43 yr old with redundancy payment, how best to use it?

C

curliewurlie

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Personal details

Your age: 43
Your spouse's age: 43

Number and age of children: 3 kids 9, 12 and 14

Income and expenditure
Annual gross income from employment or profession: 75k (have secured new job starting Jan 2025)
Annual gross income of spouse/partner: 45k

Monthly take-home pay: 6k jointly

Type of employment - e.g. Employee
Employer type: private company.

Summary of Assets and Liabilities
Family home value: 310k
Mortgage on family home: 210k
Net equity: 100k

Cash: 31k

Family home mortgage information
Type of interest rate: Fixed 3.1%

Remaining term: (25 years)
Monthly repayment: 1080

Do you pay off your full credit card balance each month? No, minimum payment. Balance is 17k

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

I have been made redundant and will be receiving 31k payment shortly. We want to convert attic on our 3 bed semi and have been quoted 30k. Are we best paying off 17k credit card debt, lodging remainder in credit union and borrowing against that to fund conversion or should we pay off conversion in full and continue paying off credit card debt?
 
Not to put too fine a point on it, 17k is a huge credit card debt, you need to address the source of it, e.g. is it lack of budgetary control or was it a once-off emergency?

In addition to that, I think you need to have a rainy day fund.

Then I think you can look at how to fund an attic conversion, possibly through a remortgage/low interest loan, but your 31k should be used for the above first and foremost.
 
Yes I am aware. We have not been good with money and trying to do better.
My first instinct was to clear the debt, thanks for confirming
 
If you are trying to do better. I would also tackle the debt. Then look at what you can do to finance the conversion. I would give it a few months before I do anything with the remainder. Some jobs don't work out as planned. Get into the job, see how it works out first.
 
Clear the card debt AND request the limit to be reduced to 2 or 3k.

If you have 2 or more cards, reduce it to one and use the debit card.

My guess is the interest on the card is about €350 - €400 a month.

Also is the attic essential? Would a garden room be better used?
 
I presume attic is for a 3rd kids bedroom, so that will be a big deal for the kids. Well worth doing. As above though you would be crazy to keep the credit card or any debt before it, pay off credit card debt asap. Then as you say 30k loan from credit union for the conversion, but make sure and keep the 14k balance of redundancy until conversion is compete for contingency in the conversion cost. I’m sure you are aware but that amount of credit card debt shows you or yours are living way beyond your means, which then puts pressure on you massively when it comes to things like a job loss as I’m sure you’ve found it to be a big eye opener.i wouldn’t get limit reduced, I’d get rid of credit cards altogether.
 
It seems clear to me that you are bad money managers and that you cannot afford an attic conversion.

You should pay the lump sum off your credit card and make sure that you don't just run it up again.

Then you should pay the balance off your mortgage.

And learn to live within your means.
 
curliewurlie said:
Annual gross income from employment or profession: 75k (have secured new job starting Jan 2025)
Annual gross income of spouse/partner: 45k

Monthly take-home pay: 6k jointly
Click to expand...
This doesn't add up for me.
On joint assessment with €75K + €45K gross your take home should be €7.3K in 2024 by my calculations (and higher in 2025):


You should double check that you are claiming all relevant tax credits/reliefs, are on joint assessment, etc.
This should be done on Revenue myAccount for the previous 4 tax years (2020-2023) and the current tax year (2024).

But as others have pointed out your priority needs to be dealing with the credit card debt, living within your means and not racking up further debt going forward.
 
You probably need a good look at all your spending to see where it's going. 5k a month has to be accounted for. Figure out as a family where it's going.

Your kids are old enough to be told that you need to save for a large project like the attic and that if they sacrifice some things maybe eating out or a less expensive family holiday then they will get the attic room sooner.

Also what will your eldest do after school? Will they stay at home or move out for college or work? If so, how would college be funded ? And if so do you really need the attic room at all?
 
Disagree with paying the balance off the mortgage, this family needs a rainy-day fund after the CC has been cleared.
 
I agree, you need to pay off the credit card, then have a rainy day fund. And then start saving for the conversion. Even saving half or a third of it, before taking out a loan would make you sit down and discuss finances. I would also recommend doing a proper money makeover when you spell out everything you spend in a month, every subscription etc. and see where you're overspending. You'll go through this lump sum very, very quickly if you keep living beyond your means.
 
What interest rate is charged on the CC debt?
Why was it incurred?
You should probably analyse your expenditure in order to understand what your actual required annual/monthly/weekly budget is and where you can maybe economise.
Use the lump sum to clear the CC debt and stop using the card for borrowing, or maybe at all.
Credit cards can be a useful cashflow management tool but only if the balance is generally cleared each month before interest charges start racking up.
They should not be used for longer term borrowing.
If you can't use one with discipline then get rid of it.
 
Thanks everyone for the input - some hard truths there to be sure. We have never had significant savings and money has always tended to burn a hole in our pockets. We only bought our first house 4 years ago and stupidly used credit card to furnish and redecorate and it crept up before we knew it.

The main reason for the attic conversion is to gain a second bathroom as we have one toilet and shower for 5 of us and as kids get older it is causing conflict. It would also mean giving our son a bigger bedroom as he is currently in box room. Box room would become smaller but would plan to use this for home office. We are also considering a garden room but garden is very small as it is.

Neither is an essential, definitely a 'nice to have' but given the rental market we expect the kids to be living here through third level and beyond so trying to make things more comfortable for everyone.
 
The good news is that your CC debt seems to be a one-off big spend rather than a bad habit, as such. Needs must and nobody’s perfect so don’t beat yourself up over it.
 
@curliewurlie, You should use a budgeting App or just kept a spreadsheet of your spending for a couple of months.
If you clear your CC balance and put the rest into the attic then you'll have to borrow or save around €20k (it'll cost a bit more than the quote, it always does). How long would it take you to save €20k?

Based on a combined income of €120,000 your take-home pay seems low. Is your new job more highly paid than your old one or do you make a pension contribution each month?
 
You need to cut your cloth to suit your measure. There's nothing wrong with second-hand furniture from SVdeP, painting your own house, or assembling your own kitchen from Ikea/B&Q. I'd guess that if you'd taken the budget option you'd have saved between €5k and €10k easy. Get the fancy stuff later.

Forget about the attic extension until you can actually afford it would be my suggestion. Your son can live with the box room, and you can keep the home office in a corner of the sitting room or kitchen or maybe even your bedroom; a fold-down table & on-wall monitor can minimise space used.

The bathroom seems a bit more of a need as opposed to a want. I'd suggest looking at only this element for the moment. Even just a toilet & sink under the stair or in the biggest bedroom could make a huge difference, but at a fraction of the cost of the attic conversion. Look at where it might fit in your house then get a few quotes. You could well be able to get this done and still have a chunk left over in your starter fund for the attic conversion.

One house I lived in had a separate toilet & shower, it looked like a stud wall was put down the middle and a tiny sink put in the section with the toilet. It wasn't anywhere near as good as having a fully separate bathroom, but it was massively better than having to wait to go to the toilet while someone else was in the shower or brushing their teeth!
 
It's great you have a new job.
I'd pay off the credit card, get rid of it and then try build up my savings again.
 
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