33, 110k per year, need advice to maximize wealth

M

matrixworld

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17
Age: 33
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: 95k

Income from rent-a-room: 14k

Monthly take-home pay:
From employment: 4,700e (200e to ESSP, 150e AVC)
From rental: 1,100e

Type of employment: e.g. Civil Servant, self-employed: Private

In general are you:
saving: 2.5k
1,250e towards extra mortgage payment
1,250e investments

Rough estimate of value of home: 345k

Amount outstanding on your mortgage: 138k

What interest rate are you paying: 2.1%

Other borrowings – car loans/personal loans etc: No

Do you pay off your full credit card balance each month? No credit cards

Savings and investments: 58k

Company stock: 15k
cash: 5.5k
Crypto: 20k
Stocks: 10k (mix of SP500, commodities etc)

Do you have a pension scheme: Yes, Zurich, 55k so far

Do you own any investment or other property?
No but this ties into my question, not sure whether to invest in Ireland or abroad

Ages of children: 3.5

Life insurance: Mortgage protection

What specific question do you have or what issues are of concern to you?

My main question is how do i maximize my wealth outside of primary employment income, i recently changed role in my company and i am happy enough with the role and package. I could make 120k-130k if i jumped ship to another company but i don't think it's worth it due to the nature of our work (i would learn more in my current role).

I can invest/save at least 2.5k per month (some months i could stretch to 3.5k) and would love advice on what i should do with it. Some caveats here, my current mortgage rate (2.1%) is up in 2025 so i am leaning towards saving as much cash as possible to lump a sizeable amount off the mortgage in 2025.

My short term goals:
- Pay as much off the mortgage as possible
- Invest for my sons future, any recommendations here is much appreciated. Only got 5k saved so far and it's in Degiro.
- Explore property in Spain to invest in for the future as i plan on living there in 20 years or so (could move sooner as the nature of my work is fully remote).

Apologies for the wall of text but would appreciate any advice from the wise sages here.

Cheers
 
Main thoughts:
Financial Goal 1 - eliminate debt by paying down your mortgage. As you say, your next mortgage will be a lot more expensive and borrowing at 3.5/4%+ to invest doesn’t make sense. Would use close to all of your savings/investments to do this when term ends, or even now. If company shares are vested, sell them immediately. Holding shares in one’s company of employment is probably the most common financial mistake. Sell as soon as they vest - always.

Financial Goal 2 - maximize pension contribs. Some will say to do a blend of 1 and 2 at the same time and there is some merit to this.

Financial Goal 3 - maximize your non pension contribution in a diversified equity fund. No need to invest in property as you’re a higher rate tax payer so you should prioritise capital gains over income. Also, direct property investment is usually too concentrated from a risk/return perpsective. Crypto is far too high a percentage of your free assets and should be reduced to zero or ‘play money’

Other thought.
- don’t worry about pocketing off your money for various things like your sons future. Just maximize your own wealth and you’ll be in great shape to take care of him in 20 years. Think of your finances as a whole.
- property in Spain sounds like a combined ‘for living/for investing’. I don’t think you’re wealthy enough yet for the former. The latter is too time consuming and brings tax complications. Diversified equities will bring a far better risk return profile for much less hassle.
 
Really appreciate you taking the time to offer advice, a lot of it makes sense and there is some bits i hadn't considered. Thank you.

In regards to "diversified equity fund", any fund you would recommend? I invest in Degiro at the moment, many Vanguard funds SP500/emerging/gold ETF etc but would be curious to go with a fund for all if there is one you would recommend.
 
It’s a little tricky right now as the tax treatment of ETFs in Ireland is messy. There’s plenty of threads on this in great detail if you’re not familiar with the pros and cons. You should look into them if not.

Some will tell you that the EU domiciled ETFs aren’t ‘that bad’ and you can use them. For regular investing, I disagree and don’t use them. When I used them pre-tax changes I’d just pick a single ‘total world stock’ type fund which will give you ample diversification and exposure to US, Europe, Emerging Markets without the need for making your own pseudo total world fund by mixing various countries. I don’t feel strongly about commodities. I think you are young enough that you don’t really need them, just go 100% equities. Others may disagree with that.
On the ETF bit there’s talk of the ludicrous tax treatment being looked at in the coming years which would make this the clear winner for you. You probably have 3-5 years of maximising pension and clearing your mortgage before you need to worry about this. Hopefully tax is sorted by then

Your other option is to try to make a diversified portfolio of stocks (a lot of people use Berkshire Hathaway as the backbone as a pseudo ETF which tracks US stock market). This is more time consuming and operationally difficult. You’ll probably need 10/20+ stocks to be diversified enough.

There are some advisers (including a guy on here) who can help you navigate the tax complications of ETFs but I haven’t explored this and assume there is costs which you may not have the scale to justify just yet.
 
Very informative, will definitely explore this further. I will take heed and likely focus on the pension and mortgage clearance in the short term then move onto the rest.

Thank you very much
 
Agree with Sarenco.

You have a very comfortable mortgage, so max you pension contributions.

At your age, you can contribute 20% of your salary, so lash in €20k a year.

