Need advice on what to do with money

SBarrett said:
Hi Molly

I wouldn't worry about your money just going every week. You're a family of 4, with 2 young kids. You take money out on a Saturday morning and by lunchtime, it's gone!

One thing that struck me is there is no catastrophe planning there. What if something happened to either of you? The Widow's pension with 2 kids is €1,000 a month. Is that enough? If your husband couldn't work he'd get c. €10,000 in disability.

On your cash deposits, there are lots of things you can do with it. But what do you want your money to do for you? Do you just want it to grow into more money or is there something in particular that you want to spend it on. For example, is the kid's accounts for college? Will leaving the money on deposit earn enough for you to be able to pay for them to go to college without having to put your hand into your own pocket when they are 18?

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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Hi Steven

While I certainly agree that managing catastrophe risk is an important part of financial planning, in Molly's case I really don't think taking that out expensive life cover or income protection insurance is necessary for the following reasons:
  • They own their home outright and are not carrying any debt;
  • They have significant savings relative to their household income;
  • I'm pretty sure the CWPS pension scheme carries a fairly generous disability benefit; and
  • In a worst case scenario, social welfare would be available and Molly is young enough to enter the workforce at some level.
I also don't think it is necessary to invest their savings aggressively to meet the children's possible education expenses. Given the age of the children, there can be no realistic assumption that an equity based investment would beat a simple deposit account or savings bonds (after taxes and expenses) over the relevant timeframe.

I'm sure you would dispute most, if not all, of the above ;)!
 
Hi Sarenco

You're right, I do dispute most of what you said :). The reasons I would dispute your life cover:

  1. Her husbands take home pay is about €40,000 a year. Even deducting the Widow's pension, her savings would last her about 4/5 years before it is gone.
  2. The CWPS disability scheme is €38.11 a day for a maximum of 50 days.
  3. If you died in the morning, would you be happy to know that your family would live out the rest of their days on welfare?

Who said investing aggressively? You don't have to go all out and invest 100% in equities. There are elements between cash and 100% stocks. While there are no guarantees with investing, there is a pretty high chance that you will beat deposits over 12+ years. Leaving on deposit will eat into the real value of the money. While inflation is low at the moment, deposit rates are usually lower than inflation.

...just flicked over to page 1 and saw Molly's replies. There's a few "hopefully's in her reply; hopefully the kids savings is enough, hopefully we don't get sick, hopefully we nothing happens to us.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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Molly2015 said:
At the moment we are not saving any money bar the children's allowance, new car money of €100 per week and putting approximately €180 per week aside for bills. The rest we just spend on day to day stuff, weekends away, dinner out, kids activities etc. We do enjoy life, don't get carried away watching money. The savings we had probably built up when both of us were working but right now we generally don't use them or contribute to them. We are planning a couple of big holidays in the next while which will probably use up a little chunk of the money.
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I would say you should look at this. On a monthly take home pay of E3900 I would expect to be able to save something more monthly to increase your nest egg, as you are saying you basically aren't contributing to them any more. Not saving anything on E3900 a month seems like alot of cash is being squandered somewhere as after bills/car saving you have E2780 (E3900 - E1120). With no mortgage or rent to pay, you are frittering away E2780 on dinner out, weekends away etc. This seems like a black hole. I think you should look into where this is going, and endeavour to save at least E500 a month to your long term savings accounts. Take it using direct debit immediately you get paid, and I guarantee after a month of adjustment you wont even notice it gone.

Alternatively, saving E100 quid weekly for a new car seems like a fools errand i.e. if you mean a brand new car then guessing a minimum of E15K, you will be over three years saving for it. Why not up that aggressively, buy the car more quickly and then redirect the car cash into long term savings.
 
First port of call in any financial review should be your tax affairs, is everything in order, are you claiming for all tax deducatable expenses (meds etc), is there an opportunity to get any kind of a rebate.?

Secondly, I would urge you to look at your life assurance position and walk through the impact if one or both of you were killed. Sadly it does happen and make sure your kids are taken care off

Also you should have a will made, it just makes things easier (sorry if all of that was a bit morbid)
 
Thanks again everyone. This is a bit of a wake up call really when I look at everything in writing. I just went back over the last 16 payslips....my husband nearly always has a couple of hours overtime etc and the average net wage was €973 per week. I just take out the €180 and €100 out of this so what we have been doing with the almost €700 per week is a bit scary!! Need to get a bit more tuned into this!!! The €180 covers all expenses like car ins/tax/bupa/tv licence/prop tax/heating oil/broadband etc.

Good idea to just set up a direct debit to savings account every week, if its not there we can't spend it!

The car money...it is not saving for a new car really. We had to use €23k from the savings a while back for a car so I just thought I would set up an account and put €100 a week into it and when we do need to change the car again in 4 or 5 years time the money will be there. That is the account with the €5615 in it.

My husband has a company van and his diesel etc is paid for so we only have the running costs of one car. God knows where we are spending money!! Reality check needed! At least if I increase the AVC, it is gone when the wages come in so we won't miss it.

We claim medical expenses etc every year. Have will made, basic one that just leaves all to the kids. Not sure about paying money into life assurance policy every month.

Thanks again!!
 
If you want to find what you are spending on, start spending diaries, both of you. Record everything for a week and then review. You'll be surprised at what adds up!
 
Hi Molly,
Just reading your post today.
First of all well done with the saving. Something you could evaluate is a sort of family based social landing.
example:
- banks are giving you 1.5%
- may be someone from your family is borrowing money somewhere at 14% to 23%
you could land the money to them at 5%. You will make more money, they will pay less interest.

Just an idea. I am myself E6000 below zero circa, recovering fast, and if I get to the point to have a good amount of cash on the side, I would look into lowering what my family members pay to banks. Ok I admit may be this is really an Italian job.

Good luck with your investments and well done again :)
M.
 
Molly2015 said:
God knows where we are spending money!! Reality check needed! At least if I increase the AVC, it is gone when the wages come in so we won't miss it.

. Have will made, basic one that just leaves all to the kids. Not sure about paying money into life assurance policy every month.
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You need a spending diary.

And you absolutely need to look into life assurance, on both of you. You have two young children and only one earner. This is more of a priority than anything else you've been suggested on here. And you should have it sorted out this week !

What do you mean a basic will, did you use a solicitor and did you not appoint guardians?
 
Bronte

There is already life assurance in place through the CWPS scheme.

Whether or not the CWPS scheme provides sufficient coverage is a matter of judgement but I would point out that Molly's family have no debts and substantial cash savings.
 
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