Moneymakeover Finances check - Money Makeover

Personal details

Your age: 42
Your spouse's age: 42

Number and age of children: 2 (6 & 8)


Income and expenditure
Annual gross income from employment or profession: €95k
Annual gross income of spouse/partner: €75k

Monthly take-home pay: Approximately €8k

Type of employment - Both public sector

In general are you:
Saving approximately €20k per year


Summary of Assets and Liabilities
Family home value: €700 -800k. Built in 2008, renovated and modernised in 2019.
Mortgage on family home: €128k

Cash: A little over €100k (€10k current account, €15k ptsb 2.75% 1 year fixed maturing May 2025, €21k ptsb 2.5% regular saver, €30k ptsb 6 month deposit account earmarked for a 2nd hand mobile home, €30k state savings 10 year product maturing in 2031. Somewhere between €2-3k in our joint account used for household bills, mortgage etc

Defined Benefit pensions x 2 - all going well healthwise, we will both retire on pre-2013 pensions with 40 years service.

Company shares : N/a
Buy to Let Property value: N/a

Family home mortgage information
Lender: Avant
Interest rate: 1.95%
Type of interest rate: Fixed.
If fixed, what is the term remaining of the fixed rate? 4 years


Remaining term: 18
Monthly repayment: €700

Other borrowings – car loans/personal loans etc: None

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

Other savings and investments: none


Other information which might be relevant

Life insurance: €200k life insurance policy each separate to death in service benefits


What specific question do you have or what issues are of concern to you?
I would really appreciate any thoughts people may have on what to do with our finances.

Future savings for the next 4 years are earmarked for mortgage overpayment's. That will bring us close to being mortgage free.
I've made an overpayment in the past year of €100k to bring our mortgage to a low stress amount.

We live in a major city so the kids will hopefully go to college in the city. I haven't worried about our pensions as I felt joint combined pensions of approximately €90k was enough for us.

I dream of being able to give both of my kids the majority of the cost of a house and have thought about bare trusts. Any advice on fulfilling this dream is greatly appreciated

Excellent set of finances.

I would personally have less money in term deposits and state savings. I think you are probably being a bit too cautious with those funds, given two public sector incomes. Fair enough that some of it is matched to an upcoming expense, but a lot is just sitting in low return safe accounts with no clear purpose. Can this money be put to better use?

Then when it comes to annual savings flows into the future:

A key issue is whether you wish to give yourself or your spouse the option of retiring early. If so, then a cheap fund in an AVC or AVC PRSA structure might make sense for you. I would be doing this (1) in case I changed my mind about retiring early or my health deteriorated over time making work a chore and (2) you can always funnel some of your high retirement income to your children through gifts. So, I would look at what is available as an AVC through work and as an AVC PRSA through a broker. There is a wealth of information on this site about how to examine these options. If you are not comfortable picking an investment fund yourself, you may have to pay higher fees for advice. But, I would definitely recommend that you contribute for reasons (1) and (2) above. There's upside, with limited downside in your circumstances.

Then given your stated priority, I would then look very closely at bare trusts. I would look for the cheapest possible way to invest in an all-equity fund in the names of each of the children. Gift €3,000 x 2 to each child per annum (total €12,000) to use up you and your spouse's gift tax exemptions. The investment horizon of your children is, at a minimum, 10-12 years and so an all-equity allocation is appropriate. I would set this up as on an execution only basis with the lowest fees possible. There are discount brokers that post on this site like Gerard Sheehy, Liam Ferguson, and LA Brokers that should be able to set this up for you, but they will not provide any advice on what fund to select. Again, if you need advice, you'll have to pay higher fees.

If you have much remaining savings per annum after additional pension contributions and bare trust contributions, then I would pay that off the principal of the mortgage.

Well done. You're flying!

Thanks Noel, it's great to get your perspective. Taking our future savings and allocating them to €12k bare trusts and €10k AVC's makes a lot of sense instead of paying these savings directly to our mortgage.

Once the 10 year state savings bond matures, we could allocate that and any further annual savings to mortgage overpayment's.

I have felt we had enough in savings that sits in low deposit accounts.

Thank you

Hard to argue with @noelÓm there, excellent set of finances and good advice from him to boot.

Couple of things I would generally consider as no-brainers for people with savings - an extra layer of attic insulation (I.e. above the rafters) if not already done, and consider solar/battery - current paybacks generally within 6-7 years with a lifetime of 25-odd years of savings overall.

Other than that, for your stated goals you should be in global equities rather than deposits, and you won’t get cheaper money than 1.95% (practically 0% after inflation) so paying off your mortgage is a false saving, really. Better off directing that into investments that should return 4-7% after inflation in the long-term.

The only criticism I would have is the 10 year state savings. Even just a bank account would be a better return, but on that investment horizon maybe equities could be considered.

Yes the 10 year state savings was a mistake I made. I did the math on removing it and placing it on deposit but it doesn't make sense.

If I had put it in the S&P in 2021 it would have grown by 30% pre tax.

Postman Paul said:

Yes the 10 year state savings was a mistake I made

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• To benefit from the full return, you must hold the product to maturity
• You may cash in your products early and you will still get your original savings back in full with any interest due. See Terms and Conditions for full details

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Thanks Clubman. I've broached this with my wife but she is adamant that we are not removing it and placing that money in equities in the current climate, she is happy to do so with future savings.

She does also thankfully agree that Noel's suggestion of splitting our future savings into bare trusts and AVC's (with the option of possibly retiring early) is a great course of action.

Postman Paul said:

I've broached this with my wife but she is adamant that we are not removing it and placing that money in equities in the current climate, she is happy to do so with future savings.

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2% AER tax free if held to the full 10 year term isn't much more than some deposit rates on offer even after DIRT is accounted for.

Postman Paul said:

placing that money in equities in the current climate

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If anything, now might be a good time to have it in there. You'll be getting them cheaper than 5 months ago!

Postman Paul said:

we are not removing it and placing that money in equities

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Would you not be better removing it and placing it into an account with a better rate?

We are cancelling the state savings on Monday.

Firstly, you are in a great place financially so well done!!

Postman Paul said:

Cash: A little over €100k (€10k current account, €15k ptsb 2.75% 1 year fixed maturing May 2025, €21k ptsb 2.5% regular saver, €30k ptsb 6 month deposit account earmarked for a 2nd hand mobile home, €30k state savings 10 year product maturing in 2031. Somewhere between €2-3k in our joint account used for household bills, mortgage etc

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You have 2 well paid public sector jobs, there is practically no chance of either or both of you losing your jobs so you just don't need that amount of cash. The various accounts, after DIRT, are breaking even with your mortgage so I would be inclined to make things simple and start clearing the mortgage

Buy the mobile home, add €10-15k to your joint account as your emergency fund and use the rest to clear the mortgage down to €60-70k if you have no other big spending planned for the next 12 months.

Postman Paul said:

I've broached this with my wife but she is adamant that we are not removing it and placing that money in equities in the current climate, she is happy to do so with future savings.

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It is better to use this money to clear the mortgage as a guaranteed return instead of hoping you've invested at the right point in time. Going forward, use all the additional cashflow to invest in equites both in the bare trust and in any of your own savings outside of AVC's.

My know of PS pensions is approaching zero but there are many on AAM who have a wealth of knowledge. If you don't get the answers here in the money makeover then consider asking specific questions in the pension forum.

Other than that, there isn't really much to add. You are in a better position than most so enjoy it. Use your wealth to do things you want to do or that are important to you e.g. use some parental leave for summers with the kids