That is your first priority.

Brendan
 
matrixworld said:
Amount outstanding on your mortgage: 138k
Click to expand...

matrixworld said:
Company stock: 15k
cash: 5.5k
Crypto: 20k
Stocks: 10k (mix of SP500, commodities etc)
Click to expand...

This is crazy.

In effect, you are borrowing money to invest in crypto!

Look at it like this. If you had a mortgage of €118k, would you remortgage your home to buy crypto? The answer should be that you would not.

So pay all your savings - other than a small amount for an emergency fund off your mortgage. You get a tax-free, risk-free 2.1% return on your money.

Brendan
 
Zion2022 said:
- don’t worry about pocketing off your money for various things like your sons future. Just maximize your own wealth and you’ll be in great shape to take care of him in 20 years. Think of your finances as a whole.
Click to expand...

This is very good advice. Most people seem to have jam jar approach to money. That jar is for my son's education. That jar is for my pension. That jar is to buy a new car in 3 years.

You should have one jar. In your case, you should not be borrowing to put money in that big jar.

Brendan
 
matrixworld said:
i am leaning towards saving as much cash as possible to lump a sizeable amount off the mortgage in 2025.
Click to expand...

Again, another mistake which people make. No need to save up to pay off your mortgage when the fixed rate ends. You can pay it off now and the penalty should be very small and probably zero.

If you can put your money in a safe deposit account which earns you more than 2.1% after tax, you could consider that. But don't fix it for 5 years at 3% as you won't be able to access it early.

Brendan
 
matrixworld said:
- Explore property in Spain to invest in for the future as i plan on living there in 20 years or so (could move sooner as the nature of my work is fully remote).
Click to expand...

If this is just an idea, then forget about it and max your pension and pay down your mortgage.

If you move to Spain in 20 years, then buy a property then. Don't buy it now with a view to living in it in 20 years. Anything could happen in the meantime.

If moving to Spain becomes more likely sooner than 20 years, then review your financial strategy then. It would make sense to maximise your cash so you could suspend pension contributions and mortgage overpayments. But if you maximise both now, it means that if you choose to move after, say, 5 years, you will have a much lower mortgage and a much bigger pension fund, which will allow you to maximise cash savings.

Brendan
 
Have you considered selling the company stocks, the crypto and the stocks and lumping that off the mortgage? Would give you a nice headstart on clearing the mortgage.
 
PaddyW said:
Have you considered selling the company stocks, the crypto and the stocks and lumping that off the mortgage? Would give you a nice headstart on clearing the mortgage.
Click to expand...
Good point, I didn't factor that in as i wanted to have some skin in the game from a diversity standpoint, but i will definitely consider all of that as i was planning on dumping my company stocks at some point this year.
 
yeah you're right, i may keep stacking cash/max out pension and see what happens closer to that time as anything could happen with both property markets/global economy in the meantime. Thanks for all the advice above.
 
Do you mind me asking "are you sitting on a profit on your crypto?" Just curious, wouldn't affect my advice which is to dump the crypto. Look it might go up, it might go down but it is not an investment. Your 20k crypto is a pure gamble. It is only a diversification in the same sense that a bet on the Derby is not correlated with share prices.
Look at it this way. Let's say you had €20k worth of Malaysian Ringgit. Now I haven't a clue about the MR but I am sure it is much less volatile than your crypto exchange rate. So for sure your €20k worth of MR is "diversified" from your other assets but would you be happy to hold on to that gamble?
To be fair to you I have seen leading investment management outfits push the diversification narrative of crypto.
 
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Yep, build up your short list of potential target destinations but don't pull the trigger until much closer to the time of the planned move. Like Brendan wrote anything could happen from natural disasters, economic disasters or wars.

Regarding the ETFs and avoiding them because of the tax complexity, bear in mind that if you buy today and leave Ireland on 20 years and remain invested in the etfs you will suffer 2 deemed disposal events at year 8 and year 16 but the next deemed disposal event would occur while you're tax resident in Spain so you'd avoid that one.

On the equities front if you buy and hold for the next twenty you'd avoid Irish CGT altogether once you become tax resident in Spain. CGT in Spain is 19%.
 
I love Askaboutmoney but this site only sees 'investing' through a narrow view of return in monetary value.
The suggestions all revolve around:
-max contributions for pension
-pay off mortgage
-best return on small savings pots

None of your plans or the suggestions from this forum appreciate the maxim 'carpe diem'.
My suggestion would be take some of your parental leave:

-take as much unpaid parental leave you can, your child is 3, you can take it up to their 12th birthday. You'll be working for maybe another 35 years + and you can never get back this time with him.

-also invest in yourself: your health, your nutrition, your interests.these don't cost much but take time. use some of the parental leave to get the headspace to think longterm about your future.


You are paying a huge amount of your wages to the taxman, if you take some unpaid time you will get back some of that tax bringing down your effective tax rate.

At 33 the time you invest in yourself and your son will have the biggest return on investment in the long term.
 
When you say live in Spain do you mean part of the year?

You could buy now and rent it out most of the year, stay occasionally.

Then in 20 years time hopefully have the mortgage paid off.
 
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