# Maximise return for spare cash



## nest egg (23 Jan 2018)

Age: 35
Spouse’s/Partner's age: 35

Annual gross income from employment or profession: 125k (incl bonus)
Annual gross income of spouse: 44k

Monthly take-home pay: 8k

Type of employment: Private (both)

In general are you: saving approx 3k p/m

Rough estimate of value of home: 730k
Amount outstanding on your mortgage: 450k
What interest rate are you paying?: 3% (30 yrs remaining) overpaying by 10% (provider limit)

Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month?: Yes

Savings and investments: 75k

Do you have a pension scheme? Yes, me a company DC scheme (approx 175k) / Her, a company sponsored PRSA (unsure balance but it's small, charges are high but kept as her company contributes) 

Do you own any investment or other property?: No

Ages of children: 2

Life insurance: I have, through work

----

Recent house move consumed most of our savings, but now that all the bills have been settled, would like to start putting spare cash to the best possible use.

Simple question, given our circumstance, how should we maximise the return for what we have left over each month?


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## RedOnion (23 Jan 2018)

Pay down your mortgage. You'd need to get 6% return before tax to end up with same result.
Are you on a fixed rate mortgage? Ask how much break fee is to pay off a lump sum early.


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## Steven Barrett (23 Jan 2018)

What's the long term goal for your money? When do you want to spend it? Do you need an education fund for your kids for example? 

Keep some money on deposit for spending if the car breaks down etc. Look at investing the balance so you can use it and the profit at a later date. 

You're probably light on protection cover too. The bank are protected if your wife dies but you are not. No income protection either. If you can't work, you're income will go from €125,000 to €10,000. 


Steven
www.bluewaterfp.ie


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## nest egg (23 Jan 2018)

RedOnion said:


> Pay down your mortgage. You'd need to get 6% return before tax to end up with same result.
> Are you on a fixed rate mortgage? Ask how much break fee is to pay off a lump sum early.



Fixed for a year (10 months remaining), would need to enquire but based on what I've read here, would not expect a large fee.


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## nest egg (23 Jan 2018)

SBarrett said:


> What's the long term goal for your money? When do you want to spend it? Do you need an education fund for your kids for example? Keep some money on deposit for spending if the car breaks down etc. Look at investing the balance so you can use it and the profit at a later date


Next 1.5-2 yrs, our main car will need to be changed (budget 20-25k).  I expect we'll need a fund for university, but what priority to give this, over say paying off our mortgage early?



> You're probably light on protection cover too. The bank are protected if your wife dies but you are not. No income protection either. If you can't work, you're income will go from €125,000 to €10,000.


My company provides a disability benefit plan (approx 55k p/a).  Would you recommend anything further?

Thinking about it, an extra 1250 a month would have our mortgage repaid by the time we're 50, which is also around the same time our child would go to university.  I think that's a worthwhile use of the additional cash.  For the remaining 1750, I'm open to ideas...


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## gnf_ireland (26 Jan 2018)

Firstly OP, congrats on being in such a strong position by 35. 
Looking at this initially, my gut tells me you would be very advisable to seriously consider paying the extra 1250 against the mortgage while you are in that position and derisk your financial situation while interest rates are low. Having your mortgage paid by the time you are 50 is massive and makes things so much easier going forward for you all. The first piece of advise I would give you is that - focus on the mortgage and give it a good hammering over the next few years. At 42, we are effectively mortgage free (payments are 200 euro a month) and it opens up lots more options to us in general.


mojoask said:


> Thinking about it, an extra 1250 a month would have our mortgage repaid by the time we're 50, which is also around the same time our child would go to university.


So yes, I 100% endorse this approach, and you will also save around 125k in mortgage interest by doing this as well.

The other thing I would say is at 35 you are on the crest of a wave and you seem invincible in terms of salary growth and opportunity. But the higher you go up that ladder, the tighter it becomes and less opportunities exist further up with more competition for them. All it takes is for a company to be taken over or some other major event and things are not as rosey in the garden. I know a fair few people who were 'sorted' in their late 30's and by 50 they were 'struggling' comparatively. Just keep this in mind - which is why reducing debt is always a good thing in this regard.

The other thing that jumped out at me is you appear to be living off 3k a month/36k a year based on your numbers. Net salary = 8k less Mortgage (2k) and saving (3k) = 3k. This seems light for me, especially when you say your kids will be starting college in 15 years time, meaning they are still in creche/pre-school. The childcare bill for 2 children alone would be a massive hole in a 3k monthly budget?
Maybe I am missing something here, but the numbers don't align to what I would consider the spending patterns/standard of living of a couple earning 170k a year. I assume things like annual holidays etc are included in this budget which again seem a bit off for me. We everything including personal expenditure is factored in, 3k seems light.

