# How do we stand ,dont seem to have any cash



## !RAY (28 Aug 2007)

Hi

Spouse’s/Partner's age: 39/36

Annual gross income from employment or profession: 40,000
Annual gross income spouse:45,000

Type of employment: employee

Expenditure pattern: In general are you spending more than you earn or are you saving? yes

Rough estimate of value of home 500,000
Mortgage on home 120,000
Mortgage provider:AIB
Type of mortgage: Tracker Interest rate

Other borrowings – car loans 35,000 CU 15,000

Do you pay off your full credit card balance each month? NO
If not, what is the balance on your credit card? 6,000

Savings and investments:20,000 SHARES and 5,000 in a profit policy

Do you have a pension scheme? YES 500 EXTRA INTO AVC

Do you own any investment or other property YES RENT1,100 . MORTGAGE 1,400

Ages of children: NO

Life insurance: YES


*Question i think we are quite healty but we seem to be straped at the end of each month .Is it us or is this common.*


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## ClubMan (28 Aug 2007)

!RAY said:


> Annual gross income from employment or profession: 40,000
> Annual gross income spouse:45,000


According to _Karl Grabe's _tax calculator at www.taxcalc.eu this should be about €5.5K p.m. take home excluding your investment property rental income below. Maybe you can itemise where it's going?


> Do you pay off your full credit card balance each month? NO


 Bad idea - outstanding _CC _balances are usually racking up interest at very hight rates and are usually the most expensive form of borrowing. In particular saving while not clearing this balance makes no sense. If you cannot use a _CC _such that you clear the outstanding balance every month (as far as possible) then you should get rid of it.


> Do you own any investment or other property YES RENT1,100 . MORTGAGE 1,400


 What is the bottom line here - i.e. rental income net of tax after deduction of allowable expenses?


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## Brendan Burgess (28 Aug 2007)

Some questions and observations.

1) Is the mortgage on your investment property an interest only mortgage? It should be so that you can get the maximum tax relief on it. If you are going to make capital repayments, make them on  your home mortgage. 

2) You are paying out €300 a month more on your mortgage than you are getting in on rent. Hopefully, this is because you are paying off capital. Switching this to interest only will save you some outgoings. 

3) I don't agree with contributing to a pension when you are paying big interest on your credit card. In effect, you are using your credit card to make AVCs! 

4) You might have a fundamental problem where you have a lifestyle higher than your income justifies. The fact that you have car loans of €35k worries me. My view would be that you should not drive expensive cars unless you are buying them for cash or with minimal borrowing. 

5) Again, I don't think you should have shares while you have a balance on your credit card. You are in effect buying shares with your credit card. It's unlikely that you will get a return higher than the interest you are paying. I would sell the shares and pay off the credit card and  loans. 

6) Do you have a share account in the Credit Union or is it just a pure loans? 

Brendan


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## z109 (28 Aug 2007)

Aside from the cars;
How often do you go on holiday? How much is this spend/year?
How often do you go out eating/drinking? How much is this spend/month?

(I ask this as you have no children, so you are not tied to the hermit-like lifestyle of those of us that do!).


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## ClubMan (28 Aug 2007)

As the previous posts show you really need to itemise your income and expenditure to identify where the money is going and where savings may be made.


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## Kendr (28 Aug 2007)

Agree fully with Brendan on the car loans.  €35k loans on depreciating assets is crazy.

You should sell at least one and get a cheaper second vehicle.  Can you make do with one car?  Remember you don't have two nice cars on the driveway - the Bank has two nice cars on your driveway.

I guess the CU loan was for home improvement or something.

Your mortgage is below 50% ltv.  Maybe you've already done this - but AIB have a rate lower than the tracker for below 50% ltv.  Have you spoken to them about switching to this?  All it takes is a valuation report and as a current customer it can be done.  Did it recently myself - although it was a little more complicated for me as I was switching from another bank.

Many won't agree - but I'd cut the AVCs for a year and clear the credit card.


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## extopia (28 Aug 2007)

!RAY said:


> Expenditure pattern: In general are you spending more than you earn or are you saving? yes



Clarify - are you spending or saving?

Agree with all who say the credit card should be paid first, and that 35k in car loans is too much for that level of income.

Also, an investment property that costs more than it earns is a poor investment, unless you have faith in capital appreciation in the medium term. Pure speculation I know, but this investment could be underwater for some time.


