Review of our financial status

[Blackrock1]

My wife and i have just bought our (hopefully) forever house. Most of our savings have gone into it. I thought it would be a good time to get a view on our financial situation.

Ideally i would like to have the mortgage paid off by the time my daughter starts college, so gives me 16 years or so, an over payment of 1k a month would just about get me there.

We are both chartered accountants and have been fortunate and hard working enough to earn decent salaries all along. In the future the hope is that we will have more kids and my wife will cut back, ideally offset by a continuing increase in my own salary, but who knows.

Appreciate that we have a relatively high lifestyle spend and car cost, but my opinion is that there is no point working hard and earning a decent salary and then not getting some enjoyment out of it!

So in the format that i have seen elsewhere

Age: 36
Spouse’s/Partner's age: 36

Annual gross income from employment or profession: 143,000 (plus bonus 20-25k)
Annual gross income of spouse:82,500 (plus bonus 5-7k)

Monthly take-home pay pre bonuses 10,500

Monthly expenses: 9.4k
Mortgage: 2.7k incl protection
Childcare: 1.3k
Car finance – 500
Family living expenses (i.e. monthly DDs, groceries etc): 1.4k
Lifestyle money: 3.5k
Mortgage overpay / savings – 1,100

Bonuses - ideally we would get around 50k back into our savings as a buffer and then bonuses will be used in part to pay down mortgages and in part for family holidays, life style expenditure

Type of employment: both private sector

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

Saving

Rough estimate of value of home 1m
Amount outstanding on your mortgage: 600k – 29 years
What interest rate are you paying? 3.1

Other borrowings – car loans/personal loans etc Car PCP 500 per month

Do you pay off your full credit card balance each month? YES

Savings and investments: Cash on deposit 20k

Do you have a pension scheme? 83,500 in a self-managed scheme with Davy. I pay 5% of my salary monthly into my pension. I need to check the details of my wifes, I think she pays 2.5% and so does her employer and has done for the past 12 years so maybe a similar ish amount in her pot


Do you own any investment or other property? NO

Ages of children: One daughter aged 2, one or two more planned

Life insurance: Mortgage protection, policy that pays 4-6x salary on death, looking at serious illness cover

 

[Sarenco]

Hi Blackrock

First off, congratulations on getting yourself into such an enviable financial position at a relatively young age. Very impressive.

Your mortgage is obviously substantial but at roughly 2.5 times your joint income it should be quite manageable, even if we do see interest rate hikes in the relatively near future.

I think your idea of rebuilding your cash reserve back to ~€50k (roughly 6 times your household's normal monthly expenditure) looks sound.

However, I would be inclined to boost your pension contributions substantially before paying down your mortgage ahead of schedule. Not everybody will agree with that suggestion but I would expect a moderately assertive investment portfolio to produce a real return comfortably in excess of the interest payments on your mortgage over a 30-year holding period.

Once you start maxing out your pension, I definitely agree that you should use any available after-tax income to start repaying your mortgage ahead of schedule before making any other (taxable) investments.

Are you comfortable with the investment approach that you are taking with your pension savings? Given your ages and circumstances, I would have thought that you have the ability to take an aggressive (equity-heavy) approach at this stage. It also makes sense to align your own approach with your wife's retirement investments.

I think you should definitely consider taking out adequate PHI cover as a matter of priority. It's expensive but not really optional given your circumstances (IMO).

Have you written your wills, EPAs etc.? They really should be put in place once kids start arriving on the scene.

Finally, I think you should brace yourself for some critical comments re your lifestyle spending!

Hope that helps.

 

[Dr.Debt]

Well done OP, not bad at all.

My own circumstances were very similar to yours about ten years ago.

In my view your borrowings are a little on the high side. Sooner or later it may become apparent that either yourself or your wife will want (or need) to stay at home full time when the kids are at a certain age (at least that was my experience and the experience of our friends) and it really would be prudent to design your finances around a single income. Two parents working full time with a nest full of children can be difficult to manage and for many can become stressful and ultimately result in a deteriorated lifestyle for everyone.

