# What to do with additional 150k p.a.?



## AGoodLife (27 Feb 2021)

Warning long post - It was a very useful exercise for myself to write this out, and if you are reading this, I would encourage you to do one yourself.

I wanted to do one of these for years, but always felt too shy. Finally I decided to do it under a new account.

I would really appreciate feedback. 

*Age*: Early 40s
*Spouse’s/Partner's age*: same

*Annual gross income from employment or profession:* ~375k 
*Annual gross income of spouse: *~50k (works part time)

*Monthly take-home pay*: (varies, depending on bonuses and shares)

*Type of employment:* Both private sector employees

*In general are you:
(a) spending more than you earn, or
(b) saving?*
Saving, have saved all my life. Parents didn't come from wealthy families, so I guess this was ingrained young.

*Rough estimate of value of home:*  800k (Dublin)
*Amount outstanding on your mortgage:* 275k, about 20 years left, paying 17k per year, regularly overpay.
*What interest rate are you paying?* 2.3% fixed with UB, plan to renew at 2.2 or switch to Avant at 1.95 or pay it off.

*Other borrowings – car loans/personal loans etc*: none.

*Do you pay off your full credit card balance each month?* Yes.
*If not, what is the balance on your credit card?

Savings and investments:*
shares in my company: 250k (probably 30% of this value would be liable for CGT)
Bank deposit: 220k

*Do you have a pension scheme?*
Yes. We max out contributions.
410k (2/3 in occupational pension, 1/3 in a Davy PRSA)
spouse: 50k over two occupational schemes, maxes out the higher rate relief.

*Do you own any investment or other property?*
300k value. mortgage 60k, ecb+.6%, ~750p.m, rent 1500pm

*Ages of children:*
From early primary school to university.

*Life insurance:*
~700k mortgage policy decreasing balance
~600k work policy

*Background info*
We realise we are very lucky, fortunate, and are in an extremely privileged situation. I'm actually embarassed to write about our very fortunate position in this post. I don't think friends and family know how comfortable we are. And externally, other than owning an expensive bombsite, we certainly don't 'look' or 'act' wealthy. Although, now that I write it, I am not really sure how wealthy looks and acts.

Earnings have increased exponentially over the last 5 years. Pessimisitically, I am probably topping out now, and If I lost my job, earnings might drop to 100-200k.

We are careful with our money, and have always lived below our means, we don't 'outsource' much work. We are happy, and don't feel like that we are sacrificing today for a better tomorrow. But we are fairly ruthless on managing the costs of the things we have, have always been on the lowest mortgage rate, always price around for cheapest suppliers for utilitiies, insurance etc.,  Have rented out rooms when younger. Have invested since I was 18, and saved since before my communion. But have also used spent my communion money long ago! 

We have good health insurance. (from work). Some disability insurance from work too, but I don't know the details.

I am holding a lot of money concentrated in my employer's shares. Historically this paid off very well. I occasionally sell off a load and pay down the mortgage. Currently holding some cash in preparation for renovation.

I am comfortable with stock market ups and downs, tax returns etc., I am willing to take risk, and to invest for long term.
I am also relatively comfortable dealing with tenants and tradesmen, and am somewhat handy, but right now I would rather have more free time!

*Spending*
Our total outgoings are about 65k per year (includes 10k on rental mortgage, and 16k on ppr mortgage, and childcare. Exclude pension contributions).

*Lifetime goal:*
I have had a lifetime goal to be comfortably financially independent (i.e. have enough assets that could comfortably cover our expenses till death, without relying on an employer, and without living on beans on toast). I'd like to hit this goal ASAP.

My 'plan' was to own my own home mortgage free, and one or two 'average' rental properties, which should deliver about 30-60% of the 'average' wage, and then to have an equity portfolio (in pension first) covering the rest, and eventually the state pension.

We will accumulate roughly 150k of cash (& company shares) per year after tax a year. Hard to get an exact number but in that region. Net worth increased about 225k over the last 12 months (additional 75k was from pension and shares growth).

*Upcoming Large Expenses.*
Big job on the house. Not sure what this will cost. I am guessing 2-400K. The cash in bank is for this (and probably some or all of the current shares).
Replace a car, budget 10k.
Potentially pay off the mortgage 300k.
College - I assume the kids will live at home, and that our current childcare budget will cover it.

*Advice to self (from reviewing finances)*
You should spend more money, especially to create some great memories, you could die tomorrow, what are you keeping it for?
You should outsource more work and even pay a little more to gain more time.

*Questions:*

1. What should we do with the additional 150k p.a?
I don't know how many more years I will continue to earn at this rate, I would like to invest the money wisely. The options I see are:
-pay off the mortgage, to do that over the next two years feels too safe, I would prefer to have the money work harder for me, I understand that is riskier, but I also have a 20-60 year timframe.
-contribute beyond tax relieft to pension (If I retire early, I understand that I might never be able to use the carried forward tax relief, but at least tax free growth)
-invest outside a pension (not very tax efficient...maybe a large basket of shares directly)
-buy a second rental property? and then a third?
-set up trusts or pensions for the kids (saw some threads here on that recently), and start using the 3k exemption per year? (we never had access to something like that growing up, and I think we benefitted from having to do it ourselves, and I fear they might just blow it, but houses are not cheap these days).
-Some of several of these?

2. How much of our wealth is, too much, to hold in my company shares?

3. Should we long term lease of the rental to the council? They pay 80% of the market rent, there is less risk of non payment, less paperwork,  and less time needed to manage it.

4. Should we bother switching to Avant  1.95% and fix for 3, 5, or 7 years *or* Should we Fix with UB for 2 years or 5 years.
Avant is .25%p.a. lower rate would lower interest by 700 per year, but would cost 1400 switching fess (1200 solicitor + 200 valuation). I would only starting save 700 per year in year three, and by that time, I would likely have a large lump sum to pay most of it down, so potentially no savings. If fix with UB for 2 years, and pay off the allowed 10% per year, that would be about the same interest saved as going to Avant, after the two years, the mortgages available with UB might not be very competivie, and the whole market might be less competive. If I fix with UB for 5 years, I can pay off half the remaining mortgage over the next five years, and that is sort of committing me to take more risk with my savings, and try to make them work harder.

5. Should we sell the bombsite, and buy a nice done up house in the same area? rather than committing to the stress and pain and one or two years of doing a large renovation?

I can't believe you read this far! Thanks for considering our case, and I'd appreciate any insights or suggestions you might have.


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## NoRegretsCoyote (28 Feb 2021)

AGoodLife said:


> Some disability insurance from work too, but I don't know the details.



To me this is a bit of a blind spot. Your family's lifestyle is pretty dependent on your income, and would be even if you earned 1/3 of what you do now. Some kind of income continuance insurance might be worth looking into. 



AGoodLife said:


> College - I assume the kids will live at home, and that our current childcare budget will cover it.



It might be nice to give the kids the chance to live away from home during college. I lived at home as an undergraduate and felt I missed out on a lot. One of my goals is to allow my kids to live away from home if they want to, and I think I'm on track. Are you on track to be able to fund an expensive taught masters or an expensive professional qualification?



AGoodLife said:


> -buy a second rental property? and then a third?



You would most likely buy in Dublin where yields are lowest, and promptly lose half of the profits on tax. I don't see it making sense. I appreciate that you are already maximising tax-relieved pension contributions. In your shoes I would probably just buy a bigger property and live in my wealth. At the same time people generally intend to downsize but rarely do. A big house can be expensive in the long run. Otherwise contributing beyond without tax relief shouldn't be taboo. Over 30 years the tax-free return on equities should be pretty good.

Finally, you are a bit vague on company shares, and I don't know how this really works, but I'm not sure if it makes sense to have all of your income and a lot of your wealth dependent on the fortunes of just one company.


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## bish123 (28 Feb 2021)

Luck favours prepared minds. Congratulations and well done for reaching a comfortable financial state at 40. 

Agoodlife has two parts- earning and spending time/ money on things you love. You haven't mentioned spending on travel, holidays, hobbies etc. 

If a house is worth 800k now, would adding another 400k bring its value to 1.2m? With that income and savings you could easily look for a house in 1.2- 1.3m range. Downsizing at later stage gives you option for early retirement ( say 60) to enjoy life or things like nursing homes.


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## Hooverfish (28 Feb 2021)

Well done! You must have great talents between you and your spouse. Perhaps think about a strategic investment in helping others through a charity that fits with your worldview? This might sound a bit American, but the combination of skills and cash that you have could provide both wonderful help and great satisfaction for you in a bit of philanthropy? I'm not dewy-eyed about the voluntary sector, there are some very badly run charities and some dubious personalities, but if there is something you care about, that motivates you, maybe think about what making a difference would provide you with in return for probably not much money and a little bit of time?


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## Bronte (28 Feb 2021)

I second the view it would be better for your children to live away from home. It’s very beneficial to them. Would also advise to buy rather than renovate. You’ve been vague enough I haven’t figured out who you are! Also agree writing it all down is a good exercise.


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## AGoodLife (28 Feb 2021)

Thanks for all the kind and considered replies - only had time to reply to @NoRegretsCoyote so far,  have to go out to enjoy the simple pleasure of the sun now, but will reply more in the future.



NoRegretsCoyote said:


> To me this is a bit of a blind spot. Your family's lifestyle is pretty dependent on your income, and would be even if you earned 1/3 of what you do now. Some kind of income continuance insurance might be worth looking into.


Great point, I will check out the details of my employers policy. If I fall ill, or can't work that would have a very significant impact. Can I get insurance against losing my job?

We have a very wealthy family member who has repeatedly said, they would love to help, and from which there would likley be a very significant future inheritance. We prefer to be independent. But if the dark stuff ever hit the fan, this is a type of insurance policy too.

If I  die, I think the situation is ok. Death insurance is ~1.3M, which would clear the mortgages, and leave 900k plus the rental income. at current expenditure of about 40k p.a. (ex. mortgages). That seems roughly fine to me.



NoRegretsCoyote said:


> It might be nice to give the kids the chance to live away from home during college. I lived at home as an undergraduate and felt I missed out on a lot. One of my goals is to allow my kids to live away from home if they want to, and I think I'm on track.


Interesting point, will think about it, and I see @Bronte has recommended it too. I lived at home during college, but spent a lot of time in friend's houses, and I agree lots of the fun and experience, and independence, (although the madness too) was in the rented student houses!

We think one or two might do a year abroad as part of college, which would at least give some taste of this.

Have also vaguely considered buying a suitable college property for them or potentially partially retaining ownership, and having them live there, use rent a room scheme, and rent out the rooms. Although maybe it would be too much to expect them to rent to their friends in college.



NoRegretsCoyote said:


> Are you on track to be able to fund an expensive taught masters or an expensive professional qualification?


At current earnings, I think this would be ok. How much do you think this could cost? The family member mentioned above, has offered to cover something like that for the kids.



NoRegretsCoyote said:


> You would most likely buy in Dublin where yields are lowest, and promptly lose half of the profits on tax. I don't see it making sense. I appreciate that you are already maximising tax-relieved pension contributions.


The though process is that when retired, our effective income tax rate would be lower. It would offer diversification and income stream, e.g. if stockmarket is dropping, we would not be forced to sell as much. I don't hold any bonds, I have 100% equity portfoilo.



NoRegretsCoyote said:


> In your shoes I would probably just buy a bigger property and live in my wealth. At the same time people generally intend to downsize but rarely do. A big house can be expensive in the long run.


Buying a bigger PPR conflicts with the life goal to be financially independent ASAP. The bigger house doesn't give us an income. We don't feel that we need more house that we have (or will have after renovation). I like the idea of a secluded large house overlooking the sea (what's not to like!). But I don't really want to commit to say 5 additional years of working to get the extra 800k that it would cost. (Costal Palace estimate 2M. current house .8, renovation fund .4)

When we bought the current house, total income was about 250k, and our intention was for it to be a forever home. The location didn't tick all the boxes we wanted, but it is very nice, and the neighbours are great, and perfect doesn't exist.

