# 40 years old & need advice to steady the ship



## Sean Bateman (1 Aug 2018)

Hello,

I need some advice and would be grateful for help.

My circumstances are:

- I'm 40 and my wife is 38
- We have three kids under 10
- She's on €70,000 a year in the public sector - She will get a DB pension
- My basic salary is €140,000 and I typically get a bonus of €50,000...I also get share options and have around €100,000 available for exercise in 2020...they pay our health insurance too
- My pension fund is worth €250,000 and is invested in a pretty cheap global equity option (0.2%). My employer contributes €14,000 a year and I contribute €28,750.
- We owe €700,000 on our home. The interest rate is 2.75% Variable with AIB.
- We own our previous home too. It is worth around €350,000 and we owe €180,000  at 0.55% to Pepper. It generates €1,750 of rent per month.
- We went overboard on the renovation of our home and have a hell of a lot of personal debt:
Credit Union - €30,000 (€570 a month)
Credit Union - €40,000 (€610 a month)
Bank - €26,000 (€352 a month)
Bank - €30,000 (€600 a month)
Other - €100,000 (Nil for the moment but can't stay that way forever)
Credit Cards - Nil
- I have €80,000 coming back to me from a private company investment that has unwound at breakeven. I plan to clear the €610 a month Credit Union loan plus the €600 a month bank loan plus €10,000 of the €100,000 loan (to show progress).

I admit that we have been reckless and have overstretched ourselves but between crèches etc and loans we are very tight at the end of each month. We have no savings. The plan is to use bonuses plus share option to repay the personal debts.

The $64,000 question is whether we should sell the investment property. Part of me thinks no, keep the head down for a few years and keep what's a solid investment plus it's on a tracker. Another part of me feels that I want to live life to the max and enjoy a large disposable income because I could be dead in 10 years.

Any advice and honest feedback welcome, no matter how candid!

Thank you.


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## PaddyBloggit (2 Aug 2018)

God Seán, €260k a year salary between ye and



Sean Bateman said:


> I admit that we have been reckless and have overstretched ourselves but between crèches etc and loans we are very tight at the end of each month. We have no savings.



To be honest, I'm gobsmacked.


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## Sarenco (2 Aug 2018)

It's really not as bad as it first looks.

If you liquidate the equity in the rental and the private company investment you could clear your personal debt in full and make a dint in that jumbo mortgage.

When you've done that you could use the increased monthly cashflow to really start paying down the mortgage to a more reasonable level, while maintaining your pension contributions at their current level.  

Best of luck.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> Hello,
> 
> I need some advice and would be grateful for help.
> 
> ...


Figures to do
Interest rates
Terms on loans
Is that a good pension investment
Spending problem
Possible family loan
Reckless, or fear of death due to family experience
Income

I’ll come back to this. Candidly!


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## Sean Bateman (2 Aug 2018)

Thank you.

The rates on the loans are all between 7.5% and 8.5% (except the €100,000 one which is zero).

The terms are all 8-10 years

It is a family loan

I have no fear of death, sorry it was a throwaway remark.


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## RedOnion (2 Aug 2018)

Sean Bateman said:


> The $64,000 question is whether we should sell the investment property. Part of me thinks no, keep the head down for a few years and keep what's a solid investment plus it's on a tracker.


Without looking at the rest of your circumstances, it's a fantastic investment. 

However, you've 170k equity tied up in it. Making a return of just under 12% before tax. Or I'm guessing net 5% after expenses and tax. And you're borrowing at up to 8.5%.

Personally I'd be selling it, pay down the debt, and start sleeping a bit easier. Once you've the unsecured debt paid down, find the best available mortgage option for you.

Would there be any CGT liability if you sell it?


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## Sean Bateman (2 Aug 2018)

There would be no CGT. Our conundrum is whether to trade out of our cashflow issues or to solve them by selling the property. My worry is that a few years from now, we’ll be crying out for an investment like that property.


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## RedOnion (2 Aug 2018)

Sean Bateman said:


> My worry is that a few years from now, we’ll be crying out for an investment like that property.


And wouldn't that be a nice worry to have? 

Realistically, how quickly can you pay down 700k mortgage? A 10 year term is 6,700 per month at 3% interest.

So in 10 years you might have some excess cash to invest? Worry about it then - a lot can change over 10 years.


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## Sean Bateman (2 Aug 2018)

Sorry, I meant in around 3 years when we’ve the personal debt cleared and around €60,000 in an emergency savings fund. I would start overpaying the mortgage then with the aim of shortening the term by 10 years - I have looked at calculators on this. But I like the idea of having my pension fund, an emergency fund, defined benefit stuff, and an investment property. I am stressed now though.


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## Monbretia (2 Aug 2018)

So you want it all in other words 

If it was me I'd sell the property and get back to not being stressed.


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## RedOnion (2 Aug 2018)

Sean Bateman said:


> But I like the idea of having my pension fund, an emergency fund, defined benefit stuff, and an investment property.


I like the idea of owning a Lamborghini, but I'm not taking out a loan for it. It's definitely not worth it if you're stressed.

You've currently got 1.1m of debt. The money coming in from your investment will take it down to 1m. That level of debt really limits your options. You're highly exposed in the event of an interest rate rise. 

If you pay down debt, you will look at investment risk completely differently. Opportunities will come up to invest in when you have cash available. The best guaranteed investment you can make right now is pay down debt.

You're only 40. Lots of time still to make investments.


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## David1234 (2 Aug 2018)

How secure is your employment?
How much is your PPR worth?
When is the €50k bonus usually paid?

