# Guidance/Feedback re Current Budget/Plan



## Michael C (3 Nov 2019)

I would really appreciate some help/guidance around whether we're on the right track. No sugar coating needed! Thanks.

We're both 39 and we have two kids. Our monthly income is €10,880 net excluding my variable pay. The split is €6,900, €3,700, plus €280 of Child Benefit.

We match our monthly expenditure at €10,880, made up as follows:

Mortgage €2,840
Revolut €1,600 (we then use Revolut to buy clothes, eat out, buy coffee, wife's hair, weekends away, etc)
Pension AVC €1,100 (to get me to the max)
Savings €700
Kids' Afterschool €659
Groceries €600
PCP €461
Credit Union loan €430
Bank loan €332
Dependent relative €270
Kids activities €248
Gas €229
Cleaner €180
Electricity €178
TV/Phone/Broadband €163
Insurance (Home & Life) €153
Charities €150
Golf Club €150
Petrol €100
Motor tax €85
Gardener €75
Mobile phone €45
Gym €40
Tolls €40
Bins €21
AA €19

We owe €32k on 0% PCP, €28k on a Credit Union loan at 5.9%, and €20k on a bank loan at 7.5%.

Our mortgage is €675k on a house worth around €1.3m. The rate is 2.5%.

We both have credit cards with zero balances.

I have around €400k in my pension. It's all invested in a global equity fund. My wife's a public servant who'll get 50% of her salary from age 60.

The PCP and loans are really a legacy from work we did on our home which we funded with savings and variable pay. The plan is to use the 2020 and 2021 payments (€50k net x 2) to clear the three loans and fund our holidays. Then, the plan is to split the €50k each year with €20k going on holidays, €10k net of tax on AVCs for my wife, and a €20k mortgage overpayment.

Once we have €50k on deposit again with the Credit Union (i.e. the max €25k each), we'll divert all savings to the mortgage plus the loan repayments that will no longer be there, so there'll be an extra €43k a year being knocked off the mortgage. Having said that, I need to change my car so I might avail of a 0% PCP deal once the other debts are cleared so that might reduce the overpayment from €43k to around €37k assuming I go for something around the €500 a month mark.

Any feedback or observations would be appreciated, thanks!


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## stantheman (4 Nov 2019)

Having read your details, I have more questions than answers (what savings do you have, ages of kids, what is your variable pay: how often and how much), but at the very least, there are a number of priorities you should be addressing:

1. pay off the €20k bank loan this month (you don't say what savings you have but given your income levels this should be doable almost immediately)
2. pay off the €28k credit union loan ASAP (again you should be able to fund this from savings)
3. once you have cleared the above loans use the additional ~€800 per month to start overpaying your large mortgage. If you or your wife were to lose your job, you are way over-extended 

You are in a great position income wise & have a well funded pension pot - so well done on that.
The thing that strikes me most is your discretionary spending is massive. I would go as far as to suggest it unsustainable.  

You are paying over 3k a year for a cleaner and gardener while having to take out loans for cars and home improvements. On your levels of income you shouldn't need to take out high interest loans for cars and home improvements. Others may be able to chime in here, but I believe PCPs are a poor option financially. 

The €1600 'fun stuff allowance' again seems crazy high to me - at the very least you should look at your Revolut spending analytics to understand where such a large amount is disappearing each month & look at reducing this significantly.

Your gas, electricity and tv/phone/bband are all approximately 3 times what I pay each month. Shop around and you should be able to halve these.  
You're paying over €1000 per annum on motor tax - what kind of cars / tanks are you driving?

Your lifestyle seems incredibly extravagant - get on top of the discretionary spending, clear down high interest debt and start reducing the mortgage.


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## Blackrock1 (4 Nov 2019)

PCP at 0% is the cheapest way to buy a new car on credit, buying a new car is expensive but thats a different argument.

1600 a month spending money isnt extravagant really, 200 a week each for discretionary spending for people with high incomes is hardly over the top IMO.

the personal and CU loan need to go, but assuming all goes to plan with your bonuses that should be sorted in short order.

if i was you i would get those sorted out and then work on getting the mortgage down to a more maneagble level so that if your variable pay goes down or if your wife or you decide to cut back to spend more time with the kids that the monthly payment isnt such a large amount.

Being nosey! Child care seems low for 2 kids, what do you do when they are on school holidays, does the cost go up or you have other arrangements?

you have reminded me to do a similar exercise as to where our monthly money goes!


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## Alkers86 (4 Nov 2019)

Not really clear for what you're looking for advice on?

A few items you might clarify:
You expenditure exactly matches your income excluding your variable pay. How much is this? IS this the source of the 50k net payments for 2020 and 2021 you mention?
Do you have any savings?
How old are your kids?
How many years left on the mortgage?
You mention planning to make AVCs for your wife only after 2021? Has she made any AVCs to-date?

