# Views on our financial position please



## Barbara Bunter

Hi

I would be grateful for your advice regarding our financial position:

Ages 37 (me) and 36 (husband).

2 children (4 and 3).

Salaries €60,000 (me) and €120,000 (husband).

I'm public sector and my pension will be 50% of my final salary with 150% lump sum (retire at 60).

He is private sector. He contributes €23,000 to his pension each year. His employer contributes 8% of his salary. His fund is worth around €100,000.
He receives a bonus of around €25,000 each year. He also has net income of around €7,000 from other sources. He also receives share options and has around €50,000 worth (realisable next year).

We owe €700,000 on our home which is worth €1,250,000. The interest rate is 3.1% and there are 30 years left. The repayments are around €3,000 a month.

We owe €200,000 on a second property worth €250,000. The rent is €1,250 a month and the mortgage rate is 0.5%.

We have a holiday home worth €175,000 and owe €118,000 on it. The repayments are around €480 a month. It also generates €6,000 of rental income a year which we use to cover some of the costs. The mortgage is a 0.5% tracker but the rate is less than 0.5%. There are around 23 years left on it.

His employer provides health insurance and protection. Our debts are all insured.

We have very little cash but are saving around €500 a month but plan to stop once we have €50,000 in cash (from savings and the share options money). Then we will focus on paying down the home mortgage. My husband says we should not repay the tracker mortgages.

Childcare is manageable at €500 a month. We have no other debts and run two cars (which we own).

Are we making any obvious mistakes or missing anything? thank you.


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## bmount

potentially a little bit sad we are all on here on a saturday night with first world problems but really looks like you are more than knowledgeable and articulate to figure this out i dont see a problem but consider surely paying off some of the 3.1% 750k and you ll be retired by 45. (what then ?)


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## Delboy

Saving €500 a month off those salaries + rental income seems very low.
Would need to see a table of net income + rent less mortgages, penions, health. See what you have then before paying the day to day bills such as the childcare you mentioned


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## Barbara Bunter

I'm inclined to agree. My husband thinks that once we have €50,000 in cash for a rainy day that should be the end of it. We saved a lot more in the past to buy the house.

Thank you for taking the time to reply Delboy.

The regular take home plus the rent is around €10,000 a month. The mortgages total around €5,000. Childcare is about €500 a month and we save €500. That leaves €4,000 which we spend on living expenses. Of the €20,000 extra in bonus/other income my husband's view is "invest 1/3, pay down debt with 1/3, and fritter away 1/3" (his Dad told him this is sensible and what he did over the years!). I think his idea now that things have stabilised is to put 1/3 of this extra money into an investment account.


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## Brendan Burgess

Delboy said:


> Saving €500 a month off those salaries + rental income seems very low.



First of all, you are saving a lot more than €500 a month. 
You are putting a lot of money into pension schemes.
You are paying down the capital off three mortgages which is a huge amount of savings.  As two of them are tracker mortgages, most of the repayments are capital and not interest. 



Barbara Bunter said:


> We owe €200,000 on a second property worth €250,000. The rent is €1,250 a month and the mortgage rate is 0.5%.



You have a lot of property and a lot of debt.  While you can handle any increase in interest rates comfortably, I wonder if the return on this property is worth the hassle and small risk  involved? 


If you sell it, you will have €50,000 to pay off your mortgage. So you will save €1,500 a year. 

So you are getting a net return of €4,500 a year. 

If it runs itself without any hassle from tenants, then let it run on a bit.  But in the next few years, as you pay down the capital on the mortgage, the pendulum swings towards selling it and using the increased equity to pay down your mortgage. 




Barbara Bunter said:


> He also receives share options and has around €50,000 worth (realisable next year).



This is really important and you will probably ignore the advice. But your husband should sell the shares as soon as they are realisable. It is wrong to have so much of your  earnings and wealth tied up with the fortunes of one company.  You can't diversify your earnings. But you can diversify your wealth. 

If the company does well, your husband's earnings will continue.  If the company falters, he may lose his job and his shares become worthless. It's probably hard for you to imagine that now. But many bankers saw their earnings hit as their shares in their employer became worthless.  

Brendan


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## Barbara Bunter

Thank you Brendan. Selling the shares as soon as we can is 100% the plan. That is an interesting way to look at the trackers. My husband says that the tracker mortgages mean that we're using someone else's money for free to make money on the property. The other tracker mortgage takes account of minus rates so it is now at around 0.25%!


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## elacsaplau

Brendan Burgess said:


> So you are getting a net return of €4,500 a year.




If we accept your figures, this net return is only true if you ignore house price movements. I believe that this is not a valid assumption in the long-term.


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## Brendan Burgess

Good point. House prices can rise as well as fall. 

Brendan


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## elacsaplau

Brendan Burgess said:


> Good point. House prices can rise as well as fall.



