Financially illiterate - how am I doing?

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fin-noob

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Personal details

Age: 47
Spouse’s/Partner's age: 47

Number and age of children: 2 (10 and 12 year olds)


Income and expenditure
Annual gross income from employment or profession: 108k + bonus up to 15k based on company performance
Annual gross income of spouse: 15k from part-time work and 19k from rental property

Monthly take-home pay: €4000 + €1000 (+rental income)

Type of employment: IT, Accounting

In general are you: Saving.


Summary of Assets and Liabilities
Family home worth €350k with a €40k mortgage left.
Cash of €60k + €20k
My employer offered pension fund: Approx €450k
Company shares : None
Buy to Let Property worth €300k with no mortgage left.

Family home mortgage information
Lender: NIB - Pepper.
Interest rate: ECB + 0.69%
Tracker / Variable

Other borrowings – car loans/personal loans etc

No other borrowings.
Do you pay off your full credit card balance each month? Yes.

Buy to let properties
Value: €300k
Rental income per year: €19000
Mortgage paid-off in full recently.

Other savings and investments:

Do you have a pension scheme? Yes

Do you own any investment or other property? Nothing in Ireland (some outside EU)

Other information which might be relevant

Life insurance: Just the company group policy (4 x my salary).


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

I moved here from outside EU a long time ago. I have some savings and properties outside EU as well (appox €50k).
The questions / concerns I have is mainly due to the lack of the financial know-how and inability to compare and contrast (because people don't really talk about finances openly). We would like to know how we are doing in general - or if we should do something differently?

* Pension:
Wife doesn't have any active pensions. Mine going for appox 20 years, currently 5% + 5% company contribution + 20% AVC.
The funds invested in 30% on Risk rating 5, and 70% on Risk rating 4. Is this okay, or should I decrease the risk given the state of the economy and my age?
Also, assuming I manage to hold onto IT jobs at similar income until the age of 55 or even 60 - am I contributing too little or too much, given kids would not have finished college in 10 years.

* Mortgage
With the interest rates going up, we have been trying our best to pay off mortgages. This of course empties savings, which is slightly worrying in case of emergencies - job loss, elderly parents on the other side of the planet etc. Are there any barriers to bringing own funds from abroad to Ireland, and are there any benefits in bringing it in specifically to pay off a mortgage / or to pay towards the cost of buying a house (if we were to move).

Thank you so much for reading thru such a long post - I really appreciate the knowledge and expertise shared here in AAM!
 
fin-noob said:
The questions / concerns I have is mainly due to the lack of the financial know-how and inability to compare and contrast (because people don't really talk about finances openly)
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Yes, irish people don't generally talk about money. If you do scan through other Money makeover posts here, just be aware there is a large bias towards higher earners posting.

Firstly, yes you're doing well. Better than average. In your 40s you've enough cash to completely pay off your mortgage, you've a BTL mortgage free, and 1 of you has a decent pension post.

I would encourage your wife to start a pension. She can only get tax relief on 25% of her earned income, but it's a start. If you move quickly, she can even contribute for last year. By juggling your tax bands between you, she will get relief at higher tax rate.

Apart from that, watch out for the dangers of 'lifestyle creep'. Lots of people with high incomes don't have much to show for it because their lifestyle increases spending as fast as their income increases.
 
Premos said:
Can I ask you what you mean by that (of interest as similar situation)?
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Ah, I didn't explain it.

A single person has a 40k tax band. But a married couple, jointly assessed, can allocate 9k of 2nd band to 1st earner:
1st earner new band:49k
2nd earner: 31k

In scenario here, 2nd earner has income of 34k: 19k unearned, plus 15k earned.
They can contribute to pension 15k × 25%: 3,750.

Now I realise my earlier maths was wrong! They'll get relief at higher rate on 3k, and lower rate on 750.

A pack dated pension to last year would all get relief at higher rate because bands were lower.

There's a thread somewhere that explains it better. I'll link it if I find it.
 
Thank you RedOnion, the pension for herself never occurred to us. We just assumed my pension would suffice but I now see the tax benefits of that. She had pension from her previous employment - we need to dig out the details and see how to go about setting up new.

Lifestyle creep is a problem, especially as kids are getting into teens and starting to demand more - peer pressure etc. We will keep an eye on this. With half the family on the other side of the world there are some expenses that we can't avoid - for example visiting once every two years (4k tickets + at least 2k spending) which is on top of the at least one holiday a year - but we are definitely not going to splash out on a new car or anything like that.
 
Just as an update - on the back of this thread and general reading here - I've gone ahead and paid off the mortgage in full.

This was a 30 year NIB LTV tracker mortgage from 2008, now done in just over half the time. It helped that it was favourable tracker (ECB + 0.69%). Good to see the back of it.

On the back of that, there's the itch to move house - lol.

Assuming this current primary residence has a rent potential of about €1.6-€2k per month - just wondering if it would make sense to start thinking of buying a house outside the town limits (it's been the dream for years) as primary residence - for about 500-550k.

With the joint income of around €140k + rent from two properties (3600 per month in total), no other loans or deductions (other than two pre-teen kids) - would any bank entertain a 450-500k mortgage, at our age (47)? Mortgage protection insurance is probably going to be rather high? Any other downsides?
 
fin-noob said:
With the joint income of around €140k + rent from two properties (3600 per month in total), no other loans or deductions (other than two pre-teen kids) - would any bank entertain a 450-500k mortgage, at our age (47)?
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I’m a little younger than you with similar household income and basically no mortgage or other debts.

BoI said they would lend 3.5x income. This would take term to past 65 but we have some DB pensions which gave them comfort but mortgage term can’t go past 70.
 
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