# Pre-Children Tune Up



## jujubes (29 Nov 2021)

*Age:*
Early 30s

*Spouse’s/Partner's age:*
Early 30s

*Annual gross income from employment or profession:*
€220,000 + €15,000 bonus

*Annual gross income spouse:*
€68,000

*Monthly take home pay:*
€13,300 after tax and pension contribution. Add €7,400 or so each year if the bonus comes in.

*Type of employment:*
Full Time Employees, Private Sector (both)

*Expenditure pattern:*
Savers - though our savings are being rebuilt at the moment, we've come through a few years where we got married, bought a house at a decent LTV, poured money into it and obviously still managed to have a contingency, while still enjoying life! 

Now 67% of our net income goes on day-to-day costs, from mortgage through groceries to insurances etc (we could trim costs here, of course, some of it is discretionary - so bare bones we're probably spending €5.5k that we have to, and €3.4k is going out automatically but could be trimmed). The balance goes to savings, setting aside money to put into our home or set aside for the costs of children, or a vacation fund.

*Rough estimate of value of home*
€1.1m

*Mortgage on home*
€705k with 34 years left

*Mortgage provider:*
Ulster

*Type of mortgage: Tracker, interest only, fixed rate*
Fixed rate

*Interest rate*
4 years left on 2.2%

*Other borrowings – car loans/personal loans etc*
€6.5k left on car loan with ~17 months left to run

*Do you pay off your full credit card balance each month?*
Yes

*Savings and investments:*
€30k in savings held as cash, building up rapidly to €40k so we have 6-7 months expenses cash for life events, emergencies, etc. Setting aside money for children, also. Have other cash we tend to put into pots for the house, holidays, etc, that isn't spent all at once, so in a pinch (unless we go on a fancy holiday and buy a new suite of furniture the same week!) we have plenty of cover for life's little events.

Residual interest in a company that could net a very low six figure sum after tax in the next year or three, will probably knock ~€70k / 10% off the mortgage (as we can do within the terms of the fixed interest) and pour the rest into home and hearth. Interest rates are low for now, but the idea of getting the same fixed rate in 4 years that we have now seems a bit too speculative for me - rather lower the amount outstanding so we can keep/lower repayments in future years when we maybe have kids running around or similar.

*Do you have a pension scheme?*
Yes x1, a PRSA into which my employer contributes 10% (€22k) and I contribute the balance of €1k to maximize the tax relief available to me (20% of €115k ceiling).

Current fund value €63k, pension is with Irish life, with fees of 1% & 1% on contribution and fund value annually. Have the fund aimed 100% at equities, 50% north American and 50% world indexed funds. I'm aware there's potentially a web of other things affecting total return here, such as quite where is indexed and fund performance vs others available in the market at large.

Big question mark if this is the right vehicle or not, or perhaps it's ok for our age as a good way to put away money without thinking about it... Or maybe it's a great way to get ridden by fees for what could be a large fund in years ahead. Don't really care about the value day to day, just the cumulative effects of fees or having access to the most efficient vehicle. Only got into the pension in recent years but do intend to stick with it as a tax efficient way to invest and save for the future.

My wife isn't in a pension and her employer offers no contributions, but considering getting her into one soon so we can make use of the tax relief available to her, albeit she'll likely be interrupted significantly in the years ahead if we go ahead and have children.

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

*Ages of children:*
None, yet. Planning to have our first late '22 or early '23 (all going well....) and aiming at 3 over the following 5 ish years. Planning to put aside €19k next year to a "baby fund", for the costs related to having a child plus some offset for foregone income.

*Life insurance:*
Income protection insurance x2 that would cover our outgoings if we lost 1x income, mortgage life assurance inc specified illness cover. Health insurance x2.

*What specific question do you have or what issues are of concern to you?*
Thanks in part to a long time of reading these forums, feel we're in decent shape but now coming up on new life stage after getting married, buying the house, etc, and wouldn't mind a point of view on the next life stage, which will be having children while continuing to put money aside for retirement and for the ups and downs that are likely ahead as we go through child rearing years.