I will accept there was a thread on here a year or so ago from someone in relatively similar earning bracket (175-250k), and I said the opposite that they should reduce expenditure. I am guessing there is a balance between the two
https://www.askaboutmoney.com/threads/review-of-our-financial-status.201532/
I would be interested in seeing your monthly/annual budget breakdown 



mojoask said:


> Next 1.5-2 yrs, our main car will need to be changed (budget 20-25k).


This is something you need to keep in mind in terms of cash reserves, and of course the car you decide to go for. Remember as children get older, the requirements for a car change as well- especially if they are sporty kids.

The final thing I would say to you is you have 2 young kids, which will probably be on the payroll for the next 20 years. There is a large income disparity between yourself and your spouse. If you pass away, your company probably cover 3.5 or 4 times your salary in Death in Service benefit. This is around 500k, but over 20 years it is only 25k a year. How realistic would it be for your family to live on this, even with the mortgage paid. Personally, I have a separate life assurance policy covering me to the age of 65, to ensure the impacts of the income disparity are minimised.


Other than that, enjoy it and go take a holiday this summer with the rewards of your labour !


Finally, I assume you have no interest at the moment in considering a place in the sun or holiday home etc here in Ireland and all of that good stuff that comes with being a high earner !


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## gnf_ireland (26 Jan 2018)

mojoask said:


> Thinking about it, an extra 1250 a month would have our mortgage repaid by the time we're 50, which is also around the same time our child would go to university. I think that's a worthwhile use of the additional cash. For the remaining 1750, I'm open to ideas..


but to answer the direct question you asked

4 steps
 - do the household budget to ensure your numbers are correct
 - overpay the mortgage by as much as you can with the target repayment age of 50
 - considering increasing pension contributions towards the maximum as it is the most tax efficient means of investing
 - save the rest in cash for a while until you buy the new car etc

Wait before using the money to invest in equities/funds etc outside a pension fund, as the tax considerations are very high here. Ireland could really do with an ISA type structure for stuff like this.

You may want to consider engaging a financial planner at some stage before your 40th birthday, as you may find the exercise beneficial and get you thinking about stuff you may not normally consider


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## nest egg (26 Jan 2018)

gnf_ireland said:


> Firstly OP, congrats on being in such a strong position by 35.
> Looking at this initially, my gut tells me you would be very advisable to seriously consider paying the extra 1250 against the mortgage while you are in that position and derisk your financial situation while interest rates are low. Having your mortgage paid by the time you are 50 is massive and makes things so much easier going forward for you all. The first piece of advise I would give you is that - focus on the mortgage and give it a good hammering over the next few years. At 42, we are effectively mortgage free (payments are 200 euro a month) and it opens up lots more options to us in general.
> 
> So yes, I 100% endorse this approach, and you will also save around 125k in mortgage interest by doing this as well.
> ...


Thanks for your response, and congratulations yourself for being close to mortgage free at 42! Look we're very fortunate, we're acutely aware of this, and I hope this keeps us grounded. I've been reading a lot about paying off your mortgage early, and there's one line of thought which basically says, take your time, inflation will help erode the value of the debt etc etc. However, as you rightly point out, you never know how long the crest will last, and for that very reason we want to make the most of what we have now, so that we have some protection in the good-so-good times.  

Mortgage wise, we can't do much until year 1 is over, unless we move provider.  UB's 4 year fixed rate looks appealing, as they also allow over-payments in the order we would like to make.  KBC's rates over 10 years may also be a good bet given ECB policy, but their over-payment terms wouldn't allow us to make the additional contribution we would like to make.  We could look at a split mortgage with them, though would need to look into this a little further.  If anyone has any experience, I'm all ears.



> The other thing that jumped out at me is you appear to be living off 3k a month/36k a year based on your numbers. Net salary = 8k less Mortgage (2k) and saving (3k) = 3k. This seems light for me, especially when you say your kids will be starting college in 15 years time, meaning they are still in creche/pre-school. The childcare bill for 2 children alone would be a massive hole in a 3k monthly budget?  Maybe I am missing something here, but the numbers don't align to what I would consider the spending patterns/standard of living of a couple earning 170k a year. I assume things like annual holidays etc are included in this budget which again seem a bit off for me. We everything including personal expenditure is factored in, 3k seems light.
> 
> I will accept there was a thread on here a year or so ago from someone in relatively similar earning bracket (175-250k), and I said the opposite that they should reduce expenditure. I am guessing there is a balance between the two
> https://www.askaboutmoney.com/threads/review-of-our-financial-status.201532/
> ...



Neither of us comes from particularly wealthy backgrounds, so spending is something we are naturally prudent about.  We could easily drive newer cars, or go on more expensive holidays, or buy designer clothes, that's just not us.  Obviously our house was expensive, but it's also perfect for our needs, avoids either of us needing a long commute which is very valuable these days.

Budget wise, I've run some numbers last night, and you're right, I think our savings rate is going to be closer to 2-2.5k.  As we've recently moved there are a lot of additionals right now, so it will take a few months before we'll be able to test the theory. 