 

[gnf_ireland]

Firstly, agree with the other posters and congrats regarding your current financial position. Had I known that chartered accountants would make 170k back in the day when I studied accounting I may have stuck with it instead of moving to IT

In general your circumstances are not too dissimilar from my own a few years ago, although my debt is lower as I bought in 2011.

As a family with two pre-school children and both parents working, I have to admit it is pretty difficult at times. Getting two kids out in the morning and making it into work at time puts everyone under massive time pressure in the morning. We are looking to see if we can reduce my partners working week from 4 days to 2.5 days for a better work life balance and overall lifestyle

I don't know what family support you have locally, but it will make a big difference in general to you. If you have no family support, you will need to factor in childcare expenses for the next 13 odd years, between creches, after school etc. This should not be under estimated. If you have more than 1 child in creche at the same time, you will notice the financial drain, even with your level of income.
BTW 1300 seems high for childcare, but depends on the type you use.

If you are planning on having 2 more kids, you will really need to assess if it is practical for both parents to work, even one part time.

Two parents working full time with a nest full of children can be difficult to manage and for many can become stressful and ultimately result in a deteriorated lifestyle for everyone.

Agree completely with this statement !


What consideration have you given to schooling? I assume you are in Blackrock, and there is no obvious choice for girls school here. Options you may wish to consider include Andrews, Loretto Foxrock, etc etc. However, most around here (and on your salaries) would be sending their kids to fee paying secondary schools (say 7.5k a year * 6 years * 3 children = 135k). Any consideration given to private national school (I don't personally agree with it, but each to their own).

Appreciate that we have a relatively high lifestyle spend and car cost, but my opinion is that there is no point working hard and earning a decent salary and then not getting some enjoyment out of it!

I am all for reasonable lifestyle expenses, but I have to say I think yours are on the high side. I would love to know what you are spending 3500 a month on in lifestyle expenses at the moment with a 2 year old at home I know my lifestyle expenses were seriously curtailed when our two arrived within 20 months of each other !

Bonuses - ideally we would get around 50k back into our savings as a buffer and then bonuses will be used in part to pay down mortgages and in part for family holidays, life style expenditure

Your bonuses are ~30k and you again use the words lifestyle expenses here in terms of spending !

Have a look at this thread also, as a comparison (my linking does not appear to be working):
http://www.askaboutmoney.com/threads/views-on-our-financial-position-please.200863/


Finally, I do think your debt is a little too high, especially if you are planning to have more kids, and I think your pension is low given your salary and years of contributions. It appears you are putting in ~600 euro a month into the pension fund.
If I was you, I would reduce 1k a month off the lifestyle budget, and pay an extra 1k (500 net) into the pension fund and 500 extra against the mortgage. I would also question if a self managed pension is right for you at the moment, and maybe 'PSRA' type one would make more sense until you have a higher pension value that would allow you to maximise the benefits of a self managed one

 

[Gordon Gekko]

I would echo Sarenco's point...you need to do more on the pension side of things.

gnf_ireland's reference to Barbara Bunter's thread is an astute one. The numbers are broadly analogous. You should have a detailed read of those pages.

Barbara and her husband are doing a lot on the pensions side of things from memory.

 

[Steven Barrett]

Hi Blackrock

You are a classic HENRY - High Earner, Not Yet Rich Life is good, you are earning good money but life is getting more expensive. You still want to enjoy that great lifestyle but now you have a big mortgage and a kid. More kids will arrive (HENRY's usually have 3 kids) and so costs go up but your wife has cut back on her job. So you have more costs, less income but what about that lifestyle you really enjoy? You don't really want to give that up. Talking about private school is usually the tipping point. €6,000 plus in school fees plus everything else.

You need to get control on your spending and redirect it for a better use. As it's the end of the year, print out all your bank credit card statements and see where all your money went in the last year. Ask yourself if you everything that you spent your money on (everyone buys stuff they don't need). Then ask yourself what do you really want to do/ spend your money on in the next 5 years. You need to redirect that cash from spending it on stuff to don't need to spending/ saving it on things that are really important to your family.