Exactly - never said they would appreciate. I just think it is genuinely silly to get into detail about one aspect of the return and to ignore the other.


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## Boyd

Barbara Bunter said:


> That leaves €4,000 which we spend on living expenses.


IMO that is a crazy amount for monthly "living expenses". You should break that down into exactly what is consuming the 4K e.g. groceries, alcohol, eating out, clothes/fashion, petrol etc. I would be looking to reduce that to E2K outgoing and save the other 2K, or better yet, pay off more of 3.1% mortgage with it.



Barbara Bunter said:


> Of the €20,000 extra in bonus/other income my husband's view is "invest 1/3, pay down debt with 1/3, and fritter away 1/3" (his Dad told him this is sensible and what he did over the years!). I think his idea now that things have stabilised is to put 1/3 of this extra money into an investment account.



Investing outside a pension wrapper in Ireland is fraught with complications and tax headaches. 1/3 invested may not be a good idea. Another 1/3 i.e. E6600 - that's alot of "frittering away". I'm sure that E6600 could be put to better use? Personally I'd use the entire E20K to pay of debt ASAP (again the 3.1% mortgage).


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## Brendan Burgess

Barbara Bunter said:


> Salaries €60,000 (me) and €120,000 (husband).





username123 said:


> IMO that [€4,000] is a crazy amount for monthly "living expenses"



With a gross income of €180k, it is not crazy to spend €4,000 a month.


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## Boyd

Brendan Burgess said:


> With a gross income of €180k, it is not crazy to spend €4,000 a month.



With E10K nett pay and 3 outstanding mortgages, I respectfully disagree. However, I hold this view as I hate debt so perhaps others will not share this view.


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## Sarenco

Hi Barbara

It seems to me that you are carrying an uncomfortably high level of debt relative to your incomes - your DTI ratio is around 5:1.

You are obviously in good shape in terms of providing for your retirement so I would be inclined to focus on de-risking your overall financial position (ie paying down debt).

Is it sensible to have a holiday home while you still have a €700k mortgage on your PDH? 

I would definitely apply any bonuses,  etc. to pay down the PDH mortgage ahead of schedule as soon as you have built up a reasonable reserve fund - €50k looks a bit on the high side in this regard.

Hope that helps.


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## Barbara Bunter

Thank you for your feedback.

The thinking behind the €50,000 (my husband thinks €60,000 actually) is to have six months worth of a reserve. If worst case scenario he lost his job, he would receive a meaningful payoff.

On the €4,000 a month living expenses, we don't scrimp but equally we don't go crazy either. Things just add up.

The de-risking you talk about Sarenco makes sense, but we're also conscious that we could try and repay the main mortgage early and die in the meantime!

My father in law thinks that if all you do with bonuses and spare money is pay down debt or invest that it's bad for the psyche and that 'frittering away' a portion of your spare money is good for the mind and soul. Invest/save 1/3, pay down debt with 1/3, and consume the other 1/3 (holidays, cars, etc).


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## Brendan Burgess

Sarenco said:


> Is it sensible to have a holiday home while you still have a €700k mortgage on your PDH?



Yes, yes, yes, it's very sensible. 

We have to be careful about not applying the advice appropriate to someone in financial difficulties to someone who is doing very well. 



Barbara Bunter said:


> We have a holiday home worth €175,000 and owe €118,000 on it. The repayments are around €480 a month. It also generates €6,000 of rental income a year which we use to cover some of the costs. The mortgage is a 0.5% tracker but the rate is less than 0.5%. There are around 23 years left on it.



The interest cost of this is €600 a year!  They are covering that ten times in rental income. 

If you enjoy your holiday home, keep it. 

Brendan


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## Barbara Bunter

Thank you Brendan. I think our broad plan may be in line with everyone's suggestions the more that I think about it. Once we have €50,000/€60,000 set aside for a rainy day, we will be paying an extra €500 a month off our home mortgage and an extra €6,600 a year with 1/3 of the bonus. That's around a €1,000 a month over-payment on a €3,000 a month mortgage which is surely sensible enough.


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## noproblem

I think the public sector pension won't kick in at 60 for people your age, just have a feeling I read somewhere.  Another thing not specifically mentioned is the future of your children, both financially and in an educational sense. You guys are so far very lucky in life but god forbid anything should happen my 2 points will come into focus. Just a thought.


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## Sarenco

That certainly looks like sensible approach.

It's really a question of balancing your lifestyle spending today with investing for the future and prudently protecting yourself from unforeseen changes in your circumstances.

It seems to me that the level of debt that you are carrying relative to your income is your main source of risk so that's where I would focus your attention.

Maybe set a target of getting your DTI ratio down to, say, 4:1 over the next 4 years. I certainly wouldn't invest in any more risky assets until you reduce your debts to a more comfortable level.


