Views on our financial position please

[Sarenco]

So what?

You're in rare form this evening!

It's obviously a balance - maintaining a cash reserve to address a short term fall in income/spike in expenditure versus paying down a debt to mitigate longer term interest rate risk, etc.

I've already expressed my view as to what I think is a reasonable balance in these circumstances (which happens to be broadly in line with the OP's view the world). I think it would be excessive to maintain €100k on deposit while carrying mortgage debt @3.1%.

 

[Bronte]

If they reduce the mortgage term by overpaying, then say husband loses job at 55, they can extend again the mortgage term and reduce repayments to a more manageable level. That's where I'm coming from.

 

[He-Man]

@Barbara Bunter

I take home a little more than you. I have several thoughts, which you are free to disagree with.

1. You don't seem to have an emergency fund.
2. You owe an awful lot of money whatever way you slice it.
3. Your monthly expenses are on the high side. I don't spend anywhere near 4k per month and I think a lot of what you're spending must be discretionary and low priority when compared with the first two points above.
4. Whatever wealth you will eventually have ('will have', since you currently have a very negative net worth) is relatively undiversified and overweighted in an unwieldy, expensive and illiquid asset class - property.
5. Finally, correct me if I'm wrong, but you are living paycheck to paycheck.

In short, you are not wealthy and your situation could nosedive rapidly if things went wrong for you in anyway.
I would assess whether you really need all those properties, I would aggressively pay down the debt, and I would aim to reduce your monthly expenditure.

- He-Man

 

[Barbara Bunter]

@Barbara Bunter

I take home a little more than you. I have several thoughts, which you are free to disagree with.

1. You don't seem to have an emergency fund.
2. You owe an awful lot of money whatever way you slice it.
3. Your monthly expenses are on the high side. I don't spend anywhere near 4k per month and I think a lot of what you're spending must be discretionary and low priority when compared with the first two points above.
4. Whatever wealth you will eventually have ('will have', since you currently have a very negative net worth) is relatively undiversified and overweighted in an unwieldy, expensive and illiquid asset class - property.
5. Finally, correct me if I'm wrong, but you are living paycheck to paycheck.

In short, you are not wealthy and your situation could nosedive rapidly if things went wrong for you in anyway.
I would assess whether you really need all those properties, I would aggressively pay down the debt, and I would aim to reduce your monthly expenditure.

- He-Man

I'm not sure I follow you. Dealing with each point in the order you raised them:

1. We have a surplus €10,000 in our current account (separate to our income and outgoings). We're saving €500 a month and have €3,000 put aside. We'll be adding €25,000 to that in January. That'll be a €40,000 emergency fund. Once it hits €60,000, the consensus is that we will have enough of an emergency fund.
2. Debt is not always a bad thing. For example, the debt on our investments is at 0.5% and 0.25%.
3. I don't know your circumstances. How many kids do you have? How many clubs are you a member of? How often do you go on holidays?
4. How do we have "a very negative net worth"? We are in our mid to late 30s, and have positive net worth to the tune of around €800,000, which we are increasing. That figure ignores my defined benefit pension (i.e. does not assign it with a capital value). Ignoring asset value growth, we are increasing our net worth by around €75,000 a year through debt repayment and other mechanisms.
5. How are we living "paycheck to paycheck" when we're saving, maxing out pensions, and paying capital off debt?!

 

[noproblem]

I'm guessing He Man might in a way be saying that if you guys saw something that was really desireable and you wanted to buy it for say, €200,000.00, you would have to borrow the money, as you don't have the ability to pay for it without borrowing. That would add to your borrowing and although you would be asset rich you would also be cash poor. I know, I know, you're in a great position to pay back all the debt, but we live in very unpredictable times.
Other than that, you personally come across as having a great grasp of what needs doing in your own personal circumstances and I wonder why you are here on this forum asking for advice at all when you seemingly intend to carry on as you desire anyway? Just an observation by the way, not in any way a criticism.