I have certainly disccovered that big gardens need a lot of time and effort to maintain, (or else pay someone to do it - we should really get a quote to outsource some of this work!).

I think a large house and large garden, with large upkeep costs would be stressful for me in later years. I'd prefer smaller house, and ability to help out kids, or more flexibility.

That said, as we are facing renovation right now, if we were going to buy a more expensive house, now would be the time to do it.




NoRegretsCoyote said:


> Otherwise contributing beyond without tax relief shouldn't be taboo. Over 30 years the tax-free return on equities should be pretty good.


I don't hear of many people actually doing this though? So I feel a bit unsure about putting in an extra unrelieved 150k a year into it.



NoRegretsCoyote said:


> Finally, you are a bit vague on company shares, and I don't know how this really works, but I'm not sure if it makes sense to have all of your income and a lot of your wealth dependent on the fortunes of just one company.


Sorry! Let me try to explain. The shares are included in my income estimate. The company guarantees that while I work for them, I will get x number of shares this year, y shares the next year, z the year after etc. And each year it makes an additional commitment to pay me a number of shares a year over the next few years. So there is always this 'pot of gold' in the future, that you will only get if you continue to work for the company. When the shares 'vest' they accumulate into my brokerage account.

I have sold them rarely, e.g. I sold a bunch of them to help fund the purchase of the PPR, and then a bunch more to pay down the mortage. I understand the best thing to do would be to sell them as soon as they vest, and diversify into other investments.

So my income estimate for this year, is based on the current share price, and the number of shares that will be give to me this year. If share price drops, my income will drop. About 50% of my income comes from these shares. I'd estimate the we are accumulating 65k cash a year in bank, and 85k of shares a year in the brokerage account. My past strategy was, when the share price was at some all time high, sell a load and pay down the mortgage.

And now that my mortgage is very comfortable, this is the 150 I am trying to decide what to do with.


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## NoRegretsCoyote (28 Feb 2021)

AGoodLife said:


> Can I get insurance against losing my job?



Not really sure. If it exists it would be very expensive. I am more thinking about disability. I had health problems while young completely out of the blue back that basically make any kind of physical work impossible for me. It's not a financial problem as I have a sedentary job (as I guess do you). It still hammered home that unanticipated illness is not at all unlikely, and is worth insuring against.



AGoodLife said:


> I don't hear of many people actually doing this though? So I feel a bit unsure about putting in an extra unrelieved 150k a year into it.



If you invest today your median drawdown from your fund will be in thirty years or so. For me the expected tax-free growth on equities over the period would be worth it, but there will be ups and downs along the way. Your pension funds (combined) are big for your age, but relatively small relative to your income. So it's worth thinking about.



AGoodLife said:


> Have also vaguely considered buying a suitable college property for them or potentially partially retaining ownership, and having them live there, use rent a room scheme, and rent out the rooms.



I've always thought that this is a very good use of wealth if you have it. Paying after-tax rent on rent to someone else is a lot of money if you have the funds to finance an apartment near a university. But it doesn't make sense to buy I think until at least one or two kids are settled at third level.



AGoodLife said:


> I have sold them rarely, e.g. I sold a bunch of them to help fund the purchase of the PPR, and then a bunch more to pay down the mortage. I understand the best thing to do would be to sell them as soon as they vest, and diversify into other investments.


Yeah, this is conventional wisdom but I have friends for whom inertia takes over and they find themselves quite concentrated often in firms they no longer work for. I guess it makes sense to sell and buy something else when they vest, but this takes discipline.


Anyway the best of luck, you have a good set of choices


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## Brendan Burgess (28 Feb 2021)

You are wealthy, so your main objectives are the preservation of that wealth and to enjoy life. 

You absolutely must sell off the shares in your employer as soon as you are free to do so.  Don't worry about the CGT bill. 

This is about the preservation of wealth and looking out for the risks which might cause you a problem. If your company suffers, you may lose your job and then suffer the double whammy of seeing your shares crash in value. 

So the clear thing to do here is to sell the shares you are allowed to sell.


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## Brendan Burgess (28 Feb 2021)

You like your house and your neighbours.

That is more important than owning a bigger house and finding that you don't like the house or your neighbours.

Whatever you do involves moving and disruption.  

But I don't think that anyone here can make that decision for you.  Only you and your spouse can make that call.

Brendan


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## Brendan Burgess (28 Feb 2021)

Again, on the preservation of wealth theme - you should clear the mortgage on your family home before investing anywhere else. 

You have two properties.  You have a well funded pension scheme. 

You should not be borrowing money to invest. 

By investing while you have a mortgage, that is what you are doing.


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## Brendan Burgess (28 Feb 2021)

As you already have two properties which will be worth about €1.5m after renovations, you should not invest in any more property. 

You may have been lucky so far in getting good tenants, but if you buy a property and get a bad tenant, you will find it consumes your life. You have a busy job, you should not be taking on an additional part-time job as a property investor. 

You should invest your savings in a diversified portfolio of directly held shares in large companies.  They should perform better than property over the long term and they will be a lot less hassle. 

Shares are also a very flexible investment. 

If  one of your children wants to go to college away from home, it won't be much use to you, to have a property in some other city in a long term lease to the council. 

If you want to buy a property in her college town , you can sell your shares and buy that property. 

Likewise, after a few years, if you want to help your children get onto the property ladder, you can easily partially liquidate a portfolio of shares and use the proceeds.

If you have an investment property, it might not be easy or even possible to sell it.  And you can't sell half an investment property. 

Brendan


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## AGoodLife (28 Feb 2021)

Another reply down - Thanks for the continued feedback. Still some more replies to get too! Might take a few days before I get through them all.



bish123 said:


> Luck favours prepared minds. Congratulations and well done for reaching a comfortable financial state at 40.


Thanks Bish! I agree with your outlook, there is luck/coincidence/happenstance, but you also have to fully grab the opportunies that fall in front of you.


bish123 said:


> Agoodlife has two parts- earning and spending time/ money on things you love. You haven't mentioned spending on travel, holidays, hobbies etc.


In my opinion we really don't spend much, in fact I think we probably spend less than most people we know, and *we probably should spend and treat ourselves more*. I have recently made a small fun budget for myself to encourage myself to spend a bit more, and it is helping. But after a lifetime of practising delayed gratification, old habbits die hard. "do you need this? will you use it regularly? Will you get the value from it? let's not buy it yet, and research it some more first".

We are not unhappy, and don't feel like we are sacrificing ourselves or our happines or being Ebenezer scrooge. I tend to agree with view that the more things you own, the more things own you. That said, I do like to have high qualty, long lasting, beautiful things.

I am not convinced that spending money on more or expensive things would make us significantly happier. I thought most people subscribed to the hedonic treadmill view of the world, where we quickly acclimitise to new things. So e.g. A new tesla, or a fancy sports car, or a lottery win will bring a bump in happiness, but then you will return to your original point. But the new tesla would require me to work for another year to save the money to pay for it. At the moment I would value retiring a year earlier higher than driving the tesla. And if I really wanted one, I would buy a 7 year old tesla. Maybe my attitude will change here more, as we approach have the house paid off and renovated. We have never owned a car that cost more than 10k, and usually it would be the cheapest car on the street!

To some degree saving money is a challenge/hobby in itself, and is enjoyable and brings satisfaction.

We don't have any really expensive hobbies, but we don't have a lot of time either! Exercising, being healthy, being outdoors, gardening, cooking, and kids take up most of the time. My biggest overarching hobby is learning & curiosity, which is fairly cheap as hobbies go.

I never really got or understood the travel bug. Might be because I never went abroad with my own parents when I was young, and am happy to spend time on my own, I can always entertain and occupy myself.  We typically spend five weeks a year abroad with family, in family owned property, It is nice and enjoyable, but it is a bit repetitive, *we probably should plan some holidays to make great memories, and mix it up a bit more.*


bish123 said:


> If a house is worth 800k now, would adding another 400k bring its value to 1.2m? With that income and savings you could easily look for a house in 1.2- 1.3m range.



I think so, but hard to be sure. I know the standard belief is that you don't get back in price what you put into your renovation, and costs are expensive at the moment. But our house really is very very basic at the moment, so a renovation would be required by most before they would live in it, and to some degree is priced into the current value. Based on comparing to new builds, I would expect our finished product to be similar size (maybe a bit larger) & quality, but with much larger garden, parking space, and more privacy. It is very rare for a recently renovated comparable family home to sell, most of the things that sell, have only had cosmetic changes, or have been upgraded maybe 20 years ago and are not modern.




bish123 said:


> Downsizing at later stage gives you option for early retirement ( say 60) to enjoy life or things like nursing homes.


I think we would be unlikley to downsize, I think we would like the space for kids to visit with their kids (even if only occasionally), and would like to keep roots in the neighbourhood. I wouldn't want to plan on downsizing as part of my financial future, it would be ok as a fallback.

When I am considering early retirement, I am think more along the lines of before 50. Originally I would have targetted well before 40, but then my earning power has increase a lot, and we have comitted to a more expensive house.


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## AGoodLife (28 Feb 2021)

Hooverfish said:


> Well done! You must have great talents between you and your spouse.


Thanks Fish! I think a lot of it was, luck, right time, right place, coupled with research, dilligence, curiosity and hard work at the right times. I still pinch myself regularly.



Hooverfish said:


> Perhaps think about a strategic investment in helping others through a charity that fits with your worldview? This might sound a bit American, but the combination of skills and cash that you have could provide both wonderful help and great satisfaction for you in a bit of philanthropy? I'm not dewy-eyed about the voluntary sector, there are some very badly run charities and some dubious personalities, but if there is something you care about, that motivates you, maybe think about what making a difference would provide you with in return for probably not much money and a little bit of time?


My spouse would be extremely interested in this. I would be mildly interested, but i accept the repeated philosphical view, that contributing to something larger than yourself brings meaning, purpose and fulfillment to life, and would be willing to try in the future. The main issue at the moment is lack of time.

I too am cautious about the percent of a financial donation that gets eaten in admininstration costs etc.,

How would you recommend to get involved in something like that? Do you have any experience doing something like that?


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## AGoodLife (28 Feb 2021)

Bronte said:


> I second the view it would be better for your children to live away from home. It’s very beneficial to them.


Thanks Bronte. We will consider it. You are not just saying that to increase the rental market are you ;-)



Bronte said:


> Would also advise to buy rather than renovate.


Would you mind expanding and be explicit on your reasoning on why?

We have discussed buy vs renovate today in some more details, and talked about new builds that we have viewed over the past few years.

The main reason we choose the buy & renovate route, is surprise, surprise, because it looked like it was better value. Even today, when we look back at comparble priced new builds over the last few years i.e. 1.2M (800+400renovation), while the houses were nice and BER ratines are high, they generally have (in order of concerns for us) tiny gardens, limited privacy (denser and closer to neighbours houses), limited parking space, management fees. Often they have not enough storage space, too many bathrooms, and would not be easy to re-organise, and two staircases (not necessarily great for later life).

These are the reasons pushing us to renovate, even though that probably means a year of rental somewhere else, and a lot of heartache.



Bronte said:


> You’ve been vague enough I haven’t figured out who you are!


Good! Although my alter ego is probably not as famous as yourself.



Bronte said:


> Also agree writing it all down is a good exercise.


I can't recommend this strongly enough. I always had a rough life and financial plan in my head, and always had goals I was working towards, but writing down the money makeover really helped. And I have got some very interesting insights from others too! 

@NoRegretsCoyote @Brendan Burgess it might take me a day or two to get back to your latest messages, but I will get back.

I think my burning question is still where is best to invest the 150p.a, but I'd appreciate all other answers to Question 1-5.


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## MugsGame (28 Feb 2021)

Use the 150k p.a. to "subcontract" your work abroad and "retire" early ...

But in all seriousness, I assume you work for a FAANG or similar? How is your work-life-balance? Would you ever consider "downsizing" to a less financially rewarding but potentially less demanding job?