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## Barbara Bunter

noproblem said:


> I think the public sector pension won't kick in at 60 for people your age, just have a feeling I read somewhere.  Another thing not specifically mentioned is the future of your children, both financially and in an educational sense. You guys are so far very lucky in life but god forbid anything should happen my 2 points will come into focus. Just a thought.



No, for people who entered the public service when I did, it's 60.

I'm not sure what you mean about our children? Whatever happens, they'll be comfortable. We have income protection, all our debts insured, and a payout of €480,000 if my husband dies.

We chatted about paying down the mortgage today and my husband made an interesting point. What good is paying down the mortgage to "de-risk" when if there's a crisis we now know the banks shut down? The difference between owing €700,000 or €400,000 wouldn't be a whole lot. Wouldn't it be safer to have €300,000 in cash and still owe €700,000 in the event of a crisis? We think yes, owing €200,000 at 3.1% and having €300,000 in cash would be crazy. But we don't think that owing €700,000 and having €300,000 in cash is crazy. Logic being that if the world goes to hell in a handbag, it makes no odds. Yes, you pay 3.1% extra per year but is it worth it to have the flexibility?

thanks


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## noproblem

That's all good. What I meant about the children was their future education needs and related expenses, that was all. Others on here have given better advice than anything I can offer and your husband's father seems to have a good outlook on life.


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## Brendan Burgess

Barbara Bunter said:


> Wouldn't it be safer to have €300,000 in cash and still owe €700,000 in the event of a crisis?



No, you have got this the wrong way around. 

Whatever happens you will still owe the banks the money. 

If a bank crashes, you could lose your all your savings. 

If the world comes crashing down, it would be very nice to own your house outright with no debt. 

Brendan


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## Barbara Bunter

Sorry Brendan, I understand you.

My point is that if someone loses their job, they're probably better owing €700,000 and having €100,000 in cash rather than owing €600,000 and having no cash?

thanks


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## Brendan Burgess

That would be right. 

But you would be better off again having no mortgage if you lose your job. 

Brendan


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## Barbara Bunter

noproblem said:


> That's all good. What I meant about the children was their future education needs and related expenses, that was all. Others on here have given better advice than anything I can offer and your husband's father seems to have a good outlook on life.



Thank you for taking the time to respond. We will send them to national primary schools and private secondary schools, so you are right - We need to factor in €10-15,000 per year (or more) for that in around 8/9 years time. And then with college, who knows what the funding model will be by then? But we should have sufficient set aside and coming in. My earnings will never set the world on fire, but my husband's seem to be on an upward trajectory thankfully.


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## Sarenco

Barbara Bunter said:


> Logic being that if the world goes to hell in a handbag, it makes no odds. Yes, you pay 3.1% extra per year but is it worth it to have the flexibility?



That's the issue in a nutshell.

Maintaining a liquid cash reserve to address any emergencies is effectively a form of self-insurance and, like any form of insurance, it comes at a cost.  Your plan to build and maintain a cash reserve equivalent to six months of core household expenses seems entirely reasonable to me but anything beyond that seems excessive in your circumstances (with two earners, one of whom is in the public service).


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## gnf_ireland

Brendan Burgess said:


> This is really important and you will probably ignore the advice. But your husband should sell the shares as soon as they are realisable. It is wrong to have so much of your earnings and wealth tied up with the fortunes of one company. You can't diversify your earnings. But you can diversify your wealth.
> 
> If the company does well, your husband's earnings will continue. If the company falters, he may lose his job and his shares become worthless. It's probably hard for you to imagine that now. But many bankers saw their earnings hit as their shares in their employer became worthless.



Absolutely going to second this - it was a very good lesson I learned shortly after leaving university just before the dot com bubble. We all made lots of money on paper due to share prices doubling in short windows (tech stocks), but very few realised the gains and for most they became worthless pieces of paper.

I had a rule ever since - never to invest my own money in the general industry I work in.

I would even go so far as to 'short' some of the share options depending on their current prices as you can offset them with the shares once vested. Alternatively you can sell a future in them. All depends on their current value and how confident you are of them keeping this value for the next year. I would say derisk in any event!


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## gnf_ireland

Brendan Burgess said:


> With a gross income of €180k, it is not crazy to spend €4,000 a month.





username123 said:


> With E10K nett pay and 3 outstanding mortgages, I respectfully disagree. However, I hold this view as I hate debt so perhaps others will not share this view.



I am going to side with @username123 here. I do think 4k a month is high spending with 2 young kids, especially when childcare is taken out of it. I know lots of people on similar incomes who would average between 50-60% of that after mortgage & childcare, and still live a very comfortable life. 

If the couple were debt free, I would say by all means enjoy the hard earned money, but personally I would be looking to reduce that 700k mortgage a faster. Cutting the household running costs by 25% [1k a month] and putting it against the mortgage would save 140k in interest and cut 10 years off the mortgage. Its also worth noting that their current mortgage brings them to 66/67 respectively, and there is no guarantee that they would be in a position to service that level of debt at that age. They can afford to pay off the mortgage by 60, and believe they should strive to do this.


