# Money Makeover - Am I on the right track?



## Live Well (5 Feb 2020)

(I have rounded all figures to make it easier, for me)

*Age:* 41
*Spouse’s/Partner's age:* 41

*Annual gross income from employment or profession:* €100,000 (recently promoted)
*Annual gross income of spouse:* €60,000

*Monthly take-home pay:* €4,400 (mine) Spouse €3,000

*Type of employment:* Public Servants.

*In general, are you:
(a) spending more than you earn, or
(b) saving? –*  Yes

*Rough estimate of value of home: *€250,000
*Amount outstanding on your mortgage: *€160,000
*What interest rate are you paying? *Tracker 1.25% (last time I checked). We are paying roughly €710 a month.

*Other borrowings – car loans/personal loans etc:* No borrowing (cleared January 2020)
*
Do you pay off your full credit card balance each month?* Yes

*Savings and investments:* €12,000 in Credit Union. €10,000 in Kids college account (Child welfare goes straight into this account).

*Do you have a pension scheme?* Yes. I have the post 2004 public sector scheme and my partner has a similar pension. We both started working for the public service late (30+), so we are buying back years so we can both retire at 65.

*Do you own any investment or other property*? No.

*Ages of children*: 5 and 2

*Childcare* is €1,400 a month.

*Life insurance: *Yes

As stated, we save the Children’s allowance into a separate account which we don’t plan to touch even though it isn’t earning any money. It is in the Credit union. This is our emergency fund, which we will repay if we ever needed to get cash in a hurry.

Each month we pay 2300 to our separate family bill account (Mortgage + Childcare), 200 to my Mum (no pension), and 1500 to clear debt (Total 4000). Groceries, Diesel and general expenses are not pooled. We spend about 600 a month in Tesco and have recently shifted to ALDI to see how much we can save. A typical month spend looks like


Monthly ExpensesMonthlyVodafone (Internet)30​MonthlyAviva Life Insurance37.46​MonthlyMortgage€710.00​MonthlySky Digital39​MonthlyEflow40​MonthlyBord Gais bundle127​MonthlyBank fee5​MonthlyDiesel150​MonthlyChildcare1400​MonthlyBin Charges20​MonthlyGroceries600​MonthlyMobile15​MonthlyHealth Insurance124​MonthlyTotal​3297.46​


Our Annual payments are separate and come to another 3,000 (Car Tax, Insurance, Home insurance, Property tax and Tv licence etc.). We don't have a budget for those and just try to pay them when they arrive.

We got married in the last 7 years and since then we have paid off a student loans (€16,000), a car loan (€18,000), the wedding (€10,000) and we renovated our house (€25,000). We don’t have a big holiday every year, we don’t even take little ones to be honest. I find that with the young kids it isn’t much a holiday although they are now of an age where we are going to look at saving for one again.

Before we got married. I did not have a good relationship with money and lived month to month on credit. I did not have a pension or any investment until my 30’s. Since then I have woken up and realised the mistakes I have made. Over the last couple of years, I have followed the Dave Ramsey baby steps philosophy, which I found helpful for keeping me grounded, even thought it doesn't apply as well in Ireland post Baby step 4.

I have now cleared all our Debt and have 12,000 in savings plus 1,000 a month which I can redirect.

*What specific question do you have or what issues are of concern to you?*

I am worried that both of our pensions are linked the public sector and that in the future the Government could reduce our entitlements or a part of it. All of our eggs are in the one government sponsored basket. While I understand the risk is very low, I still want to increase the amount of the money I have in retirement in case something does go wrong. My mum wasn’t entitled to a Pension (Pre 1946, not enough Contribs and cannot apply for homemakers credits), and I see my parents struggling to make ends meet which scares me.

I cannot figure out if I am maxing my Pension contributions (25% at age 40) or if that just doesn’t apply to me as PS worker. From any research I have done, a low cost PRSA AVC through Davy or LA Brokers seems to be the best option.

