# 39 year old, looking at saving/investing for the first time.



## Macstuff (3 Jun 2014)

*Age:
*39
*Spouse’s/Partner's age:
*N/A 

*Annual gross income from employment or profession:
*E70k per annum / €4,000 per month (including €400 from renting a spare room). 
*
Annual gross income spouse:
*N/A

*Type of employment:
*Private sector 

*Expenditure pattern:
*Now a saver. For the past 6 years, I was using spare income to pay down debt. 

*Rough estimate of value of home
*€160,000k 
*Mortgage Amt. Outstanding
*€170,000
*Mortgage provider:
*Danske Bank
*Type of mortgage: 
*Tracker 
*Interest rate
*ECB rate + 0.7%

*Other borrowings – car loans/personal loans etc.
*None

*Do you pay off your full credit card balance each month?
*N/A - I don’t have a credit card

*Savings and investments:
*7k in Savings – I am planning to lodge this into a Nationwide Regular Savings account at an interest rate of 4% 
(I have not done this yet, I am waiting for the paperwork to be finalised)

*Do you have a pension scheme?
*Thanks to my previous employer, I was a member of a Defined Benefit pension scheme for 13 years. I left that scheme last year when I took voluntary redundancy. In today’s money it would pay me an annual income of €5,500 per annum on retirement. 
I am about to invest in a new pension scheme. It will be fully funded by me – there will be no employer contribution. However, I will be able to get tax relief on the contributions. 
*
Do you own any investment or other property?
*Yes – I have two, both overseas, see below.
Investment property 1 
Value €120k Euro 
Mortgage 0k Euro 
Monthly Rent - €500 per month
Investment property 2 
Value €100k Euro 
Mortgage €130k Euro 
Monthly Rent - €450 per month

*Ages of children:
*None – I won’t be having children.

*Life insurance:*
Yes.

*Health insurance:*
Yes.


*What specific question do you have or what issues are of concern to you?
*I am debt free for the first time in 6 years! In fact I have, 7k in the bank (leftover from my redundancy payment) and now want to start saving/investing for the first time. 
I am fully aware of why and how I got into debt and through hard work, sacrifice, budgeting (and a very nice lump sum redundancy payment) I got myself out of it. If interested, you can find more information on my ‘debt story’ here: http://www.askaboutmoney.com/showthread.php?t=126974
While I know I have a lot of property exposure, I don’t plan on disposing any of it for the foreseeable future. Both properties are in good condition, are very well located and are easily tenanted. They are also managed by a locally based family friend who I trust completely. I am tax compliant in relation to this rental income. 
My income prospects are pretty good – I work in the technology sector, live in Dublin and should find it easy to find a new job if needed going forward. 
As I have literally just got back on my feet, I estimate that my monthly income of €4,000 will be allocated as follows:
_Mortgage €700_
_Food €300_ (covers; breakfast, lunch, evening meals at home. I shop at Aldi/Lidl) 
_Motoring €500_ (Diesel/Motor Tax/Insurance/Tolls/Servicing. My daily roundtrip to work is 100KM. I have a fuel efficient car and public transport is not an option)
_Socialising/Meals out €300_ (I am in a long-term relationship, and don’t socialise excessively)
_Luxuries €500_ (clothes, annual holidays, haircuts, occasional weekends away)
_Insurance €80_ (Life Insurance, Home Insurance, Health Insurance
_Miscellaneous €90
Gas and Electricity €100
Water Charges/Property Tax €75._
Overall that leaves me with up to €1,355 per month to save, invest in a pension etc. Broadly speaking my aims are to:
1. save a nest egg equal to 6 months net salary - in case of losing my job, falling ill etc. 
2. save some money for unexpected expenses – I am thinking of having a cushion of approx. 3k in this fund. 
3. change my car 5/6 years from now - so that I don’t have to borrow to do that. 
4. Invest in a pension product. My company have sent me some information on the products open to me, but I have no clue on what type of pension to invest in - as I had had a Defined Benefit scheme up to now. 
As I have focused on cutting spending and paying down debt for the past 6 years, I know very little about savings and investments. 
Any advice on; what products to use for saving, where and how much to save this would be greatly appreciated. Generally speaking I know I am in a decent position and don't plan on taking many risks regarding investments going forward. 
I would also appreciate any general advice that people want to give in relation to my planned approach, overall financial situation etc.