The €50k bonus will leave another €24k available. This plus the €80k coming back shortly will allow you to pay back the 2 credit union loans and the €30k bank loan. This will free up close to €1,800 p/m which will let you repay the other outstanding bank loan within a year.

Discuss with whoever gave you the 100k interest free loan if they require repayment soon as ideally this will be repaid with the €100k of in shares due in 2020. If they do require the funds sooner I would look to sell the investment property, whilst it may not be the best financial decision you ever made it will certainly help to steady the ship.

You are in a very envious position and with 2 years or keeping a closer eye on your finances you will be debt free excluding your mortgage.

As you are not likely to be in a position to overpay your mortgage in the next 2 years I would most certainly look at switching to Ulster Banks 2.3% fixed 2 year rate.


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## goingforgold (2 Aug 2018)

Sarenco said:


> It's really not as bad as it first looks.
> 
> If you liquidate the equity in the rental and the private company investment you could clear your personal debt in full and make a dint in that jumbo mortgage.
> 
> ...



Agree with this. You'll then have €100k coming in shares (minus tax?) in 2020, as well as any other savings you'll have built up. You may also have significant equity in PPR? So you'll have a huge income and have wealth built up which will ease the unnecessary stress you are under and put you in a better position to look at future investments, without the worry of debt hanging over you.

So basically you are quite wealthy but just putting yourself under unnecessary pressure through your current investment choices. You are both also very well setup from a pension perspective. Make life easier and enjoy your future without the stress.


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## Bronte (2 Aug 2018)

*Any advice and honest feedback welcome, no matter how candid!*

_Comment: Reminder of OP comment so you know what to expect_
*
Husband* age 40
Income 1€140,000
Bonus of €50,000
Health insurance covered
Pension fund €250,000 (cheap global equity option (0.2%) _Comment: is this good- pension guys answer this_
Employer contributes €14,000
Husband contributes €28,750 - (so 43K going into that) _Comment: good_

*Wife* age 38
Income 2 €70,000 public sector _Comment: Good_
DB pension _Comment: good. Elaborate more on this_
Full time?

*3 kids* under 10
Creche?
Other?

*Home*
Value?
Mortgage €700,000
Interest rate is 2.75% Variable (AIB)
Repayment ?
Term remaining ?
Equity

*Investment property *
Value €350,000
Mortgage €180,000
Interest rate 0.55% (Pepper)
Mortgage repayment?
Rent €1,750 monthly = 21K annually
Costs?
Profit?
Equity: 170K
*Debts*

*A Credit Union 1*
€30,000 (€570 a month)
Term?
Interest rate?
Savings?
What did you tell the CU this was for.
What did you use it for

*B Credit Union 2*
€40,000 (€610 a month)
Term?
Interest rate?
Savings?
What did you tell the CU this was for?
What did you use it for ?

*C Bank loan 1*
€26,000 (€352 a month)
Term?
Interest rate?
Which bank?
What did you tell the bank this was for?
What did you use it for ?

*D Bank loan 2*
€30,000 (€600 a month)
Interest rate?
Which bank?
What did you tell the bank this was for?
What did you use it for ?

*E Family loan* (probably parents, of one or both)
€100,000
- What lead to this loan being given?
- When was it given?
- When do they expect the money back

_Comment: 5 large debts, yikes!_

*Credit Cards* - Nil

_Comment: Phew !_

*Investments/Savings

W* €  50K bonus, but not if it just goes into general spending
*X* €80,000 coming back to me from a private company investment that has unwound at breakeven.

_Comment: Was the an unwise investment?_

*Y* € 0 savings
*Z *€100,000 share options (in 2020)

Comment: is this guaranteed? Any risk? Does this mean you actually get 100K the year after next? No matter what?

*Plan
B* - to clear the €610 a month Credit Union loan* 
D* - plus the €600 a month bank loan D
*E* - plus €10,000 of the €100,000 loan (to show progress).

_Comment: No idea if this is a good idea or not until you fill in the blanks_

*Question 1*

The $64,000 question is whether we should sell the investment property.

_Comment: Probably not._

*Question 2*

Another part of me feels that I want to live life to the max and enjoy a large disposable income because I could be dead in 10 years.

_Comments: 
- Is the OP the problem spender. 
- Someone is a problem, one or both.  
- Someone burying their head in the sand and needs to walk up
- Does spouse know extent of debt
- Definitely reckless
- Oddly no mention of life insurance, but probably has death in service benefit, but would need more than that.  _


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## Bronte (2 Aug 2018)

*Income*: 140K + 50K + 70K = 260K
*Debts*: 700 + 180 + 30 + 40 + 26 + 30 + 100 = *ONE MILLION ONE HUNDRED AND SIX THOUSAND EUROS* !!!!!!!!!!!!!!!!!
*Assets*:House? Investment: 170K
*Possible cash*: 100K + 80K = 180K

The first part of sorting financial mismanagement is being honest.  Please fill in as much detail as you can and try and be as honest as necessary without revealing who you are. For starters I hope you are not using your real name.

There is some major problem going on here.  Could be expensive tastes, outrageous holidays. And someone is very good at one thing. Accumilating debt. Top marks for that.

Positives are that it's a high earning couple. And this can be sorted I imagine with some serious talking and a proper effort to tackle the debt right now.

Investment is cheap, oddly, with Pepper, why so low.  Probably performing well.  But so much debt so it may have to be sold.

Maybe the home is worth a lot after all the renovations.