> The final thing I would say to you is you have 2 young kids, which will probably be on the payroll for the next 20 years. There is a large income disparity between yourself and your spouse. If you pass away, your company probably cover 3.5 or 4 times your salary in Death in Service benefit. This is around 500k, but over 20 years it is only 25k a year. How realistic would it be for your family to live on this, even with the mortgage paid. Personally, I have a separate life assurance policy covering me to the age of 65, to ensure the impacts of the income disparity are minimised.



We've just the one so far, but we hope there will be another one in the next couple of years.  I've always been dubious about income protection, but a separate life policy may not be a bad idea.  I will look into it.



> Other than that, enjoy it and go take a holiday this summer with the rewards of your labour !
> Finally, I assume you have no interest at the moment in considering a place in the sun or holiday home etc here in Ireland and all of that good stuff that comes with being a high earner !


 We've been fortunate enough to live abroad and see some of the world, so believe it or not, a holiday at home more than meets our needs, and is pretty handy with all of the baggage a toddler brings!


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## nest egg (26 Jan 2018)

gnf_ireland said:


> but to answer the direct question you asked
> 
> 4 steps
> - do the household budget to ensure your numbers are correct
> ...



Thanks for the clear advice.  Last year I put 11% of gross into my pension (before employer contributions).  This year I could up the amount, or use the after-tax earnings for the mortgage.  Neither are bad choices, but I need to run the numbers and weigh it against the priorities. 

Regarding independent advice, I'll consider it.  For the next few years however the mortgage / pension / cash strategy is appealing as it's something I understand.  There are probably better ways to get a return, but this needs to be weighed against the risk, and the amount of time needed to invest to understand and make decisions on such things, and manage them thereafter.


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## gnf_ireland (26 Jan 2018)

mojoask said:


> I've been reading a lot about paying off your mortgage early, and there's one line of thought which basically says, take your time, inflation will help erode the value of the debt etc etc.


Yes this is a school of thought. But this school of thought also assumes that the real value of the debt will drop by inflation being higher than the relative interest rate. We are in a period of low inflation (generally in Europe) and this is keeping interest rates low. Once inflation starts to rise, its likely interest rates will rise too to match it.
Maybe between 1980 and 1990, 100k mortgage sounded much smaller in 1990 due to inflation. I am not sure we would say the same between 2008 and 2018 ???



mojoask said:


> Mortgage wise, we can't do much until year 1 is over, unless we move provider. UB's 4 year fixed rate looks appealing, as they also allow over-payments in the order we would like to make. KBC's rates over 10 years may also be a good bet given ECB policy, but their over-payment terms wouldn't allow us to make the additional contribution we would like to make. We could look at a split mortgage with them, though would need to look into this a little further. If anyone has any experience, I'm all ears.


I would debate that anyone who is seriously looking at mortgage overpayments of the scale you are need to
(a) remain variable
(b) worst case split, having the target overpayment amount in variable
(c) shorten the term
We kept variable and shortened the term during our very aggressive over-payment period, but have decently put the small balance onto a KBC 10 year fixed. I have a redraw facility on the mortgage, so this is why we are keeping it 'active' so to speak so its not comparable in that regard

Personally, wait the year until you are out of fixed and then either go variable for a while or go split !



mojoask said:


> Neither of us comes from particularly wealthy backgrounds, so spending is something we are naturally prudent about.


Completely understand this and as a child of rural Ireland in the 1980's lots of people fall into this bracket. However, I would say to do let yourself live a little and the holiday thing is something I would recommend as it does allow you spend exceptional quality time with the kids. They are relatively young so you guys need a break too !



mojoask said:


> We've just the one so far, but we hope there will be another one in the next couple of years.


Remember the younger you buy the policy the cheaper it will be ! The price of the extra policy I bought at 37 when my eldest was born I can only dream of ~5 years later. No health issues - just age !



mojoask said:


> We've been fortunate enough to live abroad and see some of the world, so believe it or not, a holiday at home more than meets our needs, and is pretty handy with all of the baggage a toddler brings!


I understand that - especially as I have 2 less than 20 months apart. But there are fantastic places abroad that do cater for young kids and they are amazing. The difference between holidays with kids and before kids is massive !!! I spent a decade living abroad so I know where you are coming from. But the days of hiking in Myanmar/Namibia are gone for a short while


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## gnf_ireland (26 Jan 2018)

mojoask said:


> Last year I put 11% of gross into my pension (before employer contributions). This year I could up the amount, or use the after-tax earnings for the mortgage. Neither are bad choices, but I need to run the numbers and weigh it against the priorities.


11% is not bad and better than most. I remember reading somewhere to get a Public Sector type pension you would need to be paying 25% of your salary for your 40 years to get the same benefits. 25% is hard to do, but maybe bridge the gap if you can.


