# Early 30's - €100k in Savings. Are We On the Right Track?



## flyingfolly (15 Jul 2018)

*Age*: 33
*Spouse’s/Partner's age*: 36
*Annual gross income from employment or profession*:  Approx 85k (52k net)
*Annual gross income of spouse*: Approx 56k
*Monthly take-home pay*: 4k self (7k combined)
*Type of employment*: Self-employed
*In general are you*: Saving

*Rough estimate of value of home*: 300k
*Amount outstanding on your mortgage*: 185k 
*What interest rate are you paying*? 3.85%
*Other borrowings – car loans/personal loans etc *- none
*Do you pay off your full credit card balance each month*? Yes (have none)

*Savings and investments*:

Approx €6k in crypto
Approx €5k in Degiro, invested in S&P 500 ETF and Tesla shares
€60k in Black Bee Pharma 3&5 (90% protected)
€25k in Energy Supply bond (3.25% return for 3 years)
€10k personal business loan to a friend (3% yearly for 3 years - option to pay back in full, early with full return)
€1600 state savings account
€950 7 day savings account

*Do you have a pension scheme?* Yes
*Do you own any investment or other property?*  No
*Ages of children*: 1
*Life insurance*: Yes

I'm the main saver and earner in the household. I'm both self employed and employed (sole trader and have my own company). As a sole trader, I get the artists exemption scheme so all income earned from royalties is tax free (to a limit of €50k). Around 85-90% of my income as a sole trader is applicable to the artists exemption. As a sole trader, I earn around €7k per month and pay myself €500 net per week from that account. As an employee, I pay myself €500 net weekly from my company. 

Each month we're saving:
€2k to AIB 7 day savers account
€50 to Degiro
€200 state savings account

When the AIB 7 day savers account hits around €10k to €20k, then I look for a potential investment from Black Bee to invest in rather than just letting it sit in the account. I try to keep the investments at around 3 years.

We save €200 per month into a state savings account and hope to leave it for around 18 years or so to pay for college as it should be around €49k by that point. 

We have 3 years left on our fixed mortgage before it comes up for renewal and I'm thinking of just potentially paying it off in full as I should have enough money by that point (I can pull lump sums out of my business accounts now and again). We like the house and will never want to move anywhere else, but might consider an extension once mortgage is cleared.

I also pay a decent amount into two pension funds and should have around €1 million by 55. We have basic health insurance and a life assurance plan of around €900k (convertible).

We go on four nice holidays a year, but essentially we're:


Earning approx €84k net per year
Saving €24k per year (generally more as I take additional lump sum bonuses)
Have a mortage of €180k on a €300k house with 3 years left before renewal (mortgage length of 28 years)
Just over €100k in savings 
No debt (don't even own credit cards), no car loans etc.
I'm trying to cover all of the bases really so essentially:
- Good pension
- No debt
- Health insurance
- Money for college for kids
- Good life assurance

Are we in a good position for our early 30's? Should we be saving more? Is there anything we should be doing differently? If we do pay off our mortgage, what should we focus on next? I may potentially be selling a company asset which might result in an additional €300k in cash but I'm not sure what to do with this other than pay off mortgage.


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## POC (15 Jul 2018)

I can’t answer your financial queries - you appear very wealthy to me! 
Life isn’t just about accumulating wealth though.
What about quality of life? Are you both happy with your work life balance? You have one baby and it sounds like you plan to have more. Are you both going to continue working full time? Is your current home suitable for your family’s long term needs (size, location etc)?


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## RedOnion (16 Jul 2018)

audioflaps said:


> *What interest rate are you paying*? 3.85%


I'm assuming you're on a fixed rate? Which lender?
Overall you're in a good position, but I don't understand you putting large amounts in low return savings, where return is taxable, while paying such a high mortgage rate.
Effectively you're borrowing at 3.85% to put money into state savings.


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## Brendan Burgess (16 Jul 2018)

Hi Audio

As Red says, you should pay your savings off your mortgage.  It's crazy to be borrowing at 3.85% to be investing in state savings.  It's crazier to be borrowing at 3.85% to be buying Crypto and Tesla.