Very likely my wife will have strongly interrupted earnings in the 5-10 years ahead. Her employer doesn't have any sort of maternity pay arrangement (to be honest, "get a job somewhere they do have maternity pay" might be the most solid advice we could get, although she likes her work and sector and one would be reluctant to ask her to change it for purely financial reasons), so we can count on her going to 1/3 of her current net, or knock about 17% off our net income. We can absorb that, though I wonder if your contingency shouldn't increase as I'd query what would happen if my earnings took a major knock (short of dying or getting ill enough for the income protection to kick in, or the mortgage getting written off at that stage - think more, income downsized involuntarily).

Also querying if it's worth her investing in a pension in these good times for our income and if so, what vehicle to use for her; and if I should be looking at a more advanced strategy (including asking my employer to do more around the type of fund offered?) myself.

Kids... Assuming we're lucky enough that this works out, what would you set aside now and into the future for the child? And are there efficient ways to properly save for things like third level, that don't get eroded to heck by inflation?

Any other comments welcome. I take a lot of stock of the general advice around here to roll with the punches and not spend your entire day worrying about the future, but also to not ignore it entirely! Want to make sure we do our best with the significant resources we've been lucky enough to be able to muster together to ensure we can be as secure and comfortable as possible.


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## Pinoy adventure (29 Nov 2021)

Maybe clear the car loan from savings.


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## Baby boomer (29 Nov 2021)

You're in a good position and well poised for a comfortable future.

I'd suggest:
1.  Clear the car loan immediately.  Paying interest while.you have multiples of the outstanding balance in cash deposits makes no sense whatsoever.

2.   You are paying a small fortune in tax, PRSI and USC. Pension tax relief is one of the few options you have to relieve this.  Your spouse should start a pension straightaway and contribute 20% of salary, the max allowable. Put in a full 20% of her 2021 salary.  This is particularly important if her career and earnings are going to be interrupted over the next decade or so.  

3.  When she goes on maternity leave, and particularly if she intends to be out of the paid workforce for a few years, consider acquiring some income generating assets in her name to use her credits and tax band. Perhaps use your accumulated savings and/or the net cash that's coming to you as a deposit on an investment property.  You should be able to get one for about 200k that will yield 16k rent pa, which will be mostly tax free.  

4.  Your employer's contribution to your PRSA uses up the bulk of your limit.  This wouldn't be the case if your employer had a DC scheme and contributed the same amount to it.  Would the employer be open to this, perhaps?  It would allow you to make additional tax free pension contributions.


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## nest egg (29 Nov 2021)

Fantastic position to be in, well done, you're clearly doing something right! I'd completely agree with Baby boomer's recommendations, they are well worth pursuing. I'd also advocate overpaying your mortgage, UB allow 10% overpayment without penalty.


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## ned official (29 Nov 2021)

Well done that's some salary for somebody in early 30s. Do you mind me asking what industry you work in? I presume its IT or asset management although bonus is low for that.


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## Peanuts20 (30 Nov 2021)

For someone with that level of salary, you don't have a lot put aside. Given the value of the house, I'd have to question what else it is you have to do to it that requires you to put more money into it. Once the smallies start to arrive and start moving around, the nice clean house goes out the window.

Make sure you have your life assurance and will sorted out. Also worth doing a review of medical and other expenses to see if you can get a tax rebate and check your health insurance for maternity and other cover.

Big issue coming down the line is the kids. 3 in 5 years means your wife will be on unpaid maternity leave for around 18 months (at least) so that is almost €100k before tax in income gone (offset slightly by state benefit and child allowance). During the course of that period your fixed term mortgage will be up and you will have to get a new rate. When you are talking to a pension advisor, you will need to consider the tax position of your wife when she pays into a private pension with no income coming in and you may also need to consider how or if you can take advantage of her tax credits during this period

The big cost you have coming is child minding. Do you have a family infrastructure in place to support you during this period? (ie Granny for minding kids). If not, you are looking at least at €75k-€100k and probably more in creche and child minding fees alone up until the end of the decade. Do you need to go down the au pair route? You are also potentially looking at a car change in the period as well,.


