40 years old & need advice to steady the ship

S

Sean Bateman

Registered User
Messages
39
Hello,

I need some advice and would be grateful for help.

My circumstances are:

- I'm 40 and my wife is 38
- We have three kids under 10
- She's on €70,000 a year in the public sector - She will get a DB pension
- My basic salary is €140,000 and I typically get a bonus of €50,000...I also get share options and have around €100,000 available for exercise in 2020...they pay our health insurance too
- My pension fund is worth €250,000 and is invested in a pretty cheap global equity option (0.2%). My employer contributes €14,000 a year and I contribute €28,750.
- We owe €700,000 on our home. The interest rate is 2.75% Variable with AIB.
- We own our previous home too. It is worth around €350,000 and we owe €180,000 at 0.55% to Pepper. It generates €1,750 of rent per month.
- We went overboard on the renovation of our home and have a hell of a lot of personal debt:
Credit Union - €30,000 (€570 a month)
Credit Union - €40,000 (€610 a month)
Bank - €26,000 (€352 a month)
Bank - €30,000 (€600 a month)
Other - €100,000 (Nil for the moment but can't stay that way forever)
Credit Cards - Nil
- I have €80,000 coming back to me from a private company investment that has unwound at breakeven. I plan to clear the €610 a month Credit Union loan plus the €600 a month bank loan plus €10,000 of the €100,000 loan (to show progress).

I admit that we have been reckless and have overstretched ourselves but between crèches etc and loans we are very tight at the end of each month. We have no savings. The plan is to use bonuses plus share option to repay the personal debts.

The $64,000 question is whether we should sell the investment property. Part of me thinks no, keep the head down for a few years and keep what's a solid investment plus it's on a tracker. Another part of me feels that I want to live life to the max and enjoy a large disposable income because I could be dead in 10 years.

Any advice and honest feedback welcome, no matter how candid!

Thank you.
 
It's really not as bad as it first looks.

If you liquidate the equity in the rental and the private company investment you could clear your personal debt in full and make a dint in that jumbo mortgage.

When you've done that you could use the increased monthly cashflow to really start paying down the mortgage to a more reasonable level, while maintaining your pension contributions at their current level.

Best of luck.
 
Sean Bateman said:
Hello,

I need some advice and would be grateful for help.

My circumstances are:

- I'm 40 and my wife is 38
- We have three kids under 10
- She's on €70,000 a year in the public sector - She will get a DB pension
- My basic salary is €140,000 and I typically get a bonus of €50,000...I also get share options and have around €100,000 available for exercise in 2020...they pay our health insurance too
- My pension fund is worth €250,000 and is invested in a pretty cheap global equity option (0.2%). My employer contributes €14,000 a year and I contribute €28,750.
- We owe €700,000 on our home. The interest rate is 2.75% Variable with AIB.
- We own our previous home too. It is worth around €350,000 and we owe €180,000 at 0.55% to Pepper. It generates €1,750 of rent per month.
- We went overboard on the renovation of our home and have a hell of a lot of personal debt:
Credit Union - €30,000 (€570 a month)
Credit Union - €40,000 (€610 a month)
Bank - €26,000 (€352 a month)
Bank - €30,000 (€600 a month)
Other - €100,000 (Nil for the moment but can't stay that way forever)
Credit Cards - Nil
- I have €80,000 coming back to me from a private company investment that has unwound at breakeven. I plan to clear the €610 a month Credit Union loan plus the €600 a month bank loan plus €10,000 of the €100,000 loan (to show progress).

I admit that we have been reckless and have overstretched ourselves but between crèches etc and loans we are very tight at the end of each month. We have no savings. The plan is to use bonuses plus share option to repay the personal debts.

The $64,000 question is whether we should sell the investment property. Part of me thinks no, keep the head down for a few years and keep what's a solid investment plus it's on a tracker. Another part of me feels that I want to live life to the max and enjoy a large disposable income because I could be dead in 10 years.

Any advice and honest feedback welcome, no matter how candid!

Thank you.
Click to expand...
Figures to do
Interest rates
Terms on loans
Is that a good pension investment
Spending problem
Possible family loan
Reckless, or fear of death due to family experience
Income

I’ll come back to this. Candidly!
 
