What is the best thing to do with my disposable income?

arctine said:
You can have £5340 cash in an ISA tax free.
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No you can't - you can have as much as you want in an ISA tax free, but you can only add up to £5340 in each tax year. The tax year runs from April to March.

But this is irrelevent to the OP at this stage - he does NOT pay tax. Therefore tax free or not, his savings income isn't taxed (Well, it is, but he can claim it back).
 
[TW]Fox;21085377 said:
No you can't - you can have as much as you want in an ISA tax free, but you can only add up to £5340 in each tax year. The tax year runs from April to March.

But this is irrelevent to the OP at this stage - he does NOT pay tax. Therefore tax free or not, his savings income isn't taxed (Well, it is, but he can claim it back).
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Right.

Take this mans advice and ignore everything I have said.
 
I have no idea why people are saying to pay off the student loan. All this does is perhaps give you a warm fuzzy feeling that you don't owe any money but that doesn't make it the smart or correct thing to do.

Fox has stated it quite a few times. Simply put, if your savings interest rate is higher than your "debt" interest rate then do NOT pay off the loan unless you have to. Anyone thinking the opposite is either reckless with their money OR don't have a full grasp on how finances work.
 
To throw in a curveball...

Fox correctly points out that interest rates on savings are higher than those on student loans and it is therefore in your interest to keep your savings and not pay off the loan early. However, DO check which type of student loan you have. If you have one of the earlier 'mortgage' type student loans (like I had) the interest is not calculated in the same way and it may be preferable to pay it off. Mine jumped up to nearly 8% around 2007/2008, which was a shock, and it was better to clear it off than to to leave it lingering. It'll be unlikely that many people in here still have one of those older loans, but if you started your degree in 1997/1998 then you ought to check :)

Sadly, the OP is in the same situation as many savers. If you put it in a savings account you simply don't get much return at the moment.
 
Jonny69 said:
Fox correctly points out that interest rates on savings are higher than those on student loans and it is therefore in your interest to keep your savings and not pay off the loan early. However, DO check which type of student loan you have. If you have one of the earlier 'mortgage' type student loans (like I had) the interest is not calculated in the same way and it may be preferable to pay it off. Mine jumped up to nearly 8% around 2007/2008, which was a shock, and it was better to clear it off than to to leave it lingering. It'll be unlikely that many people in here still have one of those older loans, but if you started your degree in 1997/1998 then you ought to check :)
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This is completely true and good advice. There are now 3 different types of student loan - the type Jonny mentions, the later version and the new version which people wont start paying back until 2016 as it only applies to 2012 starters.

My advice is based on the second type of student loan which given the age and demographic of OcUK, 99% of us will have (and is what the OP has).
 
[TW]Fox;21085363 said:
He is not a higher rate tax payer. Infact as a PHD student he pays no tax at all on his PHD income.



Student loan repayments are calculated after tax. You don't clear £14k of student loan by paying off £700 a month over 1 year. Where did that figure even come from? :confused:
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I didn't say he was ;) My comments were also for the many others involved in the thread. While slightly off the point I'll add some figures:

Situation A

Salary per month £5,000
Post Tax Income £3,450
to Savings £700
Remaining £2,750

Savings per year £8,400

Situation B

Salary per month £5,000
Student Loan repayment £1,208
Remaining £2,763

Student loan paid per year £14,500

As I said it is simplistic and assumes that in situation A there was no payment of a student loan. All figures are extracted from http://www.thesalarycalculator.co.uk/salary.php for reference.
 
deaglecat said:
5-10% of your net worth in physical gold
Think of it as insurance against money printing / QE
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There is no "good" place for our money right now, just the least bad option lol. I have a mixture of gold, stocks and savings and although the gold has done well since 2008 I'm not sure if it will continue.
 
arctine said:
Serious answer here.

Premium bonds. I won a considerable amount from premium bonds last year.

I also think you should use a lot of your disposable income to pay that student loan off.
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Luck of the draw though, I had 30k in them and only won the occasional £100 or whatever it was, mainly £25 a month which worked out less than interest (about 5.6% at the time, so I moved it in to a nationwide e-bond for a year with the rest of me savings).
 