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## NoRegretsCoyote (30 Nov 2021)

jujubes said:


> None, yet. Planning to have our first late '22 or early '23 (all going well....) and aiming at 3 over the following 5 ish years. Planning to put aside €19k next year to a "baby fund", for the costs related to having a child plus some offset for foregone income.



At your salary you clearly have a very demanding job. Three kids under 6 and two parents in full-time work (at least one doing long hours) is very difficult to manage (trust me, I've been there).

You can do this with live-in childcare of course, but this would eat so much into your wife's net salary that it may not be worth it. I would plan pragmatically for a period of part-time work for your wife, or even her taking a few years out of the workforce. This is hard to envision when you don't have kids yet, but when you do it will make a lot of sense.


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## jujubes (30 Nov 2021)

Pinoy adventure said:


> Maybe clear the car loan from savings.


Yeah when you write it down it's quite obvious...! Will do.


Baby boomer said:


> You're in a good position and well poised for a comfortable future.
> 
> I'd suggest:
> ....


Thanks, all good advice and will look at them all. Re #3, when she's out I was hoping to use more of her tax credits in joint assessment. Not sure what the delta would be on this suggested route, but I will investigate it further. Uncertain about wanting to become a landlord in the middle of it all, but really appreciate the advice as a route to explore.


mojoask said:


> Fantastic position to be in, well done, you're clearly doing something right! I'd completely agree with Baby boomer's recommendations, they are well worth pursuing. I'd also advocate overpaying your mortgage, UB allow 10% overpayment without penalty.


Many thanks. Yes, we're rolling cash back into our savings after the depletions of recent times, but fully intend to start driving some off the capital where we can and if that windfall arrives, knock 10% off in one go probably.


ned official said:


> Well done that's some salary for somebody in early 30s. Do you mind me asking what industry you work in? I presume its IT or asset management although bonus is low for that.


Thank you. I might reserve saying if that's ok, but it's an area that attracts significant salaries and I'm probably less special than in demand. Something to be wary of for future! Though the organization I'm in is quite stable in its outlook, I'd be cautious about jumping around as you do worry about the future when you're a large cost center!


Peanuts20 said:


> For someone with that level of salary, you don't have a lot put aside. Given the value of the house, I'd have to question what else it is you have to do to it that requires you to put more money into it. Once the smallies start to arrive and start moving around, the nice clean house goes out the window.
> 
> Make sure you have your life assurance and will sorted out. Also worth doing a review of medical and other expenses to see if you can get a tax rebate and check your health insurance for maternity and other cover.
> 
> ...


Yes, we have been drained significantly in recent times - we got married, nothing lavish, but nothing about weddings is cheap. The house still has bare light fixtures in it - we've been adding everything from sticks of furniture to upgrading the alarm of the previous occupant. You can infer from the LTV that we put a lot of capital into the house, also, with an eye toward future affordability.

Great advice on all points. Childminding is, as NoRegretsCoyote also says, a major new idea to plan for.


NoRegretsCoyote said:


> At your salary you clearly have a very demanding job. Three kids under 6 and two parents in full-time work (at least one doing long hours) is very difficult to manage (trust me, I've been there).
> 
> You can do this with live-in childcare of course, but this would eat so much into your wife's net salary that it may not be worth it. I would plan pragmatically for a period of part-time work for your wife, or even her taking a few years out of the workforce. This is hard to envision when you don't have kids yet, but when you do it will make a lot of sense.


That's very sensible advice, thank you. We haven't decided on the route we'd like to take and it's worth very pragmatic discussion, as you say.


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## Gordon Gekko (30 Nov 2021)

In the US, “tune up” means to beat someone up…seems extreme.

You’ve a great platform to build wealth over the coming years, congrats.

I would echo what others have said. I’d explore the possibility of a DC pension scheme so their 10% could be added to your 20%. I’d look at pension funding for your wife. You can clip away at your mortgage quite a bit as you go along, thus buying yourselves flexibility.

