How much do you consider to be a decent war chest?

[Normie]

I've been contracting for 10 years - mostly £400-£500/day. Never had more than a weeks gap between contracts, so I've been able to save a lot of my earnings. I've got about £150k in personal savings, about the same profit in my company account (taking into account VAT, tax, etc). No mortgage or loans, wife who earns about £25K, three young kids. So I'm more than comfortable financially. My problem is that both me and the wife are tight - I find it really difficult to spend money! Don't know if its our working class backgrounds where money was always very tight. Sometimes I really wish I could just go out and splash out on the latest TV, car, or gadget.

I also wish I was creative enough or driven to come up with a Plan B to make use of some of the money rather than it just sitting there getting eaten away by inflation. My biggest problem is that I'm too lazy.

[theroyale]

+1

I had 17 years of back to back employment. Then spent from october 2008 till march 2009 sat on my arse in shock, followed swiftly by a year on a really crap rate. Should have had a far larger contingency chest but had spent much of it on the basis that I hadn't needed it in 10 years so why would I need it now...

It took me to breaking point and I took most of 2010 to recover.

A war chest doesn't just cover out of work it needs to cover rate crashes as well.

Its a balance between getting rid as of as much debt as possible and getting as much cash in the business both are key to contracting. Remember you only ever have as much future income as your notice period...

I am working on getting my outgoings down to well below £1700 per month

When I was permie a few years ago I managed easy on much below this figure. With the 'easier money' of contracting I see now that my outgoings per month have gone up to around £2400 - almost double of what it once used to be!

[redgiant]

I always thought that having about six months salary in easy to get to savings was a good guideline to stick to. However it really depends on how much you can control your outgoings really.

[Kelstar]

I find it really difficult to spend money!

+1!!

[ChimpMaster]

I've been contracting for 10 years - mostly £400-£500/day. Never had more than a weeks gap between contracts, so I've been able to save a lot of my earnings. I've got about £150k in personal savings, about the same profit in my company account (taking into account VAT, tax, etc). No mortgage or loans, wife who earns about £25K, three young kids. So I'm more than comfortable financially. My problem is that both me and the wife are tight - I find it really difficult to spend money! Don't know if its our working class backgrounds where money was always very tight. Sometimes I really wish I could just go out and splash out on the latest TV, car, or gadget.

I also wish I was creative enough or driven to come up with a Plan B to make use of some of the money rather than it just sitting there getting eaten away by inflation. My biggest problem is that I'm too lazy.

There's being tight and there's being tight. You have your house paid off and £300k in cash sitting there. Unless you are expecting to be imminently out of work for a long time, I don't think you have much to worry about, ne c'est pas?

You don't need to go out and buy a porsche, though you easily could, but instead just do things you enjoy. I wanted a big new 3D plasma, so I got one, and I really enjoy watching programmes or playing PS3 on it. We needed a new kitchen & extension, so we got one, and it's added to the value of our house as well as us getting great use out of it every day. For the first time in ages we went on a lovely 5* family holiday last year, which including lost income cost us over £6,500 for the week.

We don't waste and we don't go on many expensive holidays, and yes to some extent we are tight, but only because I expect to (have to) finish contracting later this year. But you have to enjoy your money a little.

And £150k in your personal a/c is a waste. Find ways to invest it better - such as a BTL You could buy a small BTL with your £150k cash and have it give you £700 a month. Do that 4 or 5 times over and suddenly you have £3000 a month coming in!

[BolshieBastard]

Is that including all assets you own, after tax?

No, that's just hard cash. House is paid off and valued at circa £325k (in NW England).

[lukemg]

I've been contracting for 10 years - mostly £400-£500/day. Never had more than a weeks gap between contracts, so I've been able to save a lot of my earnings. I've got about £150k in personal savings, about the same profit in my company account (taking into account VAT, tax, etc). No mortgage or loans, wife who earns about £25K, three young kids. So I'm more than comfortable financially. My problem is that both me and the wife are tight - I find it really difficult to spend money! Don't know if its our working class backgrounds where money was always very tight. Sometimes I really wish I could just go out and splash out on the latest TV, car, or gadget.

I also wish I was creative enough or driven to come up with a Plan B to make use of some of the money rather than it just sitting there getting eaten away by inflation. My biggest problem is that I'm too lazy.

In similar boat, not same level of reserves though. Wary after being stung a few years back when skills went worthless and had to build from nothing. Luxury for me is now a big enough buffer to turn down work I dont want or walk off bad contracts.

A Tracker-Only Portfolio - 29/02/2012

Get that money working for you....

[psychocandy]

Now I'm all for saving enough money to keep you going but £300K in the bank is a bit much surely.

Dont forget you cant take it with you... And its not a competition to see who accrue the most wealth.

Trouble is this is an argument I have with my elderly father whos got a bit put away (only £50K) but its just going up and up because he wont spend it all. Even though he could do with something he wont buy it if he thinks its too expensive out of principal. His friends are all the same.

He lives in small Valleys town and thats his world. Goes down local working mens club where its under £2 a pint and he thinks thats normal price!

[ChimpMaster]

Now I'm all for saving enough money to keep you going but £300K in the bank is a bit much surely.

Dont forget you cant take it with you... And its not a competition to see who accrue the most wealth.

Trouble is this is an argument I have with my elderly father whos got a bit put away (only £50K) but its just going up and up because he wont spend it all. Even though he could do with something he wont buy it if he thinks its too expensive out of principal. His friends are all the same.

He lives in small Valleys town and thats his world. Goes down local working mens club where its under £2 a pint and he thinks thats normal price!

I don't think 300k is a a lot of money, not in today's world anyway, and certainly not if you're planning to get out of this game. But yes it's a lot to hold in cash, and he should look to invest it.

Time was you could buy a lovely house for that kind of money, but you'll just about get a 3 bed semi in a crappy part of Hounslow for that much now.

£1m is OK, but I wouldn't ever hold it in cash.

There are people out there with £billions, and they're only human and only have the same 24 hours in each day. If they can do it then so can anyone else. (I'm not advocating that you should kill yourself working because I'm certainly not aiming for £billions myself!)

[MrRobin]

I too am in a similar position as normie, but the amounts are not quite as high. It's not about being tight, it's about finding things that are worthwhile spending money on. It all depends on what you value. Yes I could go buy a Porsche, or the latest, greatest, fastest computers and gadgets etc etc, but I don't really want to as I know I won't value them. My only big luxury is going on posh holidays. Spending money on experiences, rather that 'stuff', is much more worthwhile in my book.

What I do value is free time and with savings I know I can take extended time off and not have to worry about cash flow. I could take about 3 years off and maintain exactly the same lifestyle as I have while working now. The only problem is, is that there's a risk that if you take too much off in one go, you will be out of touch and will find it difficult to get more work.