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## gnf_ireland

Barbara Bunter said:


> my husband's view is "invest 1/3, pay down debt with 1/3, and fritter away 1/3" (his Dad told him this is sensible and what he did over the years!)



Solid advice for someone in their 20's and early 30's before the serious commitments kick in. Think it may not be as relevant now, but depends on what you call fritter away 

Fritter Away 1/3 - Personally I would use this to do an experience with the kids that they will remember forever - so maybe a Lapland trip to see Santa, Orlando when they are a little older, safari in Africa (again a little older) etc. Given the kids ages, and your income level, I would seriously consider a trip to Lapland next Christmas and go back then again in maybe 4-5 years again depending on when the magic ends. I can also strongly recommend an extended holiday to Martinhal in Sagres (Portugal) - the best adult friendly holiday location around (kids are the main guests here, adults are tolerated). 
While you are at it, treat yourselves to a nice weekend break in the Cliff House in Ardmore or Monart 

Pay down debt with 1/3 - no arguments on that. Pay the 3.1% debt first

Invest 1/3 - I agree with another poster here regarding investing outside a pension vehicle. I have just had to hand over 41% tax on some EFT profits I made last year + cover the same for next year's preliminary tax bill. I ended up making a pension contribution instead to eliminate the tax bill. Given the risks involved in investing, the tax is simply too high at the moment and the reward simply does not offset the risk in my view. Deposits make no interest (lose real value against inflation). 
You would have to make greater than 5% guaranteed to beat your 3.1% saving net against the mortgage. I am not sure anywhere that can provide you those returns in the short term.



Sarenco said:


> Is it sensible to have a holiday home while you still have a €700k mortgage on your PDH?


It depends on how much use you get out of it, both now and in the future. How often do you get to stay there and is it 'good for the soul'? How much of a hassle is it to run/maintain and do you believe it is giving you 'value'. A holiday home is only as good as the time you spend in it
I know people who have an apartment in the Cape Verde Islands - they have been there twice in 12 years.
I know people who have an apartment in Spain - they are there at least once every month for a long weekend.
I also know people who have a place in Ireland and they spend nearly 100 days a year there.
If you are not using it yourself for holidays, its a property investment and think you may be over leveraged here.



Barbara Bunter said:


> The de-risking you talk about Sarenco makes sense, but we're also conscious that we could try and repay the main mortgage early and die in the meantime!


Same applied with having 100k in the bank and passing away. At least the state will be happy with the inheritance taxes they receive 

There is a balance to be had between a decent quality of life and living like a miser to pay down your mortgage early. I don't think many on here will suggest the latter (although some will), but I do believe you have scope to cut back on the household expenses a bit and clear the mortgage by 60


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## gnf_ireland

Barbara Bunter said:


> my husband's seem to be on an upward trajectory thankfully.



I think this point is also key. Your husband is the main breadwinner. While you understand his income is on an upward trajectory, how 'stable' is his industry and role? In times of recession, middle management can quickly become 'surplus to requirements' and no industry is fully recession proof.

How prone is your husbands company to a takeover? This can have untold impacts on a workforce. How global is the company for example etc etc.

I have not been working that long [1998] (work in the technology domain), and I have already seen two major events in my working life, which has impacted the industry generally. The dotcom bubble bursting saw the industry go into lock-down globally with large numbers leaving it to pursue other careers and the financial crises which saw a large number of major projects/programmes cancelled and wages/contract rates reduce dramatically. 

I expect to see another 2-3 more of these types of events during the remainder of my working life - and I am only a few steps ahead of yourselves. 

You appear to be 'banking' on his salary staying the same or rising in the future - and over 30 years that's quite a gamble in my view.


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## Barbara Bunter

Thank you all for taking time to respond. In relation to the shares/share options, it has always been his intention to sell them immediately. His role is very stable and he has plenty of options both here and further afield.

In relation to what's left on our mortgage at 65/66 as someone mentioned, I can't see that being an issue. Even if we don't overpay there would only be around €150,000 owed at that stage. I will have received my tax free lump sum of at least €90,000 at that stage (assuming no wage inflation) and he will have received his pension lump sum of €500,000. The mortgage should be a moot point. Thinking it through, at 65 we should be in an extraordinarily good position. And we don't believe in people factoring in inheritances, but that's a reality also.

In any event, we have decided to overpay the mortgage to the tune of €12,000 a year once we have a €60,000 cash reserve built up. I like gnf_ireland's ideas about holidays. That is how we fritter away money to be honest - Some of the €4,000 a month goes on holidays already as does 1/3 of my husband's bonus.


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## Bronte

What happens if your husband loses his job? You won't be able to pay the home mortgage on your income.

Your home mortgage remaining term is way too long as it ends in your sixties. Considering your high salaries I'd tackle this, and live a little later.