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## presidenttttt (1 Mar 2021)

I am also always curious to hear about the role or employers providing such excellent packages. Well done anyway.

Someone guessed you are in tech, an industry where some are suggesting a share price bubble, but whichever, any share and any industry can run into a crisis, so the risk needs to be diversified via some form of portfolio as an alternate.

You mention being financially independent is the goal. I think Brendan nails this in his response, you are essentially there or on the home straight, so this is about protecting wealth.

You could approach this my doing an exercise to establish your cost of living, post mortgage repayments, required to maintain the standard of living you want, or in other words your desired retirement income. I think you have done this loosely, but put some actual numbers on it yourself. In an ideal world that number equals the your passive income, plus annual growth of  pension and equity portfolio, with no need to sell anything ever. That may well be achievable for you given your income and youth.

It seems you enjoy your house but other than that your family are not driven by materialism, multiple posh cars and posh holidays. Even if you decide to start taking an extra holiday, it won’t be a major cost in the scheme of things, unless you go totally mad.

It seems you enjoy your house but other than that your family are not driven by materialism, multiple posh cars and posh holidays. Even if you decide to start taking an extra holiday, it won’t be a major cost in the scheme of things, unless you go totally mad.


My instinct would be pay off the non trackers, max pensions, and get a diversified equity portfolio. decide or clarify if the “financial independence” is also about a very serious objective to retire early, or just a position in life so you always feel you have the comfort and choice. If retirement as early as possible is the goal then there are probably some threads on here too; you don’t need to live frugal but would want to watch your monthly costs don’t go creeping way up just because your earnings do, or things like your renovation are well managed and enjoyed but don’t become a total money pit.

I would also add given the sums involved that it’s worth taking proper advice about retirement planning and risk management.


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## Hooverfish (1 Mar 2021)

AGoodLife said:


> How would you recommend to get involved in something like that? Do you have any experience doing something like that?


The accountability bit is here: https://www.charitiesinstituteireland.ie/our-blog/2021/1/6/how-to-choose-a-charity-to-support but you also need to decide what you care about, and do a good bit of online searching on any candidate organisations - what's their social media/press and PR approach and do you agree with it? Check out any employee reviews on Glassdoor. Meet people who work for them if you can. I once worked briefly for a charity that I later discovered from a client had been the target of substantial embezzlement a decade previously. This had led to a belt-and-braces regulation and documentation approach that got in the way of the charity's intended activities, and diluted the effect of donations. I think myself it's better to support a particular project and be involved in the strategy and in measuring the effect, than in supporting the whole organisation. But that's time-consuming and it sounds as though you've enough on your plate.


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## AGoodLife (1 Mar 2021)

*Disability Insurance*



NoRegretsCoyote said:


> To me this is a bit of a blind spot. Your family's lifestyle is pretty dependent on your income, and would be even if you earned 1/3 of what you do now. Some kind of income continuance insurance might be worth looking into.





NoRegretsCoyote said:


> Not really sure. If it exists it would be very expensive. I am more thinking about disability. I had health problems while young completely out of the blue back that basically make any kind of physical work impossible for me. It's not a financial problem as I have a sedentary job (as I guess do you). It still hammered home that unanticipated illness is not at all unlikely, and is worth insuring against.


Thanks for this insight. Yes, my job is sedentry, and I have had some minor experiences to remind me how much we take our health for granted.
 I do try to take looking after myself, and eat fairly healthily, and exercise to mitigate the sedentry job. We don't drink much, don't smoke and are in decent shape. But you never know the when illness may strike.

*I checked out my work's disability insurance*. It is a bit difficult to model the exact effect, roughly my total income (including shares) would ramp down over several years to 110k p.a. If the insurance product didn't pay out, my income would drop about 50% after a few months, and then would ramp to 0 over a few years (As the future promised shares vest).

If I had 0 income, given outgoings of 40k+25k mortgage, and gross income of spouse 50k+18k rental, If we paid down the mortgages using my reducing income stream and some shares or cash, then *we could live on spouse income+rental.*

If I am too sick to work, but somehow didn't qualify for the insurance, that would be annoying, but not the end of the world. *Would it be worth taking an additional income protection policy to mitigate against this?* I guess not. But I don't know how different the payout clauses are on different policies.

Given I hope to be financially independent in a few years, this would mitigate the risk too.

*Overall, this looks ok to me, in a disability scenario, family would still be comfortable, we might not be able to help kids out as much in the future without committing to downsizing.*


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## MugsGame (1 Mar 2021)

> If the insurance product didn't pay out, my income would drop about 50% after a few months, and then would ramp to 0 over a few years (As the future promised shares vest).



If you're considering the risk that the insurance doesn't pay out, isn't there also a risk that your employment is terminated (on grounds of ill health), and that therefore your RSUs won't continue to vest?


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## Allpartied (1 Mar 2021)

My advice is to vote or campaign for a left wing party, maybe Sinn Fein.  A more equitable taxation system would mean more equitable distribution of wealth and alleviate some of your problem.


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## Blackrock1 (1 Mar 2021)

First off well done, you are in a great financial position.

Few things come to mind, one thing the lockdown as brought home to me is that your home important, if you can improve it or get a better one do that. If you are planning a major renovation itll be more like 400k than 200k.

Secondly, and you have alluded to this yourself, make sure you are enjoying yourself, holidays, gadgets, a car, stuff for the house, whatever it is that floats your boat, because you cant take it with you.

Thirdly, does your wife want to work, or is she just doing it because she can earn a reasonable income working part time? we had a similar decision to make (albeit my wife was still working full time) and we decided to forego the 80-100k she earns a year so that one of us can be with the kids full time, now my earnings had increased over the previous 2-3 years to effectively take up the slack once we took the childcare costs out but it meant i was earning a lot more for us to stay still effectively, but we still think its a good use of our resources! My kids are younger so it may not be as important in your case.

And lastly, again depends on your outlook, but personally i enjoy working, once i get my mortgage squared away  itll take the pressure off a little and im not beholden to anyone as such, but do you want to be financially independent to meet a goal you set for yourself or do you really want to leave what you are doing in the longer term?


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## Blackrock1 (1 Mar 2021)

Allpartied said:


> My advice is to vote or campaign for a left wing party, maybe Sinn Fein.  A more equitable taxation system would mean more equitable distribution of wealth and alleviate some of your problem.



you realise that once he earns over 36k everything else is taxed at 52%, so the state takes more than the worker, how much more equitable would you like it to be?


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## Allpartied (1 Mar 2021)

Blackrock1 said:


> you realise that once he earns over 36k everything else is taxed at 52%, so the state takes more than the worker, how much more equitable would you like it to be?



I was only joshing, well slightly. 

Taxation is about distribution and fairness.   In the Eisenhower era tax rates went up to 90%, because it was fairer.  And they were scared of Communism.  

If someone's " problem" is " I really haven't got a clue what to do with 150k ", every year, then they have to expect a bit of a ribbing.


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## Bronte (1 Mar 2021)

AGoodLife said:


> Have also vaguely considered buying a suitable college property for them or potentially partially retaining ownership, and having them live there, use rent a room scheme, and rent out the rooms. Although maybe it would be too much to expect them to rent to their friends in college.


I don't think a cushioned year abroad is quite the same.  And I know plenty of people who used a property to house their college going children and rented to other friends of theirs.  Generally the propety would be of a  better quality.  Don't think you can use the rent a room scheme though.

And no I wasn't suggesting it as a plan to increase the rental market. LOL.  I've actually considered it myself.  But I can't do it otherwise I would have.  Financially it makes sense as you wouldn't have to pay rent out of taxed income.  But my point was actually not about money but instead about what was better for your children.  It's better they get independence and make their own mistakes and decisions away from you and their mother.

Agree with spending to create memories. You can't take the money with you.

I think you're underspending is fine.  I was like that too.  I had to learn to spend and I quite like it actually.  My family used to give out to me about how tight I was.

The only reason I said not to renovate was because of the stress. But now you've said you'll rent, plus you're both happy where you are than absoluely stay put.

And please don't buy a Tesla.  But I'm sure you could spend 20K on a car.  My own tin can, that I love, is 16 years old and is my pride and joy. And is the despair of the entire household as I don't even have a radio in it.  But I can find my way around without a GPS !!  One thing I do know, and NRC said it, you never know what ill health can do to you.  Or how life can throw a curve ball at you.


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## Blackrock1 (1 Mar 2021)

Allpartied said:


> I was only joshing, well slightly.
> 
> Taxation is about distribution and fairness.   In the Eisenhower era tax rates went up to 90%, because it was fairer.  And they were scared of Communism.
> 
> If someone's " problem" is " I really haven't got a clue what to do with 150k ", every year, then they have to expect a bit of a ribbing.



while that is technically true, those rates only impacted single earners earning over $200k or couples over $400k, adjusted for inflation that was $1.7m and $3.4m USD.....

the rates that most workers paid were far lower.


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## EmmDee (1 Mar 2021)

AGoodLife said:


> Warning long post - It was a very useful exercise for myself to write this out, and if you are reading this, I would encourage you to do one yourself.
> 
> I wanted to do one of these for years, but always felt too shy. Finally I decided to do it under a new account.
> 
> ...



Hi,

I'm in a situation not dissimilar to yours. You already have a number of suggestions relating to mortgages / build or buy / investments etc already. I don't think I can add much to that. But I can suggest a couple of "lifestyle" comments...

- We have a really good cleaner who has been with us for almost 10 years. We also have an equally good gardener. Neither need any form of supervision or tracking. They come and do their job and maintain the place seamlessly. The cost is not large but the time and hassle saving is well worth it - weekends aren't about chores or looking at an overgrown garden. We have continued to pay them through the lockdowns - it's in our interest.

- On holidays, I'm not that into doing multiple holidays a year or some of the more ostentatious stuff that you see sometimes. But I would recommend thinking of a special "experience" holiday every 2 or 3 years - especially with the kids at the age where they can get a lot out of them. One time we did a three week trip to Costa Rica with stops in various environments (rain forest, cloud forest, pacific ocean). Another time we did an "all in" holiday in Mauritius. In between we had pretty simple holidays. But the kids remember the "big" holidays more than anything else.

- Flexibility is a major thing for us. We treated the fact that my "salary man" status gave my partner the flexibility to do more flexible work or do things not based on earning a certain salary. That has a big impact on the stress of the household. So, the idea of doing something charitable or socially minded would fall under that. Also allows location flexibility - a couple of summers we rented a place on the west coast of France for a couple of months on AirBnB - big discount because of the months and length of time. Was easily accessible which meant my partner was based there with a couple of trips back, I could go over and back a couple of times.

Otherwise, like you, we haven't a lot of overheads or status symbols. Car is 10 years old, house is mid-size and suits us, outlays are low. As with you, if I lost my job, I don't think I could achieve the same revenue - so am conscious of not digging myself into a hole by ramping up general expenditure without reason


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## Bronte (1 Mar 2021)

Yes OP needs to hire a gardener.  But having said that gardening is healthy. But I couldn't live without my housekeeper.


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## Blackrock1 (1 Mar 2021)

EmmDee said:


> Hi,
> 
> I'm in a situation not dissimilar to yours. You already have a number of suggestions relating to mortgages / build or buy / investments etc already. I don't think I can add much to that. But I can suggest a couple of "lifestyle" comments...
> 
> ...


some excellent advice here, especially around the cleaner and gardener and special family holidays.


----------



## EmmDee (1 Mar 2021)

Bronte said:


> Yes OP needs to hire a gardener.  But having said that gardening is healthy. But I couldn't live without my housekeeper.



