35, new home owner with cash rich side hustle

B

businessman

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Need advice and opinions please.

Age: 35
Spouse age: 33
No children / dependants - but plan on having 2 or 3.

Income and expenditure
Annual gross income from PAYE employment: 95K
My PAYE income is uncertain. It has served me well, but it will not last forever.
The industry is in decline and in my opinion will not be viable in a few years.
I feel I could lose my job any time.

Annual gross income from side hustle employment: 10K
It has been running for over 10 years.
There is over 250K cash in the side hustle business.
It just built up over time without a plan.

Spouse gross income: 35K

If pushed I can save about 3K per month.
Some months I do that and some months I don't.
Helping people can sometimes get in the way of my savings.

Summary of Assets and Liabilities
Family home value: 500 K
Mortgage on family home: 400K remaining (single owner, my partner is not involved)
Net equity: 105K (I would never sell the house though)

Cash: 80K in bank account
Cash in my company account: 260K
Car worth 60K (Paid off)

Family home mortgage information
Monthly repayment: I pay 1500 per month. (400K Remaining)
Type of interest rate: Fixed, but will be variable from early 2025
Remaining term: 33 years left on the mortgage.

Other borrowings – car loans/personal loans etc
No credit cards or other loans.

Pension information
I have 8K in my pension from an old job. I know nothing about it.

What specific question do you have or what issues are of concern to you?
  • My career at 35 feels like it has been long, drawn out and stressful.
  • I feel overwhelmed with a large long mortgage. But it was an opportunity I had to seize while I could.
  • I am thankful that I have a safety cushion of cash in my personal account and company account. But this cash is losing value with inflation.
  • For me knowing what to do with my money and planning for retirement is confusing. (I know my pension planning has been very neglected)
  • I feel I am conflicted between my full time PAYE job and my steady accidental side hustle.
  • My reluctance to leave a PAYE job has allowed me to get on the property ladder, but has damaged my career progression.
  • I know when I have kids my financial situation and priorities will have to change. I don't want to feel this stressed when around my future kids.
  • My future existence hangs on the cash in my company and deciding what to do with that.
 
Are you planning on getting married if planning kids ? What would happen to your assets if you died suddenly? I would consider this.
 
businessman said:
Cash in my company account: 260K
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Why on earth did you accumulate cash in a limited company? It makes no sense from a tax point of view.

You should sit down with your accountant and figure out what do do with it. There may be an option to put it into a pension fund in which case that may be the best way to extract it.

If you can't put it into a pension fund, then it is probably going to cost you €130k on top of the Corporation Tax you have already paid. But bite that particular bullet now.

People put off dealing with this problem as there is no pain-free solution. But deal with it.
 
businessman said:
Mortgage on family home: 400K remaining (single owner, my partner is not involved)
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businessman said:
Spouse age: 33
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Spouse gross income: 35K
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Is she your partner or your spouse?

If she is your spouse, she is involved in the house.

If she is not your spouse, as you are planning to have kids together, you should take an hour out and go down to the Registry Office and get married. This is more tax-efficient when there is a disparity in people's incomes.

It also protects her in the event that you suddenly kick the bucket. She will inherit your assets tax-free.
 
businessman said:
Cash: 80K in bank account
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businessman said:
Mortgage on family home: 400K remaining
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businessman said:
  • I am thankful that I have a safety cushion of cash in my personal account . But this cash is losing value with inflation.
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You have a good income. You have a side hustle. Your spouse/partner has a decent income.

You don't need to borrow €80k to fund a safety cushion.

Pay it off your mortgage.

If you do lose your job and are still unemployed after 6 (?) months, the cushion will be means and will reduce your means-tested benefit while if it's paid off the mortgage it won't be means.

If you do lose your job and need to reschedule your mortgage, it will be a lot easier to reschedule a €320k mortgage than a €400k mortgage.