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## Boyd (3 Jun 2014)

Without going through your specific questions, the first thing I notice is that you mention lodging E7, 000 into Nationwide Regular Savings account. This account is not designed for a lump sum so I don't think you'll be able to dump in the whole lot in one go. You'll need to drip feed it from another account as far as I know, or else put the lump sum into a fixed term account.


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## Brendan Burgess (3 Jun 2014)

Well done in working your way out of debt. You need to establish what your financial objectives are. 

If I was in your shoes, or, more correctly, your car, this would be my first target: 

"_Motoring €500_ (Diesel/Motor Tax/Insurance/Tolls/Servicing. My daily roundtrip to work is 100KM." 

You are in a position to buy a more suitable home.  Of course, there may be reasons why you live where you do, but you should give active consideration to moving closer to work. 

"Danske Bank cheap tracker" 
This is the next key issue.  Danske Bank may well sell your mortgage to a vulture fund or they may even offer an incentive to mortgage holders to repay their mortgage early.  In case they do, you should be in a position to grab the opportunity. 

So don't put your €7k in a pension fund or in a savings account which requires more than one month's notice. 

This would be another reason for considering selling Investment Property number 1.  You would achieve a lot by doing it: 


You would reduce your exposure to property 

You would have funds available if you ever get a deal on your Danske mortgage 

You would have funds available if you want to move house 

Of course, you would have funds available if you ever had a period of long term unemployment 

You could probably contribute the maximum to a pension and still have the funds available to exploit any opportunity arising from Danske



> Generally speaking I know I am in a decent position and don't  plan on taking many risks regarding investments going forward.


With  all of your investments in one asset class - property - you are taking  risks.  You can reduce the risk and probably increase the return and  improve your liquidity by selling Property no 1 and buying a diverse  portfolio of shares. 




> As I have focused on cutting spending and paying down debt for the past 6 years,


Don't overdo this. You have a good income and good net assets.  Some people get into a habit of cutting expenditure and saving that they never get out of it, even when they are well off.  I am not suggesting squandering your money, but you can relax the purse strings a bit.


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## Brendan Burgess (3 Jun 2014)

Buying a bigger home is very tax efficient


There is no CGT on any gain in value.
You can probably rent an extra room and get tax-free income
If you become unemployed, it won't count towards your means in any means-tested social welfare
I think you would be better off with a €280k house and no investment property than a €160k house and a €120k investment property. 


Of course, Danske Bank won't allow you to move your cheap tracker, but if you agree with the principle, you should sell your investment property and then do the numbers on trading up but losing your tracker.


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## Brendan Burgess (3 Jun 2014)

Investment property 2 
Value €100k Euro 
Mortgage €130k Euro 
Monthly Rent - €450 per month


What interest rate are you paying on this mortgage?  If the net rate after tax relief is higher than the net 2% you can get from an Irish deposit account, then you should consider paying the €7k off this mortgage. 

You may want to keep a rainy day fund, but again, don't overdo it. Your monthly income exceeds your expenditure so you should be able to handle most problems. 

If you lose your job, you can sell Investment Property no 1 to get cash. 

Maybe sell investment property no 1 and reduce mortgage on Investment Property no 2?


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## Brendan Burgess (3 Jun 2014)

Just realised that I am consistent... 

November 2009 



> The main problem I see here is that you have reasonable assets and a  good salary with a reliable job but you appear to be making financial  sacrifices to get by.
> 
> Someone in your position should be enjoying life rather than worrying about retirement in 30 years' time.



November 2011 



> It's probably still worth considering selling one or other of the  properties in Spain. That would relieve the total pressure and give you a  lot more financial flexibility. It would also reduce your exposure to  the property market.


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## Macstuff (5 Jun 2014)

Thanks for the replies. 
As much as I would like to move closer to work, I can't sell my house, as I need to live in this area for now due to family commitments. 
I will look at selling my mortgage free property in Spain. However, the property is in a building with 2 other apts. My friend, who manages my properties, lives in one and his brother lives in the other. I made a verbal commitment to them years ago to allow them to buy the property (at market value) if I wanted to sell. Neither of them could afford to buy me out at the moment. I don't want to damage a friendship unnecessarily. However, I will float the idea with them and see what happens.


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