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## !RAY (29 Aug 2007)

Hi
In the procces of paying off credit card.Mortgage on  investment property is interest only mortgage. Have one crap car and then the one good car.Dont mind paying for the car as i work hard and enjoy driving the car.I did not post here to moan about loans ect. MY question was ,i feel i am doing ok have a lot of investment shares,property there are a lot worse off.Anyway i have done a budget and work out i should have 400 euro a week left after paying loans,avc,investment . It just never workes out that way everything in this country is so Expensive. Do other people feel the same.


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## Bronte (29 Aug 2007)

Did you buy a brand new car costing more than 35K on a salary of 40K?


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## Kendr (29 Aug 2007)

You are doing well !Ray and there are many worse off.  Looks like you've a fairly good head on you when it comes to finance and the future.

Small mortage, decent investments.

Sorry mate if thread turned into a bit of a moan about loans.

But regarding your cash availability, don't worry about prices - you blew it with the car.

Myself and wife both drive expensive cars - we bought them with cash after investing over the years.  No feeling like driving a nice vehicle you actually own. But that may be just a preference for me, I have a dislike of car loans.  Ireland seems addicted to car credit.


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## ClubMan (29 Aug 2007)

!RAY said:


> It just never workes out that way everything in this country is so Expensive. Do other people feel the same.


No.


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## Kendr (29 Aug 2007)

Agree with clubman.


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## pc7 (29 Aug 2007)

best plan do up a spreadsheet for the coming months of incomings expected outgoings, as something goes out highlight it so you can see whats left.  Work out your cash requirements for the week and put them in enveleops for the month or just withdraw that amount only each week. Cut the credit card in half so you can only use it online for emergencies, but with your earnings you should learn to live without it.


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## nelly (29 Aug 2007)

ClubMan said:


> As the previous posts show you really need to itemise your income and expenditure to identify where the money is going and where savings may be made.


ok so maybe i would be a bit too basic for you but my only advice is ditch the credit card, pay off the balance and use cash only for about 6 months and see where you money is actually going. 
The loans are crazy but you probably were conned into this "we're affluent because we live in new Ireland so i deserve a car worth €xxk and the rest" and I agree that it is easy to get into that frame of mind. 
in short you don't earn enough to be spending so much on unknowns and discresionary items - i know, i earn a lot less than you.  

make some obvious changes but  don't feel so bad - your rental property is a good idea, you have a good lot of your own mortgage paid off and you both have a fairly nice income and savings in shares etc.


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## Kendr (29 Aug 2007)

nelly said:


> you probably were conned into this "we're affluent because we live in new Ireland so i deserve a car worth €xxk and the rest"


 
You've summed up the "new" Ireland perfectly.


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## Trish2006 (29 Aug 2007)

My husband and I probably jointly earn about €5k more than you do and are about 5 years younger.  We're happy enough with our 2 cars (definitely not flash, but not completely crappy either).  Our mortgage is about €190k.  We have about €12k in joint savings, maybe about €1k each in our own savings.  No loans other than the mortgage (SSIAs took care of the rest), both clear our credit cards every month, only use them where laser doesn't work.
We're earning slightly more than you, but our mortgage is higher (and we overpay each month by €200), we have a toddler to feed and clothe and pay childcare for and I still never feel that we're struggling (granted we don't have too much of a social life because of the little lad but we still get out for dinner/cinema whenever we want).  We've also got another bab on the way and there is a good chance that my salary may disappear at that point so we'll be doing it all on half of what we have now.  But I still don't think we'll struggle.  We're also thinking of moving house but will upgrade house (extra bedroom) and downgrade area (in very nice area now, will move to regular nice area) so as to avoid having to up the mortgage, may even get to reduce it by €10k or €20k.

Things may seem expensive, but as long as you know what they cost there's no reason to find it a challenge to pay for them, especially when you're on good salaries as you are.  It's just about prioritising, we found that once we did that everything fell into place.  You have been given plenty of suggestions as to how you could reduce your outgoings but you seem to be living a good life and if that's the life you want then great.  You're not yet living beyond your means, just within.  But I have to agree that credit card debt when you have savings that could clear it is crazy!!


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## elcato (29 Aug 2007)

You should also move the CC to an interest free special offer account so that at least you're not paying interest for 6 months or so and pay off capital. I suspect though that you still use the CC rather than ditching it so this may not be worth doing.


