Review of our financial status

[Rory_W]

Each to their own as to how they spend their money but a few comments FWIW :

- money is hard earned and easily lost and as mentioned before whilst now you feel bulletproof what happens if you lose your job when 52 and have 13 years to go on mortgage and just as kids are starting secondary school or college

- cut expenditure. Simple as. The L'Oreal because I am worth it (or want it) attitude should be modified

- save more and more again (you adjust your cashflows)

- cut expenditure again. leave credit card at home or be strict on usage. Take out say 200 euro on a weekend and use that as your walking around money for lunch and discretionary spends. Try 175 every second week. Be surprised when you survive and actually you are not having a miserable time.

- realistically look at your watch collection. Is it a vanity collection and do you really need it. If it was me I would sell them all and use funds more wisely to pay down debt. Holding them as a rainy day fund may not yield as much when needed if a fire sale is required.

- you live in South Dublin in Blackrock and there is probably pressure to keep up appearances re house and car and lifestyle but try to avoid such pressures. You have your dream house. Congratulations.

- pay down debt, pay down debt, pay down debt - cannot be over emphasised and whilst people may say debt is manageable, lower debt is even more manageable.

- there may be unforeseen work required to the forever house

- there may be nursing home costs for parents to be contributed towards

- look at all your policies (life, PHI, SIC etc) and start with blank page - if starting now what would I take out and for how much ? Look at cover on your wife as you would need to hire a nanny if something happened to her. Boost your own life cover whilst you are younger and it is cheaper. Don't mix up life cover and mortgage cover. Mortgage cover may clear the loan but there would be no nest egg for your wife to recover with if something happened to you.

- Think 10 years down the road, Be able to give yourself choices then as circumstances change. You may wish to downsize your own career and take a step back (for personal, health, family or other reasons)

- kids are expensive and not expensive at same time. (says he who has 19 month old twin girls and like you has just bought his forever house!) as they want time with you which costs nothing

As a CA I am surprised you need to ask for financial advise ! But given your love of lifestyle rather than trying to go cheap and get free advise on an internet forum, perhaps you should pay for and get professional advice. There are many people (including people on this forum who can advice you) and they are remunerated either by transparent fees or commission (which they should disclose and perhaps rebate a balance). Don't be your own worst client - if it was a business decision would you not seek professional advise ?

The above is my morning ramble which may or may not be useful.

ps did i mention cut expenditure and save more ?

 

[Blackrock1]

Each to their own as to how they spend their money but a few comments FWIW :

- money is hard earned and easily lost and as mentioned before whilst now you feel bulletproof what happens if you lose your job when 52 and have 13 years to go on mortgage and just as kids are starting secondary school or college

- cut expenditure. Simple as. The L'Oreal because I am worth it (or want it) attitude should be modified

- save more and more again (you adjust your cashflows)[/QUOTE]

if i lose my job at 52 ill get another one, i have moved around 5 times in the 13 years i have been working, as a partner in the accounting firm i trained at said to me a few years back after another move, there are itinerants that stick around longer than you

Also im not sure if i said it already but my stated aim is to have our mortgage clear in 16-18 years by overpaying monthly, and also to have a 50k nest egg built up by the end of next year

- realistically look at your watch collection. Is it a vanity collection and do you really need it. If it was me I would sell them all and use funds more wisely to pay down debt. Holding them as a rainy day fund may not yield as much when needed if a fire sale is required.

- you live in South Dublin in Blackrock and there is probably pressure to keep up appearances re house and car and lifestyle but try to avoid such pressures. You have your dream house. Congratulations.

