37, got finances in order, what next?

[JSF221]

Age: 37
Spouse’s/Partner's age: 37

Annual gross income from employment or profession: 80,000
Annual gross income of spouse: 50,000

Monthly take-home pay: 3450 / Partner 2850 (not married / separate finances)

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

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

Rough estimate of value of home: 480,000
Amount outstanding on your mortgage: 198,000
What interest rate are you paying? AIB 2.75 Variable (27 years left, monthly payment of 868 + 200 over payment – Partner and I split 50/50)

Other borrowings – car loans/personal loans etc:
None
Partner: 20,000 Car Loan (just upgrade this year) My car was paid for with cash.

Do you pay off your full credit card balance each month? no longer use one.
If not, what is the balance on your credit card?

Savings and investments:
Emergency Fund: 10,000
Partner Emergency fund: 8,000

Do you have a pension scheme? Only started 12 months ago, Value 25K, currently putting max in (20% + 4% employer – 1600 p/m). Partner 70K contributes minimum for employer match and happy to keep it this way.

Do you own any investment or other property? No

Ages of children: None (we will not have kids)

Life insurance: 4 x salary with employer death in service.

What specific question do you have or what issues are of concern to you?
Only started to get my finances in order last year when the pandemic struck. During that time, I've cleared c 25K in debt and started maxing my pension contributions. Both my partner and I have always worked on separate finances and mortgage, food and bills are all 50/50 (plus additional buffer for house repairs etc). Now that I'm debt free, have an emergency fund and maxing pension contributions I’m unsure what to focus on next.

We've engaged with a broker re switching mortgage to Avant to avail of the LTV < 60% 1.95% rate.

My partner and I have different views on finances, but this is mostly driven by me changing in the last 12 months and finally waking up to the amount of spending I was doing. We’ve spoke about me throwing more to the mortgage as I have additional income, but my partner isn't keen on deviating from the 50/50 philosophy we live by. This might sound odd, but it has always worked well in our relationship. There might be another question around financial goals moving in different directions but that’s probably for another forum.
Just really looking to get a view on this and thoughts on what I should be focusing on next. My main long-term goal is ensuring I have a decent retirement pot by the time I get there. I have approx. 1000 spare each month after my budget is taken care of - my budget includes essentials and lifestyle + future planned spending for holidays, Christmas, fun stuff etc.

Thank you

 

[Brendan Burgess]

We’ve spoke about me throwing more to the mortgage as I have additional income, but my partner isn't keen on deviating from the 50/50 philosophy we live by.

While this is not the optimum financial arrangement, so what? Your relationship is more important, so you should keep the mortgage 50/50.

Emergency Fund: 10,000
Partner Emergency fund: 8,000

Partner: 20,000 Car Loan (just upgrade this year)

If it's a zero interest car loan, that is fine.

But if it's at 6% a year, your partner is paying €1,200 a year in interest, while you are getting nothing on your "emergency funds"

Use the funds to clear the car loan. You give your partner a loan of €10,000 and they repay you by standing order just as if they were paying the provider of the car loan.

 

[Brendan Burgess]

With two of you working in well paid jobs, you don't need an emergency fund. If one of you loses your job, you will get notice and a redundancy payment. The other can stop contributing to the pension fund to build back up your fund.

 

[Brendan Burgess]

As you are both building up considerable assets, you should consider getting married. There is no rush, but it's so much simpler if one of you dies.

At the very least, make sure you have wills in place.

Brendan

 

[NoRegretsCoyote]

Essential that you make wills if you haven't, and highly desirable to get married.

For tax, inheritance from a spouse is unlimited, from an unrelated stranger is not. You don't want to leave the other with a tax bill and having to buy siblings out.

 

[Buddyboy]

JSF221,
you asked "What next?"

I'd say, enjoy yourself!!!!! You are 37, financially secure. No plans for children so no looming expenditure. In a stable, and by all accounts long term relationship. You're living within your means.

Otherwise, what's the point?

I know it can take a while to get out of the mind-set of striving for financial security etc., (sometimes I think my wife never has - but that's about upbringing, and being raised in a house with a self-employed father), but you have that now, time to question what to do with it.

For me, in my 50's with wife and no kids, we stay at nice hotels, take 3 week holidays (not during school time). Take a holiday abroad in Feb for a week and October for a week (at least we did before Covid). We enjoy our pastimes, and don't overspend, so we remain financially secure.

Grab a glass of something and read all the threads here on retirement, early retirement, moving house when you're older etc. You'll get the idea that some people wait too long to enjoy themselves, and some are making a great job of it.

You'll be dead long enough.
/rant over.

 

[Pinoy adventure]

Get rid of the car loan from the rainy day fund/s once cleared then build back up a rainy day fund.

 

[_OkGo_]

We’ve spoke about me throwing more to the mortgage as I have additional income, but my partner isn't keen on deviating from the 50/50 philosophy we live by. This might sound odd, but it has always worked well in our relationship.

Not odd at all, in fact its probably the most common approach especially when unmarried.

Only started to get my finances in order last year when the pandemic struck.