I know. But there's a big difference between pottering in the garden for enjoyment versus realising you're going to have to spend all Saturday afternoon hacking back the jungle that has appeared


----------



## Bronte (1 Mar 2021)

EmmDee said:


> I know. But there's a big difference between pottering in the garden for enjoyment versus realising you're going to have to spend all Saturday afternoon hacking back the jungle that has appeared


I look at the ivy infestation into the hedge and despair. I tried bribing two of the children.  They gave it a go and gave up uppaid.  Lawnmower is serviced and ready to be collected, but I don't think we can face another year doing the hedge ourselves, that would be me keeping the ladder steady and DH cutting it.


----------



## AGoodLife (1 Mar 2021)

*Re: Children living away from home, rather than at home while going to college in same city *



NoRegretsCoyote said:


> I've always thought that this is a very good use of wealth if you have it. Paying after-tax rent on rent to someone else is a lot of money if you have the funds to finance an apartment near a university. But it doesn't make sense to buy I think until at least one or two kids are settled at third level.





Bronte said:


> I don't think a cushioned year abroad is quite the same. And I know plenty of people who used a property to house their college going children and rented to other friends of theirs. Generally the propety would be of a the better quality. Don't think you can use the rent a room scheme though.
> 
> And no I wasn't suggesting it as a plan to increase the rental market. LOL. I've actually considered it myself. But I can't do it otherwise I would have. Financially it makes sense as you wouldn't have to pay rent out of taxed income. But my point was actually not about money but instead about what was better for your children. It's better they get independence and make their own mistakes and decisions away from you and their mother.


Thanks. This is not something we considered. And the additional rental+living costs would put me off. We will consider it.

*If*, we decide go down the route of kid(s) doing college away from home, I think we would try to buy something suitable for rental. Will discuss this more with my spouse. At the moment, my frugal side could only get on board with this, if we could make the thing pay for itself, or come to close to that. Potentially this could be part of some form of inheritanc planning too.


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## AGoodLife (1 Mar 2021)

Re: Selling shares as soon as possible



NoRegretsCoyote said:


> Yeah, this is conventional wisdom but I have friends for whom inertia takes over and they find themselves quite concentrated often in firms they no longer work for. I guess it makes sense to sell and buy something else when they vest, but this takes discipline.





Brendan Burgess said:


> You are wealthy, so your main objectives are the preservation of that wealth and to enjoy life.


I agree we have wealth, but we haven't yet hit the financial indepence goal, so for the moment, I don't yet see myself in protection mode. I would still like to take some risk.



Brendan Burgess said:


> You absolutely must sell off the shares in your employer as soon as you are free to do so. Don't worry about the CGT bill.
> 
> This is about the preservation of wealth and looking out for the risks which might cause you a problem. If your company suffers, you may lose your job and then suffer the double whammy of seeing your shares crash in value.
> 
> So the clear thing to do here is to sell the shares you are allowed to sell.


Thanks for taking the time to reply Brendan.

I am aware of the risk here, and I have stayed concentrated with my eyes wide open. And so far, it has paid off very handsomely. I sometimes kick myself for already selling the amount that I did (for purchase and to pay down mortgage). Even though I know it was technically correct to sell, I would be a lot better off today if I had took more risk and held them for longer!

In, fact, the risk today, is even worse than shown here. On top of the .25M of shares I own today, the company has promised me a number of shares over the next few years, with a current market value of .5M (These will be paid to me as part of my income, and taxed over the next few years,  Assuming I stay in the compay, it means that today I have .5M (.25+.5*48%) of wealth exposed to the share value. And as new future promises arrive annually, I would expect to always have a future 'unvested' after tax exposure of about .25M. But if the share price drops, or the company is not doing well this could obviously drop.

The existing shares are earmarked for the renovation.

But, I am not happy to just setup a program to automatically sell additional new shares and sit in cash. This is the essence of my Question 1. What to do with the additional cash+shares we will accumulate.

(will reply to your suggestion on what to do with the cash soon!)


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## ATC110 (1 Mar 2021)

Blackrock1 said:


> you realise that once he earns over 36k everything else is taxed at 52%, so the state takes more than the worker, how much more equitable would you like it to be?


The 52% headline tax take is less when tax credits are taken in to account


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## ATC110 (1 Mar 2021)

Hi AGoodLife,

As a slight aside, I do not have private health insurance preferring to have created my own fund by saving the would-be premiums in a dedicated account to be drawn upon when necessary.

This has worked effectively for over 25 years, with a tiny fraction spent on private healthcare compared to the premiums saved.

You're in a strong financial position so I would consider this if you haven't already done so.


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## AGoodLife (1 Mar 2021)

There are timers, so I had to wait about 15 minutes before I can post this one, will continue to work through the posts. Keep the feedback coming!

*Re buying an upgrade vs renovating*



Brendan Burgess said:


> You like your house and your neighbours.
> 
> That is more important than owning a bigger house and finding that you don't like the house or your neighbours.
> 
> ...


Thanks. They are indeed important factors.



Bronte said:


> The only reason I said not to renovate was because of the stress. But now you've said you'll rent, plus you're both happy where you are than absoluely stay put.



After discussing and checking what we could get for a comparable total spend (assuming renovation can come in under 400k), I think we will end up with an overall nicer home from renovation.


Another crazy (?) idea we played with was that if we renovate, we will have to rent somewhere for a year (our existing rental property would not work for us). The rental costs would equate to about 3-5% of the purchase price.

We could purchase a third place (at 3-5% discount). We could potentially get a long term fixed home loan rate on it, as we would be living it. We would live in it during the renovation. And then rent it out after our renovation was complete. And use future savings to pay down the mortgage.

I would need to do the maths more precisely to see if this was feasible. As pointed out already, the future yield here would not be as high as possible elsewhere, but if the mortgage rate was at home loan rate, maybe it would still be interesting. Although it would tie up capital and make it harded to execute other possible options (e.g. rental unit for kids to leave away from home for college).


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## AGoodLife (1 Mar 2021)

Brendan Burgess said:


> Again, on the preservation of wealth theme - you should clear the mortgage on your family home before investing anywhere else.
> 
> You have two properties. You have a well funded pension scheme.
> 
> ...


I was coming from the view, that with high income, and reasonable wealth, and decent knowledge/experience of market cycles. I can afford to take some risks, and wait for the return in the long term.

If I spend all the current cash+shares on the renovation, and then clear the mortgage, It would be three years before I could make further investments (beyond the max pension ones which I would continue).



Brendan Burgess said:


> As you already have two properties which will be worth about €1.5m after renovations, you should not invest in any more property.


1.2M of that, I will not really be considering an investment though, I will be considering that my lifetime home, with no plans to ever sell. And I can't get any return out of it, other than living in it, or renting out a room. Whatever happens the property market will not matter here, until we die, or can only manage something smaller.

Assuming the renovation takes a year and costs 400k
After renovations in a year, I can imagine we could look like this
Home: Value 1.2M, Mortgage 260k

Investments:
Rental 300k, Mortgage 52k
Pensions ~525k (will increase by 40k contributions a year, and I've assumed 5% gain)
Cash 75k (will increase by 75k p.a.)
Shares 75k (will increase by 75k p.a.)

In three years after the renovation (so four years after today) the situation would like this (rough back of envelope numbers, would need to check the mortgage paydowns a bit more carefully)

Home 1.2M, Mortgage: 240
Rental 300k, Mortgage 28k
Pensions ~700k
Cash & Shares 600k

When I look at if from this angle, sinking a fair amount of the cash+shares into a second rental property doesnt seem crazy, and the cash flow from a secod property would help us ride out any potential future long term stock market crash.




Brendan Burgess said:


> You may have been lucky so far in getting good tenants, but if you buy a property and get a bad tenant, you will find it consumes your life. You have a busy job, you should not be taking on an additional part-time job as a property investor.


I agree. I think I will just enter a long term lease with the council, and if I got a second one, I would plan on the same.



Brendan Burgess said:


> You should invest your savings in a diversified portfolio of directly held shares in large companies.  They should perform better than property over the long term and they will be a lot less hassle.


In a tax free pension fund or directly?

If directly, I think US stockexchange companies are off limits due to their estate taxes, so I guess this is companies on european or uk stock exchanges?



Brendan Burgess said:


> Shares are also a very flexible investment.
> 
> If  one of your children wants to go to college away from home, it won't be much use to you, to have a property in some other city in a long term lease to the council.
> 
> ...


I agree, can't beat the flexibility and easy of management of shares vs a property.


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## AGoodLife (1 Mar 2021)

MugsGame said:


> Use the 150k p.a. to "subcontract" your work abroad and "retire" early ...


If only! Have you read Tim Ferris' 4hr workweek? That is a model from his book.



MugsGame said:


> But in all seriousness, I assume you work for a FAANG or similar? How is your work-life-balance? Would you ever consider "downsizing" to a less financially rewarding but potentially less demanding job?


Yes. Overall, in my area work life balance is reasonably good to be honest. Might be better than my spouses, even though they are part time. My area takes that seriously, and realises that burning people out, and alienating them, and losing them to competitors, is not conducive for creating long term value.

Most of the pressure is self imposed pressure, as doing well, is well rewarded. That said, there are some busy periods which can require digging in a bit.


(the post limit timer is certainly slow me down here, no more replies tonight, have a nice evening everyone!)


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## Blackrock1 (2 Mar 2021)

AGoodLife said:


> Yes. Overall, in my area work life balance is reasonably good to be honest. Might be better than my spouses, even though they are part time.


which brings me back to my point, unless your spouse really wants to work would everyones life not be better if they didnt?


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## MugsGame (2 Mar 2021)

AGoodLife said:


> If only! Have you read Tim Ferris' 4hr workweek? That is a model from his book.



No, but it looks useful, added to my ever-growing backlog 

I was inspired by the memorable tale of a developer who missed his calling as a remote engineering manager:


> Evidence even suggested he had the same scam going across multiple companies in the area ... Quarter after quarter, his performance review noted him as the best developer in the building.


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## _OkGo_ (2 Mar 2021)

AGoodLife said:


> Another crazy (?) idea we played with was that if we renovate, we will have to rent somewhere for a year (our existing rental property would not work for us). The rental costs would equate to about 3-5% of the purchase price.
> 
> We could purchase a third place (at 3-5% discount). We could potentially get a long term fixed home loan rate on it, as we would be living it. We would live in it during the renovation. And then rent it out after our renovation was complete. And use future savings to pay down the mortgage.
> 
> I would need to do the maths more precisely to see if this was feasible. As pointed out already, the future yield here would not be as high as possible elsewhere, but if the mortgage rate was at home loan rate, maybe it would still be interesting. Although it would tie up capital and make it harded to execute other possible options (e.g. rental unit for kids to leave away from home for college).



I'm not suggesting that you should do this but the same thought occurred to me and it would be interesting to work out the actual cost to you. The amount of capital tied up will depend on what you can find that would be suitable for your family needs.

If you decided that a property worth €400k was adequate (with an eye on future yield), this would probably cost you €24-32k to rent for the year. Your suggested alternative would involve stamp duty, purchase costs and mortgage interest. It would tie up €80k of capital (20%) and you would borrow €320k. If you use a cashback offer, you could have an effective interest rate of ~1%. All in, it should cost you about €10k to do this and it keeps most of your capital available for funding the renovation.

The other advantage of doing this is being your own "landlord". If renovations stretch to 18 months, its not a problem for you and stays significantly cheaper than the rental option. At the end, as you suggested, you could switch and fix at a very favorable rate which then becomes your BTL.

Not many people could do something like this but your wealth/income makes it an easy option for you. Although if you want to stay living in the same area (purchasing at €600-800k), it is probably not a good candidate for long term rental and would not be as clear cut a decision for you. In this case, renting is probably just as easy.



AGoodLife said:


> *Do you have a pension scheme?*
> Yes. We max out contributions.
> 410k (2/3 in occupational pension, 1/3 in a Davy PRSA)
> spouse: 50k over two occupational schemes, maxes out the higher rate relief.