I'm not doing the maths but cashing in the 50k shares, taking it off the mortgage while keeping the repayments at the current level or higher would seem a sensible idea.


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## Gordon Gekko

There seems to be an obsession with early mortgage repayment and the OP having a mortgage in her 60s.

Pension is more important, and these people are doing the right thing on that front. They'll have the money to clear the mortgage two or three times over when they're in their 60s.

If the husband loses his job, whether they owe €700k or €600k won't be relevant. The repayments will be the same. And they have €550k of equity in their home.

Brendan's earlier comment is valid; the advice for these people should not be the same as the advice given to people who are struggling.


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## Sarenco

Gordon Gekko said:


> They'll have the money to clear the mortgage two or three times over when they're in their 60s.


All going well...


Gordon Gekko said:


> If the husband loses his job, whether they owe €700k or €600k won't be relevant. The repayments will be the same.


Not sure I understand how the repayments on a €700k loan could be the same as the repayments on a €600k loan, assuming a consistent loan term and interest rate.

Reducing debt obviously reduces a borrower's exposure to interest rate increases.  A lot of people lost their homes in the UK when interest rates spiked after the UK crashed out of the ERM.  It also increases a borrower's ability to restructure debts during a period of financial stress.

For the avoidance of doubt, I am not suggesting that the OP needs to take any dramatic corrective action given their financial circumstances.  I am simply suggesting that they should concentrate on de-risking their financial position going forward.


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## Gordon Gekko

What good is it if you lose your job?


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## Sarenco

Gordon Gekko said:


> What good is it if you lose your job?



By that logic everybody should just leverage up to the maximum extent that their current income will permit.  I thought that the recent financial crisis had cured us of that thinking.

The OP has a public sector job and could presumably address repayments on a lower loan amount more easily than a higher amount, at least for a period, while her husband seeks alternative employment.  There is certainly more scope to restructure a lower loan amount.

Also, you don't have to lose your job to get into trouble with a loan.  Lots of people lost their homes in the UK's housing crash of the early 90's without losing their jobs - the interest rate spike simply made their mortgages unaffordable.

It's worth bearing in mind that we are currently living through an era of unprecedented low interest rates.  There is absolutely no guarantee that this situation will persist.

Again, I'm not suggesting that the OP needs to prioritise paying down the PDH mortgage ahead of all else.  I'm simply suggesting that with a DTI ratio as high as 5:1 that the OP should concentrate on de-risking their financial position by paying down the PDH mortgage ahead of making any more risky investments (outside a pension wrapper).


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## Gordon Gekko

My view is that the risk they'd be seeking to mitigate is negligible.

These people are very wealthy and seem to be doing everything right.


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## Sarenco

Gordon Gekko said:


> My view is that the risk they'd be seeking to mitigate is negligible.



What risk exactly do you think is negligible?  Rising interest rates?  Another currency crisis?  Recession?

The OP's family obviously have a significant net worth for their ages and I strongly agree with their plan to focus on paying down their PDH mortgage once they have rebuilt a reasonable cash reserve.  I think that is an eminently sensible approach given their high DTI ratio.


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## Gordon Gekko

The Lord giveth them eyes, but they cannot see...

Sarenco, if you owned a house worth €1.25m and owed €700k on it, and you subsequently lost your job, would you prefer to owe €600k or still owe €700k and have €100k in the bank?

The problem with repaying a mortgage is that if the proverbial hits the fan, the money's gone!

My overarching point is that generic advice (e.g. "focus on repaying your mortgage as early as possible") is not suitable for everyone.

These people will have millions in their pension fund at retirement (assuming the asset allocation is right which nobody has mentioned). So the issue of having debt in their 60s is a red herring.

We need to be mindful of tailoring recommendations to people's individual circumstances.


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## Sarenco

Gordon Gekko said:


> Sarenco, if you owned a house worth €1.25m and owed €700k on it, and you subsequently lost your job, would you prefer to owe €600k or still owe €700k and have €100k in the bank?



Which is why I agree with the OP's strategy of rebuilding a reasonable cash reserve before they start paying down the PDH mortgage ahead of schedule.



Sarenco said:


> Maintaining a liquid cash reserve to address any emergencies is effectively a form of self-insurance and, like any form of insurance, it comes at a cost. Your plan to build and maintain a cash reserve equivalent to six months of core household expenses seems entirely reasonable to me but anything beyond that seems excessive in your circumstances (with two earners, one of whom is in the public service).



Reasonable people can disagree on the appropriate amount of that cash reserve but maintaining a reserve of €100k while carrying debt @3.1% comes at an effective cost of ~€3,000 pa.


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## Gordon Gekko

Sarenco said:


> Which is why I agree with the OP's strategy of rebuilding a reasonable cash reserve before they start paying down the PDH mortgage ahead of schedule.
> 
> 
> 
> Reasonable people can disagree on the appropriate amount of that cash reserve but maintaining a reserve of €100k while carrying debt @3.1% comes at an effective cost of ~€3,000 pa.