I'm amazed that a family loan was ever advanced.

Worst case scenario: Husband loses job.  Presumably a high powered stressful one. Could also burn out.


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## Sean Bateman (2 Aug 2018)

Thank you.

Those Credit Union loans are all net of savings. All of the bank/Credit Union loans have 8 years to run and average at 8%. I told them that the purpose was home improvements.

There is 30 years to run on the mortgage. The repayment is around €2,950 a month.

My wife is fulltime.

Childcare is around €1,600 a month.

We had saved €350,000 to purchase our new home. €250,000 went on the deposit and we had €100,000 set aside for renovations and furniture. We ended up spending about €350,000, wild I know, although that did include an element of being shafted by a builder). We had it valued at €1.8M recently.

The €100,000 is from parents. There is no immediate pressure to repay it but it gnaws away at me.


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## Sean Bateman (2 Aug 2018)

Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> There would be no CGT. Our conundrum is whether to trade out of our cashflow issues or to solve them by selling the property. My worry is that a few years from now, we’ll be crying out for an investment like that property.



My worry would be that you'd use this as a get out and not tackle the issue and just rack up the debt again.  How come there is no CC debt? That's odd.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.



I know all about it. And then my husband got fired. Luckily I'd planned for that eventuality from the get go so that we didn't have large debts later in life. That's where you need to get to.

At least your home is worth 1.8 million, I was worried about that. Maybe you should sell that.  Have you thougth about it?

Can you go back to each part where I put a ? and put in the details please. Take your time. You will get more feedback from others with more details.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> Those Credit Union loans are all net of savings. All of the bank/Credit Union loans have 8 years to run and average at 8%. I told them that the purpose was home improvements.



Part of facing up to this is giving accurate figures.  You must be prepared to go and look for the correct interest rates. I forgot to ask you how much are the monthly repayments. Can you also tell us in the last 3 months your spending on groceries, utilities etc.  We need to know where your money is going and how to help you.

I agree with you about the parental loan.

Take a couple of days to get the figures. Whatever is necessary.  It's good for you.


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## RedOnion (2 Aug 2018)

Bronte said:


> At least your home is worth 1.8 million, I was worried about that. Maybe you should sell that. Have you thougth about it?


I had the same thoughts. Sell the PPR, clear the debt, and buy a 'more modest' 1m home, keep the investment property, and sleep a bit better at night.


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## David1234 (2 Aug 2018)

Sean Bateman said:


> We had it valued at €1.8M recently.



Sell the investment property. A couple with your earnings/pensions/equity in property should not have so much unsecure debt. Personally I would pay my parents back first as I would be embarrassed owing them €100k that I used for a lavish refurbishment when my home is worth €1.8 million.

I would then take €500 and get myself some professional advice.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> Sorry, I meant in around 3 years when we’ve the personal debt cleared and around €60,000 in an emergency savings fund. I would start overpaying the mortgage then with the aim of shortening the term by 10 years - I have looked at calculators on this. But I like the idea of having my pension fund, an emergency fund, defined benefit stuff, and an investment property. I am stressed now though.



Sean today is the day you're going to begin to deal with the stress.  I wouldn't be able to sleep at night with figures like you've posted.  At least your home has a lot of equity.  So all is not lost. 

You came on here and this can be sorted I'm sure.  But it likely will not be easy.  If you are the problem than maybe your wife needs to take over the finance.  But you need a plan and you need one you will stick to.


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## Bronte (2 Aug 2018)

David1234 said:


> Sell the investment property. A couple with your earnings/pensions/equity in property should not have so much unsecure debt. Personally I would pay my parents back first as I would be embarrassed owing them €100k that I used for a lavish refurbishment when my home is worth €1.7 million.
> 
> I would then take €500 and get myself some professional advice.



While I agree with your sentiments I suspect his parents would prefer he reduced his very costly debt first.  They are probably worried about that and the spending.


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## David1234 (2 Aug 2018)

Bronte said:


> While I agree with your sentiments I suspect his parents would prefer he reduced his very costly debt first.  They are probably worried about that and the spending.



As they should be. Sean you need to get a grip on your finances and figure out where all the money is going. Pay down the most expensive debt if your parents don't need the money and continue doing this until it is all cleared.

With your net worth at 40 years of age with fantastic earning potential you should not be having money worries so something has gone wrong. Perhaps you have built unsustainable lifestyle expectations over the years which may need to be revised and updated.

As with the people who post in here on very modest salaries looking for advice I would suggest you keep a spending diary to figure out where all the money is going. This will help you identify areas where costs could be reduced.


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## 2ndtimer (2 Aug 2018)

Just to see it from a slightly less conservative side - assuming the 80k is used immediately to clear 80k of unsecured debt then they are in a position where income is 260k while debt is 1026k with no immediate pressure to repay 100 of it (forgetting about embarrassment etc).  This makes their debt less than 4 times income.  Yes, the amounts are very large (but the majority of it would be secured debt with significant equity in both properties) but is it really so different to a family with income of 100k with a 400k mortgage which wouldn't seem half as disastrous?

While it seems the risk of OP losing his job is remote, even if it did happen then they could sell either property.

Rather than doing something dramatic like selling the family home you have probably put huge work into, I would take the 80k, pay off the unsecured debts, immediately start saving that amount monthly to build up an emergency fund and meanwhile work out a monthly budget to see where you could make savings.

Also - an interest rate cut on such a large mortgage would make a significant difference so switching to UB at 2.3% seems like a great suggestion (then obviously save the difference or keep a small amount on variable and overpay with the amount saved on the mortgage each month).


