# Decent salary still renting, needs to change



## back2black (11 May 2016)

*Age:*
32
*Spouse’s/Partner's age:*
33

*Annual gross income from employment or profession:*
E80,000
*Annual gross income spouse:*
E3,500
Part time few hours per week. Recent enough.
Hopes to go self employed in near future

*Type of employment:*
Both private sector employees

*Expenditure pattern:*
Live month to month which normally runs out before payday! Just haven't got into the habit of saving. Wouldn't be out every week maybe once a month.

*Home*
Rent €1200 per month
*
Other borrowings – car loans/personal loans etc*
Credit union. €5,600 paying back €230 per month
No credit card or overdraft

Usual bills, 1 car (2004 focus)

*Do you have a pension scheme?*
Yes but from previous employment. Haven't contributed in 7 years

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

*Ages of children:*
12,10 and 6

*Life insurance:*
Yes.

*What specific question do you have or what issues are of concern to you?*
Basically things need to change dramatically.  Just got a decent increase in salary so looking to build up savings to work towards a mortgage. Am considering €800 per month but is that enough? Where do I put it?
Do I look to contribute to pension also?

Basically any advice from the experts! Much appreciated

Can go into more detail if required. Have limited company which has small turnover but will build on that


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## Brendan Burgess (11 May 2016)

As you started a family at the age of 20, it's not surprising that you have no savings on a modest salary.  You made life choices.  It's not all about money.

Now you have a good salary, you can start planning for the future.

First of all, pay off your credit union loan as quickly as possible.  They are charging you high interest and so you need to clear it as quickly as possible. 

You should not contribute to a pension as your first priority is to build up the deposit to buy a house. (The only exception to this is if your employer matches your contributions.)

You also need to build up a rainy day fund. But that would be the same fund as the deposit for your house.

How much would a reasonable house cost you where you want to live?  If it's €200k, then you will need a deposit of €20,000. So that is about two years saving €800 per month. 

I suspect that as you have had a sudden increase in salary, you may start blowing it. So I recommend you contact MABS for budgeting advice. 

Read Liam Ferguson's guide: Preparing for a mortgage application


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## back2black (11 May 2016)

Brendan, many thanks for the quick response. I've been meaning to get on this forum for ages it comes highly recommended


Brendan Burgess said:


> As you started a family at the age of 20, it's not surprising that you have no savings on a modest salary.  You made life choices.  It's not all about money.
> 
> Now you have a good salary, you can start planning for the future.





> First of all, pay off your credit union loan as quickly as possible.  They are charging you high interest and so you need to clear it as quickly as possible.


I was thinking the same have just got comfortable with the repayments



> You should not contribute to a pension as your first priority is to build up the deposit to buy a house. (The only exception to this is if your employer matches your contributions.)


Employer can match a small % but agree think it's best to secure a house and stop blowing money on rent.  Must be over €100k



> You also need to build up a rainy day fund. But that would be the same fund as the deposit for your house.


I've been trying. I have spreadsheets going back years and always looks good at start of the month but not in practice



> How much would a reasonable house cost you where you want to live?  If it's €200k, then you will need a deposit of €20,000. So that is about two years saving €800 per month.


I'm northside of Dublin. I'd say it would be closer to €250k but not sure I'd get a mortgage for that having 3 kids



> I suspect that as you have had a sudden increase in salary, you may start blowing it. So I recommend you contact MABS for budgeting advice.


It's been recent enough but went from 73k to 80k



> Read Liam Ferguson's guide: Preparing for a mortgage application


Thanks will take a good look at it


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## back2black (11 May 2016)

Brendan Burgess said:


> View attachment 1226
> If your employer's contribution depends on how much you contribute, then you should definitely contribute up to the maximum that they match.  You have to balance the short term with the longer term.   If you were within 6 months of buying a house, it might be worth taking a break from your pension contributions. But with buying a house at least two years away, then you should maximise your pension contributions now.


I just checked re pension and the company contribute 25% of employee contribution minimum of €200 per month.  Think that would be worthwhile



> Don't get carried away with the idea that you are blowing money on rent.  It's the same for mortgage holders and they rarely say "we are blowing money on interest".  Interest is just the cost of renting money.   It's a good idea to buy a house, but it's not the only solution.


I hear you it's just there was a bit of a panic last year when we landlord told us he was selling so had to move.  Blessed to have found somewhere close (kids would have been distraught otherwise!)
It's more to do with the security part of it.  I know we can't predict the future but if I have to pay €14k per year it's better it goes to something that I may eventually own


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## back2black (11 May 2016)

Thanks for the feedback.  Depending on the market the cost of renting can jump significantly, went from €1050 to €1200 which was lucky given most around were €1400+
If I am paying a mortgage albeit with the high cost of interest I would be more determined to pay it off over a shorter term and have a little more peace of mind knowing it'll be something for to hopefully help kids along the way.