So what? The risk that has been highlighted is the husband losing his job. On all other fronts, they seem fine. Throwing large sums of cash at the mortgage does not mitigate the risk around him losing his job. Keeping the cash would be a far more effective hedge against the risk of losing his job. If things keep trucking along as they are currently doing, these people will be loaded and their mortgage will become an irrelevance.


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## Sarenco

Gordon Gekko said:


> So what?



You're in rare form this evening!

It's obviously a balance - maintaining a cash reserve to address a short term fall in income/spike in expenditure versus paying down a debt to mitigate longer term interest rate risk, etc. 

I've already expressed my view as to what I think is a reasonable balance in these circumstances (which happens to be broadly in line with the OP's view the world).  I think it would be excessive to maintain €100k on deposit while carrying mortgage debt @3.1%.


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## Bronte

If they reduce the mortgage term by overpaying, then say husband loses job at 55, they can extend again the mortgage term and reduce repayments to a more manageable level. That's where I'm coming from.


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## He-Man

@Barbara Bunter

I take home a little more than you. I have several thoughts, which you are free to disagree with.


You don't seem to have an emergency fund.
You owe an awful lot of money whatever way you slice it.
Your monthly expenses are on the high side. I don't spend anywhere near 4k per month and I think a lot of what you're spending must be discretionary and low priority when compared with the first two points above.
Whatever wealth you will eventually have ('will have', since you currently have a very negative net worth) is relatively undiversified and overweighted in an unwieldy, expensive and illiquid asset class - property.
Finally, correct me if I'm wrong, but you are living paycheck to paycheck.
In short, you are not wealthy and your situation could nosedive rapidly if things went wrong for you in anyway.
I would assess whether you really need all those properties, I would aggressively pay down the debt, and I would aim to reduce your monthly expenditure.

- He-Man


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## Barbara Bunter

He-Man said:


> @Barbara Bunter
> 
> I take home a little more than you. I have several thoughts, which you are free to disagree with.
> 
> 
> You don't seem to have an emergency fund.
> You owe an awful lot of money whatever way you slice it.
> Your monthly expenses are on the high side. I don't spend anywhere near 4k per month and I think a lot of what you're spending must be discretionary and low priority when compared with the first two points above.
> Whatever wealth you will eventually have ('will have', since you currently have a very negative net worth) is relatively undiversified and overweighted in an unwieldy, expensive and illiquid asset class - property.
> Finally, correct me if I'm wrong, but you are living paycheck to paycheck.
> In short, you are not wealthy and your situation could nosedive rapidly if things went wrong for you in anyway.
> I would assess whether you really need all those properties, I would aggressively pay down the debt, and I would aim to reduce your monthly expenditure.
> 
> - He-Man



I'm not sure I follow you. Dealing with each point in the order you raised them:

1. We have a surplus €10,000 in our current account (separate to our income and outgoings). We're saving €500 a month and have €3,000 put aside. We'll be adding €25,000 to that in January. That'll be a €40,000 emergency fund. Once it hits €60,000, the consensus is that we will have enough of an emergency fund.
2. Debt is not always a bad thing. For example, the debt on our investments is at 0.5% and 0.25%.
3. I don't know your circumstances. How many kids do you have? How many clubs are you a member of? How often do you go on holidays?
4. How do we have "a very negative net worth"? We are in our mid to late 30s, and have positive net worth to the tune of around €800,000, which we are increasing. That figure ignores my defined benefit pension (i.e. does not assign it with a capital value). Ignoring asset value growth, we are increasing our net worth by around €75,000 a year through debt repayment and other mechanisms.
5. How are we living "paycheck to paycheck" when we're saving, maxing out pensions, and paying capital off debt?!


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## noproblem

I'm guessing He Man might in a way be saying that if you guys saw something that was really desireable and you wanted to buy it for say, €200,000.00, you would have to borrow the money, as you don't have the ability to pay for it without borrowing. That would add to your borrowing and although you would be asset rich you would also be cash poor. I know, I know, you're in a great position to pay back all the debt, but we live in very unpredictable times.
Other than that, you personally come across as having a great grasp of what needs doing in your own personal circumstances and I wonder why you are here on this forum asking for advice at all when you seemingly intend to carry on as you desire anyway? Just an observation by the way, not in any way a criticism.


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## Barbara Bunter

noproblem said:


> I'm guessing He Man might in a way be saying that if you guys saw something that was really desireable and you wanted to buy it for say, €200,000.00, you would have to borrow the money, as you don't have the ability to pay for it without borrowing. That would add to your borrowing and although you would be asset rich you would also be cash poor. I know, I know, you're in a great position to pay back all the debt, but we live in very unpredictable times.
> Other than that, you personally come across as having a great grasp of what needs doing in your own personal circumstances and I wonder why you are here on this forum asking for advice at all when you seemingly intend to carry on as you desire anyway? Just an observation by the way, not in any way a criticism.