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## huskerdu (2 Aug 2018)

This is not just about money, its about your life. 
You and your wife are juggling three kids and 2 jobs. I know how much work that is, Also, on your income, I doubt you are home at 5.30pm every evening. 

You are very wealthy but you have too much debt. That is adding stress that you dont need 

The next ten years of your life should be about the 5 of you enjoying life, not trying to accumulate more wealth for the future. 
in 15 years time, the kids childhood will be over ( and if your kids are lucky enough to have 4 healthy grandparents, this will not last forever)

Your massive house and investment property will not bring back those years. 
Go for the simpler option. 

Sell the investment property ( or downsize the PPR) , get rid of some of your debt and enjoy life the next 10 years.


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## Sean Bateman (2 Aug 2018)

The life insurance side of things is covered completely.

All of those bank/credit union loans have 8 years remaining; 7.5% on the bank ones and 8.5% on the credit union ones.

Selling our home doesn’t really make sense to us having put so much time, effort, and money into it.

I should point out that we were essentially defrauded to the tune of €100,000 by our builder, so that is relevant.

My worry is that the investment property is so good return-wise. It seems like I would be mad to sell it. I’ve thought about selling half of it to my Dad in exchange for the €100,000 plus some additional cash which I would use to clear the personal debts. That plus the €80,000 would leave us clear. Then build up €100,000 of savings and start attacking the home mortgage.


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## 2ndtimer (2 Aug 2018)

I think before you sell an asset you should work out your monthly incomings and outgoings.  Your net monthly income including the rental income must be between 14-15k?  I don't know how much the mortgage on the IP is but say it's 1k then your loan repayments plus childcare will be approx. 6.7k after you pay off the 80k of debt.  That leaves you with c. 7k per month for living/saving/day to day expenses...

You need to do the exact figures but it seems there should DEFINITELY be room for making savings!


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## PGF2016 (2 Aug 2018)

Sean Bateman said:


> The life insurance side of things is covered completely.
> 
> All of those bank/credit union loans have 8 years remaining; 7.5% on the bank ones and 8.5% on the credit union ones.
> 
> ...



If you're not willing to sell either property then what are you willing to change? Some outgoings need to be reduced. What's coming in? What's going out? Which of those items is are you willing to address?


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## Sean Bateman (2 Aug 2018)

I’ve looked at this. Excluding bonuses etc, €11,500 comes in.

The following goes out:

Mortgage €2,950
Mortgage €1,200
Tax re investment property €500
Groceries €600
Creches €1,600
Loans €2,130
Golf €178
Gym €165
Petrol €100
TV etc €200
Gas €140
ESB €130
Charities €150
AA €20
Tolls/Parking €40
Mobile phone €40
Bins €25
Mortgage protection €100
Helping relative €450
Leisure (pints/meals/lunches/clothes/travel/newspapers/kids’ stuff/etc €800)

THANKS


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## moneymakeover (2 Aug 2018)

I agree with you to keep the investment property.

Now you are aware of you situation start paying down the term loans. 80k is a good start. Then bonuses etc.


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## Sean Bateman (2 Aug 2018)

Bronte said:


> *Income*: 140K + 50K + 70K = 260K
> *Debts*: 700 + 180 + 30 + 40 + 26 + 30 + 100 = *ONE MILLION ONE HUNDRED AND SIX THOUSAND EUROS* !!!!!!!!!!!!!!!!!
> *Assets*:House? Investment: 170K
> *Possible cash*: 100K + 80K = 180K
> ...



I suppose just to push back on that, I saved €350,000 plus the €80,000 that I’m getting back from that ill-judged investment. And we were defrauded out of €100,000 by a dishonest builder which created mayhem as it left us in the lurch and unable to move into our property. The other mortgage was with Bank of Scotland but is now with Pepper. Mea culpa we underestimated the cost of doing up the house. We do have expensive tastes.

Partly we think that the right financial decision is to keep the investment property but partly we think that we should clear all of our debts and split the disposable income into buckets - one to overpay the mortgage, one to build up a cash safety net, and one to do stuff with the kids (Disney, Australia, safari, etc).


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## David1234 (2 Aug 2018)

Sean you are obviously very skilled in some areas given the large salary but money management is lacking. Underestimating the house refurbishment by so much seems like poor planning. Also if you were defrauded by a builder have you looked at recourse?

On a positive note you have a fantastic net worth. With some moderations you could be rid of all the unsecure debt in 2 years freeing up over 2k a month. A few things I would change in the short to medium term-

Change mortgage to Ulster Bank and fix for 2 years at 2.3%
Reduce pension contributions to the minimum that your employer will match
Explain to your family relative that you are not in a position to continuously help and cut back on social activities
Do a more detailed analysis of your monthly spending to include annual expenses like home/car insurance, tax, car & home maintenance, property tax etc. Do the incomings include €420 children's allowance?
Have an open conversation with your partner about finances and agree budgets
Manage children's expectations from Disney, Australia, Safari (probably the 3 most expensive family holidays you could do) to a week or two in France in a camp site

I really feel that you should get proper financial advice as a few changes now could give huge benefits down the line. Proper retirement planning could take years off your working life.


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## Sean Bateman (2 Aug 2018)

Yes, it includes childrens allowance and I use my bonus to pay annual stuff like insurance etc (€4k does it). I pay the property tax monthly through payroll so I don’t notice that.

Actually, I’ve some other income too, maybe €10,000 a year, which gives me €5,000 which I use towards the family holiday.