I think I've a lot of research to catch up on so I'm sure I'll be spending more time on here.

Next step is that savings account.


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## txirimiri (11 May 2016)

Congratulations on the increase in salary (and on managing to work full time and bring up three kids starting at the age of 20!). I wouldn't be beating yourself up about not having saved or contributed to a pension to date - you are way ahead of many people your age in terms of starting a family and earning a good salary. My BIL is your age and he and his friends are almost all still doing internships, or on zero hours contracts or in low paid work unskilled while trying to get a start in a variety of competitive industries and none are in a financial position to get married or have kids, even though some would like to, so I think it is really impressive where you have got to and your plans for the future. 

I agree with posters above - I would focus completely on paying down the credit union loan plus also,start a savings account for a house deposit. I'd leave the pension aside until you have bought a house. If you have 800 a month, I would consider putting 700 towards the credit union loan and 100 into a savings account each month (to get I it the habit of saving) and as soon as the credit union loan is pad off, switch to


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## txirimiri (11 May 2016)

Sorry, pressed send too soon

As soon as credit union loan is paid off, switch to saving 800 a month. Rates are pretty poor at the moment, but as it is short term savings for a specific goal, I would not consider anything other than a cash savings account. Have a look at the best buys on his site. There are a couple of regular monthly savings accouts that tie you in to not withdrawing the money for a specific period of time (anywhere between 6 months and a few years) that pay around 3% before dirt.


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## back2black (11 May 2016)

@txirimiri appreciate the kind words, it's been tough at times! Just checked online CU account and loan is just over €5400 could be push to be clear that by this year.
As you say it's getting into the habit of it and getting it out of the current account and into savings account as soon as it comes it.


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## trasneoir (12 May 2016)

back2black said:


> *Expenditure pattern:*
> Live month to month which normally runs out before payday! Just haven't got into the habit of saving. Wouldn't be out every week maybe once a month.


It's a good time to be thinking about this kind of stuff. It's easy for "lifestyle creep" to eat a raise if you don't have a plan for the new income.

youneedabudget.com 
Don't try to budget "hard" at first, just use it to learn where your money actually goes vs where you'd like it to go. Over time, this visibility of your goals is brain-altering. 
People who stick with it past the first month experience (on average) a _painless _$200 psychological raise in their monthly bottom line.


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## back2black (12 May 2016)

trasneoir said:


> It's a good time to be thinking about this kind of stuff. It's easy for "lifestyle creep" to eat a raise if you don't have a plan for the new income.


I'm always thinking about it! I'm not going to consider the extra income as extra spend which is difficult.  I'd love to have a family holiday but will resist the urge to borrow as I have done a few years ago.



> the site you mentioned - can't post links yet
> Don't try to budget "hard" at first, just use it to learn where your money actually goes vs where you'd like it to go. Over time, this visibility of your goals is brain-altering.
> People who stick with it past the first month experience (on average) a _painless _$200 psychological raise in their monthly bottom line.


I hadn't heard of that site but will check it out.  I use spreadsheets each month and was looking at the % of each thing which like you say is a bit much.
I am determined to get this sorted and am sure will feel the positive effects of it.


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## thedaddyman (12 May 2016)

start with your tax, are you using your credits in the best way, have you health receipts you've not claimed for over the past few years etc?. You may be entitled to a rebate

You need to think about your 12 year old car and are you likely to have to change it in the next couple of years. You may have to set aside some savings for that


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## back2black (12 May 2016)

I've looked at the tax credits, I'm not married so don't get any extra.  I've claimed health expenses before and have some bills from physios last year that I'm going to submit to Revenue soon.

Good point about the 12 year old car.  It's a 1.6 so road tax is around 600 (every 3 months) NCT every year  so going for a more efficient car could be an option.
I cycle to work so relatively low cost...hopefully the legs don't give up on me  

It's other things like possible college fees that wouldn't be too far away


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## Bronte (13 May 2016)

I think you should start the pension now as your employer will pay 25%. 

How much do you hold in the Credit union?


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## back2black (13 May 2016)

Bronte said:


> I think you should start the pension now as your employer will pay 25%.
> 
> How much do you hold in the Credit union?


Not an awful lot €1400

That's the thing with the pension I'm unsure and might not be one for this thread.  Minimum is €200 contribution from me but think I would get relief on that @ 42%. Then an extra €50 on top.
Just need to weigh it up really.  In my previous job there was a pension scheme so there is a fund with about €10k there


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