Don’t forget to enjoy life though too. Generic financial advice tends not to be fit for purpose for higher earners.


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## Sarenco (30 Nov 2021)

I would echo the various points made by others.

One small point in relation to your pension fund -


jujubes said:


> Have the fund aimed 100% at equities, 50% north American and 50% world indexed funds.


US equities already make up 68% of the MSCI World index so you have an overall allocation of around 84% to US equities.  That may be deliberate but it is a significant overweight to US equities relative to market cap.

If it was me, I would invest the lot in a fund that tracks a global index for the time being.

Also, I believe Standard Life offer a PRSA with an AMC of 0.65% for transfers over €100k.  That's not relevant at the moment but it's something to bear in mind in the future.


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## michaelm (30 Nov 2021)

NoRegretsCoyote said:


> or even her taking a few years out of the workforce. This is hard to envision when you don't have kids yet, but when you do it will make a lot of sense.


This option, if your wife is amenable to it, is what I would aim for.  In general, ideally, kids should land by mid-thirties and be cared for at home, where possible, until they start stated funded montessori (around age 3).  We took a financial hit to do this back in the day but the quality of life boost was huge for all.  It seems it's not doable for a lot of people these days but it would be an option for you if so inclined.


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## Gordon Gekko (30 Nov 2021)

michaelm said:


> In general, ideally, kids should land by mid-thirties and be cared for at home, where possible, until they start stated funded montessori (around age 3).


They’re pretty definitive statements…


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## michaelm (30 Nov 2021)

Gordon Gekko said:


> They’re pretty definitve statements…


They do read a bit like that alright, not intended to be.  But a rational behind them.  Trying to tiptoe in what could be a minefield.


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## misemoi (30 Nov 2021)

In relation to childcare I would suggest that in the early years you are looking at a nanny or creche or childminder rather than an au pair and to budget accordingly. An au pair might work for school aged children or if one parent is working part time. At that income level I'd nearly suggest an au pair during the various maternity leaves...three children in five years will be a very busy time & if you have the resources I'd pay for help to get through that time more smoothly...ditto for a cleaner, gardener, handyperson to do jobs etc.


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## Gordon Gekko (30 Nov 2021)

michaelm said:


> They do read a bit like that alright, not intended to be.  But a rational behind them.  Trying to tiptoe in what could be a minefield.


My understanding is that there is also evidence that children benefit from the socialisation in creches etc.

Given how much of a struggle life can be for people who don’t have cash, I’d be wary of making overly definitive statements. Horses for courses, people cut their cloth, etc.


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## NoRegretsCoyote (30 Nov 2021)

Gordon Gekko said:


> My understanding is that there is also evidence that children benefit from the socialisation in creches etc.


Evidence around this kind of thing is marginal and I wouldn't make any life choices or experience guilt over what you do.

I agree do what works best for you in your own circumstances.


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## Gordon Gekko (30 Nov 2021)

NoRegretsCoyote said:


> Evidence around this kind of thing is marginal and I wouldn't make any life choices or experience guilt over what you do.
> 
> I agree do what works best for you in your own circumstances.


Exactly, my only point is to avoid being prescriptive and cut one’s cloth according to one’s measure.

I recall advice that when a child wakes in the middle of the night, you should walk the floor with them and under no circumstances take them into bed with you. We ignored that. Go with what works.

It might make financial sense for a spouse to give up work, but what about that individual’s sense of fulfilment and career ambitions? There are lots of careers which are remunerative but contribute very little to society and there are lots of careers that are poorly paid but hugely important.


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## RetirementPlan (30 Nov 2021)

Just a very general point - kids don't always come on your schedule. One in five couples experience fertility issues, which could result in dramatic changes to your planned timescale. Worth keeping it in mind.


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## huskerdu (30 Nov 2021)

Maybe , the OPs wife would like to make a decision on whether she wants to work full time, part time or take a career break herself and maybe, its got nothing to do with any of you.