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## Learner2015 (2 Aug 2018)

Sean when I read your first post I saw great similarities between your family and mine. We are similar ages, have similar combined income with the private / public sector split. We have young children, we have an investment property.

The difference is our mortgage around €350k and the house is worth around €700k. Our investment property only has about 25k equity in it but other than a car loan we have no debt - and I still loose sleep sometimes wondering if we are saving enough / spending too much / overpaying mortgage enough etc.

Stress is a dangerous thing and if it was to take over the house of cards could come tumbling down. 

My advice is to do now whatever takes the stress out of your situation and like some other posters said enjoy life and time with the kids when they are young. Nothing wrong with having great family holidays to fantastic places but I think I'd park them for a few years until you felt like the money side of things was in hand.

Fair play to you both, you have done great, probably just need a bit of a reality check which I'm sure is why you posted here.

Anyway I'll leave it to the experts on here to give the proper financial advice, just wanted to write something cause of the similarities!


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## Monbretia (2 Aug 2018)

Regarding the money given to a relative and I understand that it may not be possible to reduce this but can it be put on a 'Deed of Covenant' basis if the relative qualifies, could save you and them a little in tax.


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## Bronte (2 Aug 2018)

Sean Bateman said:


> My worry is that the investment property is so good return-wise.  I’ve thought about selling half of it to my Dad in exchange for the €100,000 plus some additional cash which I would use to clear the personal debts. That plus the €80,000 would leave us clear. Then build up €100,000 of savings and start attacking the home mortgage.



Let's not make things even more complicated by becomming half owner with your Dad.


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## RedOnion (2 Aug 2018)

Sean Bateman said:


> My worry is that the investment property is so good return-wise. It seems like I would be mad to sell it. I’ve thought about selling half of it to my Dad in exchange for the €100,000 plus some additional cash


Just on this point, and bear with me please. 

The apartment is not that fantastic an investment. You've rent of 1750 on a market value of 350k. That's a gross yield, before expenses, of exactly 6%.
The thing that's valuable is the tiny margin tracker mortgage.

If your dad wanted to invest in property, he can get 6% yield any day of the week.


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## Blackrock1 (2 Aug 2018)

There are a few posters here ready to give you an almighty lashing Sean, ready to scold you for your profligate ways and tell you tales of doom. You have lost the run of yourself a little but its relatively easily sorted id have suggested and i can sympathise with the home renovation, it happens easily unfortunately.

Sell the investment property, its not an amazing investment and if your pensions are well funded what do you want it for - +170k
Returns from the business investment - +80k
Share options exercise (any tax on this?) - +100k

Thats 350k which can clear parents 100k plus 126k of other loans. Leaves you with 124, put say 6 months of the larger salaries net wages to one side (on the assumption you wont both lose your jobs)) say 35-40k leaving you with 84k to knock off the mortgage.

you are now down to a circa 600k morgage, income of 210k (less than 3 times) plus bonuses to live a little, and a gaff worth 1.8m (LTV 33%). Pretty good if you ask me.

i really dont see the big deal, if the amounts you have coming in are accurate then all you need to do is bite the bullet, sell the old house and rearrange things.

Im guessing all your debt comes from the new house and the renovation, this sorts all of that and hopefully you dont ever need to move again.

Or you can take the alternative advice, sell your house and live on baked beans waiting for armageddon


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## Sean Bateman (2 Aug 2018)

RedOnion said:


> Just on this point, and bear with me please.
> 
> The apartment is not that fantastic an investment. You've rent of 1750 on a market value of 350k. That's a gross yield, before expenses, of exactly 6%.
> The thing that's valuable is the tiny margin tracker mortgage.
> ...



But if I give it up, I’ll never get sonething like it again. Just playing Devils Advocate.


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## Blackrock1 (2 Aug 2018)

Sean Bateman said:


> But if I give it up, I’ll never get sonething like it again. Just playing Devils Advocate.



the tracker or the house? you could be in a pretty cushy situation, at the moment its a little precarious, id give up the marginal investment for a little comfort and less stress personally.


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## messyleo (2 Aug 2018)

RedOnion said:


> Just on this point, and bear with me please.
> 
> The apartment is not that fantastic an investment. You've rent of 1750 on a market value of 350k. That's a gross yield, before expenses, of exactly 6%.
> The thing that's valuable is the tiny margin tracker mortgage.
> ...



Totally agree with this, plus given you are paying pretty much 50% of the rent in tax (as the interest you are paying is so low), the return is not great at all, especially when you look at the rates you are paying for your debt. If you throw in a monetary value for teh extra stress it's likely not worth it.

Have you actually done the maths in terms of your net profile on the apartment i.e. how much you clear in cash after tax, expenses etc.? I am sure it would open your eyes as to how much it is really bringing in.


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## RedOnion (2 Aug 2018)

Sean Bateman said:


> But if I give it up, I’ll never get sonething like it again. Just playing Devils Advocate.


Quite possibly. Or you could have cash in 10 years, when interest rates and yields are higher and get a 10% yield with no debt.

If we're playing Devils advocate!

Just remember, the valuable bit is the cheap debt, but you have expensive debt in your overall position.


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## Bronte (3 Aug 2018)

Sean Bateman said:


> The life insurance side of things is covered completely.
> 
> All of those bank/credit union loans have 8 years remaining; 7.5% on the bank ones and 8.5% on the credit union ones.
> 
> .



In what way is the life insurance totally covered? 

Any chance you'd put up for each loan the monthy repayments?