Have you exhausted all options with your employer for additional ER contributions. Is there an option to have your bonus/performance paid as ER pension contributions? Care would have to be taken that it is not deemed a salary sacrifice and taxed as a BIK. My understanding is that it has to be at the employers discretion to choose the type of payment, i.e. you cannot request it to be paid as a pension contribution or it would be deemed a salary sacrifice. Some contractual renegotiation would be required


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## Alkers86 (2 Mar 2021)

AGoodLife said:


> *Re: Children living away from home, rather than at home while going to college in same city *
> 
> 
> 
> ...


This isn't solely a financial decision, you need to also consider your children's appreciation and understanding of money and how getting them their own place to attend college might impact on that. You say in your opening post how you've been saving your entire life, not having come from a wealthy family and this trait has served you well. You don't want this important skill / value to be lost on your children. It's one thing to fund or part fund a house share for them in another part of the country as many other students will be doing but getting them their own place if they could easily attend from the family home may not have the intended consequences for them either. Just something to consider.


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## Blackrock1 (2 Mar 2021)

_OkGo_ said:


> Have you exhausted all options with your employer for additional ER contributions. Is there an option to have your bonus/performance paid as ER pension contributions? Care would have to be taken that it is not deemed a salary sacrifice and taxed as a BIK. My understanding is that it has to be at the employers discretion to choose the type of payment, i.e. you cannot request it to be paid as a pension contribution or it would be deemed a salary sacrifice. Some contractual renegotiation would be required


If you have reached the threshold you have reached the threshold, employer contributions are already included.


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## MugsGame (2 Mar 2021)

Employer contributions to occupational schemes don't come out of the annual tax free limit of €115k of earnings.

Of course there's still the overall ~€2m fund limit to be mindful of.


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## Blackrock1 (2 Mar 2021)

ah i always read this as er contributions came out of the limit, but i see now that it relates to PRSAs.... 

PRSAs​Employer PRSA contributions are:


deemed for tax relief purposes to be made by the employee
added to the employee's actual contributions to determine if the above limits are reached
treated as a taxable employer benefit received by the employee.


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## AGoodLife (2 Mar 2021)

presidenttttt said:


> I am also always curious to hear about the role or employers providing such excellent packages. Well done anyway.
> Someone guessed you are in tech, an industry where some are suggesting a share price bubble, but whichever, any share and any industry can run into a crisis, so the risk needs to be diversified via some form of portfolio as an alternate.


Yes, Let's say a Tier-1 tech company. And shares have done very well over past years. I deliberately didn't sell for a few years, to ride the risk,and I mostly have managed to sell out at annual highs, in order to help fund house purchase and pay down mortgage. After renovation, and with current level of mortgage, I will not have something that 'forces' me to sell more of the shares, but I accept it is very risky to let the value build too high. Albeit, I have been paid hansomely for this risk by holding on to the shares in the past, and not selling as soon as they vest.



presidenttttt said:


> You mention being financially independent is the goal. I think Brendan nails this in his response, you are essentially there or on the home straight, so this is about protecting wealth.
> 
> You could approach this my doing an exercise to establish your cost of living, post mortgage repayments, required to maintain the standard of living you want, or in other words your desired retirement income. I think you have done this loosely, but put some actual numbers on it yourself. In an ideal world that number equals the your passive income, plus annual growth of  pension and equity portfolio, with no need to sell anything ever. That may well be achievable for you given your income and youth.


Ye are right, I would be there in two years. Assuming I pay down mortgages with new savings (and don't invest them) and the 400k renovation is completed, then in two years, my costs are about 40k p.a.  Rental is about 18k income. Pension growth would be about 22k (550*4%). And I would have no cash/stock in hand.

I think I can only access the pension from 50, and I think I would be more comfortable having a bit more room to maneover.

A second rental income cashflow. With a secod property of about 300k, would take 2 more years (so four years now), and then I could have the two rentals covering my base costs, and not need to sell equities to live, so would be well setup to weather stockmarket collapse.

Although Brendan is suggesting to buy a direct equity profile, before a second rental property.



presidenttttt said:


> It seems you enjoy your house but other than that your family are not driven by materialism, multiple posh cars and posh holidays. Even if you decide to start taking an extra holiday, it won’t be a major cost in the scheme of things, unless you go totally mad.


Thanks, yes I tend to agree, it would be very difficult for us to mad on spending



presidenttttt said:


> My instinct would be pay off the non trackers, max pensions, and get a diversified equity portfolio. decide or clarify if the “financial independence” is also about a very serious objective to retire early, or just a position in life so you always feel you have the comfort and choice. If retirement as early as possible is the goal then there are probably some threads on here too; you don’t need to live frugal but would want to watch your monthly costs don’t go creeping way up just because your earnings do, or things like your renovation are well managed and enjoyed but don’t become a total money pit.


Pensions are maxed. Mortgage will be paid down, although not yet clear if that is the next step, or after further investment first. Renovation is a risk, we don't have a good handle on the price for that yet.


presidenttttt said:


> I would also add given the sums involved that it’s worth taking proper advice about retirement planning and risk management.


Maybe I'm overly hubristic, but I am not convinced that I would get value from it? And did I mention I love doing things myself, rather than outsourcing them (possibly to a fault)


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## AGoodLife (2 Mar 2021)

MugsGame said:


> If you're considering the risk that the insurance doesn't pay out, isn't there also a risk that your employment is terminated (on grounds of ill health), and that therefore your RSUs won't continue to vest?


I think it is a risk, but I don't think they would. Generally I have found them to be very reasonable.

I think the outgoings of 40k+25k mortgage, and gross income of spouse 50k+18k , would mean we would probably come out ok, till we could access pension. If it happens after two years, then I think we will be 100% fine, as the additional savings culd pay down the mortgage.


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## AGoodLife (2 Mar 2021)

Allpartied said:


> My advice is to vote or campaign for a left wing party, maybe Sinn Fein.  A more equitable taxation system would mean more equitable distribution of wealth and alleviate some of your problem.


Can you send me your bank account details, you can be the middler person, and solve my problems!
Just one thing, I will need you to send me 1k first, just to make sure I have the right account.



Allpartied said:


> If someone's " problem" is " I really haven't got a clue what to do with 150k ", every year, then they have to expect a bit of a ribbing.


All in good fun. Fully realise this is a 'ridiculous' problem to have. Although, I do have several ideas/clues about what to do with it!


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## AGoodLife (2 Mar 2021)

Bronte said:


> Agree with spending to create memories. You can't take the money with you.
> 
> I think you're underspending is fine.  I was like that too.  I had to learn to spend and I quite like it actually.  My family used to give out to me about how tight I was.


Thanks, that helps. Good to hear from others who were in similar place. I will work harder on spending.



Bronte said:


> The only reason I said not to renovate was because of the stress. But now you've said you'll rent, plus you're both happy where you are than absoluely stay put.


Thanks for cofirming.



Bronte said:


> And please don't buy a Tesla.  But I'm sure you could spend 20K on a car.  My own tin can, that I love, is 16 years old and is my pride and joy. And is the despair of the entire household as I don't even have a radio in it.  But I can find my way around without a GPS !!  One thing I do konw, and NRC said it, you never know what ill health can do to you.  Or how life can throw a curve ball at you.


hehe, I can relate. Although, 20k for a car is probably more than I could spend! Unless it was going to make money for me.


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## AGoodLife (3 Mar 2021)

I am still a good bit behind in replying to all the posts, but I will get there eventually. Please keep the feedback and ideas coming.



Blackrock1 said:


> First off well done, you are in a great financial position.


Thanks! And thanks for sharing your view and life experience.



Blackrock1 said:


> Few things come to mind, one thing the lockdown as brought home to me is that your home important, if you can improve it or get a better one do that.


I agree, we spend most of our time in our homes (even without covid), and making them comfortable, with invigourating and relaxing places makes a lot of sense to me.



Blackrock1 said:


> If you are planning a major renovation itll be more like 400k than 200k.


Your are probably right. We are thinking* at maximum* along the the lines of 150m2 renovation+100m2 extension. Looking a bit further, I think rough prices are 150*1per m2+100*2 per m2 = 350k. But we will want it to be relatively high spec / over supplied on things like storage, plumbing, natural light, bringing the outside in, low future running costs, and would try to favour environmentally favourable materials. So probably 400 will even be a challenge?



Blackrock1 said:


> Secondly, and you have alluded to this yourself, make sure you are enjoying yourself, holidays, gadgets, a car, stuff for the house, whatever it is that floats your boat, because you cant take it with you.


Agreed, we need to do spoil ourselves some more.




Blackrock1 said:


> Thirdly, does your wife want to work, or is she just doing it because she can earn a reasonable income working part time? we had a similar decision to make (albeit my wife was still working full time) and we decided to forego the 80-100k she earns a year so that one of us can be with the kids full time, now my earnings had increased over the previous 2-3 years to effectively take up the slack once we took the childcare costs out but it meant i was earning a lot more for us to stay still effectively, but we still think its a good use of our resources! My kids are younger so it may not be as important in your case.





Blackrock1 said:


> And lastly, again depends on your outlook, but personally i enjoy working, once i get my mortgage squared away  itll take the pressure off a little and im not beholden to anyone as such, but do you want to be financially independent to meet a goal you set for yourself or do you really want to leave what you are doing in the longer term?


Thanks for these points. I  want to dedicate a full reply to each of these two important points, as I think they are very significant for our life.


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## AGoodLife (3 Mar 2021)

I don't think I really addressed this point in my early reply.


MugsGame said:


> Would you ever consider "downsizing" to a less financially rewarding but potentially less demanding job?





AGoodLife said:


> handy link to my earlier reply where I address the rest of MugsGame question on work/life balance


 
I think the money and work/life balance is too good where I am right now. I do place stress upon myself. But I have found I will do that in any job. So I don't think downsizing my job is interesting on my path to financial independence, or would improve my overall quality of life.

I have read that from a philosphical / 'good life' / 'happy life' point of view, I should be happier if I my work has a very strong sense of purpose, and bringing value to a wider group, so potentially when financial goals are achieved, I should consider it from that a hapiness/satisfaction point of view.

That said, presently, (but less so in the past) I do find a larger sense of purpose & creating value for others in my current work and projects.


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## NoRegretsCoyote (3 Mar 2021)

AGoodLife said:


> A second rental income cashflow. With a secod property of about 300k, would take 2 more years (so four years now), and then I could have the two rentals covering my base costs, and not need to sell equities to live, so would be well setup to weather stockmarket collapse.



I wouldn't be a fan of this idea.

Two rental properties is incredibly concentrated by asset class. It is also very high risk. One dud tenant and you lose 50% of your rental income.

I think being a private landlord can make sense. But the yield has be enough to compensate for the risk and you'd need a diversity of income streams.


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## Bronte (3 Mar 2021)

NoRegretsCoyote said:


> I wouldn't be a fan of this idea.
> 
> Two rental properties is incredibly concentrated by asset class. It is also very high risk. One dud tenant and you lose 50% of your rental income.
> 
> I think being a private landlord can make sense. But the yield has be enough to compensate for the risk and you'd need a diversity of income streams.


There is an amazing amount of emphasis on dud tenant's on AAM.  As a long time landlord with other family members in this business for decades it is not our experiences.  And sure yes we have had a bad experience here and there.


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## NoRegretsCoyote (3 Mar 2021)

Bronte said:


> As a long time landlord with other family members in this business for decades it is not our experiences.


I just looked at the RTB website. There were 923 adjudication orders in 2019 alone with the tag "overholding".

There are I think 300k private tenancies in Ireland. Assume a quarter (75k) end every year.

*So there is over 1% of tenancies that end in a legal dispute over tenant overholding. *There are more that never go to the RTB, or are settled before adjudication. So let's say 2%, or one in fifty tenancies ending with a dispute.

So as a landlord if you hold 2 properties for 25 years statistically you can expect at least one dispute with a tenant for overholding.

I think this is a very material risk.


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## Bronte (3 Mar 2021)

And that's a material risk how?  

How would you compare it to the risk of holding shares for 25 years if they turned out to be AIB or BofI shares in circa 2006?