- there may be unforeseen work required to the forever house

the forever house is new, so for now there wont be any work required i hope,

the other points you make, allow me to get something off my chest.

its a very irish thing to assume that someone with expensive jewellery, watches or cars, only have them to wind everyone else up, it isnt always the case. I have always been a car enthusiast and sold my pride and joy on the basis that we only need one car and something diesel and reliable was more sensible and it has proven to be the case. If i could get back into an e46 BMW m3 in the morning i would and im sure it wouldnt impress anyone given that its going to be 12-15 years old, unfortunately with 2k road tax, expensive servicing, expensive insurance and expensive repairs / tyres when anything needs replacing our current car is cheaper to run and more suited to family life.

also re the watches, of course they are a luxury, if anyone needs to tell the time any 10 quid watch will do, but its a hobby and not one i do to impress anybody else. i cant remember the last time someone noticed a watch i was wearing, and i'm sure to most people on here, something like an IWC isnt going to mean anything to them. if i wanted to impress people id buy whatever the current iteration of the tag carrera or monaco is, anything else doesnt register on most radars.

Also im pretty comfortable with how to go about liquidating them, and if and when i need the money, its easily done.

- look at all your policies (life, PHI, SIC etc) and start with blank page - if starting now what would I take out and for how much ? Look at cover on your wife as you would need to hire a nanny if something happened to her. Boost your own life cover whilst you are younger and it is cheaper. Don't mix up life cover and mortgage cover. Mortgage cover may clear the loan but there would be no nest egg for your wife to recover with if something happened to you.

yes, one thing that has come out of the thread (barring spend less save more ) is the need for income protection. i am getting cover for both me and my wife at the max available (75%) and we both have policies through work that pay 4-6 times salary on death as well as mortgage protection, so for now we have reasonable cover.

As a CA I am surprised you need to ask for financial advise ! But given your love of lifestyle rather than trying to go cheap and get free advise on an internet forum, perhaps you should pay for and get professional advice. There are many people (including people on this forum who can advice you) and they are remunerated either by transparent fees or commission (which they should disclose and perhaps rebate a balance). Don't be your own worst client - if it was a business decision would you not seek professional advise ?

no harm in soliciting some opinions, i am comfortable in looking after my own finances and what various products do and mean, but does that preclude me from garnering some opinion in a sub forum specifically designed for that?

i may speak to some financial advisors in the new year, ill admit im a little sceptical about what they can bring to the table for someone like me (apart from spend less save more!), but that wont prevent me from exploring it.

 

[Rory_W]

Don't get me wrong, as I say it for everyone to spend as they wish. I have a hobby which is photography and I have over the years spent a fair chunk of change of equipment which other people might say is a waste of money as the iPhone can take a photo. But for me it was discretionary expenditure and what I decided to spend money on and each year I would buy myself one item.

Now that the kids arrive, all the photos are generally taken on the iPhone of the kids.

re 50k nest egg, is that enough ? What is current net needed to live on for you and pay all bills (ignoring savings). I would try to have 6 months of this as a nest egg. Some people may say that that is too cautious and that only 3 months is needed but I always felt comfortable knowing that 6 months was there. If something unforeseen happens you can always tighten the belt and 6 months may stretch to 7-9 months.

re your luxury items, I didn't say you had them to "wind people up" and if that is how it was read, it wasn't intended.

re the car, i do sympathies re the "getting something sensible" when your child arrived - but with careful planning you can have your dream car again when they grow up !

re overpaying mortgage, depending on who it is with, check whether you can get the money back if you needed it so you have the benefit of lower mortgage but option of Plan B of getting funds if needed in a hurry.

Moving around 5 times in 13 years would be during the years of 23 (our of college I presume) to 36 (now). The next 10 years are critical for positioning yourself for the balance of your career but you probably know that anyway. It is not meant in a bad way but having been ok getting jobs in past does not mean that that will always be the case. It is a hell of a lot easier to get a job in the 23/36 age bracket than it is in the 50/60 age bracket. The save money, spend less is so that if god forbid the unthinkable happens and you end up unemployed or having to downsize your career that you don't have as large a financial noose around your neck at that time.

re PHI, SIC, and other policies - whilst they are important, care should be taken not to over insure either

re soliciting opinions on a forum like this, don't get me wrong, absolutely take all the views and opinions you can get. My concern was that if your circumstances were such that you should get professional advise that you may not and may solely rely on opinions given here. By the sounds of it you are already family clued in to your requirements and coming on here is more confirmation of what you were thinking rather than being a revelation for you.