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

 

[PGF2016]

Appreciate that we have a relatively high lifestyle spend and car cost, but my opinion is that there is no point working hard and earning a decent salary and then not getting some enjoyment out of it!

Firstly, kudos on the enviable position you've gotten yourself into.

The one change that will make you actually rich as opposed to potentially rich is getting away from the notion that you have to spend lots of money to enjoy yourself. Your lifestyle spend isn't 'relatively high' but is astronomical at ~1k a week.

I'd recommend preparing for losing your spouse's salary. How about living off your salary and saving hers? You should be able to get by on ~170k a year.

My wife and I live very well off one salary. It'll do wonders for your financial position and will give you a great cushion / safety net.

Finally, I think you should brace yourself for some critical comments re your lifestyle spending!

I'd like to think the criticism is constructive!

 

[Blackrock1]

I would like to thank everyone for their contributions, really appreciate it and a lot of food for thought.

The 'plan' in broad terms is this, one or two (id be happy with one ) more kids, my wife cutting back to 3 days within 5 years and maybe more as time goes on with a focus on me continuing to push ahead with my career. i have continued to progress by actively moving roles once i have got all i can from one and trying to identify where opportunities are. im not content with where i am at currently and will continue to try and increase my earnings, although i accept there is no guarantee of that, and if i were made redundant tmrw getting another job on the same salary isnt a sure thing either. the one saving grace is that generally with my experience and background, worst case scenario on the job front is still not too bad.

in my head i am happy that were i to die suddenly my wife and child will be ok, if i take out PHI and get seriously ill we should be ok, if things go south for us we have enough equity in the house (hopefully) to be ok and to sell and downsize, basically we have tried to skip a step and bought the house that should do us for life and as a lot of you have correctly pointed out we need to make some some sacrifices now!

think you should definitely consider taking out adequate PHI cover as a matter of priority. It's expensive but not really optional given your circumstances (IMO).

Have you written your wills, EPAs etc.? They really should be put in place once kids start arriving on the scene.

Thanks PHI will be taken out in Jan, sorry whats EPA and do i need a will if im happy for everything to goto my wife?

If you are planning on having 2 more kids, you will really need to assess if it is practical for both parents to work, even one part time.

Absolutely, we realise this, 3 may not be an option given our age and conceiving hasnt be straightforward so it may be 2, but we dont want our kids going from school to after care 5 days a week so hopefully my wife can cut back to 3 days in a few years

gnf_ireland's reference to Barbara Bunter's thread is an astute one. The numbers are broadly analogous. You should have a detailed read of those pages.

yes have started to read through, they appear to have similar circumstances altho enviable childcare costs, higher debt and more pension contributions, but lots of pertinent info there for me

You need to get control on your spending and redirect it for a better use. As it's the end of the year, print out all your bank credit card statements and see where all your money went in the last year. Ask yourself if you everything that you spent your money on (everyone buys stuff they don't need). Then ask yourself what do you really want to do/ spend your money on in the next 5 years. You need to redirect that cash from spending it on stuff to don't need to spending/ saving it on things that are really important to your family.

our spending isnt out of control, it was a decision we jointly made on how much we would take for personal use and now is probably the time to revisit that. all of our earnings are split equally so we made a decision to split the circa 4k that was left after everthing else (including the savings for the deposit on our house) for each others personal use. we have enjoyed it, travelled well, bought nice clothes, watches, jewellery, handbags etc, but probably time to grow up a little now. of all the things we have spent it on my watches are actually quite liquid and in the main worth more than i paid for them, so another potential source of liquidity should it all turn to dust!

Your lifestyle spend isn't 'relatively high' but is astronomical at ~1k a week.

i disagree that its astronomical, 500 a week each is comfortable, id easily spend more if i had it

 

[Sarenco]

...sorry whats EPA and do i need a will if im happy for everything to goto my wife?

Sorry, it's an Enduring Power of Attorney - basically allows you to appoint another individual (usually your spouse or another close family member) to look after both your personal healthcare and financial affairs in the event that, for any reason, you lose your mental capacity in the future. It might sound a bit OTT but it's worth putting in place at the same time as your will.

