# How am I doing?



## imalwayshappy (23 Jun 2020)

Age: 34

Spouse’s/Partner's age: 32

Annual gross income from employment or profession: €65K (3,300 p/m net after deductions)

Annual gross income of spouse: €56K c. 2,900 p/m (I think)

Type of employment: – PAYE/Public Sector (Nurse)

PPR: €500K, €320K is mortgage outstanding, BOI @ 2.8%. 25 years remaining repayment 1550 p/m

Second property: Value €160k, €110K is mortgage outstanding, Tracker c. 1.15%. Rental income 800 p/m. Repayments c. 700 p/m

Other Income, we rent a room to a student, 9k per year tax free

Other borrowings – Car loan, 5k @ 1.5%

Home improvement loan – 25k @ 4% C. 320 p/m repayment. We use the excess from the rent a room to overpay this loan.

*Other outgoing*

1,500 per month Creche fees

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

Savings and investments: €44k in current account (between us)

Do you have a pension scheme? Yes, I am maxing my contributions. Pension fund c. 80k. Wife is a civil servant.

Ages of children: 4 and newborn

Life insurance: Total is 700k dual life insurance, paying c. 100 per month. I also get 180k cover with work. I am happy with this amount should the worst happen.

*Financial Plan* – This year my goal is to clear off the home improvement loan, as it seems like the best return for my money. After that, I would assume I should really start reducing the home loan? We will have a rainy day fund of c. 20k after I clear the home loan and I am happy with this level. I would love to retire at 60 perhaps with nice pension but am happy to go to 66.

Before I started maximising my pension contribution (late last year) my estimated fund at retirement from the pension was €800k (given by the pension provider in my annual statement). I do not know now where it would potentially come in at with my increased contributions (it is invested in equity’s with a risk rating of 6 I believe with Irish Life) maybe someone could take a stab and offer an indicative value at 66?

Overall, I would like you to throw stones or offer any suggestions on ways to tweak the above.

I hear people talking about college for the kids and saving for that. I live in South Dublin so the kids could stay at home while they attend college (like I did). I can understand if you lived down the country and had to factor in accommodation costs for kids but there is probably no reason why if the children attend college in Dublin, which has a lot of courses available I would need to factor in these costs.

All thoughts are welcome thanks for reading!


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## cremeegg (23 Jun 2020)

You are doing fine.

Pay off the home improvement loan from your savings tomorrow.


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## Steven Barrett (23 Jun 2020)

imalwayshappy said:


> I hear people talking about college for the kids and saving for that. I live in South Dublin so the kids could stay at home while they attend college (like I did). I can understand if you lived down the country and had to factor in accommodation costs for kids but there is probably no reason why if the children attend college in Dublin, which has a lot of courses available I would need to factor in these costs.
> 
> All thoughts are welcome thanks for reading!



Living in South Dublin, what is your intention for secondary school for your kids too? Is a private secondary school something to consider? If so, you should look at funding for it now. Even if you're just going to be funding for college, why do all the heavy lifting yourself. Start investing money now and for a few hundred a month, you will have their college fund paid for without dipping into cashflow when they are 18. 

You should also look at income protection if you don't have it from work. 

Otherwise, like cremeegg says, you are doing fine and pay off the home improvement loan. 


Steven
www.bluewaterfp.ie


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## mtk (23 Jun 2020)

great postion
FYI approx. college costs for 2 per annum are currently registration x2=6k
plus transport 720x2 +no child benefit after 18 +private hea[th insurance higher over `18 +lunches +social life


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## Blackrock1 (23 Jun 2020)

your childcare costs are going to increase a lot or one of your incomes is going to suffer with two kids, factor that in aswell.


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## Khublei (23 Jun 2020)

I would echo the above. No reason to keep all that money in your current account earning no interest, and then paying 4% on a loan. Pay it off today. 
Other than that you're doing great.