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## Gordon Gekko (30 Nov 2021)

huskerdu said:


> Maybe , the OPs wife would like to make a decision on whether she wants to work full time, part time or take a career break herself and maybe, its got nothing to do with any of you.


That’s an extraordinarily helpful verbal ejaculation, thank you. Maybe, a la Eamonn Andrews, you can bring her out from behind the curtain?


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## jujubes (30 Nov 2021)

Gordon Gekko said:


> In the US, “tune up” means to beat someone up…seems extreme.
> 
> You’ve a great platform to build wealth over the coming years, congrats.
> 
> ...


Ha, was thinking more like a tune up of the car! Appreciate the sentiments.


Sarenco said:


> I would echo the various points made by others.
> 
> One small point in relation to your pension fund -
> 
> ...


Those are really good pointers, thank you. I think we made a particular point to go over exposed to North America, as that's where the outsized returns are - The Irish Life fund for NA has returned 35% over the past 12 months vs 27% for the global index, and I believe that the performance delta was similar when we "set and forget" it. That being said, I'm sure we keep a good thread going in the investments forum for quite a while on the correct strategy here, and perhaps you're right to look again and move stuff around.


michaelm said:


> They do read a bit like that alright, not intended to be.  But a rational behind them.  Trying to tiptoe in what could be a minefield.


Thank you, and to others who have commented on the whole childcare thing - it is a valid question worth exploring and I'm sure we'll have to make some decisions here.


Gordon Gekko said:


> It might make financial sense for a spouse to give up work, but what about that individual’s sense of fulfilment and career ambitions? There are lots of careers which are remunerative but contribute very little to society and there are lots of careers that are poorly paid but hugely important.





huskerdu said:


> Maybe , the OPs wife would like to make a decision on whether she wants to work full time, part time or take a career break herself and maybe, its got nothing to do with any of you.


On all of these points, there's a lot to unpick yes that's non-financial as well as financial. Of course the advice has been solicited and is welcome in all cases, and ultimately we'll make a decision that's right for us in that sphere. But I do appreciate all the points of view offered on it.

Same for the sentiment about planning the timing of this - as I said, if we are lucky enough for it to go smooth as clockwork, perhaps it won't be.


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## Sarenco (30 Nov 2021)

jujubes said:


> I think we made a particular point to go over exposed to North America, as that's where the outsized returns *are*


Well, that's where the outsized returns *have been* over the last decade but there's no particular reason to believe that will continue indefinitely.

The US actually underperformed the rest of the world during the first decade of this century.


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## Purple (2 Dec 2021)

jujubes said:


> On all of these points, there's a lot to unpick yes that's non-financial as well as financial. Of course the advice has been solicited and is welcome in all cases, and ultimately we'll make a decision that's right for us in that sphere. But I do appreciate all the points of view offered on it.
> 
> Same for the sentiment about planning the timing of this - as I said, if we are lucky enough for it to go smooth as clockwork, perhaps it won't be.


Don't underestimate the stress having children can put on you both and on your relationship with each other. The decision about both parents working or one working part time or one staying at home fulltime should be informed primarily by what arrangement produced the least stress on the parents as if you're no good to yourself you'll certainly be no good to your children. 

Time will become a much more important commodity. 

On the financial side you are doing really well. Well done. Spend your money to create quality time and good memories rather than on 'stuff'.


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## jujubes (2 Dec 2021)

Sarenco said:


> Well, that's where the outsized returns *have been* over the last decade but there's no particular reason to believe that will continue indefinitely.
> 
> The US actually underperformed the rest of the world during the first decade of this century.


That's very sound advice, thank you.


Purple said:


> Don't underestimate the stress having children can put on you both and on your relationship with each other. The decision about both parents working or one working part time or one staying at home fulltime should be informed primarily by what arrangement produced the least stress on the parents as if you're no good to yourself you'll certainly be no good to your children.
> 
> Time will become a much more important commodity.
> 
> On the financial side you are doing really well. Well done. Spend your money to create quality time and good memories rather than on 'stuff'.


Very wise and much appreciated.