It's odd that all loans are exactly 8 years remaining.


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## Bronte (3 Aug 2018)

*Husband* age 40
Income 1€140,000
Bonus of €50,000
Health insurance covered
Pension fund €250,000 (cheap global equity option (0.2%)
Employer contributes €14,000
Husband contributes €28,750 - (so 43K going into that)

*Wife* age 38
Income 2 €70,000 public sector
DB pension

Net salaries: 11,916 (Sean said he'd another 10K meaning 5K)
Bonus: 50K / 12 = 4166 (surely there's tax on that, I'll assume he gets 50%)

11916 + 2083 = 14K

*3 kids* under 10


*Home*
Value: 1,800,000
Mortgage €700,000
Interest rate is 2.75% Variable (AIB)
Repayment: €2,950
Term remaining: 30 (ages would be 70 - not good)
Equity:1,100,000 = 60% very good

*Investment property *
Value €350,000
Mortgage €180,000
Interest rate 0.55% (Pepper)
Mortgage repayment: 1200
Rent €1,750 monthly = 21K annually
Costs?
Profit?
Tax: 500 = 6K
Equity: 170K - 50% - very good

*Debts*

*A Credit Union 1*
€30,000 (€570 a month)
Term: 8
Interest rate: 8.5%
Savings? not answered

*B Credit Union 2*
€40,000 (€610 a month)
Term: 8 years
Interest rate: 8.5 %
Savings? not answered

*C Bank loan 1*
€26,000 (€352 a month)
Term: 8 years
Interest rate 8.5%
Which bank?
*D Bank loan 2*
€30,000 (€600 a month)
Term: 8 years
Interest rate: 8.5%
Which bank?

*E Family loan* (probably parents, of one or both)
€100,000

*Repayments on bank and CU loans*: €2130

*Credit Cards* - Nil

*Investments/Savings

W* €  50K bonus, but not if it just goes into general spending
*X* €80,000 coming back to me from a private company investment that has unwound at breakeven.


*Y* € 0 savings
*Z *€100,000 share options (in 2020)


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## Blackrock1 (3 Aug 2018)

home is worth an extra 800k bronte 1.8m


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## Bronte (3 Aug 2018)

Blackrock1 said:


> home is worth an extra 800k bronte 1.8m


It's a nightmare going back into all the posts ! Much easier if he'd just copy pasted mine and filled in the blanks !


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## Bronte (3 Aug 2018)

Sean Bateman said:


> Those Credit Union loans are all net of savings.



What does this mean?


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## Bronte (3 Aug 2018)

*Other:*
Groceries €600 - normal
Creches €1,600 - normal, and not forever
Golf €178/2K annually, probably needed for job plus stress reducer and healthy
Gym €165 / 2K
Petrol €100 - normal
TV etc €200
Gas €140 - ok
ESB €130 - ok
Charities €150
AA €20 - ok
Tolls/Parking €40 - ok
Mobile phone €40 - ok
Bins €25 - ok
Mortgage protection €100 - is this the life insurance? On the mortgage? Where is the house insurance?
Helping relative €450 - 5K
Leisure €800 = 10K, sounds on the low side to me.  Presumably there are some costly family holidays and high spending, bet this is more.


Monthly costs are 11.5K on an income of 14K. Missing 3.5K. But there may be a mismatch due to the dribs and draps posts.

*Advice*
- Get your figures more accurate
- Clear the 2 credit union loans, I'm confused about how much you have in savings versus loan when you said net of savings. 1K extra a month from this can then go elsewhere. These are the costliest loans.
- use  1K to pay largest bank loan
- set up a SO of savings to another account.
- set up a SO to parents
- pay off Bank loan 2 when you get your bonus. Watch out for penalties for early repayment.
- pay off your parents with each subsequent bonus
- reduce your pension this year, and next, making sure you get the max employer contribution
- life insurance if it's death in benefit is not enough because you lose that if you lose your job

*Opinion
*
Stress is probably caused by the disarray in the finances coupled with the two jobs, the three kids, the house disaster, and the borrowings all over the place.

Home and investment have good equity, investment home does not need to be sold, it has a low tracker and good rent.  The home end term of 30 years should be helped by overpaying the mortgage once being back on track.  And overpaying is a no brainer on a mortgage that high, especially if interest rates start to rise.

A future job loss must be factored in.

Pension should be maximised with the tax benefits born in mind. I would recommend an expert to advice you on that.  There are posters on here like SBarrett for example who are really good on things like this.

Exotic holidays, very doable. But only after you pay down the debt.  In any case the kids are very young, so it's pointless going with them at these ages. Other than maybe a weekend at Disneyland Paris.  I can wholeheartedly recommend a magical place called Efteling in the Netherlands.  Fly into Eindhoven and stay in the hotel directly on sight.  Two nights and you will never regret it.

Much more structure needed as to outgoings.  But impressed that most costs were readily available to post on here.  I think you're doing fine.  Try never to borrow so much so that you don't end up with loans all over the place spending money on high interest rates when a little bit of tightness for a while will have you sorted.

Lastly, move mortgage to get a cheaper rate.


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## gnf_ireland (3 Sep 2018)

@Sean Bateman Sorry to bring up an old thread. I meant to reply to this previously, but things were busy over the summer. We are our 'road BBQ' at the weekend, and one of the discussions I had reminded me of this, so here I am !!



Sean Bateman said:


> - We owe €700,000 on our home. The interest rate is 2.75% Variable with AIB.





