Can I dial back on work in 15 years or less?

P

PMCNEXGEN

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Age: 38
Spouse’s/Partner's age: 35

Annual gross income from employment or profession: Gross inc annual bonus €135k
Annual gross income of spouse: €0 currently. At home with the kids right now but will probably return to work part time in a few years

Monthly take-home pay €4,850

Type of employment: e.g. Civil Servant, self-employed: PAYE employee, private sector

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

Rough estimate of value of home €300k
Amount outstanding on your mortgage: €225k
What interest rate are you paying? AIB Variable Rate 3.15%

Other borrowings – car loans/personal loans etc None right now, but we do plan to change one of our cars in next six months.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments:
Cash Savings & Current Account €25k
Pension: Total current value across two pensions of €102k
Directly held Shares & ETFs: €170k (€19k ETF’s, balance individual stocks)
Employer Stock Options & RSU’s: €38k, of which €11k is available for exercise
P2P lending: €7.5k


Do you have a pension scheme? Yes. Paying in 11% monthly. Employer match at 10%. Last year and this year topping up with bonus plus one-time contribution for prior year at tax return time to bring up to 20% threshold for tax benefit

Do you own any investment or other property? No

Ages of children: 4 & 2

Life insurance: 4x Salary from employer


What specific question do you have or what issues are of concern to you?
I feel like we’re doing ok financially. Honestly though, this is more through working on growing income and then being a bit mindful around spending rather than having a well thought out plan on growing wealth, or knowing even how to properly build a plan.
We are not particularly big spenders, but do manage to live a reasonably comfortable lifestyle. I enjoy my job to an extent, but do not want to have to keep working at the pace I am right now until I’m in my 60’s or beyond. I would like to get to a point of being able to dial back to reduced hours or maybe to a totally different industry / career maybe by early to mid 50’s. I’ve no real desire for total early-retirement cause I think I’d go nuts. I know two boys will get pretty expensive over the next few years and need to balance that into the mix too.
Looking for actionable thoughts on how to move towards a plan where I could reasonably expect inside the next 15 years to start to phase back towards working part time or maybe start a small lifestyle business. All thoughts or suggestions are welcome!
 
I think critical to you achieving the aspiration you express in your post is that your spouse returns to full-time work in the next few years.

You have the personal finance basics more or less ticked off.

Growing income (1) and being mindful of spending (2) is what sets you on the path of 'The Millionaire Next Door'. Investing (3) is the final piece of the equation but the heavy-lifting is accomplished through 1 & 2. The aim of investing is to maintain the purchasing power of your savings and hopefully achieve a modicum of return. You are already investing via your pension and cognisant of maximising your capacity here.

There are pros and cons to accelerating repayment of the mortgage. There's plenty written on AAM about this already.

If you are considering a lifestyle change, I would put a laser-like focus on what your annual expenses are, if you haven't already.

The point of this exercise would be that you can look at the expenses your household is incurring and guestimate where there is likely to be increases (education for the kids for example) and where there is potential froth. Once you draft this, you will be better placed to consider these outgoings relative to your ambition to phase back work. If your ambition takes precedence, you can potentially look to trim some costs but you may also on reflection come to the conclusion that a comfortable life for the family trumps your personal goals. Time can only tell.

The best return on investment that I can see in this situation (apart from your spouse returning to full-time work) is that if you have the ability and potential to start your own enterprise, drafting a business plan and commencing work on this project could be key, providing you can fit it in around your work and family life. Do you need to acquire new skills in order to pursue self-employment? Do you need to start zeroing in on future contacts / clients now? Can you run the venture on a small scale test basis alongside your current employment? This effort will cost time and money but only you can determine if the venture is potentially viable or not.
 
Salary seems correct allowing for AVC and prob discounting off the bonus...maybe bonus should stated seperate to salary?
 
PMCNEXGEN said:
Directly held Shares & ETFs: €170k (€19k ETF’s, balance individual stocks)
Click to expand...

PMCNEXGEN said:
Amount outstanding on your mortgage: €225k
What interest rate are you paying? AIB Variable Rate 3.15%
Click to expand...

Hi PMC

This is the first thing you must address. It's crazy borrowing money at 3.15% on which you get no tax relief to invest in risky assets like shares where the return is uncertain and any return is taxed at your marginal income tax rate of CGT.

So the first thing you should do is to set aside how much you need to clear the PCP and to buy a new car, and then set the rest against your mortgage.

Some people have difficulty getting their head around this as they mistakenly link their mortgage to their home. So think about it this way. If you had a mortgage-free home, would you remortgage it to the tune of €170k @3.15% to buy shares?


Brendan
 
You are doing better than ok financially. You own your home mortgage-free.
You have enough income to allow your wife to stop working to mind the children.
You have made a good start on your pension fund.
You will be able to build up a separate investment fund which will give you choices.

While I am against wasting money, one can be too careful. You are at a good time when you and your family are young and healthy. Don't worry so much about what might happen in 15 years, that you make financial sacrifices now.

When your wife is ready to return to work, you can decide then if it's worth it or not. As most of her income will be taxed at your marginal rate, it might not be worth it unless she is a high earner. Or maybe it will be her turn to earn the money, and you can take a career break.

Brendan
 
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