Of course you can always do a mix and split the excess 3 ways once you have your emergency cash reserves sorted
- cash
- pension
- mortgage



mojoask said:


> For the next few years however the mortgage / pension / cash strategy is appealing as it's something I understand. There are probably better ways to get a return, but this needs to be weighed against the risk, and the amount of time needed to invest to understand and make decisions on such things, and manage them thereafter.


Absolutely and to be honest I think most would say get the basics right before being creative. 
The only advantage a financial planner now gives you is a longer lead time towards your goals
But do it at 40 and you still have ~25 years once the basics are stable

I filled in the forms for a financial planner and realised I had all the answers I needed right in front of me !


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## nest egg (26 Jan 2018)

gnf_ireland said:


> 11% is not bad and better than most. I remember reading somewhere to get a Public Sector type pension you would need to be paying 25% of your salary for your 40 years to get the same benefits. 25% is hard to do, but maybe bridge the gap if you can.



25%, excluding employer contributions? That's something else!
There's no tax advantage after €23k's worth of contributions (20% of €115k). It's an additional €10k in gross contributions compared to last year, or €500 a month in after tax earnings. 

I think I've got the basis for a plan here, taking €2250 as the working assumption for spare funds:

€1250 for the mortgage = Goal: pay it off by 50
€500 for the pension = Goal: maximise contribution (until I'm 40)
€500 for a savings a/c = Goal: key expenditure (cars, home maintenance, university fund etc)


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## nest egg (26 Jan 2018)

> The difference between holidays with kids and before kids is massive !!! I spent a decade living abroad so I know where you are coming from. But the days of hiking in Myanmar/Namibia are gone for a short while



We went to France last year for a friend's wedding and holiday with our then 1 year old, and that memory is still fresh enough that we'll stay put this year


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## gnf_ireland (26 Jan 2018)

mojoask said:


> 25%, excluding employer contributions? That's something else!


No, it was 25% in total, but it was for 40 years to give you a lump sum payment of 1.5 times your salary and a pension worth 50% of your final salary.
Remember a pension pot of say 1.5m would give you a lump sum of around 300k and a pension of around 50,000 (using the 4% rule)
It takes serious contributions to get a pension pot of 1.5m



mojoask said:


> There's no tax advantage after €23k's worth of contributions (20% of €115k).


Yes there is no point in going about your tax amounts, but you also have to consider your partners pension also and should divide this out as best you can, especially given the income difference between the two of you



mojoask said:


> I think I've got the basis for a plan here, taking €2250 as the working assumption for spare funds:
> 
> €1250 for the mortgage = Goal: pay it off by 50
> €500 for the pension = Goal: maximise contribution (until I'm 40)
> €500 for a savings a/c = Goal: key expenditure (cars, home maintenance, university fund etc)


This is the good basis of looking at what to do over the next few years. Obviously look at spending as well and the "live a little" scenario. Also consider the extra life cover etc. 
Might be worth looking at things like health insurance etc etc

Good luck with it all.


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## gnf_ireland (26 Jan 2018)

mojoask said:


> We went to France last year for a friend's wedding and holiday with our then 1 year old, and that memory is still fresh enough that we'll stay put this year



we have been mad enough to head off twice a year with our two.. including city breaks and beach holidays. Were in Iceland just after Christmas and they absolutely loved it. They are 5.5 and nearly 4 ....


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## nest egg (3 Mar 2019)

Thought I'd post an update for those who might be interested.
I did intend making this an annual event, and then promptly forgot... so here's a 13 month catch up.

Highlights from 2018

Pension: Maxed out contributions (23k)
Mortgage: maintained 10% overpayment until fixed term completed, moved to avail of UB's lower rate & better overpayment facility
Income: Mrs got a promotion (+13% increase)
Income: Increased personal income (+8%, largely bonus driven, company & personal performance, and so no guarantees...)
Expenditure: Bought new(ish) car for cash (30k)
Expenditure: Home improvements (5k)
Updates below:

Spouse’s/Partner's age: 36

Annual gross income from employment or profession: 130-135k (incl bonus)
Annual gross income of spouse: 50k

Monthly take-home pay: 8.2k

Type of employment: Private (both)

In general are you: saving 2.25k p/m

Rough estimate of value of home: 800k
Amount outstanding on your mortgage: 440k
What interest rate are you paying?: 2.6% (29 yrs remaining)

Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month?: Yes

Savings and investments: 80k
Restricted Stock Units: 35k (vested)

Do you have a pension scheme? Yes, me a company DC scheme (approx 210k) / Her, a company sponsored PRSA (minimal amount, kept due to employer match)

Do you own any investment or other property?: No

Ages of children: 3, and a new one soon...

Insurance: DIB x4 base salary, Income protection (€55k pa)




mojoask said:


> Age: 35
> Spouse’s/Partner's age: 35
> 
> Annual gross income from employment or profession: 125k (incl bonus)
> ...


