New baby on the way - Time for financial adjustments?

Age: 35
Spouse’s/Partner's age: 34
Annual gross income from employment or profession: 48k
Annual gross income of spouse: 40k
Type of employment: IT Contractor and Office Manager
In general are you spending more than you earn or are you saving? Saving
Rough estimate of value of home 310k
Amount outstanding on your mortgage: 115k
What interest rate are you paying? 4.75% NIB Tracker
Other borrowings – none
Do you pay off your full credit card balance each month? yes
Savings: 3.5k Northern Rock. (paying 250 per month)
Company Pension: Total Contributions: 79, 500
Current Value: 61, 000
My own limited company has made 14k pension contributions for the last 2 years (to avoid corp. tax).
My company also contributes 1200 per month pension contributions.
Investments: (a) 10k ISEQETF (Lump Sum) bought in Mar. 2007 now worth 3k.
(b) 10k Global REIT Fund (Lump Sum) bought in Mar 2007 now worth 4k.
(c) Quinn Life: Total Contributions: 12,540. Current Value: 7, 667.
Do you have a pension scheme? Yes
Do you own any investment or other property? no
Ages of children: none
Life insurance: Yes
What specific question do you have or what issues are of concern to you?
As I am due to be a dad for the first time next May. I'm reviewing our financial situation at the moment (I think I'm too heavily weighted in Equities), but am open to suggestions. I've tried to give as much info as possible above.
Should I continue drip feeding the 840 per month into Quinn Freeway as I feel over time this will smooth out the volatility.
Also should I maybe cut back on my company's pension contributions and take more as salary.

By the way, my wife will have paid maternity leave.

Sorry for the long email, just not sure whether this is a time to sit tight and tough it out, or just run for cover and move from Equities to Cash.
Any suggestions most welcome.

Congratulations WGT!
If you move from equities to cash, you will have consolidated the loss of value given the market turmoil. Equities are a long term investment and you have a major life event happening in 7 months time.

If I were you I would reduce the Quinn €840 per month and increase cash savings. You have €1090 per month to save. Between that and your existing savings, you could have €11,130 by next May.

Its a nice cushion to have to cover additional baby expenses. Even though your wife will have paid maternity leave, I'm guessing that it will not be 100% of her normal salary.
Your savings could form a 3 months of expenses emergency fund or at least the start of the creche fee fund.
And for general baby / parenting advice, check out rollercoaster.ie

Best of luck, D8L

Congrats

Is your wife planning to go back to work after the maternity leave?

What we did when our little girl was on the way was put away half of the expected price of the childcare into an account, and continued doing that after she was born. Then when she started in the creche we kept paying in the same amount and paid the creche from that account until it was exhausted. It means that the horror of paying the creche fees is spread out, and you don't notice it so much after a while. Get the prices of local creches and add about 5% to give you an idea of what you will be paying.

You will need cashflow over the next while, so I would consider reducing the Quinn scheme somewhat (down to 400-500) and putting more into a savings account - there are all sorts of draws on your cash (and sanity) coming. Leave the pension alone though - you will need that.


Enjoy, and I hope she's not too sick.

Thanks d8lady and j26 for those kind words. I guess getting ready to be a parent is bought a joyous occasional and also a time for adjustments both financially and otherwise. My wife is not that sick but very tired, but consultant says this will pass.
Anyway, back to financial matters (or I'll have this moved to another forum).
D8Lady, you said that going from equities to cash would simply be consolidating my losses. This is actually the dilemma I'm trying to avoid. I don't want to miss out an upturn if there is one.
What I failed mention was that we are also over-paying on the mortgage, the re-payments are currently about 800 per month but we are paying 2,000.
Do you think it would be wiser to cut back on the mortgage (currently about 115k remaining), and save the difference until junior arrives, and this could also serve as a source of money for the creche.
In this way I wouldn't be consolidating the losses in equities, I know equities are a long term investment, but even the calmest of people must be quaking in their boom when they look at the value of their investments decreasing, especially if they have a young child on the way.
Just need to make sure that I make the right decision here but short term and long term.
Thanks a million for your input.

Hi WGT,
You are in pretty good situation here.

You need to work out your baby related expenses. E.g medical costs, changes to salary income, baby gear (surprising how much kit little people seem to need) and if you want creche fees and educational fund and the like.

So how much is that going to cost? Work that out and make any necessary adjustments.
How secure is your IT contract? Besides baby expenses, general financial advice is to have at least 3 months expenses available in case of energency, like a job loss. (current climate an' all).

In practical terms, work out how much cash you need. Adjust your Quinn and mortgage repayments to meet that need. Leave your pension and equities alone.
No-one knows when equities will recover but you have a very definate happy event to prepare for very soon.

D8L

Thanks D8Lady,
To answer some of your questions. I suppose creche Fees won't come in to play until after my wife's maternity leave is over, so at least I have a window of opportunity to increase the savings.
In terms of how secure my contract is, well I have been with the same client for the last 4.5 years (except for a few periods in the middle which was my choice). I also have a 3 months notice period, so that is good.
I am absolutely flat out work wise, so the requirement for my services doesn't seem to be in question, although I'm not naive enough to assume that this will always be the case, so I take your point about building up an emergency fund just in case.

Adjust your Quinn and mortgage repayments to meet that need. Leave your pension and equities alone.

Click to expand...

What do you mean by this, if I reduce my Quinn payments, then this will reduce my monthly contribution to the QuinnLife Freeway equity funds.
By reducing the monthly repayments, will be consolidating the losses (that have occurred recently).

Do you think I'd be just better reducing the mortgage repayments and saving the difference into the emergency fund.
Another option is (but I'll have to check this) that maybe I can increase the salary I take from the limited company, although I'll have to check with the account, perhaps if I up my salary by 200 or 300 a month, I can put this into the emergency fund (coupled with possibly reducing the mortgage by say 400) would mean that I'm saving 850-950 a month towards the emergency. This would allows to maintain the contribution to Quinn Life at 840 per month, and so take full advantage of any upswing (if any?) in the market.

Do you think this would be a good solution, it would allow me to maintain the long term investments, while also ensuring that I (I mean the 3 of us)
are covered in the short term.

All opinions from anyone most welcome.

Hi again WGT,
I think your plan is workable. You could maintain your Quinn contribution, reduce your mortgage payments and still build cash savings.

If it were me, I'd personally would be a bit more conservative. You are definatley having a baby, definatley becoming a Dad. No-one has a crystal ball for the stock market, it could go even more pear shaped.
But that's me .

Best of luck with whatever you decide.
D8L

Hi D8L and fellow AAM readers,
This might sound like a silly question but do I need to maintain my level of contribution towards the Quinn Life Freeway Funds (840 per month) to take full advantage of an upswing in the market (if there is one?)?
Say if I reduced it to 500 per month, would I be consolidating my losses to date. Does this go against the concept of 'Dollar cost averaging.'?

Thanks,