SpeedFreak said:
I didn't say he was ;) My comments were also for the many others involved in the thread. While slightly off the point I'll add some figures:

Situation A

Salary per month £5,000
Post Tax Income £3,450
to Savings £700
Remaining £2,750

Savings per year £8,400

Situation B

Salary per month £5,000
Student Loan repayment £1,208
Remaining £2,763

Student loan paid per year £14,500

As I said it is simplistic and assumes that in situation A there was no payment of a student loan. All figures are extracted from http://www.thesalarycalculator.co.uk/salary.php for reference.
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Your figures make no sense. You are going to have to explain what your point is.

Firstly once you are earning more than £15k a year you will make mandatory student loan repayments anyway. Thats just life. You cannot avoid these. This thread isnt about avoiding these, they happen anyway. It's about overpayment.

The mandatory repayment on £5k a month before tax is £337.50. So where does your £1208 come from? Are you suggesting overpayment? If so why are you comparing a repayment of £1208 a month with savings investment of £700 a month and then pointing out the blinding obvious that if you pay over 500 quid a month extra off you... clear more loan? I'm missing what you are trying to say here. Infact its totally worthless as you make the assumption in Situation A there is no student loan repayment. This is impossible - there is only no student loan repayment if there is no...student loan?

IMHO for a higher rate taxpayer nothing changes - if your after tax savings rate is more than the interest rate on your student loan... dont pay it off.
 
Hikari Kisugi said:
Where do you purchase and store your gold our of interest?
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Most of it is from Hong Kong and stays in a safety deposit box with the bank. A little is at home but no more than an ounce or so I'd say. We were given about 12oz when we got married in 2008 and was about $650 an ounce. We toyed with selling it initially but decided it was a decent hedge against the economic issues at the time. Funnily enough the reason we were given so "little" was due to the high price at the time lol.
 
[TW]Fox;21085581 said:
Your figures make no sense. You are going to have to explain what your point is.

Firstly once you are earning more than £15k a year you will make mandatory student loan repayments anyway. Thats just life. You cannot avoid these. This thread isnt about avoiding these, they happen anyway. It's about overpayment.
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Thanks for pointing that out otherwise I may have missed it as my employer never puts this information on my payslip ;)

[TW]Fox;21085581 said:
The mandatory repayment on £5k a month before tax is £337.50. So where does your £1208 come from? Are you suggesting overpayment?
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Yes which I thought was the point of this thread.

[TW]Fox;21085581 said:
If so why are you comparing a repayment of £1208 a month with savings investment of £700 a month and then pointing out the blinding obvious that if you pay over 500 quid a month extra off you... clear more loan? I'm missing what you are trying to say here. Infact its totally worthless as you make the assumption in Situation A there is no student loan repayment. This is impossible - there is only no student loan repayment if there is no...student loan?
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Surely even you can see that any surplus payment of a student loan will repay much more of the capital than you could subsequently place in savings. As I stated clearly, I was simplifying the figures to illustrate a point, you're the one who made a fuss about the numbers.

[TW]Fox;21085581 said:
IMHO for a higher rate taxpayer nothing changes - if your after tax savings rate is more than the interest rate on your student loan... dont pay it off.
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I also stated that this was still probably true but that the difference in some cases can be closer than they initially seem.
 
SpeedFreak said:
Thanks for pointing that out otherwise I may have missed it as my employer never puts this information on my payslip ;)
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So why is this repayment figure not in Scenario A? Did you forget you'd still have to make a £337.50 repayment?

Surely even you can see that any surplus payment of a student loan will repay much more of the capital than you could subsequently place in savings. As I stated clearly, I was simplifying the figures to illustrate a point, you're the one who made a fuss about the numbers.
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No, because it doesn't! Why do you think it would? The only tax relevence here is tax on savings interest. The student loan payment isn't taken pre-tax, it isn't tax efficient to overpay?

The bottom line is simple. Do your savings earn more interest than you pay on your student loan? If so, leave the student loan alone.
 
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Apologies owed to fox, just checked a payslip and it is indeed a pre tax calc with a post tax deduction. Just something I haven't noticed before.
 
Hey just an update. I went and cleared my student loan for piece of mind.

Joking.
I will leave the loan and save up towards a house deposit, but my car is old and a newer one will be needed at some point :). I will leave the savings in an ISA, with an eye kept on the interest rate as I bet after the initial 12 months it will dive down to 0.5%.

I got my free £100 today for switching to a Halifax current account too:).
 
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