Brendan
 
I agree with Brendan, you should not have accumulated so much money in your business. It doesn't make any sense. To take it out of your business will cost you 52% in tax. Your pension is very underfunded, I would put most of it in a PRSA. You company can claim tax relief in the year that it is paid. The removal of annual pension funding for PRSAs is exactly for this situation. Earn €10,000 and put €200,000+ in a pension in one year and no funding checks. Use it!

Use some of the cash in your current account to reduce your mortgage. You won't see the benefit of this for years when the mortgage is paid off earlier.

Going forward, reduce the amount you spend on a car.

Brendan Burgess said:
Is she your partner or your spouse?

If she is your spouse, she is involved in the house.

If she is not your spouse, as you are planning to have kids together, you should take an hour out and go down to the Registry Office and get married. This is more tax-efficient when there is a disparity in people's incomes.

It also protects her in the event that you suddenly kick the bucket. She will inherit your assets tax-free.
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I agree with Brendan on this too. If you die prematurely, your partner will be left with a big tax bill if she gets the house. If your intention is for her to remain in the house if you died, make sure it is in a will. And then make sure there is life cover through a life of another policy where she takes out life cover on your life (you are too young for a section 72 policy). Or else get married.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
businessman said:
My PAYE income is uncertain. It has served me well, but it will not last forever.
The industry is in decline and in my opinion will not be viable in a few years.
I feel I could lose my job any time.
My career at 35 feels like it has been long, drawn out and stressful.
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Why not retrain for something else.

For a single man on a great salary and a side line you seem to be way over stressed.
You shouldn't make statements like you would never sell the house. Why not?

This is rather an odd statement:
  • My future existence hangs on the cash in my company and deciding what to do with that.
Does you partner agree about having 2 to 3 children? You'd both, particularly she, needs to get a move on. When did you purchase the house and why was your partner not involved?
 
Bronte said:
Why not retrain for something else.

For a single man on a great salary and a side line you seem to be way over stressed.
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He's not single, but otherwise you're on the nail here.

My hunch is that what is effectively a second job, however lucrative, may be fine for someone in their 20s but is a recipe for burnout and worse for someone in their late 30s or older.

He has some crucial strategic decisions to make but probably needs to work less in the meantime in order to be able to make them with a cool head.
 
Thanks to everyone for the well thought out replies and advise. I'm really grateful for the responses.

Here is some more context below.

I agree with everyone that I am stressed and suffering from burnout. I don't enjoy my job.
To add to that I do have a few personal issues (can't go into detail) which make working in a PAYE job hard.
I would find it hard to walk into another job.

The intention was always to do something with the company money.
Like start a business that I would enjoy or buy a property / business in the company that would replace my PAYE income etc
But as I grow older and got a mortgage it has simply been more and more difficult to leave the PAYE job.

Is buying an asset in the company which acts as a vehicle to allow me leave my job a runner?
 
businessman said:
Is buying an asset in the company which acts as a vehicle to allow me leave my job a runner?
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This question is probably too vaguely phrased to elicit a meaningful answer.

It's usually a bad idea to have a company owning a property. You sound like you could do with some strong accountancy/tax advice on this and associated ideas and issues.
 
Is there scope to turn the side hustle into a full time operation or expand it? With a consistent income for a decade from a side hustle would at least indicate there is potential for growth.

The other aspect is how much time does this side hustle take up? If it takes up evenings and weekends regularly then the 10k may not be worth it. It ultimately might be better to shut it down to reduce stress burn out.
 
Firstly, you need to ensure that you are tax compliant, I've seen cases (and influencers are an example) where Revenue is starting to come after them so my first recomendation is to do a proper full end to end tax review, probably with a professional accountant, to ensure you are compliant, operating in the most tax efficient manner possible and have claimed for everything you can.

In terms of kids, bear in mind that when that happens, your costs will go up and your income will go down,. Can you manage it.? Hence why I would agree with what other posters have said around paying down the mortgage with your excess cash. 250k is not going to generate enough income on it's own to allow you to give up.