I am not sure that's fair, as over the course of the discussion I have zeroed in on building the emergency fund and diverting €12,000 a year / €1,000 a month towards the home mortgage. That's taking people's advice.

Equally not a criticism, but what 36/37 year old has the ability to buy something for €200,000 with cash?

I am very grateful to people for their advice.


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## gnf_ireland

Barbara Bunter said:


> Equally not a criticism, but what 36/37 year old has the ability to buy something for €200,000 with cash?


Agree not many to be fair, but there are always a few. And there is an argument that with the salary you guys are taking in, you should be in that group [I would personally debate why anyone would want 200k in cash at the moment given the return]
However, I think the guys are saying is that you are not very liquid asset rich given your overall wealth. Your main wealth is tied up in property and pension, neither of which can be accessed in an emergency. There may be merits in having liquid assets outside the pension structure.



Barbara Bunter said:


> Debt is not always a bad thing. For example, the debt on our investments is at 0.5% and 0.25%.


Agree, but the ECB rate will not always be this low. Are you prepared for a rise in it, and will they still be good investments at say 3.5% or 5% interest rates. The overall capital return may be better now, and its worth considering in the overall scheme of things.



Barbara Bunter said:


> I don't know your circumstances. How many kids do you have? How many clubs are you a member of? How often do you go on holidays?


I think this is the point that people are making here. Yes you make a fantastic salary, but you are spending on the high side. If that is a conscious decision that's fine - its your decision. People on here, especially the ones giving advice, tend to be relatively financially 'savvy' and don't like the idea of constant frivolously spending  - they have been the impacts of good and bad times, on both people who were wealth and those who were not. As an old agricultural saying says "save the oats at the mouth of the bag".

Personally, I think this thread has run its course - but the final ask is to just look at seeing where your money is spent and agree it is best use of the money.

One final comment, given the amount of money involved both now and in the future, you should consider going to see a fee based financial planner. I do think it would be beneficial for you guys.


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## Firefly

Barbara Bunter said:


> I'm not sure what you mean about our children? Whatever happens, they'll be comfortable. We have income protection, all our debts insured, and a payout of €480,000 if my husband dies.



Life assurance is pretty cheap actually. I would double that 480k if I were you.


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## Barbara Bunter

Firefly said:


> Life assurance is pretty cheap actually. I would double that 480k if I were you.



Hi Firefly. Thank you for replying.

What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.


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## Fella

I think your doing great, when my income increased I never bought a bigger house instead I used the money so that me and my wife can both work part time. 

That's just an alternative view , for me the best part of been wealthy is that either me or my wife are at home doing stuff with our kids everyday, I'd never use childcare unless I absolutely had to work to get by.

If I was in your position I'd simplify my life downsize house to 300k house , leave work or work part time and be cash rich and enjoy time with your family , It's just my opinion though not saying its the right thing financially. 

I'm the same age roughly and similar family and income , my house is worth about 250k . 

Best of luck whatever you do , I know you're just trying to do your best .


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## moneybox

Barbara Bunter said:


> What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.





Five times you have mentioned dying in that short paragraph 

I think you need to chill out a bit.


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## Bronte

moneybox said:


> Five times you have mentioned dying in that short paragraph
> 
> I think you need to chill out a bit.



I think she's dead right to think about that.  None of us knows what's around the corner.  She's just being businesslike and proper order.


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## moneybox

Bronte said:


> I think she's dead right to think about that.  None of us knows what's around the corner.  She's just being businesslike and proper order.



There is a pun in there somewhere!


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## mtk

Barbara Bunter said:


> Hi Firefly. Thank you for replying.
> 
> What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.



+1 This alone shows Barbara that you should be giving advice on here and i hope you do in the future!


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## dishwasher

My only observation is that paying the debt would give you the freedom of more time -  be it working part time, taking time out to be with the kids full time or retiring early. 

We'd be of similar income but no property other than own home (worth maybe €800k) but in early 40s. Our objective is to be mortgage free which we should achieve in about 3 years.  

Interestingly we toyed with the idea of a holiday home but feel it's a catch 22 if you need 2 incomes and 2 full time jobs to afford a holiday home then you don't have time (i.e. Summer holidays) to properly use holiday home. Instead looking at me reducing to term time work and renting a place for the next few summers.  Do you actually get decent use of the holiday home?


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## Firefly

Barbara Bunter said:


> Hi Firefly. Thank you for replying.
> 
> What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.



When you put it like that!

My wife is always telling me I'm worth more to her dead than alive, but I always reply that she'd be left with the kids!!