As far as the expenses you listed:
€1,600 is your second highest outlay to have loosely categorised as revolut spending money. You should try to keep a better eye on where this goes. I'm not saying it's extravagant, just that you don't seem to have a good handle on it.
You're putting 700 a month to savings when paying high interest on two different loans. What is the reason for this?
TV, phone BB seems extremely expensive - shop around or see if you're using all you're paying for.
€45 on mobile phone - is this for one phone or for the whole family? If one you're overpaying by almost a factor of four unless you make many international calls.
You should be able to get the AA plan down to about half that price at your next renewal if you mention you're thinking of cancelling. Why do you have an AA membership, breakdown is included in most car insurance policies.

Overall you should be in a very good position in a year or two with a bit of housekeeping!


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## Michael C (4 Nov 2019)

Thanks for the responses. I'll try to answer those questions.

Our kids are 7 and 5. We have very little in the way of savings because of the work we did on our home (only a couple of grand basically). So repaying those loans now isn't an option.

The €50k net per year is the variable pay I was talking about.

On car tax, hers is €280 (good) and mine is €750 (bad), hence the plan to change it.

The €45 is the bill for my wife's phone but it's a contract covering the iPhone purchase. It's up soon so we'll switch.

We're saving €700 a month whilst carrying the loans because we want/need to have cash for emergencies. It doesn't sit well with us not to have cash.

My wife has a small AVC pot (maybe €3k). I have been told that she can build a fund to cover the State Pension bit of her public sector pension.

There's around 28 years left on the mortgage but the plan is to pay it down much quicker.

As the kids are in primary school, there are only really 9 weeks to cover in the summer. We go away for 3, my wife usually takes a week off, then they do camps for 2 or 3 weeks and then it's grandparents and or aunts/uncles for 1/2 weeks.


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## county (4 Nov 2019)

You both have very good incomes, well done, however it appears from the figures provided that you have a decent lifestyle which is gobbling up most of this.  I do think you can still maintain a decent lifestyle while taking a look at some of your out goings. The following is where I would start to look.

I would advise you need to analyse out the revolut expenses on a monthly basis I can guarantee there is discretionary spend here you will be able to cut out.
All household expenses appear on the high side except for groceries which appears to be reasonable.  I would pose the following questions to you;
The TV/Broadband figure appears high,  can you scale down to a lower package?
Can you eliminate the need for a gardener and do some of this work yourself?
Is a cleaner needed?
Your gas and electricity appears to be high.


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## Michael C (4 Nov 2019)

My thinking is that the cleaner and gardener are needed. And without them, we'd have less time to spend with our kids.

The gas and electricity may seem high but the flipside is that it's a big house.

The TV/Broadband may seem high but it includes all of the sports channels, the movie channels, Netflix, and Amazon. And with Amazon, you then get free delivery from the Amazon website.


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## Blackrock1 (4 Nov 2019)

One point I’d make is that the most expensive cost re a car is depreciation I wouldn’t spend a lot of money on a new one to save 500 a year tax ( there may be other factors of course )


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## county (4 Nov 2019)

Ok I can see very little that can be saved after what you are saying.  It appears the only way to save on your expenses is a change to your lifestyle which I don't think you are willing to compromise on which I can understand as you have the income to support it.  I would say keep saving as much as you can and maybe shop around with regard the utilities. Try and pay down the most expensive debt as soon as possible.


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## goingforgold (5 Nov 2019)

stantheman said:


> Your lifestyle seems incredibly extravagant - get on top of the discretionary spending, clear down high interest debt and start reducing the mortgage.


While the OP clearly has a good standard of living I think we need to be somewhat realistic here also. They are 39, have ~625k equity in their home, 400k in pension pots...that isn't bad! There's always ways to save more of course, but for me I think they may have struck a good balance between living and saving, and once they clear the loans (which they hope to do in next couple years) then I think they are in a very enviable position.

Their mortgage is high but so is the house value and incomes, so all very manageable if things are monitored going forward in a reasonable fashion


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## Fire away (5 Nov 2019)

I would love to know what you work at? IT or something really funky?


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## 2bmortgagefree (5 Nov 2019)

Michael C said:


> My thinking is that the cleaner and gardener are needed. And without them, we'd have less time to spend with our kids.



Firstly, you obviously work hard to be earning so much, to have such equity in your house and such pension provision made at a relatively young age.

 Re the gardener and the cleaner I would argue these are jobs you could do with your kids saving money and teaching kids how to live when they grow up. They won't have cleaners looking after them when they move out and go to college. 

I would also add that €150 a month to charity when you have a lot of debt yourself is something that you should look at. 

You did say no sugar coating hope I'm not too harsh.