Sean Bateman said:


> We had saved €350,000 to purchase our new home. €250,000 went on the deposit and we had €100,000 set aside for renovations and furniture. We ended up spending about €350,000, wild I know, although that did include an element of being shafted by a builder). We had it valued at €1.8M recently.



By my calculations, you spent 950k on the house (700k mortgage + 250k deposit). You then spent 350k doing it up, some of which was being shafted by the builder. That means the house cost you 1.3 million.
Sorry, but I am struggling to believe a 1.8m valuation. That's close to a 40% uplift in value in probably a 2 year window.
Very rarely do renovations on a house result in the corresponding increase in value. Normally, the renovations done will add value, but not 1-1 on the money spent. The renovations are done to your taste, which is unlikely to mirror 100% to someone else's. Yes, there are exceptions especially when a house is majorly rundown and the renovations get it back to 'liveable' standard, but not when it comes to high end specifications.
People do those kind of renovations for themselves, and just like buying a new car, its very difficult to get your money back on them.

Coupled with that, there is a slow down in the high end property in Dublin (which I assume you are in). The 1m+ houses are on sale for longer, and have seen a number of houses go sale agreed, only for the sales to fall through. 

Personally, if you got 1.25m for the house, I think you would be doing well in the current climate. Now maybe I am wrong, but I just doing see the 1.8m valuation. Of course if you bought the house in 2011/12, that's a different story.




Sean Bateman said:


> Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.



Over the last 12 months or so, I have encountered a lot of people in a similar situation to where you would be in 10 years time (early 50's having spent 20-25 years with the same company and at a pretty senior level in it). A surprising number of these have been placed on 'gardening leave', albeit with a package. However, a number are struggling to get back into the market at a level they feel they should be at, or at a similar salary anything close to what they were at. They have been very lucky and grew their packages where they worked, but finding it difficult to transfer that value outside of that company. 
During good economic conditions these changes are normally a result of an external event, such as a buy-out or restructuring or something similar. During poorer economic conditions, these changes can be caused by any number of factors.

So while you think your employment is secure for the moment, you need to think of various other factors which may influence your career and earning potential. I don't believe any job is absolutely secure - even public sector got hit with a 15% pension levy in the last crises.
I worked in telecoms when the dot.com bubble went - and saw an entire industry crash to its knees. It made no difference how good or bad you were, no one was hiring for a 2-3 year window and there was massive lay-offs. The number of people who left the industry at the time was nothing short of phenomenal - and a large number would have said 6 months earlier their role was very secure.


In summary, while things are pretty good in the garden at the moment, there are clouds on the horizon and some will impact you along the way. You know you are over leveraged, and your income/debt ratios are too high. 
The logical thing to do at the moment is stop paying into a pension fund and may down your most expensive debt. You are basically borrowing at 8% to invest in a pension. I accept pension tax rules may change, but you have more immediate challenges.
While on paper, I would say you should downgrade your new house to something more modest (around 1m mark), I don't believe you will release 800k equity from it, as I don't believe the valuation. 

At a career level, I would consider the option of doing a 'jump-ship' relatively shortly (next year or so), so you don't become too institutionalised in the same company. It may offer you more alternatives in the medium term. If nothing else, changing company does refocus people and they tend to get a new lease of life in their career as a result. Just a thought....


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## gnf_ireland (3 Sep 2018)

Bronte said:


> I can wholeheartedly recommend a magical place called Efteling in the Netherlands. Fly into Eindhoven and stay in the hotel directly on sight. Two nights and you will never regret it.



@Bronte  Thanks for the recommendation on Efteling. We are planning to do it next Easter or June with the girls, so glad it gets a seal of approval. It does indeed sound like an amazing place.


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## Sean Bateman (4 Sep 2018)

Hello gnf ireland,

We bought the house circa 3 years ago and it wasn't in great shape. We've transformed it, & modernised it completely in terms of BER, solar, etc. It stands us €1.35m and two estate agents have advised €1.75m and €1.9m.

By the way, the €80,000 came through and two expensive loans have been cleared plus €20,000 of the family loan.

I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020. I also set out a plan to be mortgage free by age 52 which we think is reasonable. I want to be flexible in my early to mid 50s in terms of moving to a less stressful job.

Thanks...

SB


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## gnf_ireland (5 Sep 2018)

Hi Sean



Sean Bateman said:


> We bought the house circa 3 years ago and it wasn't in great shape. We've transformed it, & modernised it completely in terms of BER, solar, etc. It stands us €1.35m and two estate agents have advised €1.75m and €1.9m.



I understand what you are saying regarding the estate agents valuations. But to be fair, they have often been a country mile off as well.  Especially for higher value houses which would not be so 'easy' to value and replies on finding the right buyer at the perfect time.
If you look at myhome as to houses currently on the market within that range, you will see the type of properties that fit into the bracket
https://www.myhome.ie/residential/dublin/property-for-sale?minprice=1750000&maxprice=2250000
Most are lower BER values with large plots, which allow their new owners to create their dream home, rather than taking someone else's version of it.
But thinking of it logically, you bought a house 3 years ago for say 1 million. If you done nothing to it, its likely it would have increased by a max of 20% in the meantime due to property prices - so lets say its now worth 1.2 million.
You invested 350k in it, and admit the builder kind of ripped you off. 
The estate agents now claim the house is with 1.9 million.
That means you got an increase in value of 2 euro for every 1 euro you spent, on achieving a high end spec house customed to your needs. 
I accept some of the money would see a return, especially around modernisation, but it is unlikely to see a 1-1 increase unless you are very lucky. A 2-1 increase would be exceptionally surprising, and go against the vast majority of building projects.
So either you bought the house originally at a steal, or the value is not as high as estate agents think, or you have been exceptionally fortunate. I don't know the answer. I am simply saying the numbers don't add up in my head - but I don't know the house/area either.