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## nest egg (19 Jan 2020)

My annual update, for anyone who may be interested.  Going to try to remember to do this every January, even if it's just for an audience of 1 

2019 Highlights:

*Family*: Baby #2 arrived during the summer, all well so far
*Pension*: Maxed out contributions, coupled with market performance & company contributions up 75k. Mrs maintained her 4% contribution (found out pot size, ~15k).
*Mortgage*: Overpaid by ~15%, now 430k (was 440k)
*Income*: Mrs income down 10k, due to maternity leave (3 months paid / 3 months state benefit)
*Income*: My income static (moderate increase in base salary, bonus lower than 2018)
*Expenditure*: Replaced Mrs car (18.7k cost to change)
*Savings & investments*: Static 
Thought I'd share the plan for 2020, let's see how I do...

2020 Plan:

*Family*: Cover the 6 months unpaid maternity leave my Mrs will take this year (via pausing mortgage overpayment, efficient sharing of tax credits / bands, reductions in day to day spending where feasible, savings as a last resort)
*Pension*: As for 2019, max my contributions / Maintain Mrs 4% contribution (for employer match)
*Mortgage: *Resume overpayment once Mrs returns to work (may do this more aggressively than in the past)
*Income*: Mrs income will be significantly down due to unpaid maternity (a further 10k on 2019 / 20k on a normal year)
*Income*: Mine expect to be ahead of 2019 due to moderate increase / bonus + RSU vest
*Expenditure*: No major expenditure planned
*Savings & investments*: Expect some hit due to maternity leave, hopefully will remain static



mojoask said:


> Thought I'd post an update for those who might be interested.
> I did intend making this an annual event, and then promptly forgot... so here's a 13 month catch up.
> 
> Highlights from 2018
> ...


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## Clamball (19 Jan 2020)

Will your expenses go up significantly with 2 childcare once your wife returns to work?  I think you are doing great overall, everything seems to be well planned, I am not sure about the reduction in the day to day spending while on Mat Leave, you should be easily able to maintain the same level of spending from your own income?


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## nest egg (19 Jan 2020)

Thanks, the plan fits into a very simple strategy; over the next 12-13 years: 1) to grow my pension pot to €1m &, 2) have the house repaid, which also hopefully is worth €1m by then. Anything left over would go into my wife's PRSA. No doubt there are other more lucrative ways of making money, but with young kids, and full time careers, the ROI Vs time needed for this approach is hard to beat for us.

Re: creche. It's a good point, "baby" #1 will go to primary school not long after #2 starts crèche, so costs will be broadly neutral. After-school will need to be accounted for, that may involve some grandparent / family support, but we'll see closer to the time. Re: day to day spending while on 1 income, you're right it can be covered by my salary, we also know there's a collective reduction in earnings right now, so we're consciously being more mindful about our spending right now, where we can. We know we're very fortunate, and life is still good!


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## SPC100 (23 Jan 2020)

Are you maximise the higher rate tax relief on your partner's pension contributions. I know you said you were doing 4% match. Given earnings level and 1M pension goal, imo you should capture full tax relief for your wife's pension.

Given your pension might have value of about 300k now, have you looked at what funds you are invested in and what are the charges?


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## nest egg (23 Jan 2020)

You've hit on a topic we've debated a lot. With taking the time off for maternity, she will only get relief at 20%, so we're more inclined to pursue goal #2 and overpay the mortgage, once her income comes back on stream later in the year. 

For 2021, that's the big question.... Current thinking would be to continue with the same approach for two reasons 1) We have enough exposure to equities via my pension, 2) Debt is cheap right now, it might not always be this way. Spending a few years getting the mortgage down, so that if interest rates ever do go up, our exposure is reduced, seems like the prudent thing to do, even if returns may be better via her PRSA. Happy to hear other views however, it'll help us make an informed decision.

Re: my pension, yes I've looked, it's in a passive equity fund, with low charges. Will automatically move into more interesting (i.e. expensive) funds in my 40s, if I don't step in and take control. It's highly likely I will step in... another topic to plan for


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## RedOnion (23 Jan 2020)

mojoask said:


> You've hit on a topic we've debated a lot. With taking the time off for maternity, she will only get relief at 20%


How much will she earn in the full year of 2020? I think I've misunderstood numbers.


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## nest egg (23 Jan 2020)

RedOnion said:


> How much will she earn in the full year of 2020? I think I've misunderstood numbers.



Normally 50k, would expect 30k in 2020 due to unpaid maternity.


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## RedOnion (23 Jan 2020)

mojoask said:


> Normally 50k, would expect 30k in 2020 due to unpaid maternity.


Assuming you're jointly assessed, flip part of her tax band to you, she keeps 26,300 and anything over that will be high rate, therefore high rate relief if she puts in pension.
You're not talking about huge amounts, but might as well keep both pension pots growing.