Wishing you good health, continued success and every happiness for the future whatever you decide and also some sleep filled nights when/if number 2 (and 3?) arrives !

 

[Blackrock1]

Don't get me wrong, as I say it for everyone to spend as they wish. I have a hobby which is photography and I have over the years spent a fair chunk of change of equipment which other people might say is a waste of money as the iPhone can take a photo. But for me it was discretionary expenditure and what I decided to spend money on and each year I would buy myself one item.

Now that the kids arrive, all the photos are generally taken on the iPhone of the kids.

re 50k nest egg, is that enough ? What is current net needed to live on for you and pay all bills (ignoring savings). I would try to have 6 months of this as a nest egg. Some people may say that that is too cautious and that only 3 months is needed but I always felt comfortable knowing that 6 months was there. If something unforeseen happens you can always tighten the belt and 6 months may stretch to 7-9 months.

re your luxury items, I didn't say you had them to "wind people up" and if that is how it was read, it wasn't intended.

re the car, i do sympathies re the "getting something sensible" when your child arrived - but with careful planning you can have your dream car again when they grow up !

re overpaying mortgage, depending on who it is with, check whether you can get the money back if you needed it so you have the benefit of lower mortgage but option of Plan B of getting funds if needed in a hurry.

Moving around 5 times in 13 years would be during the years of 23 (our of college I presume) to 36 (now). The next 10 years are critical for positioning yourself for the balance of your career but you probably know that anyway. It is not meant in a bad way but having been ok getting jobs in past does not mean that that will always be the case. It is a hell of a lot easier to get a job in the 23/36 age bracket than it is in the 50/60 age bracket. The save money, spend less is so that if god forbid the unthinkable happens and you end up unemployed or having to downsize your career that you don't have as large a financial noose around your neck at that time.

re PHI, SIC, and other policies - whilst they are important, care should be taken not to over insure either

re soliciting opinions on a forum like this, don't get me wrong, absolutely take all the views and opinions you can get. My concern was that if your circumstances were such that you should get professional advise that you may not and may solely rely on opinions given here. By the sounds of it you are already family clued in to your requirements and coming on here is more confirmation of what you were thinking rather than being a revelation for you.

Wishing you good health, continued success and every happiness for the future whatever you decide and also some sleep filled nights when/if number 2 (and 3?) arrives !

That's a good point about getting the money back if overpay is that an option with some banks? Ideally I'd love to have an offset mortgage but we may not see those again, but a facility like that would give that benefit if in a bind

Appreciate you taking the time to make two long posts, thank you

 

[GirlTuesday]

Blackrock, I'm in a similar position to you income wise/profession and we are expecting our second baby. One thing I thought I'd mention may or may not be of relevance to you. I'm from a working class, rural, background and most of my friends are from professional, middle class Dublin backgrounds. It appears that they were all supported financially by their parents well into their professional working lives (by monthly allowances/cars bought/holidays paid for) and received significant (I mean €200k/€300k) lump sums when buying their homes, extremely expensive weddings paid for and expect to inherit further. It just seems standard. You may or may not want to factor this into your future financial planning. Best of luck. You both are doing a great job to date.

 

[Rory_W]

That's a good point about getting the money back if overpay is that an option with some banks? Ideally I'd love to have an offset mortgage but we may not see those again, but a facility like that would give that benefit if in a bind

Appreciate you taking the time to make two long posts, thank you

Ask whoever your mortgage is with if they offer it.

I have heard of EBS in the past.

With AIB who I have my loan with, if you make an additional payment you have to write to say "take it off the capital" and they readjust the ongoing repayment due.

