Running to stand still and costs about to skyrocket

[LoneWolfe]

Personal details

Age: 41
Spouse’s/Partner's age: 41

Number and age of children: Three ages 15, 12 & 9

Income and expenditure
Annual gross income from employment or profession: € 60,000
Annual gross income of spouse: € 30,000

Monthly take-home pay: € 5,500 approx. including child benefit

Type of employment: e.g. Civil Servant, self-employed
Me: Public Servant
Spouse: Private Sector

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

Just about breaking even most months after all costs including loan repayments, we save some months but have to continually dip in to it for emergencies

Summary of Assets and Liabilities
Family home worth €260k with a €110k mortgage
Cash of €0 effectively

No other assets worth talking about except two ageing cars

Family home mortgage information
Lender: AIB
Interest rate: 2.5%
If fixed, what is the term remaining of the fixed rate? 5 years

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc

Personal loan with € 5k remaining on one car
€ 4k for dental treatment

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? 0


Other savings and investments:

Do you have a pension scheme? Yes, Public Service Single Pension Scheme joined 2017 so will retire with 30 years service approx.

Spouse: Private pension with employer contribution only joined recently as they re-trained and changed careers during Covid.

Do you own any investment or other property? No

Other information which might be relevant

Life insurance: Yes, cover of € 300k

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

It is with some trepidation that I write this as I have read through a lot of the other threads and it scares me to death how far behind some people we are in terms of savings, planning for the future and retirement etc.

We had kids early as seen above and have worked hard to save for a deposit and get our own home while paying punitive childcare rates and rents etc. Luckily our housing situation is stable and our repayment is manageable relatively speaking.

The cost of living increases have hit us hard and two of the kids have needed expensive dental treatment recently that has wiped out our modest savings again. We seem to be continually running to stand still and juggling bills and I am conscious that our costs will skyrocket when the kids start hitting college age. We also have one car that needs replacing in the next 12-18 months and another that will need to be changed a couple of years afterwards.

I know we are underprepared for upcoming education fees and retirement. We are currently prioritising clearing the short term debt and will probably then funnel everything we can in to savings. We live modestly and don't splash out on luxuries often, but kids are expensive at the ages we have them at and we find that every month there is an unplanned cost in relation to one of the cars or something to be done on the house etc etc. We had a horrendous run late 2022 and had to put several thousand in to the two cars to keep them going, also had the oil boiler pack in and need replacing. We haven't done much to the house since we bought it except painting and light decorating and there are several jobs that we have been putting off for financial reasons.

On the plus side we are both in the ascendency career wise. My partner retrained during Covid and is thriving in the new career, promoted twice in the space of 12 months and is starting a related degree paid for by her employer soon. I am also in line for a decent promotion soon. It is very possible that we will have an extra € € 20k - 30k (or more) gross between us by the time the 15 year old hits college in 3-4 years time.

There isn't much headroom at the moment but towards the end of the year after debts are cleared and further pay rises are secured we may have up to € 800 - € 1,000 per month that can be put in to savings or investments or used to do a few much needed jobs around the house. Is the move just simply to put everything we can in to savings for now to try to build up an education fund or is there something better we could be doing in the short term?

Also in terms of retirement & pensions, should we simply keep paying in to the existing pensions and forget about this until our education costs are dealt with or is there something we should be doing sooner?

I realise we are years behind where we should be and most people wouldn't like to start from where we are, but any advice would be appreciated

Thanks for taking the time to read:

 

[ClubMan]

If you're basically spending all of your €5.5k net income (excluding child benefit?) then maybe sanity check/compare this with what the ISI Reasonable Living Expenses calculator comes up with for your specific circumstances.

Reasonable Living Expenses Calculator - Back on Track

backontrack.ie

 

[LoneWolfe]

If you're basically spending all of your €5.5k net income (excluding child benefit?) then maybe sanity check/compare this with what the ISI Reasonable Living Expenses calculator comes up with for your specific circumstances.

Reasonable Living Expenses Calculator - Back on Track

backontrack.ie

Thanks, checked that, we are not very far off once short term debts are cleared. We are trying to clear the two loans ASAP

€ 5.5k PM includes Child Benefit, sorry that should have been clear in OP

Also, some health issues in family so we have a relatively high level of Health insurance that costs nearly € 300pm

 

[PGF2016]

I am conscious that our costs will skyrocket when the kids start hitting college age.