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## SPC100 (24 Jan 2020)

RedOnion said:


> Assuming you're jointly assessed, flip part of her tax band to you, she keeps 26,300 and anything over that will be high rate, therefore high rate relief if she puts in pension.
> You're not talking about huge amounts, but might as well keep both pension pots growing.


That is a great idea about how to maximise relief for a couple where one is already at max contributions and the other is a lower earner. Worth a key post imo. It's first time I have seen this suggestion.


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## nest egg (6 Jan 2021)

It's that time again folks, I've no idea whether anyone is interested in this, other than myself, but I find it useful anyway!

2020 Highlights:

*Pension*: Maxed out contributions, coupled with market performance & company contributions, pots now at about 350k. (Target met)
Mrs maintained her 4% contribution, pot at 22k (plan was to make AVCs, so target missed)

*Mortgage*: Now 420k (approx 50% LTV, no overpayments this year, the plan was to do this once my Mrs returned to work, there's no good reason why we didn't, so target missed!)
*Income*: Down to 30k (due to extended unpaid leave which was planned, target met)
*Income*: Up to 155k (moderate increase in base salary, improved performance bonus and RSU vest mean target exceeded)
*Expenditure*: Increased childcare costs (now ~2k/mth which is as expected, so target met, although a painful one!)
*Savings & investments*: 130k (no clear target for '21, area of improvement, see below)
Looking ahead...

2021 Plan:

*Pension*: continue to max my contributions / maintain Mrs 4% contribution (for employer match) & make use of AVC allowance to max her contributions.
*Mortgage: *Resume 10% overpayment
*Income*: Mrs, expect back to normal (~55k pa)
*Income*: Mine, expect to be in the 145-155k range (subject to final bonus / RSU vest)
*Expenditure*: No major expenditure planned, continued increased childcare costs (additional 12k pa)
*Savings & investments*: grow by 30k
We're very fortunate that the pandemic has had no real impact on our livelihoods, it's been a different year obviously, but in many respects there have been benefits as I've had less of the usual work obligations (travel, work dinners etc) which have improved work-life balance.

For the coming year, one of the ideas we're toying with is whether my wife opens a self-directed PRSA for her AVCs, rather than adding to her existing PRSA account with its high charges.


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## 50andOut (7 Jan 2021)

Actually its particularly interesting to see the journey as it develops and how decisions / thoughts may change over time so thanks for continuing on with it !


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## NotPoodle (7 Jan 2021)

Agree, I found this trail extremely insightful - thanks for updating @mojoask


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## nest egg (7 Jan 2021)

Cheers folks, glad to hear there's some interest, I plan to keep it up. Tune in next year...


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## Pension2020 (11 Jan 2021)

+1 on finding this very helpful-  great to see someone putting a plan in place and putting it into action!


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## _OkGo_ (11 Jan 2021)

You are clearly doing exceptionally well, very healthy pension, healthy equity in your PPR and very good income. My only question is why do you have so much in cash (€130k) and expecting this to rise by another €30k this year? I can understand keeping a larger buffer while your spouse was on mat leave but now surely you should just pay a big chunk (€100k) off your mortgage? If I have read the thread correctly, you have upgraded both cars in the past 2 years so you don't need to hold anything back for purchasing new cars so what other major expense do you see where you need (€130k+) on hand?

It would also have a positive impact on your monthly cashflow if you maintain the term length, reducing your minimum mortgage payment by ~25% (€420k >> €320k)

As RedOnion points out so regularly:


RedOnion said:


> Just remember, you can pay as much as you want. The 10% is just the limit before the check if a break fee applies. Even if a break fee applies, it will ALWAYS be less than the amount of interest you will save.



But overall, well done on planning and controlling your finances so well!


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## nest egg (13 Jan 2021)

_OkGo_ said:


> You are clearly doing exceptionally well, very healthy pension, healthy equity in your PPR and very good income. My only question is why do you have so much in cash (€130k) and expecting this to rise by another €30k this year? I can understand keeping a larger buffer while your spouse was on mat leave but now surely you should just pay a big chunk (€100k) off your mortgage? If I have read the thread correctly, you have upgraded both cars in the past 2 years so you don't need to hold anything back for purchasing new cars so what other major expense do you see where you need (€130k+) on hand?
> 
> It would also have a positive impact on your monthly cashflow if you maintain the term length, reducing your minimum mortgage payment by ~25% (€420k >> €320k)
> 
> But overall, well done on planning and controlling your finances so well!



Thanks for the feedback, we're human at the end of the day, wanted to give an honest update on what we did well, and what we didn't, because that's life and nobody's perfect! If we can do enough of the right things year after year, figures crossed we should be okay.

Good question re: paying off the mortgage. We've only about 30% of the total in cash, the rest is invested, some of which can be easily liquidated, the rest only after a penalty. We've toyed with the idea of using some against the mortgage before, although we would keep the monthly repayments the same, with a view to paying the mortgage early, rather than lowering the monthly payment.  It's a good prompt though, must run the numbers, thanks for the suggestion.


