# Where to go from here...



## HelperSam (31 Aug 2007)

Age: *38*
Spouse's/Partner's age: *38 *

Annual gross income from employment or profession: *€60,000*
Annual gross income spouse: €*29,000*
*(Monthly take-home income of €2,800 + €1,800 = €4,600)*

Type of employment: e.g. Civil Servant, self-employed: *Factory - Technician. Spouse-clerical.*

Expenditure pattern: In general are you spending more than you earn or are you saving? 

*Normally, our balance is quite low just before payday. We tend to live paycheque to paycheque.
*
Expenditure: The usual household bills (phone, ESB, cable) run at about 4 to 500 p/m with school fees, once-offs, etc.
 €200 p/m to Credit Union (loan payment only).

Rough estimate of value of home *€240,000*
Mortgage on home *€23,000*
Mortgage provider: *NIB*
Type of mortgage: *Variable*
Interest rate: *5%*

Other borrowings – car loans/personal loans etc:
Credit Union: *€16,000*
 Credit Card: *€1,300*


Do you pay off your full credit card balance each month? *No.*
If not, what is the balance on your credit card? *€1,300*

Savings and investments:

*No savings account, except for €4,000 with Credit Union.*
*Have vested share options from employer (c. USD$8,000 worth) now.*

Do you have a pension scheme? Yes - employer scheme through BoI. Employer matches AVC contributions up to 3% of salary - paying this much in each paycheque.

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

Ages of children: *16.
*
Life insurance: *Very basic - original requirement for the mortgage.*

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

 We realise our attitude and habits towards money are not ideal. We both come from backgrounds that would not have had much of it about growing up. I think we are still compensating for this both for ourselves and our daughter! 

 Our home (c. 30 yrs old) is in need of repairs/double-glazing, etc. The estimated cost of this is around €60,000 - 80,000. We don't want to move house right now, but maybe in 3-6 years.

 Also, it is likely that I will have the opportunity to take redundancy in the coming months - this will amount to roughly €50,000 nett. I would like to take this chance to change careers, though this will more than likely mean earning less for a few years. 

We are in a good position in many ways, but we just don't seem to be making the right long-term plans for ourselves.

 I am looking for advice on the best path to financial security and the "best practice" approach! At the end of the day, we would like to have a nicer house, savings for a rainy day and be able to treat ourselves every so often. 

Your input is appreciated.


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## GeneralZod (31 Aug 2007)

HelperSam,

Your monthly take home pay of €2800 implies a gross annual taxable income of €38000 after any pension contributions have been deducted. Figures calculated using [broken link removed]. 

€60,000 would imply monthly take home of €3898 before any pension deductions.

Your spouse's monthly figure also looks smaller that what would be expected for that gross.

Can you clarify your income figures as I think the difference may be too big to be explained by any tax exempt compulsory pension contribution you may be making but didn't mention.


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## nelly (31 Aug 2007)

unless your shares are going to explode in the coming year sell them and pay your CC and some of your debt.
I would also up your contribution to the pension.


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## comanche (31 Aug 2007)

nelly said:


> unless your shares are going to explode in the coming year sell them and pay your CC and some of your debt.
> I would also up your contribution to the pension.



Am I correct in saying that you may indeed be better to only invest ESP plan if you have your pension maxed out because:

1. Your pension is more diversified
2. You get tax relief

However depends on what sort of discount you get with your ESP. I know I had an esp where the discount was about 9%. I treated it as a savings account, sold shares as soon as I got them. However after paying tax @ 42% on profit from shares I wasn't really doing much better, I was only making 4.5% every 6 months provided the share price hadn't dipped..

Anyone care to support/correct me on this?


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## Bez (31 Aug 2007)

You should keep the shares in the ESP for at least three years, then there would be only a tax on any capital gain doing what you are doing sounds crazy to me!


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## ClubMan (31 Aug 2007)

Bez said:


> You should keep the shares in the ESP for at least three years, then there would be only a tax on any capital gain doing what you are doing sounds crazy to me!


Surely this assumes that the _ESPP/ESOP _is _Revenue _approved and most are not so income tax would apply on any discount to the market value when acquiring the shares and then _CGT _on disposing of them.


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## Bez (31 Aug 2007)

Of course that's what I assumed, otherwise you are just day trading with no tax break which is downright dangerous for most unless someone that has massive disposable income.


