# Need Help with my money!



## appleman (17 Dec 2008)

Age:
28
Spouse’s/Partner's age:
28

Annual gross income from employment or profession:
50400
Annual gross income spouse:
0

Type of employment:
Civil service

Rough estimate of value of home
Renting at 750 a month

Other borrowings – car loans/personal loans etc
Car Loan: 8,000 at 210 a month
Credit Union 5,000 at 360 a month
Outstanding arrears on various bills 2,000 paid when i can.

Do you pay off your full credit card balance each month?
No Credit Cards

Savings and investments:
0 Savings

Do you have a pension scheme?
No

Do you own any investment or other property?
No.

Ages of children:
A five year old and another on the way soon

Life insurance:
No


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

I am finding it very hard to save money, we are trying to get rid of outstanding debt and finding saving quite difficult.

My goal is to buy a home for my growing family but this seems so distant.
I have a very bad track record when it comes to my finances, just never seem to look after my money well and always have some debt.

I have a budget account, 300 a week from my wages goes in to this to pay rent and Gas/ ESB and Vhi

Any advice is much appreciate.
Thank you


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## CGorman (17 Dec 2008)

Some general advice:

1) Look at the €300 a WEEK in expenses such as VHI, Gas, Esb etc. Is there any room for cuts here? A €75 cut would give almost €4,000 in savings a year. Common examples...
> Do you have Sky? If so, consider axing it
> Is your mobile phone package the best value out there?
> Is your homephone/interent package the best value out there?
> Is your insurance premiums the best value out there? Check car, health, travel etc.
> Is your esb/gas bill exceptionally high? Could turning off lights, no standbys, turning down heat etc., reduce this?
> Are food bills, entertainment, takeaways a large portion of these weekly expenses? If so, then theres probably lots of room for cuts

2) Can your spouse work? Or at least earn some income? Minding kids whilst minding your own, giving a few grinds, teaching music, 10hrs a week p/t work, etc. - any of these could help. If she could earn just €100 a week (3 grinds for example), it would generate over €5,000 a year in income.

3) Your income is in the order of €3,300 a month after tax or so (my estimate). After repayments, rent & weekly budget (€2,619), theres about €700 per month remaining. Where does this money go????


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## Bob_tg (17 Dec 2008)

If you look at it from a 3-5 year horizon, your situation doesn't look too bad at all.  You could actually be running a surplus.  

The good news is your income is pretty good and your rent is pretty low.

If we assume your net monthly income is 3000, you might actually end up with around 500 surplus, based on the following:

 416         loans
  90            car tax/ins
  225         petrol
  750         rent
  500         food
  100         gas/esb
  100         vhi
  100         baby stuff
  100         clothes/expenses
  120         tv/phones

This has a lot of obvious assumptions above (some could be way out, so please correct any major errors), and doesn't include allowances for things like cosmetics; holidays; emergencies; doctor visits; entertainment/alcohol, etc.  It actually also doesn't include car servicing either, so you might need to take another bit off for that.

However, by sticking to the above basics, it does show that a theoretical surplus of 500 per month could be achieved.

This would also assume that the loans of 15k total are rolled into one and paid back over 36 months.  (15k/36 = 416 per month)

If there is indeed any surplus left after all actual necessary expenses are incurred, it would be advisable to pay off the loans early and avoid interest as much as possible.  If not, at least you'll be clear in three years.  However, you won't be able to save until you have cleared the debt.

For the future, save for short term expenditure such as cars, holidays etc. instead of financing them through debt.

The key is sticking to a budget.


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## Bob_tg (17 Dec 2008)

CGorman said:


> Where does this money go????



I was writing mine at the same time as CGorman posted, so missed that input.  If we up the income to 3.3k, then we actually both arrive at around about the same surplus.

I also wondered the same question as CGorman: where does it all go?  Are your expenses way out of line with the assumed budget above?


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## appleman (17 Dec 2008)

Thank you very much for the replies.

