# Financial mess gets inheritance - advice?



## Finances2020 (12 Feb 2020)

*Age:* 44
*Spouse’s/Partner's age:* 46

*Annual gross income from employment or profession:* €48,000
*Annual gross income of spouse:* €60,000

*Monthly take-home pay:* €2,700 (mine - after health insurance) Spouse €3,000

*Type of employment:* Public Servants.

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

*Rough estimate of value of home: *€250,000
*Amount outstanding on your mortgage: *€250,000
*What interest rate are you paying? *4.5%. We are paying roughly €1460 a month. We bought just before the crash - spent 340,000 on a house 14 years ago that is only now just about worth what is left on the mortgage - bitter!

*Other borrowings – car loans/personal loans etc:* 15k car loan

*Do you pay off your full credit card balance each month?* No - approx 2k remaining on both credit cards

*Savings and investments:* €1,000 in total

*Do you have a pension scheme?* Yes - both public sector pension schemes. Not as good as they could be as I have worked part time for a few years

*Do you own any investment or other property*? No.

*Ages of children*: 8 and 6

*Childcare* is €40 a week (one afternoon) - work part time hours to facilitate child care

*Life insurance: *Yes

So - as you can see, we've not been great with money to date - the screw up with the house coupled with early deaths of parents gave me a bit of a 'whats the point' attitude, life is for living etc - but its worn off a bit now and I'm trying to be more financially sensible. I am due to receive approximately 100k inheritance and my question is - what to do with it? Obviously pay off the debt first but after that? I'm not minded to pay anything into the mortgage - I know it would make sense but I genuinely feel that it would be a waste of money as one of us could die (thereby paying off the mortgage - morbid I know but its my experience in my family) and I'd prefer to keep the money. I will look into switching the mortgage now that the house is out of negative equity and we can look for better interest rates. I'm using 'I' here but all money is shared and the inheritance will be shared.
I'd be grateful for any suggestions


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## dereko1969 (12 Feb 2020)

Before you do anything else I'd have a long hard look at what you're spending your money on day-to-day. You're pulling in nearly €6k a month, your mortgage payment is very manageable (forget about what you paid for the house, pointless now) and your childcare costs are minimal, where's all the rest of the money going when you're not paying off credit cards and struggling to save?
Maybe you and your spouse should just use cards for a month so you'll be able to track all your payments a lot easier.
With regard to the inheritance, go on a big splash out family holiday with part of it, pay off the car loan, put a decent chunk into a long term savings account to provide for you kids 3rd level education.
But first look at your current spending and try to figure out why you're not saving anything at the moment or else you'll fritter away the inheritance.


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## Finances2020 (12 Feb 2020)

Thanks, very true and that is my big fear. I think we do fritter - we spoke last night about keeping more of a track on our spending - we are not big spenders on anything except food/drink and holidays. Coffee/lunch in work is also eating into it. We got rid of childcare costs 2 years ago and didn't see any tangible increase in money - I think we just don't consider what we are spending and how much little things add up. We never ask 'can we afford this'. 
We also like a nice holiday and spend about 3,500 a year on that. All of our spare money seems to go into paying back credit cards every month (from spending on holiday, yearly bills, Christmas, eating out) and we never seem to catch up. 
I am motivated now though and I've made a spreadsheet - we should be out of credit card debt next month and then that money will go towards savings.


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## Brendan Burgess (12 Feb 2020)

As you say, you are not good with money.

If you don't pay off your loans, it will be frittered away very quickly. 

So, clear your car loan.
Clear your credit cards and then tear them up. Work from debit cards from now on.

And then use the balance to pay down your mortgage.  

After that figure out how you are spending so much and learn to save. 

Brendan


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## Brendan Burgess (12 Feb 2020)

Finances2020 said:


> *What interest rate are you paying? *4.5%. We are paying roughly €1460 a month.



What lender are you with? 

Most lenders have much cheaper rates than this and allow you to switch to them. 

Don't do it yet though, as most require you to fix. 

After you have paid €80k off your mortgage, your Loan to Value will be 68% and you should be able to switch to a much cheaper lender easily enough. 