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## nest egg (2 Jan 2022)

For those who've been following this thread, I've been posting an annual update on our finances for the past few years, assessing how we've done for the year just gone, and outlining our plans for the forthcoming year. We hopefully achieve these plans, we sometimes exceed them, and occasionally, we miss them, but that's all part of life. The exercise itself is very useful, helping us take stock of where we are, get feedback on what we're doing, and stay focused on our plans for the future. So without further ado, here's our 2021 update.

2021 Highlights:

*Income*: 
Mine, 159k, that's up on 2020 as a result of bonus & LTI vest (Target Exceeded)
Mrs, back to normal, 55k (Target Met)



*Pension*: 
Mine, maxed available relief, pots now at ~480k (Target Met)
Mrs, increased contributions to ~75% of available relief. In addition, retrospectively maxed 2020 contributions (a miss from last year). Pot now at ~36k, long road ahead but finally making progress (Target Met)



*Mortgage*: 
Overpaid €600 pm / 33% overpayment (Target Exceed)
Balance now at 400k. Puts us at ~40% LTV, based on today's (inflated) prices 



*Expenditure/Cashflow*: 
Tracked in much more detail in 2021 (new pandemic hobby). Given the year that was in it, we spent less in 2021 overall. Looking forward to a more detailed comparison this year using all this lovely new information I've collected over the past 12 months!
For our regular expenditure, childcare is down slightly, as my eldest has started primary. One eye-opener is that after-school costs aren't too far off full time creche fees as it turns out. 
Unplanned expenditure included a couple of white-goods which needed replacing, and a minor car repair, nothing which broke the bank
Finally, despite Covid's best efforts, we had a nice summer holiday!



*Savings & investments*: 
50k in cash. We liquidated a few investments in December to put towards our mortgage (see 2022 below).
Remaining savings / investments (~100k) for emergency purposes, investments which can't be accessed without penalty, and/or a few other items kept for fun (yes it's probably wiser to put everything into the mortgage)



*Savings Rate *(new for 2021, going to track this rate from now on): 
44% (using this model, > total saved/invested in a year, expressed as a % of income)

 
2022 Plan:

*Income*: 
Mine, forecasting 150-155k (lower LTI vest than last year, otherwise income should be similar)
Mrs, forecasting 58k (subject to bonus, a new element of her pay, will see what comes to pass)



*Pension*: 
Me, big 4-0 this year and I'm thrilled! Brings me into the 25% AVC contribution bracket. Aim to max contributions accordingly. As far as I'm aware I can do this on the entirety of 2022 income, regardless of when in the year I turn 40 (open to correction).
Mrs, ditto (less thrilled). Plans to maximise her contributions in this bracket too. Also retrospectively max out her remaining 2021 allowance.



*Mortgage*: 
We're aiming to clear our mortgage in 10 years. We will review this goal periodically to continually assess if it's the best use of spare funds at any given time
Plan for 2022 is to switch providers to reduce our rate, but also to knock 50k off the balance using the investments we just liquidated



*Expenditure / Cashflow*: 
As inflationary pressures increase, expect a knock on effect on day-to-day spending. How much this will affect us we will have to see. With good 2021 data available, there's a clear baseline from which to make a comparison in 2022
No other large purchases planned, nor changes to regular expenditure. 
Fingers crossed another nice family holiday will be on the cards.



*Savings & investments*: 
Shifting focus to Savings Rate from now on, see target below. After-tax savings will be channelled into the mortgage in line with the plan above



*Savings Rate:* 
Target 50% (increase largely due to change in pension contribution bracket)


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## nest egg (3 Jan 2022)

EDIT: Mistake spotted with the new savings % model. If I follow it correctly, the actual rate was 44% in 2021, and fingers crossed, should be 50% this year. Following a consistent calculation approach, and tracking it correctly I suppose is what's most important.


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## nest egg (3 Jan 2022)

For anyone who might be interested, quick overview of the model used to calculate the savings rate. The method used on reddit seemed reasonable but I would be interested in how others do this, if anyone has their own approach?

Savings Rate

Take-home/after tax income savings (incl. mortgage overpayments)
Pre-tax contributions (eg: pension contributions, incl. any employer matching)
Total Savings (1+2)
Total Income (Take-home/after-tax income & any pre-tax contributions)
Savings Rate % = Total Savings (3) / Total Income (4)
PS: Thanks for taking the time to read the latest update, if anyone thinks we should be doing something differently for our 2022 planning, I'm all ears!


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## PebbleBeach2020 (3 Jan 2022)

Unsure if there's a separate thread. A friend of mine recently retired is looking for a home for a lump sum, fairly decent amount 50-100k. Besides state savings, what other options does she have?