> 3) I don't agree with contributing to a pension when you are paying big interest on your credit card. In effect, you are using your credit card to make AVCs!


Assuming tax free on this you could pay 3k off your CC rather than into a pension of 6k. Jury could be out whether one is better than other but the investment property is currently acting as a pension for you so I suggest you would be better off paying CC.


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## jiz (29 Aug 2007)

Assuming tax free on this you could pay 3k off your CC rather than into a pension of 6k. Jury could be out whether one is better than other but the investment property is currently acting as a pension for you so I suggest you would be better off paying CC.[/quote]

How is inv property acting as a pension if it is interest only? Or does the capital magically disappear at a future date?


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## Howitzer (29 Aug 2007)

I know the chatter about housing is banned but I can't believe no one has spotted the elephant in the corner here. An investment property on an interest only mortgage which is costing the OP 300 Euro EVERY month before any costs (maintenance fees, depreciation, etc). 

This is where your money is going every month, you're subsidising your tenants.

Unless it is achieving a fantastic level of appreciation this expenditure is not justified, and certainly can't be classed as an investment OR a pension. I've no idea how to resolve that situation in the current market but that's where your money's going and why you don't seem to have any cash. You have overextended yourself in the property market at a time of rising interest rates and falling house prices.

AAMers can't ignore this forever.


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## nelly (29 Aug 2007)

Kendr said:


> No feeling like driving a nice vehicle you actually own. But that may be just a preference for me, I have a dislike of car loans.  Ireland seems addicted to car credit.


yep - thats my opinion too - hate loans for something that loses its value while costing me money at the same time in maintenance - i was told it was the "culchie way of thinking" when discussing this with a mate a while back


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## extopia (29 Aug 2007)

Howitzer said:


> I can't believe no one has spotted the elephant in the corner here. ....



See my post above


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## extopia (29 Aug 2007)

nelly said:


> I was told it was the "culchie way of thinking" when discussing this with a mate a while back



Hmm. I'd say it's more of an "All-Ireland" way of thinking.


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## elcato (29 Aug 2007)

> This is where your money is going every month, you're subsidising your tenants.


Of course you've taking into account that rents are rising over time ? His tenants will still be paying 1300 amonth in 20 years time ?


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## ClubMan (29 Aug 2007)

Howitzer said:


> I know the chatter about housing is banned but I can't believe no one has spotted the elephant in the corner here. An investment property on an interest only mortgage which is costing the OP 300 Euro EVERY month before any costs (maintenance fees, depreciation, etc).
> 
> This is where your money is going every month, you're subsidising your tenants.





extopia said:


> See my post above


Or even earlier...


Brendan said:


> Some questions and observations.
> 
> ...
> 
> ...


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## Howitzer (29 Aug 2007)

elcato said:


> Of course you've taking into account that rents are rising over time ? His tenants will still be paying 1300 amonth in 20 years time ?


 
As are (currently) interest rates. The one thing not changing on an IO mortgage is the debt.

The Daft rental report showed rents were only now greater than the level the reached in 2002, 5 years ago. There is no guarantee whatsoever that the OP will be able to achieve significently higher rents over the short to medium term of the mortgage, and certainly not the 27.3% increase needed to break even with interest payments (at current levels) alone.

Assuming a uniform 5% increase in rents, and no increase or decrease in interest rates, the OP would be at a break even point on a day to day basis in 5 years, and would recoup the amount of subsidised rent in 9 years.

Assuming no maintenance charges, voids, insurance or further expenditure. Once those are taken into account a period of 20 years before the OP sees a profit from the rental income would seem about right.


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## Howitzer (29 Aug 2007)

ClubMan said:


> Or even earlier...


 
I missed extopias post, there was no further reference to it. Brendan assumed the mortgage wasn't IO and suggested changing it to IO. The OP subsequently clarified that the mortgage was already IO, hence the incredulous post by myself.