I have known self employed people to overpay their mortgage and then draw down the money again in November to pay their tax and in meantime getting a better return on savings (i.e. effectively at their mortgage interest rate)

 

[Rory_W]

another thought is re life cover, no need to read small print. You can't be half dead, So lowest premium applies. Most if not all life companies do price match so you can get the lowest premium with the life company of choice.

Aviva have an add on benefit called best doctors which is available at no extra cost

http://www.aviva.ie/broker/lifepensions/protectionfeatures/bestdoctorssecondmedicalopinion/

Benefit available to

• you,
• your spouse / partner
• your children up to the age of 18 (or 23 if in full time education).
• your parents and your spouse’s / partner’s parents

You hopefully never need to use it but as an added (free) extra worth having

Aviva will also reduce the premium (which they have already matched the lowest) by a further 20% from memory if the broker waives commission so a once off fee could save thousands over life of policy.

As a ballpark, EUR 1 million cover over 20 years for a 36 year old non smoker (subject to application and underwriting) would cost 67 euro. 20% of this is roughly 13 euro so cost is down to 54 per month.

The 13 euro saving x 12 months x 20 years = 3120 (time value of money ignored) and if indexation is selected or conversion option is selected then savings are more as premiums would be more.

Add this saving for your wife's policy as well and savings are adding up overall.

Even if you have life cover elsewhere its worth having an Aviva policy in back pocket to have the Best Doctors safety net

And if looking at overall requirements then maybe consolidating and replacing existing policies with an Aviva one may make sense

Re Death in Service that you mention, one comments is that if you or your wife leave the employment (which you've done 5 times in 13 years!) then this cover is gone so i would tend to consider treating this cover as "bonus cover" and maintain your own cover separately

(Note to Mods - if I am not meant to mention Aviva or their products feel free to amend the post)

(Note - I don't work for Aviva in case you are wondering why I mention them above)

 

[Blackrock1]

another thought is re life cover, no need to read small print. You can't be half dead, So lowest premium applies. Most if not all life companies do price match so you can get the lowest premium with the life company of choice.

Aviva have an add on benefit called best doctors which is available at no extra cost

Benefit available to

• you,
• your spouse / partner
• your children up to the age of 18 (or 23 if in full time education).
• your parents and your spouse’s / partner’s parents

You hopefully never need to use it but as an added (free) extra worth having

Aviva will also reduce the premium (which they have already matched the lowest) by a further 20% from memory if the broker waives commission so a once off fee could save thousands over life of policy.

As a ballpark, EUR 1 million cover over 20 years for a 36 year old non smoker (subject to application and underwriting) would cost 67 euro. 20% of this is roughly 13 euro so cost is down to 54 per month.

The 13 euro saving x 12 months x 20 years = 3120 (time value of money ignored) and if indexation is selected or conversion option is selected then savings are more as premiums would be more.

Add this saving for your wife's policy as well and savings are adding up overall.

Even if you have life cover elsewhere its worth having an Aviva policy in back pocket to have the Best Doctors safety net

And if looking at overall requirements then maybe consolidating and replacing existing policies with an Aviva one may make sense

Re Death in Service that you mention, one comments is that if you or your wife leave the employment (which you've done 5 times in 13 years!) then this cover is gone so i would tend to consider treating this cover as "bonus cover" and maintain your own cover separately

(Note to Mods - if I am not meant to mention Aviva or their products feel free to amend the post)

(Note - I don't work for Aviva in case you are wondering why I mention them above)

That's great advice Rory !

So I could replace my mortgage cover with something like this maybe

I've had dis in my last few jobs and will insist on it if I move again

 

[Dan Murray]

Anyone know whether individuals can become members of "best doctors" in Ireland and the cost - seems like this is an option in Trumpland.

 

[Rory_W]

So I could replace my mortgage cover with something like this maybe

Yes if you wanted to - see other post for policies that are covered

 

[Rory_W]

That's great advice Rory !

you're welcome !

 

[Bronte]

Black rock did you ever consider giving up the day job to deal in watches?

Life cover is better earlier in life when you are fit and healthy so that you don't have to have a medical etc.