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## Lambchops65 (2 Dec 2021)

Wow! That's a fantastic salary! (well done you) I am dying to know your occupation 
That's a great position to be in. Great to be able to still enjoy life whilst still saving. So important.


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## ATC110 (2 Dec 2021)

We need better people not more; adopt instead of adding to the problem


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## Purple (3 Dec 2021)

ATC110 said:


> We need better people not more; adopt instead of adding to the problem


Well aren't you a ray of sunshine...


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## ATC110 (3 Dec 2021)

Purple said:


> Well aren't you a ray of sunshine..


Why thank you. 
Do you think we need more people?


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## Purple (3 Dec 2021)

ATC110 said:


> Why thank you.
> Do you think we need more people?


Who else are we going to screw over to fund our retirements?


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## Blackrock1 (3 Dec 2021)

Peanuts20 said:


> For someone with that level of salary, you don't have a lot put aside. Given the value of the house, I'd have to question what else it is you have to do to it that requires you to put more money into it. Once the smallies start to arrive and start moving around, the nice clean house goes out the window.
> 
> Make sure you have your life assurance and will sorted out. Also worth doing a review of medical and other expenses to see if you can get a tax rebate and check your health insurance for maternity and other cover.
> 
> ...


Given what 1.1m now buys in parts of the country the house could needs 100s of thousands spent on it, also i disagree that kids mean that your nice clean house goes out the window. 

I do agree with the general advice that your outlook, and your plans may well change when kids come along. its one thing to theorise what you might do and look at the financial impact but its quite something else when they are actually there and you realise what it all entails.

We were in a similar position financially, albeit my wife earned a bit more, when the chance came to take redundancy she took it and will take at least 3 or 4 years out and see how we go, it has improved our quality of life a lot, but she wanted to do it, its not for everyone.

Also, having kids in your mid 30s isnt always straightfoward so maybe consider how you are covered for fertility treatments if required.


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## Gordon Gekko (3 Dec 2021)

ATC110 said:


> Why thank you.
> Do you think we need more people?


Hello Chairman Mao, and welcome to Askaboutmoney.

Yes, I do.


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## Leper (3 Dec 2021)

Annual income €303,000.00 and a home worth €1.100,000.00 along with investments and the OP is asking us mere mortals with incomes of <€50,000.00 and mortgaged homes valued @ <€300,000.00 to give him financial advice. We've spent more time keeping the wolf from the door and trying to keep food on the table from meal to meal but perhaps some of us can actually give some advice?

But, I won't leave him go away emptyhanded. Beware of the two words "Hey Dad!"  and of course the old chestnut "Some day dad I'll pay it all back." Get over those two statements and count your lucky stars.


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## Purple (3 Dec 2021)

Leper said:


> Annual income €303,000.00 and a home worth €1.100,000.00 along with investments and the OP is asking us mere mortals with incomes of <€50,000.00 and mortgaged homes valued @ <€300,000.00 to give him financial advice. We've spent more time keeping the wolf from the door and trying to keep food on the table from meal to meal but perhaps some of us can actually give some advice?


Speak for yourself, pal.


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## ATC110 (3 Dec 2021)

Purple said:


> Who else are we going to screw over to fund our retirements


All labour needs can be met by immigration


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## ATC110 (3 Dec 2021)

Gordon Gekko said:


> Hello Chairman Mao, and welcome to Askaboutmoney.
> 
> Yes, I do.


He wasn't wrong. We're about 5-6Bn over carrying capacity


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## Purple (3 Dec 2021)

ATC110 said:


> He wasn't wrong. We're about 5-6Bn over carrying capacity


No we’re not. There are enough resources on the planet to support a population of over 10 billion if we choose not to waste those resources.


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## Purple (3 Dec 2021)

ATC110 said:


> All labour needs can be met by immigration


Or we could have our own.


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## ATC110 (3 Dec 2021)

Purple said:


> No we’re not. There are enough resources on the planet to support a population of over 10 billion if we choose not to waste those resources.


With no other species left and the biosphere destroyed; but that's ok because we're special and have the right to choose


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## ATC110 (3 Dec 2021)

Purple said:


> Or we could have our own.