Despite your relatively recent change in mindset, your finances weren't in bad shape to begin with so any improvements that you have made will go a long way.

There might be another question around financial goals moving in different directions but that’s probably for another forum.

This is probably the question you need to focus on. What plans do you and your partner have in life and what is the financial impact?

• Do you plan to get married? can be as cheap or expensive as you want it to be
• Do you want to retire ahead of schedule or change the type of jobs you have?
• Do you plan to move to a more expensive property or do any renovations to your existing home?
• Are children 100% out of the equation? You don't have to answer this on here but I've had friends who have said this and eventually went down some expensive routes to have children (before the expense of raising them) so its worth having this conversation with your partner again.

And with most things in life, the softly softly approach is usually the best way to get your new found ideas across. Certainly don't start with "I've been reading AAM and we need to stuff our pensions to the max" as it will go down like a lead balloon You could start by suggesting that after your mortgage switch that your partner increases their pension to match the reduced payment. Kind of a 'you never had it in the first place' situation and at the next pay rise, do the same thing. By 40, your partner could be contributing 6-10% more without really noticing it in their take home pay.

And similarly with your ability to overpay the mortgage, don't try to make a lump sum but suggest that you add €100-200 to the monthly overpayment because you have nothing else to do with the money.

And if kids are definitely off the table, then as @Buddyboy says, you should enjoy it a little. You are pretty comfortable financially so finding a few ways to spend some of your spare cash is not a bad thing. You can still strive for getting value for your money, e.g. midweek/off-peak hotels, but do try to enjoy it too.

 

[JSF221]

Thank you all so much! Super feedback.

At the very least, make sure you have wills in place.

We do not have wills in place, actually never really thought about this. We have a joint tenancy so if anything happens the mortgage will be paid and full ownership goes to the surviving partner - but I think there might be a CAT issue given we're un married.

With two of you working in well paid jobs, you don't need an emergency fund. If one of you loses your job, you will get notice and a redundancy payment. The other can stop contributing to the pension fund to build back up your fund.

This is a great point, both employment is very stable.

I'd say, enjoy yourself!!!!! You are 37, financially secure. No plans for children so no looming expenditure. In a stable, and by all accounts long term relationship. You're living within your means.

Yup - 16 years together We have been fortunate enough to travel all over the world during this time, - we both love travel above all else. Maybe I need to be careful I don't get so wrapped up in money - or more than I need to be anyway.

This is probably the question you need to focus on. What plans do you and your partner have in life and what is the financial impact?

• Do you plan to get married? can be as cheap or expensive as you want it to be
• Do you want to retire ahead of schedule or change the type of jobs you have?
• Do you plan to move to a more expensive property or do any renovations to your existing home?
• Are children 100% out of the equation? You don't have to answer this on here but I've had friends who have said this and eventually went down some expensive routes to have children (before the expense of raising them) so its worth having this conversation with your partner again.

This is probably the question that has been on my mind more than anything.

• Do you plan to get married? can be as cheap or expensive as you want it to be: It isn't out of the question just both of us have not had a massive desire to do so.
• Do you want to retire ahead of schedule or change the type of jobs you have? Yes, we'd both like to retire early. At the moment, 60 is the number we're playing with.
• Do you plan to move to a more expensive property or do any renovations to your existing home? No, our mortgage was at c157K last year but we topped up to 200K to extend at the back. So that's us done. We've 3 bed for just the 2 of us and the dog so plenty of space. We're both on the same page not to increase the mortgage further.
• Are children 100% out of the equation? You don't have to answer this on here but I've had friends who have said this and eventually went down some expensive routes to have children (before the expense of raising them) so its worth having this conversation with your partner again. Zero desire for children

And similarly with your ability to overpay the mortgage, don't try to make a lump sum but suggest that you add €100-200 to the monthly overpayment because you have nothing else to do with the money.

I think this might be a good compromise, doing this on top of our current 200 overpayment would knock around 10 years of it and if we increased that a little in line with any pay rises it could get us mortgage free by our early 50s.

And with most things in life, the softly softly approach is usually the best way to get your new found ideas across. Certainly don't start with "I've been reading AAM and we need to stuff our pensions to the max" as it will go down like a lead balloon You could start by suggesting that after your mortgage switch that your partner increases their pension to match the reduced payment. Kind of a 'you never had it in the first place' situation and at the next pay rise, do the same thing. By 40, your partner could be contributing 6-10% more without really noticing it in their take home pay.

Really like this suggestion. There is massive scope to increase the contributions here and as I mention above, earlier retirement is defo something we're both aligned on.

Above all, maybe I need to relax a little and be grateful knowing we're on a decent path!

 

[_OkGo_]

Do you want to retire ahead of schedule or change the type of jobs you have? Yes, we'd both like to retire early. At the moment, 60 is the number we're playing with.

Financially, you should be able to do pretty much whatever you want with no dependents and good income. It just needs a little planning and foresight.