 

[cremeegg]

I have been thinking about your original post, looking for an overview of your financial affairs, and accepting that you have an income of nearly €250k per annum, which you expect to continue.

Taking that level of income on a continuing basis as a given, which in fairness you have said clearly is your position, I suggest that the opinions given here have been too cautious.

I suggest that you should borrow as much as possible, and invest it. That is the best use of your excellent earning capacity. You will need to invest in property to be able to borrow.

You should find the largest property investment that you can comfortably cashflow, over a 20 year capital and interest basis. If the return on the investment is greater than the borrowing cost, you will make a profit on the bank's money. Such investments are widely available in Ireland today, the capacity to raise the finance to buy them is not. You may have that capacity, you should put it to use.

I suggest that this would change you from a prosperous worker to a wealthy man.

 

[gnf_ireland]

interesting view @cremeegg

I think if the OP is to consider this option, they need to considerably increase their pension contributions into a self administered pension scheme and borrow through that mechanism. This will allow them to keep all the rent made, effectively tax free, until retirement. They should be able to retire at say 55 in that case, with the money available from then.

Anyone know of any banks currently lending for property within a 'small' pension fund? I was talking to my broker last year and they said not really ! What size deposit would one need to undertake this sort of investment - I am assuming at least 30% for the banks to entertain it?

My view is this is the issue the OP has - because they are living for the moment, they don't have the available capital to consider opportunities such as this.

 

[Sarenco]

I am personally familiar with a significant number of high income professionals that similarly thought that leveraged real estate would be their path to riches. Many subsequently had to defer their retirement and/or seriously down-size their lifestyles. And they are the lucky ones…

In any event, I struggle to see how leveraged residential rentals currently make any financial sense for individuals given current yields, BTL mortgage rates and our personal tax code.

It seems to me that Blackrock1 is going to need investable assets materially north of €1.5m (in 2016 terms) to maintain anything like his current lifestyle in retirement. I would suggest that his best chance of accumulating that level of wealth is by maximising any available, tax-deferred, pension space and investing in a diversified, unleveraged, portfolio of assets.

 

[gnf_ireland]

It seems to me that Blackrock1 is going to need investable assets materially north of €1.5m (in 2016 terms) to maintain anything like his current lifestyle in retirement.

@Sarenco to put this into perspective, what type of monthly contribution are you talking about over a 25-30 year period to hit this type of pension pot ?

 

[Sarenco]

@Sarenco to put this into perspective, what type of monthly contribution are you talking about over a 25-30 year period to hit this type of pension pot ?

Well, it really depends on what assumptions you use but if you assume a constant real (after-inflation) annual growth rate of 3.5%, after all investment costs, it would take nearly 27 years for an annual contribution of €36,000 to hit €1,500,000.

 

[Dan Murray]

Of course, an annuity of €1.5m will, as we all know, provide an annuity of €24,000 p.a.

 

[gnf_ireland]

it would take nearly 27 years for an annual contribution of €36,000 to hit €1,500,000

Given the OP is putting in around 6000 euro into a pension fund per annum, I think its safe to say they will need to review this element of their financial plan as a matter of urgency !

 

[mtk]

I have been thinking about your original post, looking for an overview of your financial affairs, and accepting that you have an income of nearly €250k per annum, which you expect to continue.

Taking that level of income on a continuing basis as a given, which in fairness you have said clearly is your position, I suggest that the opinions given here have been too cautious.

I suggest that you should borrow as much as possible, and invest it. That is the best use of your excellent earning capacity. You will need to invest in property to be able to borrow.

You should find the largest property investment that you can comfortably cashflow, over a 20 year capital and interest basis. If the return on the investment is greater than the borrowing cost, you will make a profit on the bank's money. Such investments are widely available in Ireland today, the capacity to raise the finance to buy them is not. You may have that capacity, you should put it to use.

I suggest that this would change you from a prosperous worker to a wealthy man.

This is a windup I assume !
see his satirical post in shooting the breeze forum !