The last thing the earth needs is more people; we're the only species threatening the survival of every other


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## Purple (3 Dec 2021)

ATC110 said:


> With no other species left and the biosphere destroyed; but that's ok because we're special and have the right to choose


Well this has gone off topic, even by my standards. I’ll not continue down that rabbit hole.


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## PebbleBeach2020 (3 Dec 2021)

Where the hell has this topic gone?!!!


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## ATC110 (3 Dec 2021)

Purple said:


> Well this has gone off topic, even by my standards. I’ll not continue down that rabbit hole.


Well you did reply to my point and start a separate debate


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## Baby boomer (3 Dec 2021)

Leper said:


> Annual income €303,000.00 and a home worth €1.100,000.00 along with investments and the OP is asking us mere mortals with incomes of <€50,000.00 and mortgaged homes valued @ <€300,000.00 to give him financial advice.


He's more than welcome to whatever advice I can offer, and I'm sure many others here feel the same. I know for a fact that many high earners in the 200k and upwards bracket make far from optimal financial decisions.  Perhaps it's because they are comfortable and don't have to; perhaps they are so busy with career that personal finances don't get the attention they should; perhaps commission-based financial advisers target them for sub-optimal investments with laser-like accuracy!!

Either way us "mere mortals" may have useful advice to offer - the OP is paying a compliment to this site by asking for it.



Leper said:


> We've spent more time keeping the wolf from the door and trying to keep food on the table from meal to meal but perhaps some of us can actually give some advice?
> 
> But, I won't leave him go away emptyhanded. Beware of the two words "Hey Dad!"  and of course the old chestnut "Some day dad I'll pay it all back." Get over those two statements and count your lucky stars.


They won't pay it back.  I, for one, don't want them to or expect them to.  If you're at the stage where you're in a position to think about passing on some resources to the next generation, that's one way traffic!  If you don't agree, don't pass it on just yet!


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## RetirementPlan (7 Dec 2021)

Baby boomer said:


> He's more than welcome to whatever advice I can offer, and I'm sure many others here feel the same. I know for a fact that many high earners in the 200k and upwards bracket make far from optimal financial decisions.  Perhaps it's because they are comfortable and don't have to; perhaps they are so busy with career that personal finances don't get the attention they should; perhaps commission-based financial advisers target them for sub-optimal investments with laser-like accuracy!!
> 
> Either way us "mere mortals" may have useful advice to offer - the OP is paying a compliment to this site by asking for it.


It was certainly interesting to see the number of RTE-related high earners who seemed to be very susceptible to poor financial advice or worse - Gay Byrne, Pat Kenny (who told us how 'every financial advisor in the country was advising him to pile into Irish financial stocks', whereas in fact, every professional financial advisor would have been advising him to diversify), Joe Duffy (claiming to have 'lost his pension').

There must be a market there for boring, basic financial advice that doesn't get overly influenced by the latest big thing (whether dot.com or Irish property or bitcoin).


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## invest101 (7 Dec 2021)

my 2c

Best advice I ever got was "you think its hard earning money, try keeping it". There are very sophisticated industries out there whos business plan  is to get the money off you. As from the poster above avoid all get rich quick schemes. I know lots of people who were doing great and pushed too far with debt for investments and crashed.

Lifestyle and "investments" can grow to consume any amount of income and capital it you let them.

My advice would be to decide what is there to spend and what to invest in long term assets monthly or annually.  Be realistic on what you can invest don't be to aggressive, it won't work. You can change it over time. Define a budget and try to keep to it until you change it. Pay for memories, especially family ones, not depreciating things. Avoid lifestyle loans and debt, despite everyone offering them to you. Pay for things when you have the cash. Don't get in the habit of expensive cars on finance deals. Watch your monthly payments and subscriptions, they will consume your income before you get it.

Maximise pensions is always a good idea. The money comes out first and you wont miss it. With incomes at this level in this country tax is a big issue and will take a very large proportion. Shelter investments inside a pension for as long as you can.