So get the kids (who will be adults by then) who intend on going to college to defer for a couple of years and save up and contribute to the costs.

The kids will learn valuable life lessons, the importance of saving, the value of money and be more mature when going to college.

 

[LoneWolfe]

So get the kids (who will be adults by then) who intend on going to college to defer for a couple of years and save up and contribute to the costs.

The kids will learn valuable life lessons, the importance of saving, the value of money and be more mature when going to college.

Thanks, they will be expected to work part-time through college if they wish to go, but I really would prefer not to ask them to defer. I understand this will involve sacrifices on our part.

There are excellent and much cheaper pathways to qualifications outside of the traditional third level routes now and there is a good possibility that one or more of them may choose not to go to college but I want to be prepared for whatever eventuality arises in any case

 

[Itchy]

It is with some trepidation that I write this as I have read through a lot of the other threads and it scares me to death how far behind some people we are in terms of savings, planning for the future and retirement etc.

Fair play. You've taken a good approach to sitting down and working out a plan. You're far ahead of some people! But there is no need for comparison to other people. It's your own position that counts.

You are in a relatively secure position in that your mortgage is fixed and you have a public sector role with low debt. You have no savings which makes you vulnerable to unexpected expenses, the risk of which are high given a family of five and two cars on the road. As you are breaking even most months, you need to track your expenses and find out exactly where the money is going. This will allow you to evaluate your largest expenses/unanticipated expenses more accurately.

We had kids early as seen above and have worked hard to save for a deposit and get our own home while paying punitive childcare rates and rents etc. Luckily our housing situation is stable and our repayment is manageable relatively speaking.

Fair play, that's tough and you got through it.

The cost of living increases have hit us hard and two of the kids have needed expensive dental treatment recently that has wiped out our modest savings again. We seem to be continually running to stand still and juggling bills and I am conscious that our costs will skyrocket when the kids start hitting college age.

First things, have you claimed all the tax reliefs and social welfare benefits that are available to you (FIS, flat rate expenses WFH etc.)? Can you get tax relief on the dental work, MED 2 relevant work? And is there anything back from your health insurance (if applicable)? You can claim for expenses back four years, if applicable.

Are you married, can you be jointly assessed? Tax benefits here, in your situation

There should be some small relief for 2023 with the change to tax credits and increase in the tax bands so you will have more take home pay.

We also have one car that needs replacing in the next 12-18 months and another that will need to be changed a couple of years afterwards.

You have identified a future debt spiral here. Do you absolutely NEED two cars? There could be savings with tax/insurance/maintenance here and more importantly, debt avoidance.

I know we are underprepared for upcoming education fees and retirement. We are currently prioritising clearing the short term debt and will probably then funnel everything we can in to savings. We live modestly and don't splash out on luxuries often, but kids are expensive at the ages we have them at and we find that every month there is an unplanned cost in relation to one of the cars or something to be done on the house etc etc. We had a horrendous run late 2022 and had to put several thousand in to the two cars to keep them going, also had the oil boiler pack in and need replacing. We haven't done much to the house since we bought it except painting and light decorating and there are several jobs that we have been putting off for financial reasons.

On the plus side we are both in the ascendency career wise. My partner retrained during Covid and is thriving in the new career, promoted twice in the space of 12 months and is starting a related degree paid for by her employer soon. I am also in line for a decent promotion soon. It is very possible that we will have an extra € € 20k - 30k (or more) gross between us by the time the 15 year old hits college in 3-4 years time.

There isn't much headroom at the moment but towards the end of the year after debts are cleared and further pay rises are secured we may have up to € 800 - € 1,000 per month that can be put in to savings or investments or used to do a few much needed jobs around the house. Is the move just simply to put everything we can in to savings for now to try to build up an education fund or is there something better we could be doing in the short term?

Assuming your expenses are reasonable, my reading of this is that you have an income issue. Large family, large expense but relatively low salaries. You both sound ambitious and competent. OK your partner is retraining and doing well. What degree is she doing and is it/does it have earning potential in the future? If not, is it worth it right now?

