Advice young family

Deniswalsh

New Member
Messages
2
Age: 32
Spouse’s/Partner's age: 31

Annual gross income from employment or profession: €40K plus Additional’s varying from €10k to €15k
Annual gross income of spouse: approx. €12k

Monthly take-home pay €4,333 combined
Can vary upwards depending on projects
Type of employment: e.g. , self-employed,private sector

Myself: Private sector, construction industry

Wife: Private Sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving

Rough estimate of value of home €500k
Amount outstanding on your mortgage: €148k


What interest rate are you paying?3.3%
Fixed for 4 years with two years left on fixed term payments €663 plus €33 life cover per month for 28 years

Health insurance €2,900 Per year

Other borrowings – car loans/personal loans etc none

Do you pay off your full credit card balance each month? n/a – no credit card
Savings and investments:

€35,000 in instant access savings a/c – this a/c has two purposes i.e. saving for a modest replacement used family car & Rainy Day Fund (saving €800 per month to this account)
€10,000 Cash reserves

Do you have a pension scheme? – no looking for advice on this for future planning for both me and my wife


Do you own any investment or other property? – no

Ages of children: Child #1 – 7yrs Child #2 – 2 years

Life insurance:
50 %mortgage cover death or illness



What specific question do you have or what issues are of concern to you?
I’m looking for advice regards our financial situation, I’ve worked very hard in the last few years to set us up with having very little borrowed money only our mortgage .
We have no other loans or borrowings , we live a moderate life style . We save up to go on holidays or to buy any expensive things like Christmas and birthdays etc . We have a vary small child care cost of only €140 per month ,my wife works part time so we have a good quality of life for our kids and there actives and family time .
I work long hours and I want to set us up to be financially secure if the economy changes as I’m in the construction sector .
Couple things I’d like advice on
Correct fund to have as an emergency fund
Pension for our future (maybe look at another property through my company )
College fund for our kids
Where I can invest an amount of savings with a return .
Income protection

Final two cents
I would regard my self as a low risk taker as I seen what happened in the financial crash to people around me in the construction sector and also with houses and borrowed money beyond their control . My motto is to live with in your means and build the portfolio gradually over night with out taking major risks. All suggestions and advice greatly appreciated. Thanks
 

Brendan Burgess

Founder
Messages
40,536
Given that you are in the construction sector and that you are both young, then paying down your mortgage has absolute priority over contributing to a pension.

You are, in effect, borrowing €45,000 @ 3.3% to put it on deposit earning nothing. This is crazy. It is costing you about €1,500 hard cash every year.

When will you be buying the replacement car and how much will you be spending?

If you are going to spend €20k on it next month, then pay the €25,000 balance off your mortgage.

If you are going to buy it in about a year, then you will save about €10,000 over the next year, so pay €35k off your mortgage and you will have €20k for your car.

If you are not going to buy it for two years, then pay the lot off your mortgage. If you want to keep €5,000 as an emergency fund, then that's fine, but no more.

The best fund for your children's education is to be mortgage free when they are going to college.

Brendan
 

Brendan Burgess

Founder
Messages
40,536
If you are able to wean yourself off the comfort blanket of having €45k cash earning you nothing and pay it off your mortgage, then you will have to check the best way to do that.

Get a quote from the lender about the breakage fee.

Does your lender allow you to pay down some amount without penalty?

And when the fixed rate is up, it's probably better not to fix again. With a variable income and being a high saver, you want to be free to pay down your mortgage when you have spare cash.

Brendan
 

Deniswalsh

New Member
Messages
2
Thanks Brendan
I understand your advice above and appreciate your perspective, would you not advise to have at least 6 months cash reserve or wages in place to cover us and pay a percentage off the mortgage. I will check with my bank with what the breakage fee would be . New car will probably be at some stage this year ie spend twenty , trade in value €5000 plus €10,000 payed down . Borrow €5,000 just to keep some expenses showing .
 

Brendan Burgess

Founder
Messages
40,536
maybe look at another property through my company
Sorry, I had meant to respond to this.

Under no circumstances should you buy another property - either directly or through your company.

Although you have a low loan to value, you have a very high mortgage relative to your salary which is uncertain.

Clear your mortgage completely. Then start a pension.

Brendan
 

Brendan Burgess

Founder
Messages
40,536
would you not advise to have at least 6 months cash reserve or wages
No, I would not unless you were facing an imminent risk of losing your job.

You need €15k to buy a car. That should also double as your emergency fund.

When you have bought the car, you could build up a cash fund of about €5k and that would be enough.

I can't stress enough the benefit of paying down a very expensive mortgage.

If you lose your job and you then have a house without a mortgage or with a very low mortgage, you will survive.

If you lose your job and you have a big mortgage you will be under real pressure.

Brendan
 

LS400

Frequent Poster
Messages
537
Pension for our future (maybe look at another property through my company

In this regard, you have an advantage being in the industry, you should certainly give it some thought. Whether you should keep this separate to the company or not, its something you really need to weight up the pros and cons to it.
I would regard my self as a low risk taker as I seen what happened in the financial crash to people around me in the construction sector
You cant look to be financially independent within in a shorter time frame without exposing yourself to some element of risk.

Again here, you have the advantage, self employed in a much needed growing industry, Low mortgage to property value, in the prime of your working life, combined earnings the guts of €60k

I agree paying down a Mortgage trumps paying into a pension, but as were all different, and if like me, know nothing about investments or stock portfolios etc, then unless you have this knowledge, or, are associated with someone of this profession, I would not dismiss an investment property.

You are in the game, you have contacts in the field. I would be looking for a Do`er upper type of property.


Reason for this thought.

Youngest is 7. In 10/11 years college starts. This would be my investment time frame. Having a property with the majority of the loan paid off capitalizing on the financial/work situation you are in today.


New car will probably be at some stage this year ie spend twenty ,

This bit, I dont really get in that your trying to build a strong future, yet are prepared to sink hard earned cash into the fastest depreciating asset out there.

To me its one or the other. If your serious about building a strong future in a "kind of unpredictable industry", then there are plenty of €10k vehicles out there, with the other €10k chipped off a mortgage..
 

Marantz

Registered User
Messages
20
You're young and in a good position.

Buying an investment property is probably a bad idea.
It would take all of your savings for the deposit and even if rental income covered the mortgage you would just be treading water for the next 20 plus years until it's paid off.
The stock market would give you more control and liquidity for your disposable cash while your children are young.
Paying down your mortgage before your kids hit college ,whether by lump sum or regular over payments should be aimed for.
The choosing of the replacement car will actually help you look deeper into what you want against what you really need.
 

Brendan Burgess

Founder
Messages
40,536
I understand LS's reasons for recommending a property in that Denis's skills means that he can add value.

But it's just too risky. Bad things tend to happen at the same time. His business goes quiet and his income falls just as rents fall and the tenant can't afford or won't pay the rent.

While paying down the mortgage is a guaranteed 3% , tax-free and risk-free return, if he does not want to do this, then equities is the way to go. If he needs his rainyday fund, he can cash the shares in part or in whole. If he has a property with a tenant, he must sell the lot or none at all.

Brendan
 
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