The problem is that you see your savings as separate from your mortgage. They are not. You must integrate both.

Check with your lender and you may be pleasantly surprised at the break fee. It will probably make sense to liquidate as much as you can of your investments and pay it off.

I had not heard of Black Bee, but I had a look at their website. I don't need to look much further. These are the same sorts of structured products provided by BCP which make a fortune for brokers and the manufacturer but are terrible for investors - actually savers. These are savings products dressed up to look exciting.  You are probably stuck in this to maturity but as soon as it matures, get out of it and pay down your mortgage. Alternatively, ask the broker who sold it to you to give you a guaranteed investment that pays you more than 3.85% tax free. 

Brendan


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## Brendan Burgess (16 Jul 2018)

audioflaps said:


> We save €200 per month into a state savings account and hope to leave it for around 18 years or so to pay for college as it should be around €49k by that point.



This is a common mistake. Your child is only 1!   Paying  €200 per month off your mortgage will save far more than €49k over 18 years. 

When you have your mortgage paid off, you should put your savings into pure equity products - not deposit accounts designed to look like equities.  

Brendan


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## Brendan Burgess (16 Jul 2018)

A small point on pension planning for artists or people with exempt income. 

It's unlikely to make sense to contribute to a pension unless your other income is taxed at the top rate of tax.  In your case, it seems that you are, so contributing to a pension makes sense for you. But if your situation changes so that your top rate of tax is only 20%, then you should review this. 

Brendan


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## Brendan Burgess (16 Jul 2018)

It's sometimes very hard for people to understand the integration of mortgages and savings. So let me put it another way. 

Let's say you have an €80k mortgage and no investments or savings. 

Your bank offers to lend you €60k at 3.85% to invest in something called "Black Bee Pharma 3&5 (90% protected)".

I presume you would laugh in their face. 

By investing in this while you have a mortgage which costs you 3.85%, that is what you are doing. 

Brendan


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## flyingfolly (16 Jul 2018)

Thanks guys. The reason I did those savings investments is because we had a five year fixed mortgage with Aib so are unable to pay it off early until it comes up for renewal which is in three years time. Does that make better sense now with that in mind?


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## flyingfolly (16 Jul 2018)

Brendan Burgess said:


> This is a common mistake. Your child is only 1!   Paying  €200 per month off your mortgage will save far more than €49k over 18 years.
> 
> When you have your mortgage paid off, you should put your savings into pure equity products - not deposit accounts designed to look like equities.
> 
> Brendan


Could you give an example of what a pure equity product is please? Thanks!


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## flyingfolly (16 Jul 2018)

RedOnion said:


> I'm assuming you're on a fixed rate? Which lender?
> Overall you're in a good position, but I don't understand you putting large amounts in low return savings, where return is taxable, while paying such a high mortgage rate.
> Effectively you're borrowing at 3.85% to put money into state savings.



We're with Aib with three years left on our fixed rate so are unable to pay off in the meantime. The idea is to have enough savings to pay it off in full when it comes up for renewal?


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## Bronte (16 Jul 2018)

I wouldn’t pay the mortgage right off. It’s easier to get credit when you have credit. 

What life insurance do you have.


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## Brendan Burgess (16 Jul 2018)

audioflaps said:


> We're with Aib with three years left on our fixed rate so are unable to pay off in the meantime.



Hi Audio 

You can pay it off at any time.  Unfortunately, AIB has the highest early break fees. 

****You should definitely ask them for a quote for a break fee immediately, whether you decide to break out or not****

I believe that AIB is calculating it incorrectly and will have to go back and compensate people to whom they misquoted a break-fee. 

But it will probably still make sense to break out. If I am right, then you will get retrospective compensation for the overcharge. 

Brendan


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## Brendan Burgess (16 Jul 2018)

audioflaps said:


> Could you give an example of what a pure equity product is please? Thanks!



Hi Audio - my personal preference is to invest directly in a portfolio of shares. 

But the majority believe that a low cost Exchange Traded Fund is better. 

