Living of savings for a couple of years
August 23, 2010 1:17 AM   Subscribe

I am thinking about living off savings of about £15000 for a couple of years. How can I best manage my money?

I will not live in the UK for all this time, but I will probably continue to be based there financially. I have budgeted around £600 per month. There is a possibility of some income during this time, but probably not enough to cover my expenses, and certainly not every month. I don't have any other investments. I therefore don't expect to be liable for UK income tax during this time.

This is a significant lump sum for me, but I've never done any more sophisticated investing than opening a bank savings account. UK savings accounts are currently paying pretty dreadful rates of interest in an absolute sense (if you shop around you're lucky to get 3%) but I have no idea if this is as good as it gets in the current circumstances for my needs. Should I be putting (some of) it somewhere else? Index trackers? BP shares?

Bonus question: anything else I should be thinking about before doing this? More general comments very welcome.
posted by caek to Work & Money (6 answers total) 6 users marked this as a favorite
 
If you're expecting it all to be gone in two years then accessibility is probably going to be more of an issue than ROI. A 'safe' investment won't be returning much, and you don't want to be gambling with money that you need to live on. I'd just stick it in a savings account.
posted by muteh at 1:40 AM on August 23, 2010 [1 favorite]


Keep some cash in an ordinary bank account that you have a debit card to, so that you can walk to the ATM and get the cash within the space of a few minutes. This is for emergencies.

Work out a budget of your fixed expenses like mortgage and such so you can see where you can save some of the money. Are you used to living on more or less money than this a month? If it's more, you're going to have to budget to keep on top of things. If it's less, don't get excited at the thought of extra income and start overspending. If you drove your car to work and no longer need it, factor in spending less on fuel. If you can afford to, declare it SORN and get the road tax back.

Depending on how much income you get from things like investments, you might be liable for income tax. Multiply your tax code by 1000 to get the amount you can earn before paying tax. As long as you're having less than that in income, you'll be OK. It's unlikely that you'll be getting anywhere near that much as interest.

Consider dividing the money into two accounts, one for this year and one for next. Put next years money into something like an ISA so you'll earn a bit of interest, guaranteed tax free. Don't touch this money.
posted by Solomon at 1:47 AM on August 23, 2010


www.moneysavingexpert.com is your friend - you will find great information on the website and check out the fora as well, a treasure trove of reliable and down-to-earth financial information.
posted by coffee_monster at 1:49 AM on August 23, 2010 [2 favorites]


You can make arrangements to get all 3% of your interest, by getting a form from your bank/building society to say you're not a taxpayer. You then get the interest gross. They keep doing this until you tell them you're a taxpayer again; if at any point you need to sort out any possible repayments from the tax people (e.g. if at the end of this tax year you've overpaid on anything you've earned already (you can leave this to sort out until you come back in two years time)) you just mention that you've had £x of interest that you didn't pay tax on that wasn't in an ISA.

(ISAs seem to have lower interest rates at the moment so as a non-taxpayer you'd be better off without bothering with them).
posted by Lebannen at 2:28 AM on August 23, 2010


Try to do this in the middle of the tax year, if you don't work from April 20xx - April 20xx you will avoid paying income tax for just those 2 years, but if you don't work from October - October, you will pay no (or very little) tax for 3 years.
posted by Lanark at 3:00 AM on August 23, 2010


You absolutey need to be comforts me cooking a variety of things from scratch. Your money will go much farther if you are buying dried beans and fresh vegetables than if you are buying frozen ready made meals.

Stop buying new clothes, but be modestly good to your feet.

Keep up your regular medical and dental care. If you let those things go, they may be expensive to catch up with.

Have activities to do. I've been living for 18 months on a 2 day/week job. If it weren't for $5 cheeseburger Monday, swing dancing Wednesday, a beach nearby, free museum days, and friends in the music scene, I'd have gone crazy from boredom (and job desperation/frustration, so our circumstances are different, you're joblessness is a happy thing).

Don't let your brain atrophy. Crossword puzzles have been helping keep my mind sharp.

Lastly, stay abreast of what's new and exciting in your industry, to help ease your transition back to work.
posted by bilabial at 6:11 AM on August 23, 2010 [2 favorites]


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