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## ClubMan (31 Aug 2007)

_ESPPs _(even _Revenue _unapproved ones) are grand for low risk investment if you resolve to sell up immediately after each purchase period ends and you acquire shares. Often this is at a 15% discount to the market value which means that once you have paid (say 41%) income tax (within 30 days via [broken link removed]) you are left with an 8.85% largely risk free* return on your money over 6 months. Ask yourself if you would/should be investing your money in shares in the company in which you work if you did not have access to the _ESPP_. If not then always liquidate in the way outlined above. That's my approach anyway.

* Very sudden exchange rate or market volatility between your acquisition and, as far as possible, immediately following disposal of the shares does represent a risk.


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## Bez (31 Aug 2007)

Yes but for a revenue approved ESOT then you should not sell up, should hold for three years, and be in a much stronger postion than the one with an 8% return you described.

The points you're making are completely irrelevant to my post so I am not sure who they are directed at?

Maybe the poster can clarify if has revenue approval or not.


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## ClubMan (31 Aug 2007)

Bez said:


> The points you're making are completely irrelevant to my post so I am not sure who they are directed at?


My comments are not irrelevant to the thread at least until...


> the poster can clarify if has revenue approval or not.


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## Bez (31 Aug 2007)

I did not say there were irrelevant to the thread, I said they were irrelevant to my post, glad to see clarification (sort of) that they were just inserted as info to the thread.


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## ClubMan (31 Aug 2007)

Yah - whatever!


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## Bez (31 Aug 2007)

Yup!!

A revenue approved ESOT would be quite different in its nature and requirements, hope the picture is getting clearer now


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## nelly (31 Aug 2007)

ClubMan said:


> _ESPPs _(even _Revenue _unapproved ones) are grand for low risk investment if you resolve to sell up immediately after each purchase period ends and you acquire shares. Often this is at a 15% discount to the market value which means that once you have paid (say 41%) income tax (within 30 days via [broken link removed]) you are left with an 8.85% largely risk free* return on your money over 6 months. Ask yourself if you would/should be investing your money in shares in the company in which you work if you did not have access to the _ESPP_. If not then always liquidate in the way outlined above. That's my approach anyway.
> 
> * Very sudden exchange rate or market volatility between your acquisition and, as far as possible, immediately following disposal of the shares does represent a risk.


these are the ones i have myself and if i need to make a big spend i just sell up and start again - otherwise they are a great scvings scheme - but this person has a fair amount of debt, hense my suggestion to flog them and pay the bills.


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## HelperSam (31 Aug 2007)

Thanks for the very interesting replies from everyone.
_GeneralZod_ - sorry, you're right. I actually included my Credit Union deductions (which go straight from my paycheque to CU) of €400 pm (was using the fortnightly figure as thats how I get paid) as a deduction the same as tax - my mistake!
Just to clarify:
Gross income = 4160, 
Sum Deductions =1000 (Income tax €300, PRSI-EE €110, Pension €60, AVC €30)
Balance =*€3,160 p/m.*
So my own take-home is actually very close to the figure obtained using Karl Grabe's Tax Calculator as you said.

I will have to double check my spouses deductions.

To clarify re: shares - they are *Options* with a current cash in value of roughly USD$8000. These have been accumulated over the last 7 or 8 years, though the more recent additions are not worth anything at present (option price greater than actual stock price for the last few years).

I have taken shares as a (Revenue approved - Employee Stock Purchase Plan) bonus payment instead of cash in the _past_ and kept them for 3 years, as Bez mentioned above. But I have sold them after this time as Clubman recommends. However, this has not been an attractive option for most employees here due to the stock's performance in recent years.

An important factor to me is the impending *redundancy* and how best to prepare for it, given the redundancy payout detailed above.

If I am missing any other information you need I will put it up here as soon as possible.

Regarding the home improvements, we are considering taking out a *re-mortgage*.
I appreciate you taking the time to analyse our situation, as we are not the most financially-literate when it comes to the important stuff!


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## Brendan Burgess (31 Aug 2007)

Hi Sam 

You are finding the going tough at the moment, but you are planning to spend €60k on your house and then you are thinking of moving in 3-6 years? 

If you borrow €60k now, you will find your finances even tougher. 

Moving is very expensive and I don't think that you can afford it, unless you are moving to a cheaper house. 

The Credit Union is an expensive place to borrow from. Have a look at adding the net borrowings to your mortgage, but maybe the legal costs of doing that will wipe out any savings from the lower interest rate. 

Check out the money saving and budgeting tips and try to get your day to day expenditure inline with your income or a bit below it. 