Brendan


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## flyingfolly (16 Jul 2018)

Brendan Burgess said:


> Hi Audio
> 
> You can pay it off at any time.  Unfortunately, AIB has the highest early break fees.
> 
> ...



I did not know that! I thought fixed meant you couldn't pay it off at all. Going into the bank today to see what the story is and how much it would cost.


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## Brendan Burgess (16 Jul 2018)

And make sure to get a quote in writing or at least the name of the person giving you the quote. 

It will be useful if it turns out you have an overcharging claim in future. 

Brendan


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## flyingfolly (16 Jul 2018)

Brendan Burgess said:


> And make sure to get a quote in writing or at least the name of the person giving you the quote.
> 
> It will be useful if it turns out you have an overcharging claim in future.
> 
> Brendan



Thanks. Went into Aib and they said they can do it in branch any more so I have to call and talk to the mortgage team on the phone. Apparently there is a fee if you pay off early during a fixed rate but no fee if you pay off during variable rate. Will confirm with the team on the phone later. 

It sounds like I should basically just be throwing everything against the mortgage to get the full benefit of my current circumstances (but hold a chunk for emergency fund) when it's possible to do so right?


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## Andy836 (16 Jul 2018)

audioflaps said:


> We have 3 years left on our fixed mortgage before it comes up for renewal and I'm thinking of just potentially paying it off in full as I should have enough money by that point (I can pull lump sums out of my business accounts now and again). We like the house and will never want to move anywhere else, but might consider an extension once mortgage is cleared.



Just on the mortgage/extension thing. I could be wrong, but I thought there were minimum mortgage amounts for most banks. So if you paid off your mortgage in full, and your extension cost is less than the minimum mortgage size a Bank requires, then you're looking at a consumer loan (high interest rate) if you don't have all the cash at the time. So rather than funding the extension with a cheap top-up mortgage (3% ish) you might have to fund it with a shorter term loan paying 7% or higher.

One other point, you're kid is 1 now. You're holidays are going to get more and more expensive - kids need their own seats, you need bigger hotel rooms/airbnbs, when they start school you'll have to travel at the most expensive times of the years (when schoold's out), they need there own tour or park entry fee etc. Kids are bloody expensive.

Otherwise, nice work. You're in a great position.


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## Brendan Burgess (16 Jul 2018)

audioflaps said:


> We like the house and will never want to move anywhere else, but might consider an extension once mortgage is cleared.



Hi Andy

I had missed that. 

But if he pays all his current savings off his mortgage, he will still owe c. €80k 

So Audio - pay it off but leave the term the same. 

If, after a few years, you have paid it down even further and you are thinking of an extension - then you can decide whether to save for the extension or remortgage. 

But the correct thing to do now, is to pay down the mortgage while keeping the term the same.

Brendan


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## cremeegg (16 Jul 2018)

While I agree with Brendan about using savings to reduce the mortgage that seems to me less important than getting out of investments you don't understand.



audioflaps said:


> Apparently there is a fee if you pay off early during a fixed rate but no fee if you pay off during variable rate. Will confirm with the team on the phone later.



This comment, while perfectly correct, suggests a very low level of familiarity with matters financial, (its the "apparently" that gets me). Certainly not suited to someone investing in Cryptos or Tesla shares.


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## flyingfolly (16 Jul 2018)

cremeegg said:


> While I agree with Brendan about using savings to reduce the mortgage that seems to me less important than getting out of investments you don't understand.
> 
> 
> 
> This comment, while perfectly correct, suggests a very low level of familiarity with matters financial, (its the "apparently" that gets me). Certainly not suited to someone investing in Cryptos or Tesla shares.



Correct, I certainly have more money than sense and don't deny it. I'm trying to educate myself on financial matters though - its only three years ago that I had to figure out what a mortgage was and only in the last 2 years am I making what I'd call decent money so its all pretty new to me. I made about 20k profit in crypto (left the remaining 6k in there) and my Tesla shares have gone by up by around 10% with S&P 500 going up 4%. All sheer luck so far and I don't expect it to continue. 

Are there any good books, articles etc. you could suggest that are a good starting point on all matters financial like this?


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