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## imalwayshappy (23 Jun 2020)

Thanks everyone for the responses some really good info there and things I never thought about such as transport for kids etc. Could anybody advise on a projected pension calculator by any chance? I have looked at ones from the UK however their projected pension fund is coming nowhere near Irish lifes pension estimate. Thanks again


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## imalwayshappy (23 Jun 2020)

SBarrett said:


> Living in South Dublin, what is your intention for secondary school for your kids too? Is a private secondary school something to consider? If so, you should look at funding for it now. Even if you're just going to be funding for college, why do all the heavy lifting yourself. Start investing money now and for a few hundred a month, you will have their college fund paid for without dipping into cashflow when they are 18.
> 
> You should also look at income protection if you don't have it from work.
> 
> ...


Thanks Steven for this very valid points. Would you recommend a map fund which is invested in equities to save for the college fund. Am I not overexposed to equities via my pension fund?


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## imalwayshappy (23 Jun 2020)

mtk said:


> great postion
> FYI approx. college costs for 2 per annum are currently registration x2=6k
> plus transport 720x2 +no child benefit after 18 +private hea[th insurance higher over `18 +lunches +social life


They will have to get a job to fund their own social life like I did


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## cremeegg (23 Jun 2020)

imalwayshappy said:


> PPR: €500K, €320K is mortgage outstanding, BOI @ 2.8%. 25 years remaining repayment 1550 p/m



Rather than saving for your kids college now, after you have paid off the home improvement loan, make a plan to have this mortgage paid before the kids start college. A guaranteed after tax 2.8% return is good and it will free up €1,550 per month guaranteed.

Pension calculators should be banned, they tell you nothing but fool you into believing you have some insight. Assume a 3% return look at what you get, now assume a 6% return then a 9% return huge differences, no clue which will be closer to the truth.


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## Blackrock1 (23 Jun 2020)

mtk said:


> great postion
> FYI approx. college costs for 2 per annum are currently registration x2=6k
> plus transport 720x2 +no child benefit after 18 +private hea[th insurance higher over `18 +lunches +social life



only thing is, given the age gap, its likely the elder will be finished when the next one starts


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## Steven Barrett (24 Jun 2020)

imalwayshappy said:


> Thanks Steven for this very valid points. Would you recommend *a map fund* which is invested in equities to save for the college fund. Am I not overexposed to equities via my pension fund?



An Irish Life map fund? God, no, they're rubbish. 

Your eldest is 4, so 14 year before you need to draw down on the money, so plenty of time to invest in equities. If the volatility that goes with equities is too much, invest in a Balanced fund. Remember, risk and return are related!


Steven
www.bluewaterfp.ie


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## Steven Barrett (24 Jun 2020)

cremeegg said:


> Rather than saving for your kids college now, after you have paid off the home improvement loan, make a plan to have this mortgage paid before the kids start college. A guaranteed after tax 2.8% return is good and it will free up €1,550 per month guaranteed.



While it's great to be debt free, the problem with paying down your mortgage is that once its been paid in, you can't get it back. Then life gets in the way and all those unexpected expenses rear their ugly head. A balance has to be found between accumulating wealth for short, medium and long term use. Paying down the mortgage as soon as you can will look after the long term but not the short and medium term.


Steven
www.bluewaterfp.ie


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## imalwayshappy (25 Jun 2020)

SBarrett said:


> An Irish Life map fund? God, no, they're rubbish.
> 
> Your eldest is 4, so 14 year before you need to draw down on the money, so plenty of time to invest in equities. If the volatility that goes with equities is too much, invest in a Balanced fund. Remember, risk and return are related!
> 
> ...


Thanks Steven, I have no knowledge of equities would you recommend a fund that tracks the FTSE 100 or something like that? Would you know of any such funds? Would it be beneficial to get an account with Degiro or something along those lines? Thanks again


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## Gordon Gekko (25 Jun 2020)

SBarrett said:


> While it's great to be debt free, the problem with paying down your mortgage is that once its been paid in, you can't get it back. Then life gets in the way and all those unexpected expenses rear their ugly head. A balance has to be found between accumulating wealth for short, medium and long term use. Paying down the mortgage as soon as you can will look after the long term but not the short and medium term.
> 
> 
> Steven
> www.bluewaterfp.ie



This is really smart advice.