Brendan


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## Finances2020 (12 Feb 2020)

Thanks Brendan - we are with PTSB. That's a good point about LTV ratio, I hadn't considered it. Having said in my post that I wouldn't put it into mortgage I've just been playing with mortgage repayment calculators to see how much of a lump sum plus how much of a monthly overpayment would get rid of our mortgage in 10 years! 
I know we can be good with money - we were when we had none and lived on one small wage in Dublin. We just need to stop being lazy about it.


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## Itchy (12 Feb 2020)

If you paid down a minimum of 50k of the mortgage you would be in a position to effectively cut your interest rate in half and thereby free up approx. 6k from interest payments per year from where you are now!


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## Finances2020 (12 Feb 2020)

Yes true - definitely thinking along those lines now. We've been stuck with that rate for so long with no way out on the horizon so the thought of being more in control of the mortgage is changing my mind about it - we could put a lump sum in, cut the interest rate, overpay (essentially keep paying the same amt or a bit more) and get rid of it a lot sooner....... food for thought


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## Easel (12 Feb 2020)

In your shoes I would do the following.
€17,000 to pay off car and CC. No brainer
€19,000 to top up savings for a rainy day fund. Might be slightly too much considering you have very secure jobs but I like a decent buffer.
€60,000 off mortgage. Use the new LTV to get a much better rate even if you have to switch banks.
€4,000 Holiday. I am sure the person who left you the funds would like you to have nice memories of spending whilst also making your life more comfortable financially.

Your mortgage rate is too high and you are right to focus on getting this down.

Your monthly spending is also too high. You really need to get a handle on where it is all going. I am the sole earner of a family of 4 with identical mortgage costs and out average outgoings are €4,500 a month. This includes €4,000 Christmas/holiday p/a fund and €500 p/m socialising fund.


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## Clamball (12 Feb 2020)

I think you are being a bit harsh on yourself.  You are living comfortably enough within your means, you overspend each month but you don’t appear to be getting deeper in debt every month.

So sit down with your spouse and decide your saving and spending goals.   Then list all your outgoings on your spreadsheet. You like a decent holiday once a year so add to budget. You might find between you and your spouse you are spending €200 a month on lunch and coffee, that’s €2400 a year.  So decide if this is something that you want to keep, or drop from the budget.  The choice will be based on your preferences, lifestyle, family circumstances, and your ultimate spending and saving goals.   You can see if there are easy wins with changing utility providers, mortgage provider, phone plan etc.   Then as someone said, after a month, 6 weeks of tracking the spending you will know where the money is going.  Then decide your budget going forward, you will be planning your spending and savings and you can say “this is something we enjoy and budget for” And not “I am frittering my money away”.  And you have a clear saving goal too.  Decide how much you can save every month and add to a rainy day fund, for when the boiler goes, you want a new car, second holiday,  whatever.

As what to do with lump sum.  You can pay off car loan.  You can pay lump sum off mortgage, you can create a nest egg etc.  The advantage of remortgaging and paying a lump sum off the mortgage is that you will be paying less every month for the remainder of the mortgage.   And the difference between your current payment and the new payment can go straight into savings for your family.  Psychologically this may make you feel even better overall, you are now a saver, with a budget to fund the lifestyle you and your spouse agreed on.

Your in a great spot now financially so best of luck.


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## Finances2020 (12 Feb 2020)

Thank you all so much for all your advice, its been very useful and has helped focus my mind.


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## Brendan Burgess (12 Feb 2020)

Easel said:


> €19,000 to top up savings for a rainy day fund.



This is the wrong way to go for both financial and psychological reasons.

Financially, with both of you in the public service, you do not need to protect against a loss of income.

Psychologically, until you manage to get your spending under control, having €19,000 in the bank would be dangerous. You would fritter it away. 

Brendan


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## mtk (12 Feb 2020)

Brendan Burgess said:


> This is the wrong way to go for both financial and psychological reasons.
> 
> Financially, with both of you in the public service, you do not need to protect against a loss of income.
> 
> ...


should they pay off more of mortgage then?


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## Brendan Burgess (12 Feb 2020)

Yes. Put the money beyond reach. Reduce the monthly repayments. 