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## Steven Barrett (3 Mar 2021)

_OkGo_ said:


> Have you exhausted all options with your employer for additional ER contributions. Is there an option to have your bonus/performance paid as ER pension contributions? Care would have to be taken that it is not deemed a salary sacrifice and taxed as a BIK. My understanding is that it has to be at the employers discretion to choose the type of payment, i.e. you cannot request it to be paid as a pension contribution or it would be deemed a salary sacrifice. Some contractual renegotiation would be required



Still difficult to do as the basis of how the bonus is calculated is set down in the contract. By giving your employer discretion, you are in effect giving them permission to give you no bonus and you have waived your contractual right to receive a bonus if certain metrics are met. You'd be crazy to give up those rights. 

Also, for larger organisations, there is no way HR are going to get into that as once one person does it, others will too and it just becomes messy. It is also more likely to attract the attention of the Revenue and they may ask to examine all these new contracts that the employees now have and roll them back. 


Steven
www.bluewaterfp.ie


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## NoRegretsCoyote (3 Mar 2021)

Bronte said:


> And that's a material risk how?


Because it's something that:

you are statistically likely to encounter as a landlord over a career;
will involve non-trivial financial loss and/or a lot of personal hassle.



Bronte said:


> How would you compare it to the risk of holding shares for 25 years if they turned out to be AIB or BofI shares in circa 2006?


That's a complete straw man.


----------



## Sarenco (3 Mar 2021)

AGoodLife said:


> Your are probably right. We are thinking* at maximum* along the the lines of 150m2 renovation+100m2 extension. Looking a bit further, I think rough prices are 150*1per m2+100*2 per m2 = 350k. But we will want it to be relatively high spec / over supplied on things like storage, plumbing, natural light, bringing the outside in, low future running costs, and would try to favour environmentally favourable materials. So probably 400 will even be a challenge?


€400k for that level of work in Dublin looks like a pretty tight budget to me, particularly if you are going for a high spec.

2019 RIAI Consumer Cost Guidelines (ex vat): Extension - €1,900 to €2,300 per sqm / Renovation - €1,800 to €2,000 per sqm.

So, €460k to €530k (ex vat) for your project.


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## Steven Barrett (3 Mar 2021)

Sarenco said:


> €400k for that level of work in Dublin looks like a pretty tight budget to me, particularly if you are going for a high spec.
> 
> 2019 RIAI Consumer Cost Guidelines (ex vat): Extension - €1,900 to €2,300 per sqm / Renovation - €1,800 to €2,000 per sqm.
> 
> So, €460k to €530k (ex vat) for your project.


Prices are going through the roof at the moment and only going higher. Builders can't get tradesmen, who's prices are only going higher. supply of materials going up. I was told as a rule of thumb €1,500 per square meter if single story extension, €2,000 if going for 2 storey. If you want it high spec or there's anything complicated, it's going to be more. 

Get a QS to do the cost before you put it out to tender.


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## MugsGame (3 Mar 2021)

Great, we've solved the OP's problem


----------



## AGoodLife (4 Mar 2021)

NoRegretsCoyote said:


> I wouldn't be a fan of this idea.
> 
> Two rental properties is incredibly concentrated by asset class. It is also very high risk. One dud tenant and you lose 50% of your rental income.
> 
> I think being a private landlord can make sense. But the yield has be enough to compensate for the risk and you'd need a diversity of income streams.



I was planning a long term lease to the state, although the state could renege...


@NoRegretsCoyote Are your ordered preferences, 1. putting extra money into pension (unlikley to get tax relief on it), 2. pay down mortgage, 3. buy shares, 4. buy another rental.

At what size portfolio do you think a second rental makes sense?


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## AGoodLife (4 Mar 2021)

Sarenco said:


> €400k for that level of work in Dublin looks like a pretty tight budget to me, particularly if you are going for a high spec.
> 
> 2019 RIAI Consumer Cost Guidelines (ex vat): Extension - €1,900 to €2,300 per sqm / Renovation - €1,800 to €2,000 per sqm.
> 
> So, €460k to €530k (ex vat) for your project.


<gulp>

Thanks, I think I saw numbers I used based on some other folks experiences, but RIAI sounds more reliable. Might be better off just knocking it all and starting again.

Big picture, I guess we can afford it, or we can shrink the project.


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## AGoodLife (4 Mar 2021)

SBarrett said:


> Prices are going through the roof at the moment and only going higher. Builders can't get tradesmen, who's prices are only going higher. supply of materials going up. I was told as a rule of thumb €1,500 per square meter if single story extension, €2,000 if going for 2 storey. If you want it high spec or there's anything complicated, it's going to be more.
> 
> Get a QS to do the cost before you put it out to tender.


Thanks Steven. Yes, will do.


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## AGoodLife (4 Mar 2021)

MugsGame said:


> Great, we've solved the OP's problem



Well not really, only deferred it for a year, there is still the 'problem' of after the renovation spend, where to put the 150k p.a.

My options are still:

-pay off the mortgage, to do that over the next two years feels too safe, I would prefer to have the money work harder for me, I understand that is riskier, but I also have a 20-60 year timframe.
-contribute beyond tax relieft to pension (If I retire early, I understand that I might never be able to use the carried forward tax relief, but at least tax free growth)
-invest outside a pension (not very tax efficient...maybe a large basket of shares directly)
-buy a second rental property? and then a third?
-set up trusts or pensions for the kids (saw some threads here on that recently), and start using the 3k exemption per year? (we never had access to something like that growing up, and I think we benefitted from having to do it ourselves, and I fear they might just blow it, but houses are not cheap these days).

Brendan says pay off mortgages and then buy shares.
Bronte says buy rentals
NRC says fill the pension boots


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## AGoodLife (4 Mar 2021)

ATC110 said:


> Hi AGoodLife,
> 
> As a slight aside, I do not have private health insurance preferring to have created my own fund by saving the would-be premiums in a dedicated account to be drawn upon when necessary.
> 
> ...



Interesting point. I think I saw Brendan suggesting this decades ago, on here, but to start the fund when you are young. As we age it is more likley that we need medical assistance. 

Work pays for a decent policy at the moment, so my cost if the BIK, which is about half the cost of the policy.

Do you plan to purchase a policy as you/your family age, to hedge against increased risk? (and bank your profits?)


----------



## AGoodLife (4 Mar 2021)

_OkGo_ said:


> Have you exhausted all options with your employer for additional ER contributions. Is there an option to have your bonus/performance paid as ER pension contributions? Care would have to be taken that it is not deemed a salary sacrifice and taxed as a BIK. My understanding is that it has to be at the employers discretion to choose the type of payment, i.e. you cannot request it to be paid as a pension contribution or it would be deemed a salary sacrifice. Some contractual renegotiation would be required





SBarrett said:


> Still difficult to do as the basis of how the bonus is calculated is set down in the contract. By giving your employer discretion, you are in effect giving them permission to give you no bonus and you have waived your contractual right to receive a bonus if certain metrics are met. You'd be crazy to give up those rights.
> 
> Also, for larger organisations, there is no way HR are going to get into that as once one person does it, others will too and it just becomes messy. It is also more likely to attract the attention of the Revenue and they may ask to examine all these new contracts that the employees now have and roll them back.



It's an occupational type pension, I max out my age based tax relieved percentage of 115k, and my employer puts in an additoinal percentage of my salary.

I have considered trying to approach HR about improving pension funding options in general, I would be delighted if they put vast majority of my income straight into pension for a few years. Given tax regime in Ireland, this would be my dream. But unfortunately based on reading the occasional threads on here about it, it seems unlikley to be easy or possible to arrange, with companies with dedicated legal & hr departments.


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## MugsGame (4 Mar 2021)

AGoodLife said:


> -contribute beyond tax relieft to pension (If I retire early, I understand that I might never be able to use the carried forward tax relief, but at least tax free growth)



Brendan cautioned against me doing this as the tax relief regime might change.

I've prepaid small AVC amounts (and gotten the AVCs reflected on my tax free allowance certificate for 2021 to get immediate relief through payroll) but haven't gone ahead with a multi-year contribution in part because of this line from Revenue


> this relief is only from the source of income in respect of which the contributions are made.



One interpretation is that if you prepay your AVCs above the annual limit, you can only use that for future relief if you stay in the same employment.


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## DublinHead54 (4 Mar 2021)

Well done Op on being in such a great position! I also like the spouse earning 50k whilst working part time! I hope to be in your position in my 40s.

The only observation I can add is after watching years of home renovation programmes the majority go overbudget.


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## NoRegretsCoyote (4 Mar 2021)

AGoodLife said:


> @NoRegretsCoyote Are your ordered preferences, 1. putting extra money into pension (unlikley to get tax relief on it), 2. pay down mortgage, 3. buy shares, 4. buy another rental.



For you I would:

Pay down mortgage
Put extra into pension
Buy a rental
Buy an ETF



AGoodLife said:


> At what size portfolio do you think a second rental makes sense?



Your income is big enough to weather a dud tenant easily. 

To me a rental portfolio makes sense in some or all of the following circumstances:

You have the benefit of a tracker and/or sheltering a CGT loss
You have time and resources to do maintenance and even renovations yourself
You or a spouse has no other earned income and can accumulate pension entitlement with Class S PRSI from rental income
You are in a high-yield area (as in 10% or higher), usually apartments
You can acquire more than one property in same development


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## ATC110 (4 Mar 2021)

AGoodLife said:


> Do you plan to purchase a policy as you/your family age, to hedge against increased risk? (and bank your profits?)


I'm over the community rating threshold so it would be too expensive to enter the health insurance market.
I'll continue to act as my own insurer aka take my chances!
I have no dependents so cannot foresee how it would ever be worthwhile.


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## ATC110 (4 Mar 2021)

AGoodLife said:


> Do you plan to purchase a policy as you/your family age, to hedge against increased risk? (and bank your profits?)


It's also worth bearing in mind there is no private children's hospital or beds and no private orthopaedic service


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## Steven Barrett (5 Mar 2021)

AGoodLife said:


> Well not really, only deferred it for a year, there is still the 'problem' of after the renovation spend, where to put the 150k p.a.



Get your renovations done first and wait and see how much cash you have after that. 

Max out your pension each year. 
Build up a cash reserve that you are comfortable with. 
Pay down your mortgage asap
Build up an investment portfolio with the rest. 
Don't be in a hurry to buy a property. Those high prices that first time buyers are complaining about apply to investors too. There is plenty of time to buy a property and if you wait, you can buy it in cash. 

Working for a tech firm, you won't get a gold watch for 40 years service, so make hay while the sun shines. Put a plan in place to automate savings each month and watch your wealth grow.

Remember, there is a difference between having a large income and being wealthy. There are lots of people with incomes similar to yours who are not wealthy as they have spent it on expensive houses and lifestyle. Build wealth and you will have lots of options. 


Steven
www.bluewaterfp.ie


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## Blackrock1 (5 Mar 2021)

SBarrett said:


> Remember, there is a difference between having a large income and being wealthy. There are lots of people with incomes similar to yours who are not wealthy as they have spent it on expensive houses and lifestyle. Build wealth and you will have lots of options.
> 
> 
> Steven
> www.bluewaterfp.ie



thats an interesting point Steven, the other side is whats the point in earning lots of money if you dont get the enjoyment / benefit from it, because wealth generally gets passed on ! 

i am all for some fiscal prudence, but the recent past has also reminded me that tomorrow is promised to no one!


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## Steven Barrett (5 Mar 2021)

Blackrock1 said:


> thats an interesting point Steven, the other side is whats the point in earning lots of money if you dont get the enjoyment / benefit from it, because wealth generally gets passed on !
> 
> i am all for some fiscal prudence, but the recent past has also reminded me that tomorrow is promised to no one!


You are misunderstanding me. You accumulate now to spend later. In the industry, we use the term "financial independence" but what we really mean is being rich. If you accumulate wealth, you have choices. You can retire earlier, you can change to a less demanding role, help out the kids, go on more holidays. 