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## !RAY (29 Aug 2007)

The investment property is costing me 300 per month but i have made about 110,000 on this and any loss i will offset against capilal gains when i sell .So i look at this as a saving plan. I am going to sort out the cc.As for the car ,well i could be dead tomorrow .I dont really worrie about money and do belive in living for today but also look after the future. MY post as i stated above was just a rant about how expensive ireland has got.There are a lot worse off so i am thankfull for what i have got.
Cheers
Ray


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## ClubMan (29 Aug 2007)

!RAY said:


> but i have made about 110,000 on this


Do you mean capital gains - on paper right now? And does this figure account for all costs incurred to date including any periods during which rental income was less that mortgage and other costs or maintaining the asset?


> MY post as i stated above was just a rant about how expensive ireland has got.


So you just wanted to moan and didn't really want assistance? What a waste of people's time.


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## Kendr (29 Aug 2007)

!RAY said:


> The investment property is costing me 300 per month but i have made about 110,000 on this and any loss i will offset against capilal gains when i sell .So i look at this as a saving plan. I am going to sort out the cc.As for the car ,well i could be dead tomorrow .I dont really worrie about money and do belive in living for today but also look after the future. MY post as i stated above was just a rant about how expensive ireland has got.There are a lot worse off so i am thankfull for what i have got.
> Cheers
> Ray


 
Heck of a strange way to ask how he stands because he doesn't "seem to have any cash". If you don't (worrie) worry about money why bother posting in this section? Just curious.


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## !RAY (30 Aug 2007)

“MY question was ,I feel I am doing ok have a lot of investment shares, property there are a lot worse off. Anyway I have done a budget and work out I should have 400 euro a week left after paying loans,avc,investment . It just never works out that way everything in this country is so expensive. Do other people feel the same?”



Hi
The investment property is costing me around 300 per month .This gives me a loss on my investment which I will offset against c gains tax. I have made about 110,000 on the property at the mo .I do feel that prices while steady at the moment ,will still increase at a slow rate. Properties at present worth about 380,000 say 3% increase 11,400 per year. About the car ,well could be dead tomorrow (hope not).I don’t want to go through life not enjoying the good things .I can afford it at the moment and realize I am lucky to have what I have there are a lot worse off through no fault of there own. In 3 months time cc will be gone and will still have 25,000 in shares.
Cheers
Ray


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## Bronte (30 Aug 2007)

You cannot offset the 300 rental income deficit per month against capital gains.

There is no guarantee that property prices will go up, nor is their a guarantee that rents will go up.  If you estimate that property prices are going up by 3% where does that leave you in relation to inflation (currently 5% in Ireland?).  Also at some point people are just not going to be able to keep increasing their rents by the huge percentages that we have seen in the recent past.


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## Howitzer (30 Aug 2007)

!RAY said:


> Properties at present worth about 380,000





!RAY said:


> i have made about 110,000 on this


 
You're paying an interest rate of 6.22%? This seems a high rate, is it the most competitve rate or does your 1400 repayment include insurance, etc?


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## extopia (30 Aug 2007)

!RAY said:


> “It just never works out that way everything in this country is so expensive. Do other people feel the same?”



It depends on how much you earn. In your case, for example, your car is expensive compared to your salary. You've decided it's worth it, which is fair enough, but it reduces the cash you have available for saving, investing, or buying other things.



> The investment property is costing me around 300 per month .This gives me a loss on my investment which I will offset against c gains tax.



CGT is applied to the appreciation of the property value (less certain maintenance expenses). You can't deduct rental "losses" of the type you describe. (Think about it - if that was the case, there would be an incentive to maximise the monthly mortgage payment to creat a "loss".)




> I have made about 110,000 on the property at the mo.



You haven't made a penny until you actuall sell. At the mo, it's costing you money as your rental income is less than the interest on the loan.



> I do feel that prices while steady at the moment ,will still increase at a slow rate.



Speculation at best. It is possible for property prices to actually fall. Irish property prices, as a multiple of average income, are far higher at the moment than they have been historically.



> I don’t want to go through life not enjoying the good things..



Fair enough. But some of the best things in life are free.  



> In 3 months time cc will be gone and will still have 25,000 in shares.



Share prices can fall too.  But keep paying off that cc.


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## ClubMan (30 Aug 2007)

!RAY said:


> As for the car ,well i could be dead tomorrow .I dont really worrie about money and do belive in living for today but also look after the future. MY post as i stated above was just a rant about how expensive ireland has got.There are a lot worse off so i am thankfull for what i have got.
> Cheers
> Ray


Since you're patently not genuinely looking for assistance I'm closing this thread to avoid wasting any more contributors' time.


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