27 - Optimizing My Finances For The Future

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Younginvestor93

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Age: 27
Spouse’s/Partner's age: Single

Annual gross income from employment or profession: 38000

Monthly take-home pay:

Type of employment: Self Employed- Contractor

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving more than I spend

Rough estimate of value of home: Currently, living at home, looking to buy within 1-2 years.
Amount outstanding on your mortgage:
What interest rate are you paying?

Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 200000 in deposit accounts for deposit on a house. 13000 in global equity ETFs

Do you have a pension scheme? Yes, 6000 euro worth of PRSA with Irish Life. 1 or 1.25% management charge. 95% allocation I think.

Do you own any investment or other property? No

Ages of children: None

Life insurance: None


What specific question do you have or what issues are of concern to you?

1) I need to move my PRSA pension to a better alternative so it grows faster with lower charges.
2) I need to set up a personal pension with the lowest charges on the market and with good aggressive funds so I can grow my pension as much as possible and make max contributions to it every year.
3) I need to figure out how to best buy a house, whether to draw down a mortgage from the bank or to get help from parents who would be able to assist.
4) After all this is done, I can start looking at how to invest my after tax money after the pension is maxed and I have no loans, for example mortgage is paid off.

I have a asked a few questions on these issues in various threads the last few days but I was advised a this forum would be the best to get a complete review based on my personal circumstances.

Thanks in advance to anyone who can help.
 
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Younginvestor93 said:
I am in 20% tax bracket and probably will be for a long time,
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Younginvestor93 said:
Annual gross income from employment or profession: 38000
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Have you very recently gotten a pay increase? :)

  • If your parents are willing and able to assist you, then take advantage of your inheritance now & be mortgage free before you are 30. Very few people can say that. You will have the next 30 years to fund your retirement both in and outside of your pension
  • Identify the type, location and cost of house that you need. Don't spend more than you actually need to on the property
  • At your age, you should focus more on increasing your earnings so that all of your pension contributions are at the higher rate of tax relief instead of solely focusing on which pension product to use. If you can upskill through training or education, it will be money wisely invested.
  • When you finally move out & if you are still single, you should really consider using the rent-a-room scheme. You can earn up to €14k tax free by doing this. It would be equivalent to getting €28k in taxable salary. A much bigger impact on your wealth than deciding where to invest your extra cash
  • Don't forget that living alone and running a home costs money. There will be expenses (bills, utilities, insurance, furnishing etc) that you have probably never paid for or at least only paid your share of. Very different when it is only you paying all the bills so your grand plans for investing may not be as easily achieved.

As for your pension options, you should clarify your exact status as it will change the approach you should or can take

Pensions Where to Start

Hi Folks, I need to get started on a Pension here in Ireland I know dropped the ball here a bit; but looking for advice on companies options etc. I spent a large number of years in Australia and only returned 3 years ago and the whole pension scheme here seems a bit confusing or else I just...
www.askaboutmoney.com
 
In my opinion, increasing your gross income is important.

Average earnings for FT workers are 48k approx.

38k at age 27 is okay, but you say your max will be 35-40k?

I would not like to be in a sector where max earnings are 40k, unless you absolutely love it.

Rather than investing in a pension, can you invest in your own human capital, so as yo boost earnings at age 40, to say 60k?
 
_OkGo_ said:
As for your pension options, you should clarify your exact status as it will change the approach you should or can take

Pensions Where to Start

Hi Folks, I need to get started on a Pension here in Ireland I know dropped the ball here a bit; but looking for advice on companies options etc. I spent a large number of years in Australia and only returned 3 years ago and the whole pension scheme here seems a bit confusing or else I just...
www.askaboutmoney.com
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Firstly, thank you.

Regarding pension.
Self-Employed. No company. I work as a contractor. Single. 27. My contributions would be at 38k salary 15% of the so 5,700 per year. As the allocation that I can contribute increases. I will happily pay that in every year and max out contributions. If there's any other details I need to clarify let me know?
 
Younginvestor93 said:
Firstly, thank you.

Regarding pension.
Self-Employed. No company. I work as a contractor. Single. 27. My contributions would be at 38k salary 15% of the so 5,700 per year. As the allocation that I can contribute increases. I will happily pay that in every year and max out contributions. If there's any other details I need to clarify let me know?
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Might not be worth maxing your pension contributions at minute, looks like your only receiving 40% tax relief on 2700, with the remaining 3000 only getting 20% relief. Until your salary is higher and you can avail of 40% on all your pension contributions I'd divert the money (3000) to extra savings for you property purchase.

What price of property have you in mind?
 
You have 200k in savings. Theres your house. I'm presuming that was inherited and not saved. Or is it a typo should be 20000?
 
Coldwarrior said:
Might not be worth maxing your pension contributions at minute, looks like your only receiving 40% tax relief on 2700, with the remaining 3000 only getting 20% relief. Until your salary is higher and you can avail of 40% on all your pension contributions I'd divert the money (3000) to extra savings for you property purchase.

What price of property have you in mind?
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I don't know for sure yet, probably in the region of 400k at least to get I think, maybe less if I find something I like cheaper.
 
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Sarenco said:
You are 27 and managed to save €200k on an income of €38k? Really?!
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Actually it is probably a little under, I rounded because it will be in that region when I look to buy next year or so but by the end of the year it should be at that figure or over. I realise that may be unusual, I understand many at my age struggle to get a house deposit together. I guess I got some small gifts from family over the years and saved well.

If you have any advice other than questioning my figures, I'd be keen to hear. Thanks
 
Younginvestor93 said:
No, it's 200k and saved it. I've been good at saving and I've been working since a young age.
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That's astonishing. You should post a thread on how to save so much money so quickly. Even if you started working at 15 that's over 16k per annum saved. Were you earning 38k as a teenager or have you had no material expenses?
 
24601 said:
That's astonishing. You should post a thread on how to save so much money so quickly. Even if you started working at 15 that's over 16k per annum saved. Were you earning 38k as a teenager or have you had no material expenses?
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Earning since a young age but almost no expenses which is probably why. I was only made aware that I was in an unusual position for my age. I didn't think much of it tbh.
 
I've never heard of someone at 27 has 180-190k saved and is only earning 38k wages now. What wear you earning 5 years ago?

That's a thread in itself as suggested already.
 
Thread: how to save 200k by age 27 on below average salary.

Live at home with parents, and never put your hand in your pocket. For anything.
Groceries. Utilities. First car. Insurance. Mobile phones. Health expenses...

I've seen people like this really struggling with basic skills when they move out.
 
I know people who had saved €100k by 32.

But that was living at home with parents, working in professional jobs in Dublin (on maybe €50k by 30). Little foreign travel and no car ownership.
 
Younginvestor93 said:
I don't know for sure yet, probably in the region of 400k at least to get I think
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You will struggle to raise a mortgage of more than €133k on your current income so €400k seems an unrealistic budget (unless you are expecting further financial assistance from your family).

I still think you should forget about pensions for the time being. Concentrate on boosting your income and buying your first home.

And brace yourself for a large increase in your expenses. I remember being shocked at the price of things like washing powder when I first moved out of home!
 
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