Joint income of €190k but bad with money

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WendyIRE

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Personal :

45, spouse is 46. Two kids - 10 & 6

My salary: 100K
Spouse salary: 90K

Assets: House worth 750K with outstanding mortgage 270k
Mortgage payments 1500e p/m
No car loan
Two personal loans between spouse and myself for home improvements - total 20K
Pension: me - 200K pension fund, I contribute 9pc, employer 7.5pc

Spouse pension: 300K
Credit card debt - 2k (this is recent and untypical due to bad money management this year - currently paying down)
Savings: 0
Life Insurance: 2x my salary
Health Insurance: 120p/m

Question: As you can see from the above, as a family we are bad with money. Despite having decent incomes, we tend to prioritise enjoying ourselves (holidays, eating out etc). We have a happy life and don't worry too much about these things but obviously have no savings, and I can see at this point that needs to change. I also underestimated the recent cost of living increases and therefore have used my credit card for the first time in years, and now have a 2k debt which I am anxious to clear.
I will be due an inheritance of about 350K in the next two years. My fear is that given our bad track record, we will not use this money wisely. What is the best thing to do with this inheritance? I would like to buy an investment property outright to give us additional monthly income, which I would use for school fee and additional pension AVCs. Is this a good idea?
 
If you are bad with money buying an investment property may not be the best move for you. Managing it takes time and attention.

Why not clear your mortgage, that puts the money to good use without fear of spending it unwisely. You could put the balance in pension, or just invest it in a fund, keeping some as a cash reserve.
 
Thank you for your reply cremeegg. Yes, I had considered this. I suppose I was thinking that because we are bad with money, if we cleared our mortgage, we would just fritter away the additional monthly income that wouldn't be spent on the mortgage. But if we had an investment property, at least there would be an additional asset there, if that makes sense. But I see what you mean about putting the mortgage payments into pension instead, that would be smart
 
In your shoes, I would use the expected inheritance to clear all debts (including your mortgage) and then dramatically increase your AVCs.

Try and automate the process as far as possible and get into the mindset of paying yourself first.

I would steer well clear of rental properties - you really don’t need the hassle.
 
At the mad rate that you seem to run up debt having the money deducted at source i.e. from salary and sent directly to pension and savings fund would appear to be the best course of action as mentioned above.

Before you know where you are college fees will come into the equation so even putting something small away every month will make a difference.

One never knows when a family member may get sick so you need some savings to fall back on for that also.

If I were you I would put the credit card out of reach even until the inheritance arrives.

Need to sit down with partner and set out a grown ups financial plan of action :)
 
Even without the inheritance, its time to get your big girl and boy pants on and do an annual budget and stick to it.
Set up standing orders for savings on pay day and budget for each month.
You both have very good incomes so this "should" be easy.

You mention school fees - are you planning on fee paying school in 2 years. Is this a real plan and if so, are you saving for the fees or how do you plan to pay the 4-6K in year one and what will you do in year 3 when you have two sets of fees.

Re the investment property : do a full plan for the costs to buy and a realistic annual plan , assuming some voids, maintenance costs and tax . Then and only then can you decide if that is better than the interest you will save if you pay off your mortgage and increase your pension payments.
 
I don't think you're doing too bad,
you're both middle forties with two young kids, have €190k income with €300k of debt and €500k in pension pots so far

WendyIRE said:
Question: As you can see from the above, as a family we are bad with money. Despite having decent incomes, we tend to prioritise enjoying ourselves (holidays, eating out etc). We have a happy life and don't worry too much about these things but obviously have no savings, and I can see at this point that needs to change. I also underestimated the recent cost of living increases and therefore have used my credit card for the first time in years, and now have a 2k debt which I am anxious to clear.
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Have you thought about starting a spending diary or tracking your spending ??
Sometimes when you see it all laid out in front of you in paper form can be a great motivator to change habits and reassess life priorities

Re the inheritance, I'm a big believer in clearing all debt as quickly as possible so my advise would be clear the mortgage and any other debt first
and then use the money that was servicing that debt to build up a fund for future expenditure like school/college fees, rainy day fund etc etc
 
True. You are in a good position and this is a good time to set you and your family up for financial security for the next 40 years
 
This is not a financial engineering question - "What should I do with my inheritance?"