There is far too much focus on AAM around paying back one’s mortgage early.

One mightn’t always be able to access credit.

As with so many things, it’s about striking a balance.

But in simple terms, if the kids’ college education is going to cost €100k, I’m better off having €100k in cash and owing €100k on my mortgage than simply being mortgage-free.

Similarly, unless I’ll breach the €2m pension threshold, I’m better off making an AVC with some spare cash rather than overpaying on my mortgage.

By all means, overpay one’s mortgage rather than investing in one’s own personal name for no particular reason other than to make money, but if money if required for something specific down the line, it needs to be planned for and accessible. And if the time-horizon allows for it, it can have its own mini-investment time horizon.


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## OMG_OMG (25 Jun 2020)

imalwayshappy said:


> Thanks Steven, I have no knowledge of equities would you recommend a fund that tracks the FTSE 100 or something like that? Would you know of any such funds? Would it be beneficial to get an account with Degiro or something along those lines? Thanks again



Dont make the mistake I did.
I invested in equities with Degiro.  Buying and selling different ETFs in different countries thinking it was easy.
Now I am in a mess to sort out what tax I have to pay on what I sold (I thought that would be easy to work out).  Ive no idea and will need an accountant to look at it.
Educate yourself before, not after you do it


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## Steven Barrett (25 Jun 2020)

imalwayshappy said:


> Thanks Steven, I have no knowledge of equities would you recommend a fund that tracks the FTSE 100 or something like that? Would you know of any such funds? Would it be beneficial to get an account with Degiro or something along those lines? Thanks again




You can track something like the MSCI World Index or S&P 500. DeGiro is low cost but don't expect anyone there to hold your hand. You have to negotiate yourself around the website and be aware of the different currencies for an ETF and whether it is accumulating or distributing. If you are putting in a small enough amount each month, you can look at the insurance company regular saver plans. A bit more expensive but they look after all the admin and tax for you. People on here say they are too expensive but that's not my experience. Just fill out the form and a direct debit mandate and off you go. 


Steven
www.bluewaterfp.ie


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## Sarenco (25 Jun 2020)

Gordon Gekko said:


> But in simple terms, if the kids’ college education is going to cost €100k, I’m better off having €100k in cash and owing €100k on my mortgage than simply being mortgage-free.


I really don't understand this approach.

I think we can all agree that, in general, it makes no sense to borrow money @3% to place it on deposit earning zero interest.  So why would it make sense to do so to address one particular anticipated expense in the distant future?

Paying down a mortgage now should increase disposable income at the time the expense needs to be addressed (i.e. when the kids go to college). That should allow college expenses to be met out of the increased disposable income at that time - the expenses don't have to be paid in one lump sum.

If for some reason income is materially reduced at that time, fee and maintenance grants are available.  These grants are means-tested on the basis of gross income - assets are ignored.  Obviously no grants are available to meet mortgage repayments!


SBarrett said:


> People on here say they are too expensive but that's not my experience


IIRC insurance company savings plans typically have an AMC of around 1.25% - IMO that is very expensive.

But more importantly the taxation of these plans is punitive - 41% exit tax, with a deemed disposal every 8 years.

The probability that the after-tax return on one of these plans will exceed or even just match the interest savings by simply paying down a mortgage is pretty low.   And there is a material risk that the return will be significantly lower than the interest savings - it's a far riskier option.

IMO it rarely makes sense to invest after-tax money while carrying a mortgage.


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## Steven Barrett (25 Jun 2020)

Sarenco said:


> IIRC insurance company savings plans typically have an AMC of around 1.25% - IMO that is very expensive.
> 
> But more importantly the taxation of these plans is punitive - 41% exit tax, with a deemed disposal every 8 years.
> 
> ...