Starting that conversation about what retirement would actually look like is very important rather than picking an age and just hoping it happens. State pension will probably be at 68 by the time you get there so how can you both bridge the 8 year gap? You can probably do it with maxed pension contributions but your partner couldn't at current contribution levels. Trying to explain that without coming across as 'all knowing' can be difficult but it should help get you on the same page. I doubt your partner will want to continue working while you retire

If you enjoy your current standard of living, you will at least want to maintain or even improve on it. If you retired at 60, you will probably be quiet active and able to enjoy it. A substantial pension plus other savings or investments would be required to fund this

You might decide that maintaining your current lifestyle and working until 65 might be better for you both as pensions continue to grow making the transition easier. You can even look into reduced working weeks/unpaid leave etc to manage work/life balance between 60-65.

 

[JSF221]

Starting that conversation about what retirement would actually look like is very important rather than picking an age and just hoping it happens.

You might decide that maintaining your current lifestyle and working until 65 might be better for you both as pensions continue to grow making the transition easier. You can even look into reduced working weeks/unpaid leave etc to manage work/life balance between 60-65.

Super Advice @_OkGo_ and thank you for taking the time to respond.

 

[Peanuts20]

With two of you working in well paid jobs, you don't need an emergency fund. If one of you loses your job, you will get notice and a redundancy payment. The other can stop contributing to the pension fund to build back up your fund.

Sorry but I totally disagree with this. You should always have some rainy day money put away regardless of where you work. This is not just on grounds of redundancy (and we don't know what kind of package or length of service the OP has) but also to deal with other emergencies such as long term sickness where an employer sickness scheme runs out, a house emergency or who knows what else life can throw at you. A lot of people in well paying jobs got a shock in the last 12 months when they got laid off temporarily and found social welfare wouldn't cover their living costs.

Both the OP and their spouse should do a full tax review for the last number of years to see if they are paying tax in the most efficient manner and to see if there is anything they can get a rebate on.

They should also review their health insurance to make sure they are on the best package for their circumstances

 

[NoRegretsCoyote]

We have a joint tenancy so if anything happens the mortgage will be paid and full ownership goes to the surviving partner - but I think there might be a CAT issue given we're un married.

Not automatically if you don't have a will. The surviviving partner would have to apply for what is called the redress scheme for cohabitating couples. This is time-consuming and involves a trip to court. You should make wills immediately. There is no downside.

There would be a CAT issue for sure whether there is a will or not. No CAT if you are married.

My (now) wife and I didn't marry til quite a while after we had kids and had a house. We did it for a few reasons and CAT exposure was one of them. But we made wills when our first child was born and amended again after we bought a house.

In your circumstances I would consider a will essential and marriage highly desirable.

 

[JSF221]

Not automatically if you don't have a will.

There would be a CAT issue for sure whether there is a will or not. No CAT if you are married.

Looks like I have some reading up to do on this. So what you're saying is not having wills in place at a minimum has all sort of risk associated with it, maybe my naivety but I had thought the Joint Tenancy provides estate protection to the surviving partner - I will look into this as priority. The CAT exposure is concerning, my understanding is that if something were to happen to one partner, the mortgage protection pays the mortgage in full, and the surviving partner will be liable for CAT on the 'inherited half' is that right? Given the property value, that's a huge burden to leave to the surviving partner. We're in the process of switching, will add this to the conversation with the solicitor. Thanks for adding a little more insight.

 

[NoRegretsCoyote]

and the surviving partner will be liable for CAT on the 'inherited half' is that right?

Yes.

but I had thought the Joint Tenancy provides estate protection to the surviving partner

Maybe it does. I'm not the expert on this. But it seems like you have totally separate finances and even cars. If you dropped dead would you want your partner or your siblings/parents to, for example, inherit your car?

 

[JSF221]

But it seems like you have totally separate finances and even cars. If you dropped dead would you want your partner or your siblings/parents to, for example, inherit your car?

No We also have our life insurance (death in service) policies to think about though. Or what happens to pension pots, savings etc.

 

[noproblem]

You guys are not getting any younger, even though you might think you're in the peak of your lives. Both 37, and if you live to 74 that's half way there already. I'd be thinking about having private health insurance and would also emphasise the importance of making wills. Some very smart people on here, take heed of them. Most have been there, done that and have the T-Shirt. As for retiring at 60? Maybe you can, but that's not huge money you're earning, and not a lot of assets or savings to fall back on. What happens if the relationship goes downriver, if the other person wants to sell the house for whatever reason, etc? Life has a way of throwing us curved balls with no warnings! It's very easy to prepare for the expected, not so simple for the unexpected, and don't you worry one bit, you'll be thrown a few curved balls given time. Good luck with all your plans

 

[JSF221]

What happens if the relationship goes downriver, if the other person wants to sell the house for whatever reason, etc? Life has a way of throwing us curved balls with no warnings! It's very easy to prepare for the expected, not so simple for the unexpected, and don't you worry one bit, you'll be thrown a few curved balls given time. Good luck with all your plans

Really good advice. Both our parents divorced and I think this is part of the reason we've never been keen on marriage. And you're right, anything can happen. Dare I say it on here but we also never bothered with any cohabitation agreement when we bought the house - although not very romantic, I do think we should have in hindsight.