Brendan


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## hlm (1 Sep 2007)

Hi Sam
You're taking home a healthy amount between the two of you with a very low mortgage, yet you are living paycheck to paycheck. You need to get a grip on what you do with your money before you make any decisions on remortgaging/redundancy etc. A spending diary can be enlightening. It takes a little discipline but is well worth it. You'd be amazed how much money can slip through your fingers if you're not watching it. We were similar to you a while back so I set up internet banking and kept a close eye on all transactions in/out of the account. We were spending hundreds each month in DIY shops and we had a grocery bill that would have been worthy of harrods. I was shocked to see how much little things quickly add up, I'd forget very quickly where I had spent money, so internet banking meant I could check anytime. I also set up a budget spreadsheet which keeps a running total of how much money I have left for the month, that can be quite different to the balance in your account on a given day, when there might be direct debits due,cheques to clear etc. Give it a go, I promise it's well worth it


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## GeneralZod (1 Sep 2007)

HelperSam said:


> An important factor to me is the impending *redundancy* and how best to prepare for it, given the redundancy payout detailed above.



Suggest you suspend all thoughts of taking on new debt even if it's for home improvements until you're safely in a new job. 

Keep track of your spending to identify wastage. Use the money saved to pay off credit card debt. With an impending redundancy I'd be actively looking for ways to trim back the life style to something more modest. 

With the redundancy payout I suggest you clear your personal/car loans and mortgage and keep the rest in savings until you're earning again.

Longer term I'd get some life insurance to protect your dependents and start boosting your pension payments.


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## HelperSam (1 Sep 2007)

Hi all! Thanks for the comments.

*Brendan*, Its not really that the going is tough, its more of a feeling that we should be doing more with our money. Day-to-day life is good, everything gets paid and we're never short of anything. Compared to some of our friends who are only just on the housing ladder in the last year or two, our remaining mortgage is quite small.

I think we could well afford an increased mortgage payment - even if this was on 1 wage for a while - it'd still be a quarter of a 'normal' mortgage and I would expect to get another job before too long - maybe I'm being too optimistic? I definitely will check out the money saving and budgeting tips here and make some changes as you suggest.

*Hlm*, that sounds very sensible and describes my situation pretty well! I do try to keep an eye on where the money goes and I do use internet banking, but its usually just withdrawals from ATMs (Maybe using the Laser card more instead of cash would be better for traceability?) and starting a spending diary will take a bit of getting used to but it sounds like it would be well worth it for us! I do keep a second account just for direct debits and have been meaning to set up a direct debit for the credit card balance, so that I know at the end of the month, whatever I spend will be going out of my account - that would make us think twice before using it.

*GeneralZod*,


> With the redundancy payout I suggest you clear your personal/car loans and mortgage and keep the rest in savings until you're earning again.
> Longer term I'd get some life insurance to protect your dependents and start boosting your pension payments.


Thanks for the advice. I will look into getting more suitable life insurance (using these forums as a guide) and boosting pension payments. I don't think it will take too much to modify our spending habits and start seeing some changes.

We have a lot of thinking and research to do regarding all your comments so far!


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## Bronte (3 Sep 2007)

Not sure on the rules on redundancy re tax, but it would probably be better if you were into the next tax year before you receive it - that way you can maybe use up all your allowances/tax credits for 2008, particularly if you are going to be unemployed for a while.

Also you need to check with social welfare whether you will be entitled to unemployment benefit if a) you take voluntary redundancy or b) compulsory redundancy.

If you are doing up the house and plan to sell in a few years you should only do renovations that add value to the house.


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## hlm (3 Sep 2007)

afaik the rules on redundancy allow some/all of your severance payment to be paid tax free. There are different exemptions, and you can claim the one most favourable to your circumstances. They work differently to income tax and if you do have to pay tax on severance, it will be taxed as income on the day its paid. But if you have long service and with your income, there's a possibility you'd have to pay little or no tax. Unemployment benefit may not be payable for up to 8 weeks. But you really need to get your spending in check before you seriously consider redundancy.


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## ClubMan (3 Sep 2007)

hlm said:


> afaik the rules on redundancy allow some/all of your severance payment to be paid tax free. There are different exemptions, and you can claim the one most favourable to your circumstances. They work differently to income tax and if you do have to pay tax on severance, it will be taxed as income on the day its paid. But if you have long service and with your income, there's a possibility you'd have to pay little or no tax. Unemployment benefit may not be payable for up to 8 weeks. But you really need to get your spending in check before you seriously consider redundancy.


See here?

[broken link removed]


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