Premiums tend to be small. For a €200 per month policy, that's €30 in year 1. It compounds obviously but not that expensive given the admin, ease of management and the taxation is taken care of. Putting €200 per month into a DeGiro account may be cheaper but a lot more hassle. 

The tax is the same as ETFs and funds. Unless you go for investment trusts or individual stocks, there's not many options in getting around it. 

The reason of investing instead of paying into the mortgage is that you might actually need to spend it. 

Steven
www.bluewaterfp.ie


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## Gordon Gekko (25 Jun 2020)

Sarenco said:


> I really don't understand this approach.
> 
> I think we can all agree that, in general, it makes no sense to borrow money @3% to place it on deposit earning zero interest.  So why would it make sense to do so to address one particular anticipated expense in the distant future?
> 
> ...



Fair enough, but I fundamentally disagree.

If I have €100k in cash, €100k in mortgage debt, and a €100k expense in the future, I believe it’s more prudent and a better overall plan to not clear the mortgage.

You simply don’t know that you’ll have the funds or be able to access the credit in the future.

It is not as simple as the basic maths.

It’s a bit like having an emergency fund that’s equal to the amount outstanding on your mortgage; I wouldn’t advocate clearing the mortgage.

One does not know what is around the corner.


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## Sarenco (25 Jun 2020)

Gordon Gekko said:


> It’s a bit like having an emergency fund that’s equal to the amount outstanding on your mortgage; I wouldn’t advocate clearing the mortgage.


That's effectively paying a massive premium for liquidity you almost certainly won't need.

IMO paying down a mortgage ahead of schedule is the best college funding plan.

I might take a different view if we had a tax-advantaged saving scheme for college expenses (like 529 plans in the US).  But unfortunately we don't have anything like that here.


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## cremeegg (25 Jun 2020)

SBarrett said:


> While it's great to be debt free, the problem with paying down your mortgage is that once its been paid in, you can't get it back..... A balance has to be found between accumulating wealth for short, medium and long term use.



Rather than a being a matter of balancing competing demands I suggest that liquidity takes precedence. It’s no good being wealthy if you don’t have access to cash when you need it. 
However in the OPs case, liquidity does noT seem to be a concern.


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## imalwayshappy (25 Jun 2020)

Blackrock1 said:


> your childcare costs are going to increase a lot or one of your incomes is going to suffer with two kids, factor that in aswell.



I don't know how much more child care costs can increase, I believe I am in the most expensive part of my life paying Creche fees!


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## Blackrock1 (25 Jun 2020)

imalwayshappy said:


> I don't know how much more child care costs can increase, I believe I am in the most expensive part of my life paying Creche fees!


You are only paying for one at the moment right ?


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## imalwayshappy (26 Jun 2020)

Blackrock1 said:


> You are only paying for one at the moment right ?



No two at present 1500 per month


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## Steven Barrett (26 Jun 2020)

imalwayshappy said:


> I don't know how much more child care costs can increase, I believe I am in the most expensive part of my life paying Creche fees!



Creches fees are nuts alright. But as they get older, they want more so there's always costs. They want an XBox and games. A new bike, tracksuits (the cost was a real shock!!). They may need braces, they may go to a fee paying school. While these may not add up to €18,000 a year, kids are bloody expensive!!


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## imalwayshappy (26 Jun 2020)

SBarrett said:


> Creches fees are nuts alright. But as they get older, they want more so there's always costs. They want an XBox and games. A new bike, tracksuits (the cost was a real shock!!). They may need braces, they may go to a fee paying school. While these may not add up to €18,000 a year, kids are bloody expensive!!



Time for a my four year old to get a job so and start contributing to the household income! 

What I found interesting in the UK was how people start a pension fund early for their children. I think it is a really good idea although we don't have it here. By the time the children start out on their career they could be sitting on a pension fund of over 100k. Great idea!

[broken link removed]


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## Blackrock1 (26 Jun 2020)

imalwayshappy said:


> No two at present 1500 per month


Sorry presumed when you said new born the baby wasn’t in childcare yet

1500 is very good for two in fairness


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