 

[Barbara Bunter]

I'm guessing He Man might in a way be saying that if you guys saw something that was really desireable and you wanted to buy it for say, €200,000.00, you would have to borrow the money, as you don't have the ability to pay for it without borrowing. That would add to your borrowing and although you would be asset rich you would also be cash poor. I know, I know, you're in a great position to pay back all the debt, but we live in very unpredictable times.
Other than that, you personally come across as having a great grasp of what needs doing in your own personal circumstances and I wonder why you are here on this forum asking for advice at all when you seemingly intend to carry on as you desire anyway? Just an observation by the way, not in any way a criticism.

I am not sure that's fair, as over the course of the discussion I have zeroed in on building the emergency fund and diverting €12,000 a year / €1,000 a month towards the home mortgage. That's taking people's advice.

Equally not a criticism, but what 36/37 year old has the ability to buy something for €200,000 with cash?

I am very grateful to people for their advice.

 

[gnf_ireland]

Equally not a criticism, but what 36/37 year old has the ability to buy something for €200,000 with cash?

Agree not many to be fair, but there are always a few. And there is an argument that with the salary you guys are taking in, you should be in that group [I would personally debate why anyone would want 200k in cash at the moment given the return]
However, I think the guys are saying is that you are not very liquid asset rich given your overall wealth. Your main wealth is tied up in property and pension, neither of which can be accessed in an emergency. There may be merits in having liquid assets outside the pension structure.

Debt is not always a bad thing. For example, the debt on our investments is at 0.5% and 0.25%.

Agree, but the ECB rate will not always be this low. Are you prepared for a rise in it, and will they still be good investments at say 3.5% or 5% interest rates. The overall capital return may be better now, and its worth considering in the overall scheme of things.

I don't know your circumstances. How many kids do you have? How many clubs are you a member of? How often do you go on holidays?

I think this is the point that people are making here. Yes you make a fantastic salary, but you are spending on the high side. If that is a conscious decision that's fine - its your decision. People on here, especially the ones giving advice, tend to be relatively financially 'savvy' and don't like the idea of constant frivolously spending - they have been the impacts of good and bad times, on both people who were wealth and those who were not. As an old agricultural saying says "save the oats at the mouth of the bag".

Personally, I think this thread has run its course - but the final ask is to just look at seeing where your money is spent and agree it is best use of the money.

One final comment, given the amount of money involved both now and in the future, you should consider going to see a fee based financial planner. I do think it would be beneficial for you guys.

 

[Firefly]

I'm not sure what you mean about our children? Whatever happens, they'll be comfortable. We have income protection, all our debts insured, and a payout of €480,000 if my husband dies.

Life assurance is pretty cheap actually. I would double that 480k if I were you.

 

[Barbara Bunter]

Life assurance is pretty cheap actually. I would double that 480k if I were you.

Hi Firefly. Thank you for replying.

What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.

 

[Fella]

I think your doing great, when my income increased I never bought a bigger house instead I used the money so that me and my wife can both work part time.

That's just an alternative view , for me the best part of been wealthy is that either me or my wife are at home doing stuff with our kids everyday, I'd never use childcare unless I absolutely had to work to get by.

If I was in your position I'd simplify my life downsize house to 300k house , leave work or work part time and be cash rich and enjoy time with your family , It's just my opinion though not saying its the right thing financially.

I'm the same age roughly and similar family and income , my house is worth about 250k .

Best of luck whatever you do , I know you're just trying to do your best .

 

[moneybox]

What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.

Five times you have mentioned dying in that short paragraph

I think you need to chill out a bit.

 

[Bronte]

Five times you have mentioned dying in that short paragraph

I think you need to chill out a bit.

I think she's dead right to think about that. None of us knows what's around the corner. She's just being businesslike and proper order.

 

[moneybox]

I think she's dead right to think about that. None of us knows what's around the corner. She's just being businesslike and proper order.

There is a pun in there somewhere!

 

[mtk]

Hi Firefly. Thank you for replying.

What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.

+1 This alone shows Barbara that you should be giving advice on here and i hope you do in the future!

 

[dishwasher]

My only observation is that paying the debt would give you the freedom of more time - be it working part time, taking time out to be with the kids full time or retiring early.