I believe that the €12,000 I have saved is wasting in the credit union. I would like to “invest” this money or put it to a better use.
Our current savings are our emergency fund if we ever need it. We both have secure jobs.

I see the following options.

I could save money (€500 month) now into a PRSA AVC and use that vehicle to build up a pension fund for the next 23 years. This would provide an additional income once we retire.

AND / OR

I could overpay the tracker by €300 a month then I would save 7.5 years from the mortgage and roughly €8500. However, we have talked a lot about moving and it is likely we could move in 5 years. Maybe – maybe not. I realise that it is normally the highest guaranteed, risk free, return but I think it would cost me more in the long run if I was to move to a new house.

I could use the other 200 to save for a family holiday every year or do something for the family. We don’t have a savings account for spending (Family Holiday, Christmas, etc.).

Now that I have cleared all of my debts (apart from house) I want to do something with the €12,000 I have saved up. The best idea I have had for this is to put the money into an EFT (VWCE) and leave it for the next 20+ years. I like the idea of having a separate “investment” that is growing and outside of my PS pension. I could also use this investment in 20 years+ to pay for the kids’ education or help them with a mortgage. I will never have a windfall or bonus so if I don’t save now, I don’t think I will be in a position to help them out.

I could also just pay it off the Mortgage but as it’s a tracker, that seems cheap credit to me right now. If I did a once off payment of €12,000 I would save €4,300 over the rest of the mortgage.

If I did setup a PRSA AVC I could use the €12,000 to start that off with. In some ways this idea is tied in with the EFT option, but it makes the money less accessible until I am 60 (?) which could be fine too.

*Perhaps a mixture of the above?

Do you think I am on the right track?*

Thank you in advance, any advice is appreciated.


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## RedOnion (5 Feb 2020)

Live Well said:


> 200 to my Mum (no pension)


Are you claiming tax relief on this?






						Deeds of covenant
					

A deed of covenant is a legally binding agreement to pay an agreed amount to someone else without receiving any benefit in return.




					www.citizensinformation.ie


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## Firefly (6 Feb 2020)

OP, you should be netting somewhere between 5,500 - 6,000 per month on 100k


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## Easel (6 Feb 2020)

Op you do not have any reason to be worried. You both have very good salaries that are viewed as very secure, you have no short term debt and €22,000 in savings. Whilst you are not alone in saving for your children's college education at such a young age you would be better off putting this money to use elsewhere considering the dismal return on savings at present. a €12,000 emergency fund seems fine for 2 public servants.

If I was in your shoes I would be looking to move house sooner rather than later given your age and age of your children. This will become more difficult once your children are settled in school. You can move your tracker at an additional 1% premium with some banks.

Without any existing or proposed pension contributions/PS deductions your net income including child benefit should be €8,900 p/m. This should enable you to live a very comfortable lifestyle whilst contributing the max towards your pensions and saving/overpaying your mortgage and have an annual holiday.

Your homework is to do some more research into your existing pension plan and how much more you can contribute into a PRSA. Look at setting a realistic budget that includes money for holidays and socialising. Look at suitable homes that you may wish to upgrade to in the future and run calculations on home much the increased mortgage repayments would be.


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## Pinkpanter (7 Feb 2020)

Firefly said:


> OP, you should be netting somewhere between 5,500 - 6,000 per month on 100k



Not public servants- they pay circa 15% on pension before any AVC deductions etc.


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## Live Well (8 Feb 2020)

On the pay, I have deductions of €1,648 which includes pension, and then I pay €1,786 on PAYE Tax and another €1,181 on PRSI total. USC then comes out which works out €400 a month. This month the nett pay is €4,261.

@Red Onion. No, I looked at it before which I was trying to see if I could get my mum her own pension. At the time, I didnt want anything to negatively affect that so I just gave her cash every month. Thank you for the reminder though, I'll go back and check that form again.

Thank you for the advice Easel. I'll certainly do that research. My wife has just changed jobs so we are waiting to see how that works out us now before we go looking at houses.

Thank you for your replies.  I appreciate any feedback I get.


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