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## He-Man

gnf_ireland said:


> Agree not many to be fair, but there are always a few. And there is an argument that with the salary you guys are taking in, you should be in that group [I would personally debate why anyone would want 200k in cash at the moment given the return]
> However, I think the guys are saying is that you are not very liquid asset rich given your overall wealth. Your main wealth is tied up in property and pension, neither of which can be accessed in an emergency. There may be merits in having liquid assets outside the pension structure.



Yeah this is sort of what I'm driving at. As far as I'm concerned the primary residence is not an asset but an ongoing cost, and one on which they owe ca. 700k if I remember rightly the OP. I don't think they own any of their properties outright. These are all debts as things stand and high cost in terms of maintenance, insurance, property tax etc. 

Interesting that when I raised the point about discretionary expenditure the OP referred to the cost of club memberships, as though these aren't discretionary. I just think with so much debt all contingent on an income that is multiples lower than the total sum of said debt, they're not exactly in a rosy position. I think this is down to lifestyle inflation. The OP can live as she sees fit and I've no doubt they'll do well. But I believe they could be _more _comfortable than they are, with a few tweaks.


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## midleton

Maybe I am older than Barbara but can I just make one comment and its well meant..........why in the name of God do ye have three properties?  I just do not get why people needed to buy second homes and holiday homes.  Ok the bust came and caught so many people but why do ye land so much debt on yer shoulders?  Its fine if all goes ok but if something else goes wrong its scary .....well it would be to me anyway.  Ye are lucky in a way to be in good jobs and I am sure ye work hard of course ye do and running one home and a family is great but not easy.  This may not be on yer radar but I hope things improve recession wise etc and ye get opportunity to sell one or both of those properties and clear a lot of yer debt/mortgage.  Get rid of some stress and you know what enjoy life and have a yearly holiday somewhere really nice in lovely hotel where ye have no worries bout upkeep of a holiday home etc.  I spose I grew up in big family where it was day to day making do but it was great as well...........we learned to ask 'is it a need or a want' when it comes to investing or purchasing anything except a home and if its neither then walk away.  I am so glad we learnt that ........saying that we had debt too but managable the normal mortgage and bills etc.  Wish you well in the future.


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## xoxoxo

I am a bit further down the line than op with my family, but One thing I will say is that it is so important to make lots of memories, as well as money. These memories and time spent together with family and friends are what is so important  and what shapes your children into the people they will become. It is those memories they will remember. You will never get this time again, money is always there to be made. Enjoy it all, take all the holidays, days out, days off, playmates, sleepovers that you can and treasure every single moment.


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## GirlTuesday

Where did the OP say that she wasn't enjoying time with her family? She's a public servant so I'm sure she gets good holidays and is out at a reasonable time every evening. While health is obviously more important than money, money is very important and the OP should be commended for having such a healthy income and assets at a young age. Believe me, as someone who does not have family wealth while most of my peers/work colleagues do, it makes a big, big difference to life satisfaction, safety and future options for her children. Also, having a few properties is not unusual when you earn what the OP earns and can well afford these properties. They're a good, solid way of building up assets generally (and yes, I know what happened over the past few years!). Can I suggest you visit an independent financial advisor who is used to dealing with high earners/high net worth individuals. Best of luck!


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## Investadvice

All in all you owe: 1,018,000 on assets worth 1,675,000

On a combined salary of circa 205K.

Your debt is almost 5X your combined salaries, thats alot. If I was in that position I wouldn't think I was well off.


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## Gordon Gekko

It looks to me more like circa 4 x income which isn't excessive (think of the Central Bank 3.5 multiple for context).

€180k salaries
€25k bonus
€7k other
€15k rental income
€12.5k share options (assume 4 year)

€240k give or take

I'd look to fast track the repayment of the home mortage, but I wouldn't be obsessing over it.


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## Barbara Bunter

I thought I'd post an update!


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## Barbara Bunter

- Our salaries are now €80k and €145k.

- I was going to be missing around a year of service at age 60 so we spent around €25k before tax relief buying that back.

- His pension fund is now worth around €500k and it's invested 100% in a global share fund.

- We sold our other properties.

- The mortgage is around €510k now, with the property worth around €1.5m.

- We have no other debt and €50k in the credit union for emergencies.

- We're overpaying the mortgage by €1,000 a month.

- My husband gets a bonus of €80k each year. We put 2/3 of the €40k against the mortgage and spend the other €13,000 on an experience for the family as people suggested!

Thanks again for the good advice!


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## Sarenco

Many thanks for the update.

I think you made all the right moves and you’re obviously in a fantastic financial position for your stage of life.


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## Bronte

It’s always great when a poster comes back to give an update. Little did we think in 2016 that we would end up in a pandemic. Barbara you were so right to take the advice and go for it as regards family experiences. We’ve done the same. And will go mad altogether if this covid ends. We can’t take the money with us and life is very short, you never now what’s around the corner. (Illness, loss of job, pandemic, age).


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