What is your potential in the private sector? Yes you sacrifice employment security, pension, probably some lifestyle but you have more immediate issues. Often taking a sideways move into the private sector can give you the opportunity to advance to a higher grade, faster that if you had stayed.

Your oldest is 15. Without pressuring them, it may be time to sit down and discuss your family's circumstances. Consider a part time job so they can help out. Even in a year or so, something to think about.

Also in terms of retirement & pensions, should we simply keep paying in to the existing pensions and forget about this until our education costs are dealt with or is there something we should be doing sooner?

You need an emergency fund and need to clear short term debt. That should be the focus for now.

 

[LoneWolfe]

@Itchy thanks for the detailed reply.

yes I am maximising all tax reliefs on all expenses as far as I know, Med 2 etc

Jointly assesses and set up to maximise credits etc

We absolutely need two cars unfortunately, we generally run them in to the ground but maintenance has been an issue recently

Partners degree is in the finance area and is being fully funded by employer, she has more scope than I have to increase earnings over the next five years, albeit from a much lower base, overall I think she is on the right track, time will tell. I think she could nearly double her salary in that time if she continues on the trajectory she is on. Salaries in her area are good once qualified.

I have considered private sector / consultancy as I definitely feel I am undervalued where I am but haven't had the courage to make the jump. This is something I will need to consider further. I live 15 minutes from the office and this is hugely convenient in terms of work / life balance, school drop & collect etc. We are in a relatively remote area and opportunities in my field would be limited enough unless I wanted to commute, albeit I know WFH is an option in many cases now.

Build up emergency fund / savings and clear debt is what I was thinking, I suppose I am looking for reassurance and encouragement as much as anything. It has been a bit of a struggle over the past 12 months in particular, lots of unexpected bills and expenses that just keep hitting us

I am at the stage where everything is tracked now and have tried to eliminate all unnecessary spending but I agree, we just aren't earning enough between us right now to live comfortably and with the peace of mind that we want.

Thanks again

 

[Zion2022]

So get the kids (who will be adults by then) who intend on going to college to defer for a couple of years and save up and contribute to the costs.

The kids will learn valuable life lessons, the importance of saving, the value of money and be more mature when going to college.

I’d be extremely wary of this. I completely agree with the principle but I think this can be derived from asking them to work hard through college part time to fund most of it themselves.

As is, it’s increasingly difficult for young people to hit any milestones in reasonable time frame. Average ages for marriage, home ownership, their old children all increasing as it just takes longer these days to get yourself financially stable. Deferring college would exacerbate this issue further.

Thoughts of graduating college at 27/28/29, getting a job on €25/€35k and trying to stand on your own two feet in ireland is a scary prospect right now.

 

[Itchy]

I have considered private sector / consultancy as I definitely feel I am undervalued where I am but haven't had the courage to make the jump. This is something I will need to consider further. I live 15 minutes from the office and this is hugely convenient in terms of work / life balance, school drop & collect etc. We are in a relatively remote area and opportunities in my field would be limited enough unless I wanted to commute, albeit I know WFH is an option in many cases now.

Build up emergency fund / savings and clear debt is what I was thinking, I suppose I am looking for reassurance and encouragement as much as anything. It has been a bit of a struggle over the past 12 months in particular, lots of unexpected bills and expenses that just keep hitting us

I am at the stage where everything is tracked now and have tried to eliminate all unnecessary spending but I agree, we just aren't earning enough between us right now to live comfortably and with the peace of mind that we want.

Only you can make the call as to what is right for you. From reading your post's the issue seems that you have backlog of issues that need to be dealt with house, debts and upcoming issues, car replacement, possible health issues, college expenses. It's the precariousness of your position that needs to be addressed in order to get "the peace of mind" that ye want. There will have to be trade offs somewhere.

If you have considered other opportunities previously, it would be remiss not to explore them further. At least evaluate what opportunities are available, you have five years behind you now i.e. go for an interview, get an offer, at least then you have a choice. You can decide if the trade offs make sense or not. And be ambitious, PS people always undersell themselves. Set yourself a target, you might have to get up earlier in the morning but a 50% bump would solve a few problems for you. Best of luck with whatever you do.