percentage of investment/savings

**TheCyclingProgrammer** · 14 March 2014, 13:14

Currently:

* No specific percentage goes towards war chest. I take basic salary + dividends up to the higher rate, the rest stays in the company (up to a point). I like a minimum of 6 months cover but am more comfortable with 12.

* If retained profit starts exceeding my 12 month buffer, I'd re-evaluate but I'd still be hesitant to draw the funds unless I needed them (example: I'm about to take a big chunk to cover a mortgage deposit). I don't see much point in paying higher rate tax unless I really need to.

* Nothing set aside for pension, I don't have one, but am aware this is something I need to start looking into soon. My mortgage advisor is going to arrange a consultation with one somebody. So at some point I'd imagine I'd start putting a reasonable chunk over and above my war chest into a pension.

* No investing in company funds.

* Of surplus income (that's been withdrawn from the company), most of it goes towards debts, specific saving goals and general savings in that order. We plan to make regular mortgage overpayments when we get one. I'd consider putting any excess in an ISA but its low down on my priorities. I don't like to accumulate any debts but do currently have a personal loan for a car that I intend to overpay on where I can and pay off ASAP.

**northernladuk** · 14 March 2014, 15:26

Interesting post. Have wondered the same. Am I saving too much for the long term and will be more (dare I say 'too') comfortable when I am old and missed a bit of living now?

* Same as TCP for divis. Just got to the level I can divi myself for the full year in April and then build it back up over the year. I am not going to bother doing anything with this until I get to the stage I can divi the full year and still have 6-12 months in account. Not sure what I can do but that's when I think I have excess in the company. Oh, I do divi myself more than minimum but only a couple of K over. The tax break isn't a hard stop, just somewhere around I would like to be.

* I chop and change my pension values as I keep changing my mind. Currently put £500 a month away but will up that as the company starts accumulating too much.

* Don't invest any of the company funds

* I do have some BTL's and not much surplus cash at the end of the year. At the moment it sits in my account going towards my offset but tends to dwindle to not much by the end of the year before diving the full year again in April.

I also wonder if the balance is right and should cut back on the BTL's to spend a little now or start pulling more out of the company and not worrying too much about the tax implications. Decisions decisions.

**lukemg** · 14 March 2014, 15:52

Rule of thumb is half your age as a percentage of the total coming in (I know this is harder to work out for us !) Use total turnover (less VAT) or maybe after corp tax.
I know - this sounds like a lot but with a combination of SIPP contri's from the LTD and ISA from personal funds, you can stash a chunk.
This is my warchest and pension and if not needed, it should provide a comfortable enough retirement. It's all in shares, I don't like BTL, too much grief and although I like the leveraged nature, it's not for me.
One other thing - I have no interest in paying off my mortgage and using all my IHT allowance up, I know this can work psychologically for a lot of folks and is probably a good idea if you don't have any discipline and will just spend it otherwise but not for me.
House equity is just another element of my asset allocation.

**badger7579** · 14 March 2014, 16:27

Having paid my self the min sal and divs over a number of years I have approx 2 years of war chest (more than enough I know) but I now take all monies out of the company each year and take the additional tax hit so the war chest will stay pretty static. I do have anumber of big ticket items that will be coming down the line. Car, home improvements, moving house etc) so war chest will reduce.

Pension wise I make Sipp contributions from the company to the tune of approx 10k per year and then approx 11k into a stocks ISA per year out of my own pocket. I'm looking at a 20-25 year horizon to retirement. This way I expect to get a combination income from an annuity and the ISA divs. At least with the ISA I still retain the principle.

This site is very good to give you a rough stocks return calculator.

Dividend Calculator Results!

**edison** · 15 March 2014, 11:00

Originally posted by chef View Post

What rough percentage of your profit/income* do you assign/invest to the following:

-Cash Savings (including long/short term savings and "leave it in the company")
-Pension
-Stocks/Bonds
-Other investments (if so what category have i missed??)

assuming a variety of scenarios:
- you have a ltd: its the total of salary & received dividends after tax + profit left in company account
- you are self employed: income after tax
- you are a permie: income after tax
- you have another stream of income: profit after tax

Currently I allocate approx:
-15% Cash Savings (including long/short term savings and "leave it in the company")
-10% Pension
-10% Stocks/Bonds
with the rest going on the house, bills, living, holidays and fun

but am starting to question if the balance is right.

That question is almost impossible to answer properly without knowing how old you are; what your short/medium/long term financial objectives are and your attitude to risk. Only when you have defined this can you make a proper assessment of how much you should be saving and asset allocation.

In my last few years as a permie I typically saved up to 30% of my net income. In my last year as a perm that went up to about 45% as I really upped my pension contribution. My normal asset allocation was:

5% cash
20% pension (about 95%+ invested in equities)
10% ISA (100% equities)
60% living expenses

I'm in my first year as a contractor but my wife has gone back to work after a few years at home looking after the kids so I expect to save quite a bit more of my net income. Although I have a fairly large cash buffer outside the company already, I expect it to be skewed more towards cash in the first 1-2 years as I build up my war chest further:

25% cash
15% pension
10% ISA
50% living expenses

percentage of investment/savings