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## Michael C (6 Nov 2019)

Thanks to everyone for the feedback. A lot of food for thought there.

The question was asked about our goals. It is an interesting one.

I guess we work hard, as many people do, so we sort of see the Revolut money as "ours" to be relatively frivolous with. Rightly or wrongly, I think our 20s were enough of a struggle financially that we should be at a point now where if we want to buy something on a whim, we can.

Longer term, we want to be debt free as soon as possible but without preventing us from enjoying life now, to secure pension income of at least €100k pa gross between us, to be able to choose to work into our 60s and 70s rather than have to, to travel extensively, and to have enough in the kitty to subsidise house purchases for the kids if they choose to follow their hearts into something like teaching or nursing.


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## Blackrock1 (6 Nov 2019)

Michael C said:


> Thanks to everyone for the feedback. A lot of food for thought there.
> 
> The question was asked about our goals. It is an interesting one.
> 
> ...



sounds about the same as us!

one thing to start looking into is the tax implications of pensions pots >2m etc i am only just starting to educate myself on that stuff now. options for lump sum at retirement etc


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## notabene (11 Nov 2019)

I agree teachers aren’t paid nearly what they’re worth  but just for perspective, as one, with a household income less than a third of yours I’m able to save a higher percentage of my income every month, pay income protection and have no debt aside from a modest mortgage - (i don't mean that to be smart by the way)

While I’d agree €1600 discretionary income between two people on a high salary is reasonable in the main - a high mortgage is also a discretionary (and while the house is worth a lot, that is no use until you sell) expense plus gardener, cleaner etc (tho I completely see how they make life easier when both parents are working) clearing those loans in particularly would make a good difference, but I would just say I have seen a couple of people I know recently who have had unexpected health issues and they have been painted into a corner either having to give up work for a long period or not being able to do so when they should be as a result of huge domestic expenses - not saying you should give up everything but your financial flexibility it is just something to consider I think that people often don’t


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## Michael C (15 Nov 2019)

notabene said:


> I agree teachers aren’t paid nearly what they’re worth  but just for perspective, as one, with a household income less than a third of yours I’m able to save a higher percentage of my income every month, pay income protection and have no debt aside from a modest mortgage - (i don't mean that to be smart by the way)
> 
> While I’d agree €1600 discretionary income between two people on a high salary is reasonable in the main - a high mortgage is also a discretionary (and while the house is worth a lot, that is no use until you sell) expense plus gardener, cleaner etc (tho I completely see how they make life easier when both parents are working) clearing those loans in particularly would make a good difference, but I would just say I have seen a couple of people I know recently who have had unexpected health issues and they have been painted into a corner either having to give up work for a long period or not being able to do so when they should be as a result of huge domestic expenses - not saying you should give up everything but your financial flexibility it is just something to consider I think that people often don’t



Sorry I'm only replying now.

Firstly, thank you.

Though I would challenge you on your point around savings.

We're "saving" €1,400 a month in terms of capital repayments on the mortgage, €1,100 on the AVC, €700 on "savings savings", €461 at 0% on the PCP, about €450 on capital repayments for the home loans, and the €270 a month to the relative will be paid back from their estate.

That's €4,381 out of €10,880, or 40%.

Then €30k of the €50k net variable pay will be used for AVCs and paying down debt, meaning that 46% of our net income will be "saved".

Is that not a more logical way to look at it? Or am I codding myself?!


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## notabene (15 Nov 2019)

No worries - can see where you’re coming from and longterm I think you have it sussed - I’ve never thought of the capital of the mortgage payments as saving because unless you’re selling it’s all tied up - and also have a loss still on property here from 2005 purchase which also leaves me remembering there are no guarantees the money will definitely be there when you want it

 but for argument sake what I meant was with just €700 savings savings a month which is less than 10% of your joint pay per month and a lot of outgoings (savings or otherwise) what would happen if you or your wife couldn’t work (which hopefully won’t happen but could for lots of reasons)for the next six months or more or the €50k variable payment didn’t come through? 

0% good for pcp but personally I prefer to have the money saved for no pcp if possible at all and I’ve been lucky I’ve been able to do that - in fairness tho I would be a bit more conservative maybe


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## Michael C (15 Nov 2019)

No, I hear you. We've actually refined our plan a little as it happens. We're going to move the loans across to the mortgage, so the rate is capped at 2.5%. The bank have already agreed to this in principle. This will free up about €500 a month which we will save to get our cash buffer back up to a safe level. Then we'll use the variable pay to bring the mortgage back down, which the bank will also allow. It'll save a few bob and get our cash fund back to a safe level.

Thereafter we're sort of himming and hawwing about just focusing on paying down the mortgage, or splitting between that and buying an ETF or investment bond every month.


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## notabene (15 Nov 2019)

Sounds like a good plan!


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