We'd be of similar income but no property other than own home (worth maybe €800k) but in early 40s. Our objective is to be mortgage free which we should achieve in about 3 years.

Interestingly we toyed with the idea of a holiday home but feel it's a catch 22 if you need 2 incomes and 2 full time jobs to afford a holiday home then you don't have time (i.e. Summer holidays) to properly use holiday home. Instead looking at me reducing to term time work and renting a place for the next few summers. Do you actually get decent use of the holiday home?

 

[Firefly]

Hi Firefly. Thank you for replying.

What would be the point? If one of us dies, there's a €1.25m property, a €250k property, and a €180k property, all debt free. Plus €480k tax-free if my husband dies or a meaningful lump sum if I die. Plus €12k per annum from the State. Plus a pension payable immediately, the size of which depends on who dies. Plus the share options if my husband died.

When you put it like that!

My wife is always telling me I'm worth more to her dead than alive, but I always reply that she'd be left with the kids!!

 

[He-Man]

Agree not many to be fair, but there are always a few. And there is an argument that with the salary you guys are taking in, you should be in that group [I would personally debate why anyone would want 200k in cash at the moment given the return]
However, I think the guys are saying is that you are not very liquid asset rich given your overall wealth. Your main wealth is tied up in property and pension, neither of which can be accessed in an emergency. There may be merits in having liquid assets outside the pension structure.

Yeah this is sort of what I'm driving at. As far as I'm concerned the primary residence is not an asset but an ongoing cost, and one on which they owe ca. 700k if I remember rightly the OP. I don't think they own any of their properties outright. These are all debts as things stand and high cost in terms of maintenance, insurance, property tax etc.

Interesting that when I raised the point about discretionary expenditure the OP referred to the cost of club memberships, as though these aren't discretionary. I just think with so much debt all contingent on an income that is multiples lower than the total sum of said debt, they're not exactly in a rosy position. I think this is down to lifestyle inflation. The OP can live as she sees fit and I've no doubt they'll do well. But I believe they could be more comfortable than they are, with a few tweaks.

 

[midleton]

Maybe I am older than Barbara but can I just make one comment and its well meant..........why in the name of God do ye have three properties? I just do not get why people needed to buy second homes and holiday homes. Ok the bust came and caught so many people but why do ye land so much debt on yer shoulders? Its fine if all goes ok but if something else goes wrong its scary .....well it would be to me anyway. Ye are lucky in a way to be in good jobs and I am sure ye work hard of course ye do and running one home and a family is great but not easy. This may not be on yer radar but I hope things improve recession wise etc and ye get opportunity to sell one or both of those properties and clear a lot of yer debt/mortgage. Get rid of some stress and you know what enjoy life and have a yearly holiday somewhere really nice in lovely hotel where ye have no worries bout upkeep of a holiday home etc. I spose I grew up in big family where it was day to day making do but it was great as well...........we learned to ask 'is it a need or a want' when it comes to investing or purchasing anything except a home and if its neither then walk away. I am so glad we learnt that ........saying that we had debt too but managable the normal mortgage and bills etc. Wish you well in the future.

 

[xoxoxo]

I am a bit further down the line than op with my family, but One thing I will say is that it is so important to make lots of memories, as well as money. These memories and time spent together with family and friends are what is so important and what shapes your children into the people they will become. It is those memories they will remember. You will never get this time again, money is always there to be made. Enjoy it all, take all the holidays, days out, days off, playmates, sleepovers that you can and treasure every single moment.

 

[GirlTuesday]

Where did the OP say that she wasn't enjoying time with her family? She's a public servant so I'm sure she gets good holidays and is out at a reasonable time every evening. While health is obviously more important than money, money is very important and the OP should be commended for having such a healthy income and assets at a young age. Believe me, as someone who does not have family wealth while most of my peers/work colleagues do, it makes a big, big difference to life satisfaction, safety and future options for her children. Also, having a few properties is not unusual when you earn what the OP earns and can well afford these properties. They're a good, solid way of building up assets generally (and yes, I know what happened over the past few years!). Can I suggest you visit an independent financial advisor who is used to dealing with high earners/high net worth individuals. Best of luck!