Brendan


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## Finances2020 (12 Feb 2020)

You have a point about secure jobs but one of us could get ill and be unable to work and so I think a rainy day fund would be advisable - I will keep it in an account that it not accessible though. If we put it all into the mortgage there is no taking it back if needed. 
We are capable of being good with money, we've done it before where even going for one pint involved a long 'can we afford it' discussion. Strangely as we've gotten 'better off' and older we've gotten flabby financially speaking - its as if now that we have good jobs we don't need to worry about money and therefore we just won't even consider it at all - we just need to focus and spend more consciously.


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## Easel (12 Feb 2020)

Brendan Burgess said:


> Financially, with both of you in the public service, you do not need to protect against a loss of income.
> 
> Psychologically, until you manage to get your spending under control, having €19,000 in the bank would be dangerous. You would fritter it away.



I agree to a certain extent but for a family with a net income of €6,000 to have no emergency fund is mad to me. Any unexpected expense could give rise to financial difficulty. Perhaps keep it in a 7 day term deposit account.



Brendan Burgess said:


> Yes. Put the money beyond reach. Reduce the monthly repayments.



In the vast majority of cases I would recommend people reduce the repayments but for a family who appear to spend everything they earn perhaps shortening the term while keeping the repayments as they are is the best course of action.


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## noproblem (12 Feb 2020)

Finances2020 said:


> You have a point about secure jobs but one of us could get ill and be unable to work and so I think a rainy day fund would be advisable - I will keep it in an account that it not accessible though.



You're doing everything to avoid what Brendan's telling you and he has been very kind to you in the way he's put it to you. I feel you have a need to have disposable money and not shy about getting rid of it either. I see you want to put it in a non accessible account? You have one, your mortgage. Lodge it there and you've the best of both worlds and afterwards start getting a grip on what you have coming in all the time.


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## Laughahalla (12 Feb 2020)

1.Pay off all loans in full except mortgage. Promise yourself to never to take on consumer debt again. Get rid of credit card.I did this and haven't missed it one bit.
2. Put away 3 months worth of money to cover expenses should the unknown happen or an emergency come up  ,10k is probably enough. Having this will help you not to get into debt again.
3. Pay 15% of family income into pension
4. Start putting a small amount of money away each month for childrens education.
5. Pay down your mortgage and switch to a lower rate. 

Follow above advice and you won't go far wrong.


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## RedOnion (12 Feb 2020)

Laughahalla said:


> Follow above advice and you won't go far wrong


In these circumstances, in my opinion this is not the correct approach (mainly different order).

OP has 100% LTV mortgage at 4.5%.
They need to pay at least 10% (possibly 20%) off mortgage to switch to s better rate.
4.5% on 250k Vs 2.3% on 200k, saves >6k interest per annum. This should be their #1 priority.
The car loan might need to be repaid in order to switch. 

Better control of spending / budgeting, and then kick in the rest of your advice.


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## Finances2020 (13 Feb 2020)

Thanks all. We now have a plan. 
Weekly budget which we will stick to - take out in cash - envelope budgeting - we've done it before and it works for us. If we stick to this we can easily save every month 
Save at the start of the month instead of waiting to see if there is anything left at the end - this money will pay for holidays/Christmas/birthdays etc - all of the stuff I now put on credit card will come from this account - visa card is now banned
Pay off car loan
50k into mortgage to allow for us to move to better interest rate
Take savings from reduced interest rate mortgage (approx 300) plus money we were paying for car loan (300) and overpay mortgage by 600 a month - our mortgage could be paid off in 10 years instead of 23!
Put 30k away in an account that cant be accessed easily - I think we do need this safety net psychologically if nothing else - we got caught out 2 years ago when we unexpectedly had to buy two cars in one year which wiped out our savings.

The plan above assumes we are staying where we live now - we had hoped to move but actually I think plowing all of the inheritance into a bigger house and taking on a bigger mortgage is not what we want - financial freedom in 10 years time will be sweeter. The 30k we put away can be used to make the house we are in work better for us if necessary rather than moving. 

Thanks for your insights - its been v informative!


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## PaddyBloggit (13 Feb 2020)

Finances2020 said:


> we had hoped to move but actually I think plowing all of the inheritance into a bigger house and taking on a bigger mortgage is not what we want - financial freedom in 10 years time will be sweeter. The 30k we put away can be used to make the house we are in work better for us if necessary rather than moving.



.... this comes across as a wonderfully, positive financial decision!


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