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## ClubMan (11 Jan 2022)

mojoask said:


> *Pension*:
> Me, big 4-0 this year and I'm thrilled! Brings me into the 25% AVC contribution bracket. Aim to max contributions accordingly. As far as I'm aware I can do this on the entirety of 2022 income, regardless of when in the year I turn 40 (open to correction).


That's correct.


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## nest egg (26 Dec 2022)

Another year, another update! Actually it's 5 years since I first started this thread, time really does fly. 
Thought I'd do a 'before and after' comparison on this occasion, especially as we both hit a major age milestone in 2022.

Age: 35 / *40*
Spouse’s/Partner's age: 35 / *40 *

Annual gross income from employment or profession: 125k (incl bonus) / *160-170k (depending on bonus / RSU vests)*
Annual gross income of spouse: 44k / *64-65k (depending on bonus)*

Monthly take-home pay: 8k / *8.2k *

Type of employment: Private (both) / *Private (both)*

In general are you: saving approx 3k pm / *7.6k pm* *(considering gross AVCs & employer pension contributions) *

Rough estimate of value of home: 730k / *€1m*
Amount outstanding on your mortgage: 450k - 61% LTV / *307k - 31% LTV*
What interest rate are you paying?: 3% (30 yrs remaining) overpaying by 10% of the monthly repayment / *1.95% (25 years remaining) overpaying by up to 10% of outstanding balance p.a.*

Other borrowings – car loans/personal loans etc: None /* None*

Do you pay off your full credit card balance each month?: Yes / *Yes*

Savings and investments: 75k / *85k *

Do you have a pension scheme? Yes, me a company DC scheme (~175k) / ~*455k *
/ Her, a company sponsored PRSA (unsure balance but it's small, charges are high but kept as her company contributes) / *now an OPS,* ~*55k *

Do you own any investment or other property?: No / *No*

Ages of children: 2 / *6 & 3*

Life insurance: I have, through work / *no change*

*Summary*
Reflecting on the last 5 years, despite any recent market turmoil, my pension has been the star performer during this period. It just shows you what can happen when you combine buoyant markets, tax relived contributions and compounding returns. We've also successfully chipped away at the mortgage, especially in the last 12 months. The one regret is not sorting out my Mrs' PRSA sooner. On the bright side, she has maxed AVCs for the past two years, and is on course to do the same in 2023. She's also in a bona fide occupational pension scheme now, with lower charges, which bodes well for the future.

One thing I hadn't realised is just how little our take-home pay had changed since I started the thread, despite an increase in earnings. This reflects how much harder our money is working for us, and that's a result of all the good advice we've received on AAM. So thank you to all the contributors here, you've made a big difference for us.


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## nest egg (2 Jan 2023)

Happy new year all. As well as my last post, I'm continuing the tradition of reviewing the 12 months just gone, to see how we fared, and lay down the plan for 2023. Helps us to focus our minds, hopefully some of you will find it of interest too.

2022 Review:

*Income*: 


Forecast
Actual
Target
Update
Mine
150-155k
160k
*Exceeded*
Increase in base salary
Mrs
58k
64.5k
*Exceeded*
Increase in base salary and better bonus than expected


*Pension*: 


Forecast
Actual
Target
Update
Mine
28.5k
28.5k
Met
25% allowance used / increase in contributions
Mrs
14.5k
21.6k
*Exceeded*
25% allowance used / increase in contributions. Also retrospectively maxed out 2021


*Mortgage*: 


Last Year
Actual
Target
Update
Balance
400k
307k
*Exceeded*
Switched lender & locked in at 1.95% until 2029. Reduced balance by ~90k


*Expenditure/Cashflow*: 


Forecast
Actual
Target
Update
Exceptional
0k
11.5k
*Missed*
Home improvements


*Savings & investments*: 
Savings/investments focused on pensions and mortgage over-payments
Remaining funds (~80k) for emergency purposes, investments which can't be accessed without penalty, and a few other bits to keep things interesting.



*Savings Rate:*


Forecast
Actual
Target
Update
Savings Rate
40%
51.6%
*Exceeded*
Using this model > Total saved/invested expressed as a % of total earnings (excluding tax).

 Saved/Invested = Mortgage overpayments, pension contributions (by us & employers), and any after-tax savings
 
2023 Plan:

*Income*: 
Mine, forecasting 170-175k (subject to bonus/RSU vesting)
Mrs, forecasting 60-65k (subject to bonus)



*Pension*: 
Mine, personal contributions to the maximum limit (28.5k)
Mrs, personal contributions to the maximum limit (15k + bonus)



*Mortgage*: 
Save 2k a month towards an overpayment at year-end (target balance: 275k). On the off chance we find a better return, after tax, in a guaranteed savings a/c, we will keep the funds instead



*Expenditure / Cashflow changes*: 
Nothing major planned (fingers crossed)



*Savings & investments*: 
Continue to prioritize pension contributions & mortgage overpayments



*Savings Rate:* 
Target 45-50%


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