War Chests

[cityben]

Hi all

I've been contracting for about 3 months now and I'm in the process of saving up a war chest.

I just wanted to see what or where some of the more experienced among you do with your war chests?

Do you save them in your company or personal accounts?

I'll need to have some in company account for ongoing expenses such as insurances, mobile phone and accountancy fees

I'd presume at the end of your financial year you'd extract as much as possible for tax purposes (if tax efficient)?

Also, what's reasonable amount to save up? I'm aiming for enough to cover me for about 3 months.

Thanks

[northernladuk]

6 months to a year. The idea is to cover you if the worst happens. 3 months isn't a long time.

I keepine in the company as I can't pull enough out efficiently to keep it personally.

[psychocandy]

NLUK is right. 3 months isn't long. Only if I had a year would I be happy.

As someone whos been on the bench for longer than I'd like in the past- it goes quicker than you think too.

As for where to store it. If you can get it out of the company in a tax-efficient way then do so and stick in savings account. If it pushes you into 40% then might be worth leaving in company.

BUT, beware of the changes that MIGHT come in next April. Might be worth taking what you can out before it all hits us all April 2016. But you can leave that until March 2016 if needs be.

[BlasterBates]

3 months is not long enough, you need at the very least 6 months, a year is better.

When the market is bad it will take you months to get a new contract.

At the moment the market is not bad and has improved, so for the time being 3 months is probably OK, but you want to aim to build it up.

If you invest wisely you can have a combined retirement/warchest fund, though obviously tax considerations make it tricky to combine the two.

Perhaps leaving funds in the company is one way to go, probably best talked through with an accountant.

[Pherlopolus]

I put my war chest into an aldermore business savings account (a whole 1% interest) but it is at least separate.

I am in a similar position (started 6 months ago) and am aiming to leave as much in the business as possible and only take out the same as i needed as a permie (unless april 2016 changes that significantly).
I'd like to keep a minimum of 6 months, but would not stop putting to one side until I got to 12 months at least. last spell of contracting (early 2000) saw me have a spell of 8 months off with no war chest at all (wife was working so mortgage got paid!) and I have no wish to be in that position with no cash again as I am the sole earner!

I am in the lucky position of starting contracting again with a reasonable redundancy package which we still have most of left, so I guess I have about enough for 9-10 months off now.

[cityben]

Ok,sounds like I need to keep on saving! Thanks everyone!

[PerfectStorm]

War chest under the taxable limit in personal current accounts that pay high interest (better than savings and ISAs).

Above the tax limit in Aldamore's 1.1% savings account. Don't spend the winnings all at once!

[Danglekt]

Don't forget to make sure you have a reasonable sum in mind. There is a difference between what I'd look to take home when in contract to what I'd be happy to take to eek thinks out when not in work.

Whats with the overly stylised/macho "Warchest" lingo - surely it's closer to "rainy day fund"?

[Pherlopolus]

War chest under the taxable limit in personal current accounts that pay high interest (better than savings and ISAs).

Above the tax limit in Aldamore's 1.1% savings account. Don't spend the winnings all at once!

I am aiming to max out my ISA, but generally I keep mine in the company as it is more difficult for it to be spent on house improvements

I just had an offer from HSBC that they would add an extra £120 to my ISA if I paid in a certain amount either as a lump sum or as regular payments, that was a no brainer.

[Pherlopolus]

Whats with the overly stylised/macho "Warchest" lingo - surely it's closer to "rainy day fund"?

My aldermore account is called "rainy day fund"!