Drip feed or lump dividend payments?

[Ret]

I have been contracting for a few years now and have accrued enough in the company account that I can effectively take all of my years dividends in one hit or make a payment each month. I figure I'm better off to take all of it one hit rather than leave it in the company account earning no interest.

I guess my question is two fold, is there any reason not to take it all out at the start of the year if you can? Secondly what would you do with that amount (circa 30k) that keeps the money liquid (as I will need to draw from it to live on) but also gains some value.

Any suggestions or ideas welcome!

[diseasex]

I have been contracting for a few years now and have accrued enough in the company account that I can effectively take all of my years dividends in one hit or make a payment each month. I figure I'm better off to take all of it one hit rather than leave it in the company account earning no interest.

I guess my question is two fold, is there any reason not to take it all out at the start of the year if you can? Secondly what would you do with that amount (circa 30k) that keeps the money liquid (as I will need to draw from it to live on) but also gains some value.

Any suggestions or ideas welcome!

i'd draw it and put on isa or put down as a deposit for BTL if i was you. you can always invest into something from your limited - be it small ebay business or whatever.

[WTFH]

Pay off/reduce any outstanding debts.

Got a mortgage? Pay it off now while money is cheap.

Once you've paid off all your debts, then look at investing. Many people have it the wrong way round and are borrowing when they should be repaying.

[diseasex]

Pay off/reduce any outstanding debts.

Got a mortgage? Pay it off now while money is cheap.

Once you've paid off all your debts, then look at investing. Many people have it the wrong way round and are borrowing when they should be repaying.

paying debt is generally a good idea but not with today's lowest interest like ever.
lets compare following examples:
2% mortgage (interest charged monthly) VS
saving account 3% a year (interest paid monthly)


mortgage saving account
30000 30000
30049.8 30075
30099.68 30150.18
30149.64 30225.56
30199.69 30301.12
30249.82 30376.87
30300.04 30452.82
30350.34 30528.95
30400.72 30605.27
30451.18 30681.78
30501.73 30758.49
30552.36 30835.39
30603.08 30912.47
30653.88 30989.75
30704.77 31067.23
30755.74 31144.90
30806.79 31222.76
30857.93 31300.82
30909.16 31379.07
30960.47 31457.52
31011.86 31536.16
31063.34 31615.00
31114.90 31694.04
31166.56 31773.27

after 2 years you are better off 606.72 with just 1% difference - compound interest baby
Conclusion - its better NOT to pay debt while money is cheap

[northernladuk]

Hmm.. Leave it in th3 company for no apparent reason earning next to nothing... Draw it out and invest it... Hmmmmm Let me think about that one for a bit...... :

[mudskipper]

I take my divvy at the beginning of the year, and shove 20K into the Santander 123 account.

[WTFH]

paying debt is generally a good idea but not with today's lowest interest like ever.
lets compare following examples:
2% mortgage (interest charged monthly) VS
saving account 3% a year (interest paid monthly)


mortgage saving account
30000 30000
30049.8 30075
30099.68 30150.18
30149.64 30225.56
30199.69 30301.12
30249.82 30376.87
30300.04 30452.82
30350.34 30528.95
30400.72 30605.27
30451.18 30681.78
30501.73 30758.49
30552.36 30835.39
30603.08 30912.47
30653.88 30989.75
30704.77 31067.23
30755.74 31144.90
30806.79 31222.76
30857.93 31300.82
30909.16 31379.07
30960.47 31457.52
31011.86 31536.16
31063.34 31615.00
31114.90 31694.04
31166.56 31773.27

after 2 years you are better off 606.72 with just 1% difference - compound interest baby
Conclusion - its better NOT to pay debt while money is cheap

You may be correct based on today's interest rates.
Do your same comparison on, say £250k mortgage at 2% interest and a £250k mortgage at 5% interest.


If someone said that interest rates would stay at 2% or lower for the next 20 years, I'd agree that paying off debt is maybe not the thing to do. Anyone with any financial skills will tell you that it is highly unlikely the rate will stay that low for much longer.


You've also based your figures on a 3% savings account. Care to tell which bank is offering that on a regular saver?

[diseasex]

You may be correct based on today's interest rates.
Do your same comparison on, say £250k mortgage at 2% interest and a £250k mortgage at 5% interest.


If someone said that interest rates would stay at 2% or lower for the next 20 years, I'd agree that paying off debt is maybe not the thing to do. Anyone with any financial skills will tell you that it is highly unlikely the rate will stay that low for much longer.


You've also based your figures on a 3% savings account. Care to tell which bank is offering that on a regular saver?

santander 123 up to 60k (joint with spouse)

I said paying off debt is a good thing, however not always OPTIMAL. Good to have calculator or excel spreadsheet and calculate your own scenarios - be it you have 4% morgage or 1.7% etc

My point is : by the time interest rates raise you have at hand 606£ more than you would reduce the mortgage by if you early repaid it. if that makes sense

[Ret]

The money needs to be liquid, as I will live off it for the year. Putting it into a mortgage, or a BTL property will not allow me to do this unfortunately.

I take my divvy at the beginning of the year, and shove 20K into the Santander 123 account.

This is what I think I'm going to do - the only problem is it sounds like you need to setup two direct debits from it. Do you use the account as your current account or have you set up two small payments just to qualify for the interest?

[diseasex]

The money needs to be liquid, as I will live off it for the year. Putting it into a mortgage, or a BTL property will not allow me to do this unfortunately.



This is what I think I'm going to do - the only problem is it sounds like you need to setup two direct debits from it. Do you use the account as your current account or have you set up two small payments just to qualify for the interest?

123 actually gives you cashback from all your bills, and thats quite a sum to be honest - like 20-30£ a month. Definately worth it to have as main account with all the DD's