In the longer term it will all be about sustainable income/withdrawals from pension/investments and being debt free. The 4% withdrawal rate idea is interesting and highlights the magnitude of the problem. e.g. To generate 200k+ p.a. long term which your currently enjoy, you would need 5M+ in savings  .  The pension fund will probably (hopefully) max out in contribution and total value terms. You will probably have outside pension investments e.g. property, shares etc. Investments vs paying down mortgage is well discussed in other forums. Always put money in investments initially with a very long term view so you don't have to chop and change e.g. uk investment trusts. Investments should be long term and "boring", ignore all the noise. Most changes outside a pension (where you have gains) will be taxed reducing your capital deployed. Probably avoid single companies, it's not worth the stress during volatility.  In my opinion most people can do this themselves with an online broker and don't need much advice if they disciplined and just leave it there. However being disciplined is sometimes very hard. If you "over invest" you may find yourself cashing in to fund lifestyle.

Kids will consume huge money - private schools etc. paying for 1X or 2X on a holiday or restaurant is a lot different to 5X. Hopefully you can pay this from income. They are more expensive as they get older.

Its good advice for you both in the longer term to look in to how to generate an income for other half if they stop working to use up tax allowances before the 40% kicks in. I used a small commercial property in joint ownership, that's not for everyone. This also contributes to lifetime PRSI contributions leading to state contributory pension entitlement (under the current rules), but that another complicated subject.


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## Blackrock1 (7 Dec 2021)

invest101 said:


> Its good advice for you both in the longer term to look in to how to generate an income for other half if they stop working to use up tax allowances before the 40% kicks in. I used a small commercial property in joint ownership, that's not for everyone. This also contributes to lifetime PRSI contributions leading to state contributory pension entitlement (under the current rules), but that another complicated subject.


If you dont mind, can you give a little more colour on this? My wife has taken redundancy and the kids are young so her going back to work is some way off. Right now she has no income, how does the commercial property in joint ownership address this and also how does the PRSI element work?


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## NoRegretsCoyote (7 Dec 2021)

Blackrock1 said:


> how does the commercial property in joint ownership address this


If your spouse has more than €5k a year in rental income they pay €500 Class S PRSI or 4% of the rental income, whichever is greater. For this you get 52 PRSI contributions valid for state pension which is very good value.

It's not necessary though if she is caring for children under 12 where they get credited automatically.


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## Blackrock1 (7 Dec 2021)

NoRegretsCoyote said:


> If your spouse has more than €5k a year in rental income they pay €500 Class S PRSI or 4% of the rental income, whichever is greater. For this you get 52 PRSI contributions valid for state pension which is very good value.
> 
> It's not necessary though if she is caring for children under 12 where they get credited automatically.


Thanks, so in my wife's case she has worked for say 20 years and our youngest is 3. so she should have 29 years worth of contributions before we need to worry about that aspect?

The maximisation of the tax allowances / thresholds is still interesting though!


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## NoRegretsCoyote (7 Dec 2021)

Blackrock1 said:


> so she should have 29 years worth of contributions before we need to worry about that aspect?


That's right, yes.


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## presidenttttt (23 Dec 2021)

There is a theme on these forums where some high earners have huge lifestyle creep which has a massive compound impact on their longterm wealth - and then limits their ability to wind down or adapt their careers. Expense creep often seems to be down to a lack of focus or laziness with financial objectives and very basic planning. 

Your head is clearly screwed on and this is likely not relevant to you, now anyway. The point about budgeting shouldn’t be underestimated, made by Investing101 above. Family awareness of a budget will stop silly unused subscriptions and other needless regular out goings and bad habits. It drives conscious decision making, which protects from many problems be it lifestyle creep or someone trying to milk you with absorbent fees. That’s all cash that goes into pensions or mortgages and gives you a compounding ROI. 

Given your incomes avoiding mistakes and basic management should see you right. 

That said, now that you have your home sorted, a rough family plan, and an idea of your income for the next few years, I would take professional wealth advice. Even a few small tips will make it worthwhile given the time you have for compounding.


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