Spending now means your lifestyle costs are higher. You will want to maintain that lifestyle in retirement but because you have been spending more, you are saving less. But you need a bigger pot of money to be able to maintain your lifestyle. So what is the solution? You work for longer than you want (I know people working just as hard in their 70's because they never saved) or you have a big drop in lifestyle when you stop working. 

I am not a FIRE advocated and I do not tell people not to enjoy life. Automate you savings, so it comes out of your account automatically, just like a bill. then feel free to spend what is left over on whatever you want. 


Steven
www.bluewaterfp.ie


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## AGoodLife (9 Mar 2021)

Thanks @MugsGame

It is fairly certain I will not recoup most of the relief in the future, so I don't think that element of regulation change affects me much.

I would be overpaying the pension, just to get the tax free growth. A contribution today, might grow tax free for 50 years if I have a good run. and would be expected to grow tax free for 30 years.


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## AGoodLife (9 Mar 2021)

Dublinbay12 said:


> Well done Op on being in such a great position! I also like the spouse earning 50k whilst working part time! I hope to be in your position in my 40s.
> 
> The only observation I can add is after watching years of home renovation programmes the majority go overbudget.


Thanks DublinBay

That is certainly a possibility from what I have seen. But I guess once we get it completed, while I still have the high earnings that could be ok.


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## AGoodLife (9 Mar 2021)

NoRegretsCoyote said:


> For you I would:
> 
> Pay down mortgage
> Put extra into pension
> ...


Thanks NRC!

To maximise time in the market, I am really considering pushing out fully paying down of the mortgage, or doing it over the next few years, while doing some other investment.



NoRegretsCoyote said:


> Your income is big enough to weather a dud tenant easily.
> 
> To me a rental portfolio makes sense in some or all of the following circumstances:
> 
> ...


I understand the rationale behind most of these, but not the last point, is that just for convience? Same development seems to concentrate your risk?


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## AGoodLife (9 Mar 2021)

Thanks Steven!



SBarrett said:


> Get your renovations done first and wait and see how much cash you have after that.


I think that is very pragmatic advice. We have about 400k with cash+stocks today, but even the rough estimates here, imply we might need 600k. (Writing down 600k for a renovation just sounds so ridiculous, I have trouble believeing it). But that means I likley need to accumulate another 150k over the next 12 months, i.e. I dont need to make a decision on where to put my money today, I just need to keep saving it.

Arguably I should sell all my stocks today (and as they arrive for the next year), as if the stock price fell, I might be forced to wait longer before we could do the big renovation, or sacrifice some of the renovation.




SBarrett said:


> Max out your pension each year.
> Build up a cash reserve that you are comfortable with.
> Pay down your mortgage asap
> Build up an investment portfolio with the rest.


Pension is Maxed, cash reserves in place, and this should hold through our renovation.

The future question becomes about timing on paying down mortgage vs investing more. I think I am leaning towards doing both at the same time with future money, paying down mortgage a bit, and investing a bit, with a view to maximising time in market, rather than paying down mortgage first, and then investing further.

For your last step, How do you suggest to hold the portfolio? Direct shares like Brendan? What do you think of overpaying it into pension? I am strongly considering putting it into pension.



SBarrett said:


> Don't be in a hurry to buy a property. Those high prices that first time buyers are complaining about apply to investors too. There is plenty of time to buy a property and if you wait, you can buy it in cash.


I take your point that I don't need to rush. But, don't the current yields imply the prices are not crazy? And don't I get a better return on cash if I take mortgage with it. There is also the point, that I could potentially buy a house as PPR, lock in PPR rate, live there during renovation, and then rent it out afterwards. This set's it up with a nicer mortgage rate for the future, and also allows us to avoid paying rent for an unknown period during renovation.



SBarrett said:


> Working for a tech firm, you won't get a gold watch for 40 years service, so make hay while the sun shines. Put a plan in place to automate savings each month and watch your wealth grow.


I think that's true for most jobs these days! And yes, I strongly agree, I have automatically saved and invested all my life. And my mortgage max contributions will continued. Recently the priority was paying down the Mortgage, but now that is reasonable, next it will be renovation, and then within the next year, I need to have a good automatic plan for where and how to save the additional 12k per month.



SBarrett said:


> Remember, there is a difference between having a large income and being wealthy. There are lots of people with incomes similar to yours who are not wealthy as they have spent it on expensive houses and lifestyle. Build wealth and you will have lots of options.




Strongly agree, we live well below, and arguably too far below our means, Our outgoing are something like 25% of our after tax income, that includes mortgage payments, but not pension payments. That is partially just our habit and values, but it also with an eye on reaching Financial Indepennce, and having options for the future.

The PPR+renovation is the main splurge, with a median house and no big renovation project, we would already be Finacially independent.


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## AGoodLife (9 Mar 2021)

Blackrock1 said:


> i am all for some fiscal prudence, but the recent past has also reminded me that tomorrow is promised to no one!





SBarrett said:


> You accumulate now to spend later.....





SBarrett said:


> I am not a FIRE advocated and I do not tell people not to enjoy life. Automate you savings, so it comes out of your account automatically, just like a bill. then feel free to spend what is left over on whatever you want.


I think the issue is figuring out what current (and by defintion, future) spending level is reasonable. We can all agree on the tenet to live below your means. But by how much, and for how long.

As you say, increased spending now, means it takes longer before hitting financial independence or other savings goals, but assuming the spending is not wasteful, it can also bring more life now when you are perhaps better able to handle more life!


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## AGoodLife (9 Mar 2021)

Blackrock1 said:


> Thirdly, does your wife want to work, or is she just doing it because she can earn a reasonable income working part time? we had a similar decision to make (albeit my wife was still working full time) and we decided to forego the 80-100k she earns a year so that one of us can be with the kids full time, now my earnings had increased over the previous 2-3 years to effectively take up the slack once we took the childcare costs out but it meant i was earning a lot more for us to stay still effectively, but we still think its a good use of our resources! My kids are younger so it may not be as important in your case.





Blackrock1 said:


> which brings me back to my point, unless your spouse really wants to work would everyones life not be better if they didnt?


 
Unfortunately (from my point of view!) my spouse does want to work. They value having their own independence and career highly. I think this is mostly about, the what ifs, and in particular, if we seperated, they still have their own career and income. Relationship longevity statistics are not awe inspiring.

They also enjoy the intellectual and social side of working outside the home, but they also tend to overwork,and their employer is not as considerate as mine, so their work life balance is worse.

They would also be very interested in getting invlved in some charity/not-for-profit stuff, but don't have the time today.

Overall, I think our qualiy of life would be much much higher if we only had one breadwinner, and with the rental, and tax bands, and childcare, I don't think we would even be that much worse off.

It takes time and energy to organise outings, activities, social events, weekends away, holidays, Having someone with more time to focus on that would be really great for the family.

Any strategies to convince my spouse to take the plunge?


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## Gordon Gekko (9 Mar 2021)

So you’ve about €450k in cash/shares, the renovation might cost €600k, your mortgage is €275k, and you’re generating a surplus of €150k a year.

You’re already maxing out your pensions, so my analysis would be quite simple:

- Use your €450k and one year’s surplus income to fund the €600k renovation
- Don’t switch to Avant’s 1.95% rate as you won’t be able to pay down your mortgage aggressively
- Then over two years clear your mortgage and make sure you’ve around €50k in cash for emergencies
- Then invest €150k a year in a diversified share portfolio and don’t look back


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## NoRegretsCoyote (10 Mar 2021)

AGoodLife said:


> I understand the rationale behind most of these, but not the last point, is that just for convience? Same development seems to concentrate your risk?


I guess so.

This is more economies of scale. One management company to deal with. You are more attractive customer to a managing agent and contractors.


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## Gordon Gekko (10 Mar 2021)

It’s also worth pointing out, especially in the context of the number of AAM contributors naively looking to “go it alone”, that Vanguard have a study showing that clients with a financial advisor do 3% better per year...

[broken link removed]

People need to be very wary of all of the “which cheapest ETF or pension should I buy?” threads...


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## AGoodLife (10 Mar 2021)

Thanks, I have seen several studies referenced that say financial advisor can increase return. I think a lot might depend on the client, and their starting point though. Like everything, people have different levels of knowledge and skills. I think I have fairly decent knowledge, having immersed myself in finance related stuff for years, but I probably have some blind spots that I dont know about.

I will read the doc - here is a highlight of the table and where the gains come from.


Benefit of moving from the scenario described to Vanguard Advisor’s Alpha methodology


Typical value added for client (basis points)Suitable asset allocation using broadly diversified funds/ETFs> 0*Cost-effective implementation (expense ratios)34Rebalancing26Behavioral coaching150Asset location0 to 75Spending strategy (withdrawal order)0 to 110Total-return versus income investing> 0*

Range of potential value added (basis points) About 3% in net returns

* Value is significant but too unique to each investor to quantify.

Notes: We believe implementing the Vanguard Advisor’s Alpha framework can add about 3% in net returns for your clients and also allow you to differentiate your skills and practice. The actual amount of value added may vary significantly depending on client circumstances.

Source: Vanguard.


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## Blackrock1 (10 Mar 2021)

AGoodLife said:


> Unfortunately (from my point of view!) my spouse does want to work. They value having their own independence and career highly. I think this is mostly about, the what ifs, and in particular, if we seperated, they still have their own career and income. Relationship longevity statistics are not awe inspiring.
> 
> They also enjoy the intellectual and social side of working outside the home, but they also tend to overwork,and their employer is not as considerate as mine, so their work life balance is worse.
> 
> ...



i think you have hit the nail on the head there, when we weighed it all up, having one breadwinner and one person solely dedicated on the family and organising all that goes with that (which is more than a full time job in reality) leads to a better life for everyone.

We were fortunate in that while my partner was a very high achiever when she started out, as we started our family and she was out of the work place for extended periods (i think she took 14 months off for each child) she started to get left behind and seeing less capable people elevated galled her a little (even though she understood why). After the second we started to look at the financial reality of one income and realised that with some adjustments we wouldnt be that much worse off and would accrue all the benefits of her being at home full time. Added to that there was the opportunity of a vol redundancy (she has been with one employer since we left university) so it would have been crazy to pass on that. So it gives us the opportunity to treat this as a temporary career break (which is mentally easier) but i dont see her going back (to her old career at least who knows what will happen in the future).

If you could convince your wife on the above she could then take a part time charity role which would give her all that she values from work except financial independence, thats something you have to work on together i suppose. My partner and i have been together since college so we had nothing when we met and everything we have now is considered shared, even with the current arrangement we split everything down the middle which makes life easier.


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## AGoodLife (10 Mar 2021)

Gordon Gekko said:


> So you’ve about €450k in cash/shares, the renovation might cost €600k, your mortgage is €275k, and you’re generating a surplus of €150k a year.
> 
> You’re already maxing out your pensions, so my analysis would be quite simple:
> 
> ...


That's a good point, you can't overpay with Avant, the interest bill would be about 10% lower with avant, but if I pay down 10% a year with UB, it gives a similar net interest bill for the year.


Gordon Gekko said:


> - Then over two years clear your mortgage and make sure you’ve around €50k in cash for emergencies
> - Then invest €150k a year in a diversified share portfolio and don’t look back


Thanks Gordon.

I think this is a good plan and concise summary. I guess I feel this is a bit too "safe" for me.