€700 per month is a figure that has truly shocked me... but it is a true figure. The crazy thing is we have not had a holiday in 6 years, neither of us drink alcohol, we get out together about once every few months, and that is normally just a movie... 

The only budget difference i have is i spend €20 a day on petrol as i have to travel by car to work. In the budget account of 300 p/w i forgot to say €170 p/m is for play school for my child.

 I could get a loan to combine all bills into one but i am worried that if i do that it would add extra interest. it would be nicer though to only have one ball in the air not 4 or 5. This is my downfall i find it hard to manage

 I also thought about changing the car as the millage is high and a diesel would be cheaper to run. i still cant believe €700....

Should we try save now or get rid of Loans first? 
I am desperate to get the family in to our own home. I know i need to look in to my expenditure on luxury things.

Just to add, i have been to mabs and found them no help at all. You have been more helpful

Thank you.


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## CGorman (18 Dec 2008)

Petrol at €20 a day equals about €450 a month (work days only), which obviously accounts for a good portion of the €700 budget discrepency. That leaves €250pm



appleman said:


> Should we try save now or get rid of Loans first?



Absolutely get rid of loans first before starting any form of saving (bar, perhaps pension). (See comments below)



appleman said:


> I also thought about changing the car as the millage is high and a diesel would be cheaper to run. i still cant believe €700....



If I were you i'd try to convert car without increasing borrowing - a smaller diesel car with value roughly = to your petrol car might be a good idea. Is there any way to reduce spending on petrol? Is rent nearer your workplace significantly more expensive? Or even better, can you car pool???

Aside from a general improvement in your finances, you've said your medium term goal is to buy a home. _Now, i'm not going to comment on the risks or suitability of doing so_ - im just going to lay out the practicalities below for you to think about....

*Price*
Im guessing to buy a property similar to the one you are renting in would cost in the region of €200k - €250k. Lets say €225k for arguments sake. You'd probably need a good €25k deposit to convince most banks to lend to you. (On a side note, at your income level, the banks would lend you up to around €240k if debts were cleared)

*Repayments*
This balance of €200k would have repayments of €934pm for a 35yr 4.49% mortgage. A shorter term, or higher interest rate could push this up to €1,100+. 

*How to Get there!*
If you reduced spending by €75pw, your partner or you was able to bring in an extra €100pw (gross), and you ridgely saved the €250pm unaccounted for above, you could probably accumulate €10k savings a year. At that rate, you could clear ALL debts within 1.5yrs. After clearing the debts, you'd have €570pm extra (no repayments) to play with. Saving as before and adding in this €570pm extra, you could probably save €25k within another 1.5yrs. 

*Timeframe*

Now - 1.5yr time: Reduce spending, Increase Income, Budget - clear all debts
1.5yrs - 3yrs time: Save €25k deposit
3yrs time: Earliest date you could comfortably purchase home

*General Points*

> Obviously a new baby may increase costs and hence increase lenght taken to save/reduce debts
> Starting a pension is highly advisable, but may reduce ability to save/reduce debts slightly
> If you can cut costs/increase earnings by more than i've outlined, you will get to your goal/dream sooner
> I have not allowed for interest relief on the mortgage. Broadly speaking, with a €25k deposit saved and all debts cleared you could comfortably met the anticipated mortgage repayments
> You have a good salary in what is still a relatively safe profession. If you can get a handle on your finances as outlined, you will be in a very good position. I strongly believe increasing your income by either you or your wife doing a small bit of side work (grinds, lessons, p/t work) could absolutely transform your finances. 

Best of luck!

_PS: Don't let your desperation to buy a home cause you to do anything irrational or foolish! Solid saving and work will get you there soon enough!_


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## Bob_tg (18 Dec 2008)

CGorman said:


> Is there any way to reduce spending on petrol? Is rent nearer your workplace significantly more expensive? Or even better, can you car pool???