Sean Bateman said:


> By the way, the €80,000 came through and two expensive loans have been cleared plus €20,000 of the family loan.


Well done - first step towards reducing your debt profile and enabling you to sleep a little bit better at night



Sean Bateman said:


> I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020.


I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020. 
I assume this is based on a realistic spending budget that you agreed with your wife? Yes of course things like this can be done, but just be careful not to be too drastic and react in panic, as its likely you wont be able to keep to it. Drastic change is sometimes needed, but its not always the best answer. Reasonable change, done incrementally, is sometimes a better approach. Everyone still needs to live and have fun. No point working all hours under the sun if you cannot enjoy yourself




Sean Bateman said:


> I also set out a plan to be mortgage free by age 52 which we think is reasonable.


I like the fact you use the word "we" here, but I do caution that that may have to be flexible. Its difficult to plan 12 years into the future, and in particular the impact of rising interest rates etc. That is one of the reasons you should want to reduce your debt profile.
Have you considered private secondary schools for the kids (depending on where you live) and also the cost of 3rd level etc.
I am all for aggressive clearing of debt, as long as there is a life being lived as well. Kids in particular are only young once, and if you are time poor to spend with them it very easy to end up spending on experiences the kids will remember for every. Say a trip to Lapland for Christmas might set you back ~5-7k, depending on how you do it (tour or DIY)




Sean Bateman said:


> I want to be flexible in my early to mid 50s in terms of moving to a less stressful job.


This may be easier said than done, and you might find it difficult to get a role you are 'overqualified' for. Again, if that is the aim, you need to consider how you want to go about it and I suggest a few potential moves between companies to show flexibility and adaptability to different organisations and ways of working. 

Finally, good luck with it all and remember to have a life. Yo work hard enough for it !


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## Sean Bateman (10 Sep 2018)

Hi gnf,

I hate to disagree with you but prices in Dublin are up 40% since we bought AND we put €350,000 into the property AND we feel that we got decent bang for our buck irrespective of the problem with the builder.

€1,350,000 x 140% is €1,890,000, so I'm not wildly off. I also built a one bed studio for guests which could easily generate €14,000 a year tax free if needs be, an aspect that greatly interested the two estate agents. They also looked at it based on a per square foot basis relative to our neighbours houses which sold recently and weren't as well specc'd. But who knows I suppose.

Thanks for the kind words.

Sb


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## gnf_ireland (12 Sep 2018)

Sean Bateman said:


> I hate to disagree with you but prices in Dublin are up 40% since we bought AND we put €350,000 into the property AND we feel that we got decent bang for our buck irrespective of the problem with the builder.


We can respectfully agree to disagree here. I am not sure where you are getting 40% increase from, but of course you are entitled to your opinion.
If you look at the Daft reports from Q2 2015 and Q2 2018, you will see the average asking price in houses in South Dublin has gone from 526,313 to 599,194 - an increase of 72,881 or 13.85%. Of course these reports are not fool-proof, but are a reasonable indication of movement.
https://www.daft.ie/report/2018-Q2-houseprice-daftreport.pdf
https://www.daft.ie/report/q2-2015-daft-house-price-report.pdf




Sean Bateman said:


> I also built a one bed studio for guests which could easily generate €14,000 a year tax free if needs be, an aspect that greatly interested the two estate agents.


With all due respect, I cannot see someone purchasing a house for ~2 million euro and then renting a studio for 14k a year in tax free earnings. It does not really go with the lifestyle of someone who can afford a 2 million euro house. They might use it for an au-pair, or some hired help. Would it be handy for guests, family and young adults - absolutely, but in terms of a rental option it does seem a bizarre proposal (unless it has its own access and is completely isolated from the rest of the property).



Sean Bateman said:


> They also looked at it based on a per square foot basis relative to our neighbours houses which sold recently and weren't as well specc'd. But who knows I suppose.


Correct - both of us do not know unless you put the house on the market and see what price it actually goes for. We are both entitled to our different opinions here.


The final comment I will make is most people in the know (not me btw) will say that your home should not be considered an asset to you. You gain no money from it and it actually costs you money to maintain, repair, insure, pay mortgage interest on etc. For you, it is likely to be classified as a liability, although is an asset for your children or if you were genuinely willing to sell it in the future to downsize. The fact that property tax is now a further consideration, the only person* to benefit from an increase in valuation are the Revenue Commissioners. I am sure they will be delighted with your revised 1.8 million valuation when the time comes ! 
[*Excluding your own ability to lower your mortgage rate based on LTV] 

As I said in the original post, the value of the house is largely immaterial unless you were considering selling it. I was just saying not to always believe estate agents valuations. You are going exceptionally well income wise, but you know high debt levels are a concern and I would just caution getting too comfortable in one company as you may end up 'institutionalised' and unable to transfer the value you add there to a different organisation as easily, especially if there is any sort of blip in the market. Think of what happened to some of the people in your industry who may be ~15-20 years older than you when the last recession hit and how they fared in the fallout. Good luck with it all


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## aristotle (12 Sep 2018)

Sean Bateman said:


> I also built a one bed studio for guests which could easily generate €14,000 a year tax free if needs be



If the self contained studio is not attached to the house then rent-a-room scheme doesnt apply as far as I know?


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