Yes, it's prudent to put wills in place for a number of reasons. If you die intestate (without leaving a will) your wife won't be able to deal with your estate until she secures a grant of probate which takes time. You can also provide for circumstances where your wife predeceases you and address the guardianship of your kid(s) in the unfortunate event that you both pass away - is there a particular relative or friend that you would want your kid(s) to live with in those circumstances?

These are relatively standard form documents that a competent solicitor could draw up in an afternoon.

 

[Blackrock1]

Sorry, it's an Enduring Power of Attorney - basically allows you to appoint another individual (usually your spouse or another close family member) to look after both your personal healthcare and financial affairs in the event that, for any reason, you lose your mental capacity in the future. It might sound a bit OTT but it's worth putting in place at the same time as your will.

Yes, it's prudent to put wills in place for a number of reasons. If you die intestate (without leaving a will) your wife won't be able to deal with your estate until she secures a grant of probate which takes time. You can also provide for circumstances where your wife predeceases you and address the guardianship of your kid(s) in the unfortunate event that you both pass away - is there a particular relative or friend that you would want your kid(s) to live with in those circumstances?

These are relatively standard form documents that a competent solicitor could draw up in an afternoon.

thank you for that, something else for the list!

 

[Mrs Vimes]

Thanks PHI will be taken out in Jan, sorry whats EPA and do i need a will if im happy for everything to goto my wife?

If you die intestate then your wife will not get everything - one third of your estate will go to your child(ren) so if you are happy for everything to go to your wife then put that in writing as well as what Sarenco said about who will look after the child(ren) if you both die.

 

[cremeegg]

with a focus on me continuing to push ahead with my career. i have continued to progress by actively moving roles once i have got all i can from one and trying to identify where opportunities are. im not content with where i am at currently and will continue to try and increase my earnings, although i accept there is no guarantee of that, and if i were made redundant tmrw getting another job on the same salary isnt a sure thing either. the one saving grace is that generally with my experience and background, worst case scenario on the job front is still not too bad.

The pyramid narrows as you get older. What is the ratio of 46 year olds and 56 year olds to 36 year olds earning good money in your company/industry. The worst case scenario is worse when you are 47 than 37.

I have no real financial advice arising from that, except perhaps tilt the balance away from spending toward saving.

The decisions you are making now will make little difference to the 37 year old you will become, the effect on the 47 year old, or older, you will become are much greater. That person will have a different view on life.

While obviously you have enjoyed success in your career, and that comes from effort and ability, the comment about the watches strikes me as naive. Have you ever tried to sell one ?

 

[PGF2016]

i disagree that its astronomical, 500 a week each is comfortable, id easily spend more if i had it

Astronomical and comfortable are not mutually exclusive. If Warren Buffet was spending 100k a week that would be astronomical but he can comfortably afford it (as can you at 1k a week).

I consider 52K a year leisure spending astronomical as that's a very decent salary for the majority of the population. You're spending that after having already paid mortgage, car, creche, food, bills etc.

That's an observation rather than a criticism.

 

[Blackrock1]

While obviously you have enjoyed success in your career, and that comes from effort and ability, the comment about the watches strikes me as naive. Have you ever tried to sell one ?

not naive in the slightest, i have bought and sold dozens of watches in the 5 figure bracket so i have a reasonable handle on what each one is worth. Obviously its all in the buying, if i walked into weirs in the morning and paid retail for a breitling for example, i could legitimately expect to get 40% less the next day selling it privately. by the same token if i could walk in and buy a new rolex daytona i could sell it to a UK pre owned watch company for a 30% premium.

 

[Sarenco]

You're spending that after having already paid mortgage, car, creche, food, bills etc.

...and income tax, USC and PRSI...