The amount of mileage you are doing in a petrol car is really working out to be one of the big hitters.  In the medium term, can you consider either changing to a job closer to home, or else moving your home closer to work?  The advantage with your case in renting is that it gives you some flexibility.  You could really make a dent in your expenditure if you could get that petrol bill down by at least a couple of hundred a month.  Is public transport a possibility?

If you agree with my rough budget, the other big hitter could actually be food.  Make a list (keep receipts) of every single thing you buy for a few weeks and pay close attention to it.  See if you need every single thing on the list.  You may be shopping in convenience stores - can you go to Lidl/Aldi instead?  Can you increase the level of home-made meals, and reduce processed food?  Take a long hard look at it - there is potential to shave 100-150 or maybe more per month off your expenditure in this area by giving it close attention.


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## NorthDrum (18 Dec 2008)

Some good suggestions here, so dont need to reiterate whats been advised.

Just giving an *alternative option* :

Firstly, you could make some savings (monthly) if you combined your two small loans and your arrears which would come to €302.85 per month over 5 years. (thats 8.1% APR, 15k loan).

Yes it means prolonging the payments of the loan and will increase the overall costs (are you paying interest on any outstanding bills? ). Its an overall savings of €200 per month + whatever you have been throwing off your outstanding bills, if you considered setting up a Standing order to move €250 or so to your credit union account (best moving it to a 30 day demand deposit or something longer for a better rate of interest and less access to spend it!). 

I know interest rates arent great for saving at the moment but when applying for a mortgage down the road its just as important to show that you have saved as it is to show that you pay your bills.

This is just talking based on your mortgage and savings desire and what you said after initial suggestions.

The word of the moment is save save save, but if you find things getting on top of you at the moment, consolidating the loans in an affordable manner is prudent. In an ideal world you should obviously pay off the loans as quickly as possible but you are in good shape to consolidate and save

Have you considered the affordable housing scheme? Based on your wages I would imagine you would be a valid applicant.

You mentioned that you have no life assurance, you might want to consider looking into the possibility of taking some out if you feel your family could do with a lump sum payment if either you or your partner were to pass away! Its one of the financial needs most of us usually have at some stage of our lives but generally prefer not to discuss or consider (given that we have to die or be critically Ill in order for these policies to take affect). 

Depending on your personal situation many would argue that its more important to have life assurance and possibly critical Illness before a pension. If you die or get critically Ill in the next few years, what use is a Pension? Thats one of the first things you learn as a financial advisor, work with the budget you have, but prioritise your needs. 

We all May need:

Life Assurance
Critical Illness
Income Protection
Savings
Mortgage
Pensions
Investments


But its a question of prioritising them and deciding what you can afford to have and what you can afford to be without.

Personally, I would consider with another child on the way you should be looking to make sure that your family is as financially secure as possible with prudent spendings, savings and life cover. Owning a house is a personal desire not a must have (not meant to be condescending just trying to put my point into perspective).

My disclosure is below (yes I am a financial Advisor). Most of my friends have very little life assurance and no critical Illness cover but I still advise it to them (based on their own personal financial situation), if I didnt I wouldnt be able to sleep at night. These are products you hope you need never claim on, but if you ever have to will be a much needed relief to your family.


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## extopia (18 Dec 2008)

CGorman said:


> Petrol at €20 a day equals about €450 a month (work days only), which obviously accounts for a good portion of the €700 budget discrepency. That leaves €250pm



Which probably goes on food? (Seems low.)

€20 a day in petrol? Yikes! What are you driving, and how long is your commute? You're spending 10% of your (gross) salary just getting to work. I second the poster above who wondered if public transport is an alternative.

Playschool at 170 a month. Not a huge amount, but extravagant nevertheless.


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## Flax (19 Dec 2008)

Could you move closer to work?

I walk to work (no car!) which saves me a lot of money...


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## CGorman (19 Dec 2008)

extopia said:


> Which probably goes on food? (Seems low.)



I was assuming the food bill was already included in the €300 per WEEK budget account for genaral bills etc... if not, then theres even more room in that budget than I thought for cuts. Only OP can clarifiy this point.


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