*Question*: What do you think about contributing beyond tax relief to the pension (with little chance of claiming relief in future)  in preference to direct share portfolio? (until danger of reaching funding limits)


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## AGoodLife (10 Mar 2021)

On the plan for the future, I see three options emerging in front of me at the moment

a. The Safe Way - Following the safe plan that @Gordon Gekko @Brendan Burgess @Blackrock1 @SBarrett advised - Prioritise paying down the mortgage before further investment. take a 2 year fixed with UB,  get the renovation  done, pay down 10% of mortgage during Y1 and Y2, Pay the rest of the mortgage during year three and four. Start putting surplus cash into market during end of year 4.  This means I miss four years of time in the market; Market inflows would look like Y1-3 0, Year 4 75, Y5 150, Y6 150.

b. The mild leveraged way - sign up for the UB 5 year fixed, get the renovation done, overpay the 10% pa, in year 6 pay off the remaining ~120k. Putting the surplus into the stockmarket as I go. Y1 0, Y2 0, Y3 120, Y4 120, Y5 120, Y6 50. this gets more money into market soner, maximising time in market.

c. The Avoid rental renovation & lock in low cost debt way - discussed a bit with @_OkGo_  - Buy a suitable ppr to live in during renovation, (likley to be @800k to get space we need and stay in area), lock in a long term ppr low mortgage rate, renovate existing home, and then rent it the purchased home (or potentially sell if market moved favourably). I still haven't run the figures on this, but I think it would mean delaying or reducing renovation budget, or living in a home that is not great for us during the renovation, None of which we want to do.

Notes:
I don't anticipate that I will still be 'working' or earning at these rates in Year 7 but who knows!
I still am not definite that I would put in market, instead of buying high yield rental, and long term lease to council.
I am still unclear if the stock market investment should be direct share portolio or non relieved contributions to pension.
I don't know why but plan A. seems to easy and safe to me.


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## AGoodLife (10 Mar 2021)

Thanks for sharing your life experience and advice Blackrock.



Blackrock1 said:


> If you could convince your wife on the above she could then take a part time charity role which would give her all that she values from work except financial independence, thats something you have to work on together i suppose.


I will have to work on this.


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## AGoodLife (10 Mar 2021)

Thanks EmmDee, I think I didn't get a chance to reply to you yet, great to hear from others who are in a similar place.



EmmDee said:


> Hi,
> 
> I'm in a situation not dissimilar to yours. You already have a number of suggestions relating to mortgages / build or buy / investments etc already. I don't think I can add much to that. But I can suggest a couple of "lifestyle" comments...
> 
> - We have a really good cleaner who has been with us for almost 10 years. We also have an equally good gardener. Neither need any form of supervision or tracking. They come and do their job and maintain the place seamlessly. The cost is not large but the time and hassle saving is well worth it - weekends aren't about chores or looking at an overgrown garden. We have continued to pay them through the lockdowns - it's in our interest.


I see @Bronte and @Blackrock1 also strongly recommended cleaner, housekeeper, gardener. And I really think some extra help would be great, it might even help me work a few more years in the high earning job.

I can fully relate to the overwhelming garden, and we have done most of the work ourselves so far, but it is neverending, we have tried to be strategic and do work that will reduce future work.

We had a cleaner before for a few years, but we suffered from the (self enforced stress) on the amount of tidying we had to do in advance, for the cleaner to be able to clean somewhat effectively.

What does a housekeeper do?

We could do with some advice, on how to find good folks to help out, but maybe more importantly,  on* how to manage and organise the work, and how much to pay/budget for the work. How frequent, how long etc?

I think we could do with that advice for gardener, cleaner, and house keeper*




EmmDee said:


> - On holidays, I'm not that into doing multiple holidays a year or some of the more ostentatious stuff that you see sometimes. But I would recommend thinking of a special "experience" holiday every 2 or 3 years - especially with the kids at the age where they can get a lot out of them. One time we did a three week trip to Costa Rica with stops in various environments (rain forest, cloud forest, pacific ocean). Another time we did an "all in" holiday in Mauritius. In between we had pretty simple holidays. But the kids remember the "big" holidays more than anything else.


We need to do more here. We haven't done enough of this.



EmmDee said:


> - Flexibility is a major thing for us. We treated the fact that my "salary man" status gave my partner the flexibility to do more flexible work or do things not based on earning a certain salary. That has a big impact on the stress of the household. So, the idea of doing something charitable or socially minded would fall under that. Also allows location flexibility - a couple of summers we rented a place on the west coast of France for a couple of months on AirBnB - big discount because of the months and length of time. Was easily accessible which meant my partner was based there with a couple of trips back, I could go over and back a couple of times.


I'm jealous of this! For the moment my spouse would prefer to have an independent career.



EmmDee said:


> Otherwise, like you, we haven't a lot of overheads or status symbols. Car is 10 years old, house is mid-size and suits us, outlays are low. As with you, if I lost my job, I don't think I could achieve the same revenue - so am conscious of not digging myself into a hole by ramping up general expenditure without reason


Have you done a money makeover post yet? I recommend it to get views from others! Sounds like you have most of your affairs in good order though.


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## Gordon Gekko (10 Mar 2021)

I really don’t see how clearing the mortgage over 2 years is “the safe way”! I think “the smart way” is a better description.

Who can predict what markets will do over that two year period? So you’re locking-in a guaranteed after-tax return of around 2.2% for two years which is the equivalent of maybe 5% in a managed share account. Whereas you could lose significantly through equities over a short period like that, or make circa 7% a year on average over the longer-term.

But thereafter you’re lashing €150k a year into an all equity strategy (i.e. once your mortgage is clear after 2/3 years).

I think it’s the approach that makes most sense and it’s what I would do myself.


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## time to plan (12 Mar 2021)

Gordon Gekko said:


> It’s also worth pointing out, especially in the context of the number of AAM contributors naively looking to “go it alone”, that Vanguard have a study showing that clients with a financial advisor do 3% better per year...
> 
> [broken link removed]
> 
> People need to be very wary of all of the “which cheapest ETF or pension should I buy?” threads...


Interesting document but I wouldn't give it too much weight unless it's been peer reviewed and published in a respectable academic journal.


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## Gordon Gekko (12 Mar 2021)

time to plan said:


> Interesting document but I wouldn't give it too much weight unless it's been peer reviewed and published in a respectable academic journal.



You’re right. It’s controversial to argue that someone with a professional advising him or her should do better than a know-all paddling his or her own canoe.

Exhibit A is the volume of eejits who fled the market last March. Exhibit B is the volume of eejits fleeing the market recently.

Some investment trusts are trading at significant discounts right now and the managers are attributing it, in part, to dumb retail money which is flitting in and out of the market at the slightest hint of bad news. A sure fire way to lose money over time.

1) Have a diversified portfolio and be smart about tax
2) Stay invested and ignore the newsflow


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## DublinHead54 (12 Mar 2021)

Blackrock1 said:


> i think you have hit the nail on the head there, when we weighed it all up, having one breadwinner and one person solely dedicated on the family and organising all that goes with that (which is more than a full time job in reality) leads to a better life for everyone.
> 
> We were fortunate in that while my partner was a very high achiever when she started out, as we started our family and she was out of the work place for extended periods (i think she took 14 months off for each child) she started to get left behind and seeing less capable people elevated galled her a little (even though she understood why). After the second we started to look at the financial reality of one income and realised that with some adjustments we wouldnt be that much worse off and would accrue all the benefits of her being at home full time. Added to that there was the opportunity of a vol redundancy (she has been with one employer since we left university) so it would have been crazy to pass on that. So it gives us the opportunity to treat this as a temporary career break (which is mentally easier) but i dont see her going back (to her old career at least who knows what will happen in the future).
> 
> If you could convince your wife on the above she could then take a part time charity role which would give her all that she values from work except financial independence, thats something you have to work on together i suppose. My partner and i have been together since college so we had nothing when we met and everything we have now is considered shared, even with the current arrangement we split everything down the middle which makes life easier.



I assume this is a much easier conversation when there is a large variation in pay between spouses?

Interestingly I think this is starting to shift for those starting families now in their late 20s early 30s. There is much more equality in the workplace and support for mothers taking maternity in not falling behind in their careers. I know in my own experience that I historically earnt more than my spouse but in the last few years the gap has closed. We probably need 75% of our total income to live comfortably but each contributes near 50% each.

As an observation with the high salary and low mortgage you could probably employ somebody part-time to do your admin for you.


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## Blackrock1 (12 Mar 2021)

Dublinbay12 said:


> I assume this is a much easier conversation when there is a large variation in pay between spouses?
> 
> Interestingly I think this is starting to shift for those starting families now in their late 20s early 30s. There is much more equality in the workplace and support for mothers taking maternity in not falling behind in their careers. I know in my own experience that I historically earnt more than my spouse but in the last few years the gap has closed. We probably need 75% of our total income to live comfortably but each contributes near 50% each.
> 
> As an observation with the high salary and low mortgage you could probably employ somebody part-time to do your admin for you.


There was a large pay variation by the time we made the decision but for 15 years or so my wife earned as much as i did, but one way or another us starting a family impacted that, either by her deciding not to move jobs as we got closer to starting a family and missing out on promotions due to the time she took off to have the kids. Anyway by the time the second came along we were both of the view that for us it would be a better family life and a better life for the kids if she was off. We will see how it goes but for now its definitely the best thing for us.


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## Gordon Gekko (12 Mar 2021)

The way the tax system works, couples are heavily incentivised to have a second spouse earning at least €25k pa.


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## EmmDee (12 Mar 2021)

AGoodLife said:


> We had a cleaner before for a few years, but we suffered from the (self enforced stress) on the amount of tidying we had to do in advance, for the cleaner to be able to clean somewhat effectively.
> 
> What does a housekeeper do?
> 
> ...



I don't think there is a hard and fast rules here. But if any of these help....
- We pay a gardener €100 per month flat. The arrangement is that he comes and goes as needed. So during the Summer he'll come more often, less during the Winter. We have a small grass element but he cuts that and then does various things depending on the season - trimming, beds, weeding, planting.
- We pay the cleaner about €18 p/hour for three hours once a week. That is above average but over the years we have increased it. We also pay a month extra at Christmas which again wouldn't be standard. The three hours has become a bit notional really because we have a good routine and we leave it to her (we often leave the house when she's here - use it as an excuse to go out and do things). So some weeks she might be here a little less than three hours, some weeks a bit longer.
- Different people have different irritations about house keeping. Some hate ironing, some don't mind it. I'd sit down and think of things that you both hate doing but if they were done weekly would make a difference. Some people save their ironing up and have their cleaner do that and you have a pile of ironing done for the next week. Not for us - we get all the floors done (hoover or washed), the cooker cleaned really well, all surfaces and bathrooms washed, dusting. 
- You shouldn't have to clean before the cleaner. Depending on your list, you might have to prep a bit but it is a good routine. For example, we need to clear floors and surfaces before she comes but it only takes 15 mins and it's good to do be forced to do it. When the kids were young, the rule was they had to tidy their rooms for the cleaner. If they didn't we told her to ignore their room and they had to do the hoovering and cleaning of their room. Was a pretty handy routine
- Find the right person. Have a specific list of what you want done. If you have a candidate, have them do a couple of weeks as a trial - if the "dynamic" isn't right or you (or your partner) doesn't feel the job is done as you'd like to see it, then change quickly and go with an alternative. People have different areas of emphasis in terms of cleaning - better to find someone who matches your "style" rather than someone who doesn't and you trying to change them. If you get the right person, you won't feel you have to monitor them really closely, won't feel you have to clean the house before they arrive. And if you have specific jobs you want done, you won't need to clear something they won't be working on. The place doesn't need to be a show-house before they arrive.


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## Blackrock1 (12 Mar 2021)

a good cleaner is hard to find, if you get a good one look after him or her!


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## Blackrock1 (12 Mar 2021)

Gordon Gekko said:


> The way the tax system works, couples are heavily incentivised to have a second spouse earning at least €25k pa.



yes absolutely but unfortunately part time working with small kids introduces as many issues as it solves, its a pity that single income families are worse off on the same income than with two people earning half that amount.


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## DazedInPontoon (12 Mar 2021)

Gordon Gekko said:


> The way the tax system works, couples are heavily incentivised to have a second spouse earning at least €25k pa.


I don't think my first spouse would like that much


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## Gordon Gekko (12 Mar 2021)

DazedInPontoon said:


> I don't think my first spouse would like that much



Neither would my current spouse.

The next one’s probably pretty chilled out, especially with college lectures being virtual at the moment.


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