 

[Bronte]

Bonuses - ideally we would get around 50k back into our savings as a buffer and then bonuses will be used in part to pay down mortgages and in part for family holidays, life style expenditure

I don't understand why the bonuses would pay for holidays or life style expensive if you are already spending 3.5K a month on this or 42,000 a year. In fact that is in any man's book is astronomical (unless you are as others said Warren Buffet)

If you want to do what you expressed in your OP then you will have to tackle this spending. There is nowhere else for the money to come from.

I can't help but feel that you pointed out yoru spending to stop us being too hard on you but maybe you'd prefer if we were. Not in a nasty way but in a cop yourself on way. If you didn't have the financial aspirations you profess to then it wouldn't matter.

- I think the point about private education is very pertinent. And important.

- You should aim to have excellent pensions.

- you should underestand that not everybody keeps their earnings high - life can throw a curve ball at you, another poster told you this and I'll tell you the same thing

- this I consider 'fritteries' travelled well, bought nice clothes, watches, jewellery, handbags - or stuff, you don't need them. And I suspect the car goes into this category too.

 

[Blackrock1]

The pyramid narrows as you get older. What is the ratio of 46 year olds and 56 year olds to 36 year olds earning good money in your company/industry. The worst case scenario is worse when you are 47 than 37.

agreed on the pyramid, however most executives are in their 40s, and in my company my boss for example has 12 years on me and earns a lot more, if he left in the morning its likely i would take his role, my expectation and hope is to move up the food chain to CFO level in the next 5 years, but who knows if that will happen

 

[aristotle]

I don't like big levels of debt. When interest rates rise the cost goes up which you obviously know about being in Finance.
With a mortgage of 600k at 3.1% you will pay back over 300k in interest over 29 years, if rates go up to 5.1% it will be over 500k in interest, all paid with after tax money. I would be diverting the overspend on "lifestyle" into paying down the mortgage asap.

As mentioned life doesn't always go to plan so you need to be able to survive on lower or one salary for example and you can only do that my having low debt. You or you wife might want to cut back on work with your children for example.

Your pensions should be higher given the high income as well. Overall with the excellent income you should review in detail your spending and 1) increase pension, 2) lower mortgage.

 

[Blackrock1]

I don't understand why the bonuses would pay for holidays or life style expensive if you are already spending 3.5K a month on this or 42,000 a year. In fact that is in any man's book is astronomical (unless you are as others said Warren Buffet)

If you want to do what you expressed in your OP then you will have to tackle this spending. There is nowhere else for the money to come from.

I can't help but feel that you pointed out yoru spending to stop us being too hard on you but maybe you'd prefer if we were. Not in a nasty way but in a cop yourself on way. If you didn't have the financial aspirations you profess to then it wouldn't matter.

- I think the point about private education is very pertinent. And important.

- You should aim to have excellent pensions.

- you should underestand that not everybody keeps their earnings high - life can throw a curve ball at you, another poster told you this and I'll tell you the same thing

- this I consider 'fritteries' travelled well, bought nice clothes, watches, jewellery, handbags - or stuff, you don't need them. And I suspect the car goes into this category too.

42k a year makes it sound more than it is , in reality its €400 a week per person to cover lunch, eating out, clothes and other sundries, yes lots of scope to cut it down, but i dont think im living like a millionaire!

Private education for second level is a given, whatever it will cost will be less than childcare.

i understand not everyone keeps their earnings high and i dont take it for granted, but at the same time i am in a sphere where my reasonable expectation should be to keep going, not stand still or go backwards. i havent got to where i am by luck and i can see where i can get to looking at my peers or those 5 -10 years ahead of me. thats not to say ill get there but there is a reasonable chance.

the same on the house, i thought it better to get the best we can now, in the hope we never have to move again, potentially saving us money in the future.

to put things in perspective we wanted to stay in the general are we are in, we have sold our apartment for over 500k, obviously on that basis a house with more space is going to cost us quite a lot more. sure i could move miles out and live mortgage free or close to it but we like where we live, have a lovely standard of living and imo earn enough to own the house we have bought.

understand everyone wont agree, and appreciate all of the suggestions and comments

 

[moneybox]

Blackrock, you doing mighty and fair duce to you. You have posted a number of times today so I guess you must have a handy enough number