If you’re a landlord like Callum Barnard, you may be contemplating whether it’s time to sell your property. For the past seven years, his rental home hasn’t seen any increase in value. This lack of financial security and the feeling that his money isn’t working for him has left him uncertain about what to do with his interest-free credit card debt. Is it better to pay it off or keep it? Mr. Barnard’s ultimate goal is to achieve financial peace of mind and generate wealth.
At 30 years old, Mr. Barnard has a fixed-mortgage rate of 1.89% on his rental property until 2026. He also has interest-free credit card debt, which will remain interest-free until December 2024 if he makes only the minimum payments. However, by the end of this period, he’ll still have around £5,000 in debt. In terms of savings, Mr. Barnard has £40,000 in pension savings but no cash or Isas.
Advice from Marcus Ellis, financial planner at Quilter:
Mr. Barnard’s desire to achieve financial peace of mind and generate wealth is no small feat. In order to work towards his goal, we need to consider three timelines for saving and investing: short term, medium term, and long term. Initially, Mr. Barnard should aim to have accessible cash reserves that amount to at least three times his monthly expenditures. This emergency fund will provide a foundation of stability.
Next, depending on his circumstances and how close he is to his desired retirement age, Mr. Barnard can explore medium-term investments using government allowances such as Isas. Stocks and shares Isas offer the opportunity to invest £20,000 per year with minimal tax implications (with the exception of inheritance tax). There are a plethora of funds and providers available that cater to different risk appetites. It is generally recommended to have a minimum time frame of five years for stocks and shares Isas, making them suitable for medium-term investments. If lump sums aren’t available, regular contributions can be set up for an Isa.
Over the past decade, stocks and shares Isas have consistently outperformed cash and deposit-based savings accounts, generating considerably greater returns. This makes them an attractive option for individuals looking to grow their wealth.
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