You have great salaries and no savings. With your habits, the inheritance could be blown very quickly. So you do need to fix your spending habits before you get your inheritance.

I would normally recommend MABS but I doubt you can go into MABS saying "We are earning €190k a year and can't manage. Teach us to budget".

I wonder if there is some private individual offering this service? Is there a counsellor who helps people to be good with money?
 
You are both on very good salaries so you are both obviously intelligent enough to look at your spendings and where you are probably wasting money. Your net income montly is what, about 10K?

You have plenty of income, do the basics, in no particular order:

1) Max your pension AVCs
2) pay off your credit personal loans and credit card asap
3) look at your outgoings and eliminate the silly spends

Something is very wrong if you have no savings, and need to borrow, on such a large net income. Are you fully aware of your spending and what exactly you are spending it on?

You have taken the first good step, knowing you need to change things.

With the expected inheritance, probably worth paying off a large amount of your mortage, but what can happen is you then just increase your spending as you have more disposable income. Primary thing is really understand and get your spending under control asap.

Then come back when you have the good problem of not knowing what so do with your left over money each month.
 
With the inheritance I would clear the mortgage. The put 40k each into 10 year joint state savings accounts for the kids potential college education.with the mortgage cleared then I would live off one wage and save the second along with children’s allowance. Give it 6 months. Once you see the savings building up your find it each to keep it going.
Go bank to basics of filling in a spending diary for a month or two to give you some perspective on spending.
Good luck with it all.
 
Brendan Burgess said:
No one should put 10 year money in a deposit product. It should be put in equities.
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Nearly 10 years ago I was undecided about this.....then went ahead and put money in a 10 year bond. It is maturing in 2027. We all know that time is moving along faster.....It is hard to believe that in just over two years, the bond will be maturing.

I do have other savings and funds in the stock market. I invested heavily last Thursday....bad timing on my part as Thursday and Friday ended badly and today the market is already dropping like crazy. If I had waited until today to make that investment.........

Sometimes when all hell is breaking lose out there an old reliable like a 10 year bond feels like a warm blanket....
 
WendyIRE said:
Thank you for your reply cremeegg. Yes, I had considered this. I suppose I was thinking that because we are bad with money, if we cleared our mortgage, we would just fritter away the additional monthly income that wouldn't be spent on the mortgage. But if we had an investment property, at least there would be an additional asset there, if that makes sense. But I see what you mean about putting the mortgage payments into pension instead, that would be smart
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Are you sure that an investment property would be cash generating? The rent may just cover the mortgage, or it may need additional funds from you each month for the repayments.

If I knew I needed funds in place to pay a known future expense (school fees) my immediate thoughts on a solution would not be to buy another house.
 
Brendan Burgess said:
No one should put 10 year money in a deposit product. It should be put in equities.
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Especially since the 10 year term doesn't match their needs. Eldest will be 20 when it matures, and hopefully 2 years into their third level education.
 
Fortune said:
Especially since the 10 year term doesn't match their needs. Eldest will be 20 when it matures, and hopefully 2 years into their third level education
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If they are living in Dublin then the cost shouldn't be significant (couple of grand) as they will likely be living ar home thus saving on crazy rents
 
Two steps will fix 90% of this

1) do a monthly and annual budget of what you currently spend. This will firstly drive awareness and secondly should support arresting the leak
2) maximise both your pension contributions
 
Brendan Burgess said:
This is not a financial engineering question - "What should I do with my inheritance?"

You have great salaries and no savings. With your habits, the inheritance could be blown very quickly. So you do need to fix your spending habits before you get your inheritance.

I would normally recommend MABS but I doubt you can go into MABS saying "We are earning €190k a year and can't manage. Teach us to budget".

I wonder if there is some private individual offering this service? Is there a counsellor who helps people to be good with money?
Click to expand...
To my mind OP is doing great, what am I missing that would necessitate MABS? Easy enough to set up a savings account standing order for both same day salary is paid to keep them on track and when time comes use bulk of inheritance money to pay off a big chunk of mortgage, nice holiday with kids, and then any remainder into savings.
 
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