thinking about buying, make sure you looking at the stamped somebody. First time buyers understand value which can be a brutal thing but is worth like stamp duty is is what just for anyone who doesn't stamp duty is the tax you pay or buying a house.

What is stamp duty

00:31:51:03 - 00:32:10:22

Unknown

Those actually can be free for first time buyers as long as you buy below a certain value. The other thing to look at is lifetime ISAs. If you know that you want your money to buy your house and you know that your house is going to be again below asset value, I think it's £425,000, but don't quote me on it and then you can put it in a lifetime.

00:32:10:22 - 00:32:35:11

Unknown

Isa, the government pays you 25% back up to £4,000 a year. Is that and the help to buy Iceland still in existence to help things down? There's been phased out. I plates of the lifetime isa the advantage the lifetime Isa is it also works as a pension savings account. So if you were to no end up using it for mortgage, you could end up using it for your pension.

00:32:35:13 - 00:32:56:19

Unknown

The flipside both of those is that you can't withdraw it for any other purpose without incurring a penalty. And obviously, if you're trying to save as much income for a mortgage, it's the buying house. Yes. Pension. Yeah. It's depending on how what you need it for and how long you keep. Exactly. But the thing to remember with buying a house, we've talked about this.

00:32:56:20 - 00:33:13:14

Unknown

You mentioned about your partner buying a house. You often end up doing it jointly to be able to for more and that might tip you over that minimum level that you can afford with that you were allowed to buy with with your lifetime. ISA And that includes the whole value of the property. It's not just your share of it.

00:33:13:20 - 00:33:37:00

Unknown

So that's just like that's something to think about when you're thinking about whether a lifetime isa is appropriate. So one thing I learned the hard way with my stamp duty exemption as a first time buyer, you both need to be first time buyers. You both in one piece and not the full. Whether they have that property or they've sold if you've ever bought before.

00:33:37:00 - 00:34:03:02

Unknown

So even if you've inherited with your siblings, you sold any bought an investment property, you sold it 15 years ago. Now it's a one time offer and it's if you'll both buying together, even if you're not married, which is very brutal but is true. Okay. And one last thing actually about this. So a lot of people are looking at shadow ownership as an alternative to buying outright.

SHARED OWNERSHIP

00:34:03:04 - 00:34:26:16

Unknown

How does that work? Shared ownership is where an account party owns a proportion of your house. So sometimes that's council quite often it's what's called a housing association. They'll own maybe 75% of the property and then you get a mortgage on the remaining 25%. So you ubank owns most of the 25% and then you own a portion of it and then you're building it over time.

00:34:26:16 - 00:34:52:11

Unknown

So you get the rights of a homeowner, but you don't actually own the whole high, right? And that could be really positive as a way to get yourself into that much more comfortable place and also to start building equity in properties and start getting the pay out for the property going up in value. Now, of course, if it declines in value, that's more factors that something simple and there can be costs involved because obviously you tend to be in developments and things.

00:34:52:11 - 00:35:15:12

Unknown

And so there's often costs to do with maintaining developments, which we would need by the maintenance be very high. So that is a that's a risk that's worth looking at. But fundamentally, if full ownership is out of reach for you, shared ownership, it's definitely something worth exploring and taking advice on, looking at the options online, seeing if it works for you, but exploring the risks as well.

00:35:15:12 - 00:35:33:12

Unknown

But again, as you say, your the price of your property can go up and it can go down. Absolutely. A property is an investment like any other. I think people think of property prices. It's only ever going up, but they are very, very expensive relative to incomes. Now. And so that's something to keep in mind. Like does how is that going to continue forever?

00:35:33:12 - 00:36:00:00

Unknown

Yeah, we don't know. That's such a solid piece of advice because I think I just saw getting a mortgage as I was getting a mortgage, I didn't see it as an investment yet and I'm maybe kind of thinking twice about putting £50 into a Yes, an investment fund. I actually have made that quite quickly and and easily made a fake financial, you know, So, you know, you've given yourself a home as well.

00:36:00:00 - 00:36:19:24

Unknown

And I think that's something to think about. And that comes like the final bit of this puzzle is do you pay off more of your mortgage or do you put it in a savings account if you've still got a cheap mortgage from before rates went up, puts it in a savings account. Now the amount you could pay off extra and then so those overpayments do.

00:36:20:01 - 00:36:47:04

Unknown

Exactly. And then do those overpayments at the end because you're earning more money than you would be paying off in interest. It will in capital. But if you're on a higher interest mortgage, it's normally pay off. The mortgage is more sensible because you pay off the cuff, so not the interest. So yeah, all very interesting. Yeah, I think that's left us with a lot to think about, but a lot of positive points actually.

00:36:47:04 - 00:37:08:08

Unknown

A lot of things that actually feel quite achievable to go away with, like going in, looking at things like nutmeg and looking at investing and not being terrified. Yeah, I'm actually thinking about risk and what you can afford to take and how actually if you're younger, you can take more risks and you maybe want to be a bit more conservative further down the line.

00:37:08:10 - 00:37:31:24

Unknown

Absolutely. That was the principle. Yeah. No, that's really great. Thanks so much, Ali. Thank you for having me. Fascinating. Just asking you questions. And I hope that that's I hope that everyone else finds it as interesting as I did here. So, of course, if anyone has any additional questions off the back of this podcast, we are very happy to kind of feel them.

00:37:31:24 - 00:37:58:18

Unknown

And maybe we could get Ali back for a follow up session at some point and focus in on some of the other topics if they may arise for them. Thanks so much, Ali. And for everyone who has found Ali's advice today as invaluable as I have, you can find her on Tik-tok Ali are investing.