Your earning 95k a year, hence you must be senior and skilled in your role so don't underestimate your ability to change jobs in the future. Perhaps consider investing in some training as well in areas such as interview techniques.
 
DublinHead54 said:
The other aspect is how much time does this side hustle take up? If it takes up evenings and weekends regularly then the 10k may not be worth it. It ultimately might be better to shut it down to reduce stress burn out.
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I'd agree with this, 10k really isn't significant income relative to 95k salary, especially as it's at the highest tax rates. I think there may be some false mental accounting going on because it has been kept in a company and seems more significant than it is because it hasn't been taxed.

Presumably in the worst case scenario OP would get a significant redundancy and that might be the time to look at a new lifestyle choice.
1500 euro mortgage seems quite cheap as a housing cost really, I think OP has done well to look after long term housing for that while their salary made it affordable and they're relatively young so could get a long term.
 
Sorry, no advice to offer and apologies if this is a thread de-rail- but @Steven Barrett could you explain what you meant by:

'You company can claim tax relief in the year that it is paid. The removal of annual pension funding for PRSAs is exactly for this situation. Earn €10,000 and put €200,000+ in a pension in one year and no funding checks.'
 
Brendan Burgess said:
It is the right thing to do, but as he is only making €10k profit a year, he will be wasting a lot of the tax deductibility. But the alternative is worse.
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Well I take 10K salary but the company actually turns over 50K per year.
I could probably engineer it to have a 30K + profit if I wanted to.

Not sure I understand pensions or how that impacts things.
 
businessman said:
Well I take 10K salary but the company actually turns over 50K per year.
I could probably engineer it to have a 30K + profit if I wanted to.
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How would you engineer that? By increasing turnover? Does this business take up a lot of your time? Do you enjoy it?
 
Steven Barrett said:
I agree with Brendan, you should not have accumulated so much money in your business. It doesn't make any sense. To take it out of your business will cost you 52% in tax. Your pension is very underfunded, I would put most of it in a PRSA. You company can claim tax relief in the year that it is paid. The removal of annual pension funding for PRSAs is exactly for this situation. Earn €10,000 and put €200,000+ in a pension in one year and no funding checks. Use it!

Use some of the cash in your current account to reduce your mortgage. You won't see the benefit of this for years when the mortgage is paid off earlier.

Going forward, reduce the amount you spend on a car.


I agree with Brendan on this too. If you die prematurely, your partner will be left with a big tax bill if she gets the house. If your intention is for her to remain in the house if you died, make sure it is in a will. And then make sure there is life cover through a life of another policy where she takes out life cover on your life (you are too young for a section 72 policy). Or else get married.


Steven
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Thanks Steven. I agree with what you (and all the other posters) are saying.
I have really neglected the pension part of things.

I was always of the opinion that I could start a business (with the capital in the business) and that would provide a greater return than say the 5% every year that a pension (which I may never see if I die early) would make. But time is making a bit of a fool of me

I am hoping there is a hybrid option where I can (from this year on) get the pension organised but also start a new business which produces a new revenue stream.

T McGibney said:
This question is probably too vaguely phrased to elicit a meaningful answer.

It's usually a bad idea to have a company owning a property. You sound like you could do with some strong accountancy/tax advice on this and associated ideas and issues.
Click to expand...

Yes, agree 100%. I will work with a financial advisor / tax accountant to get things right over the coming months.

Brendan Burgess said:
It is the right thing to do, but as he is only making €10k profit a year, he will be wasting a lot of the tax deductibility. But the alternative is worse.
Click to expand...

Thanks Brendan.
I take 10K p.a salary currently... but the company actually turns over 50K per year.
I could probably cut some costs and engineer it to have a 30K + profit if I wanted to.
I just have a very limited understanding of pensions and how they work
 
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