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Thank you.

The rates on the loans are all between 7.5% and 8.5% (except the €100,000 one which is zero).

The terms are all 8-10 years

It is a family loan

I have no fear of death, sorry it was a throwaway remark.
 
Sean Bateman said:
The $64,000 question is whether we should sell the investment property. Part of me thinks no, keep the head down for a few years and keep what's a solid investment plus it's on a tracker.
Click to expand...
Without looking at the rest of your circumstances, it's a fantastic investment.

However, you've 170k equity tied up in it. Making a return of just under 12% before tax. Or I'm guessing net 5% after expenses and tax. And you're borrowing at up to 8.5%.

Personally I'd be selling it, pay down the debt, and start sleeping a bit easier. Once you've the unsecured debt paid down, find the best available mortgage option for you.

Would there be any CGT liability if you sell it?
 
There would be no CGT. Our conundrum is whether to trade out of our cashflow issues or to solve them by selling the property. My worry is that a few years from now, we’ll be crying out for an investment like that property.
 
Sean Bateman said:
My worry is that a few years from now, we’ll be crying out for an investment like that property.
Click to expand...
And wouldn't that be a nice worry to have? :)

Realistically, how quickly can you pay down 700k mortgage? A 10 year term is 6,700 per month at 3% interest.

So in 10 years you might have some excess cash to invest? Worry about it then - a lot can change over 10 years.
 
Sorry, I meant in around 3 years when we’ve the personal debt cleared and around €60,000 in an emergency savings fund. I would start overpaying the mortgage then with the aim of shortening the term by 10 years - I have looked at calculators on this. But I like the idea of having my pension fund, an emergency fund, defined benefit stuff, and an investment property. I am stressed now though.
 
Sean Bateman said:
But I like the idea of having my pension fund, an emergency fund, defined benefit stuff, and an investment property.
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I like the idea of owning a Lamborghini, but I'm not taking out a loan for it. It's definitely not worth it if you're stressed.

You've currently got 1.1m of debt. The money coming in from your investment will take it down to 1m. That level of debt really limits your options. You're highly exposed in the event of an interest rate rise.

If you pay down debt, you will look at investment risk completely differently. Opportunities will come up to invest in when you have cash available. The best guaranteed investment you can make right now is pay down debt.

You're only 40. Lots of time still to make investments.
 
How secure is your employment?
How much is your PPR worth?
When is the €50k bonus usually paid?

The €50k bonus will leave another €24k available. This plus the €80k coming back shortly will allow you to pay back the 2 credit union loans and the €30k bank loan. This will free up close to €1,800 p/m which will let you repay the other outstanding bank loan within a year.

Discuss with whoever gave you the 100k interest free loan if they require repayment soon as ideally this will be repaid with the €100k of in shares due in 2020. If they do require the funds sooner I would look to sell the investment property, whilst it may not be the best financial decision you ever made it will certainly help to steady the ship.

You are in a very envious position and with 2 years or keeping a closer eye on your finances you will be debt free excluding your mortgage.

As you are not likely to be in a position to overpay your mortgage in the next 2 years I would most certainly look at switching to Ulster Banks 2.3% fixed 2 year rate.
 
Sarenco said:
It's really not as bad as it first looks.

If you liquidate the equity in the rental and the private company investment you could clear your personal debt in full and make a dint in that jumbo mortgage.

When you've done that you could use the increased monthly cashflow to really start paying down the mortgage to a more reasonable level, while maintaining your pension contributions at their current level.

Best of luck.
Click to expand...

Agree with this. You'll then have €100k coming in shares (minus tax?) in 2020, as well as any other savings you'll have built up. You may also have significant equity in PPR? So you'll have a huge income and have wealth built up which will ease the unnecessary stress you are under and put you in a better position to look at future investments, without the worry of debt hanging over you.

So basically you are quite wealthy but just putting yourself under unnecessary pressure through your current investment choices. You are both also very well setup from a pension perspective. Make life easier and enjoy your future without the stress.
 
Any advice and honest feedback welcome, no matter how candid!

Comment: Reminder of OP comment so you know what to expect

Husband age 40
Income 1€140,000
Bonus of €50,000
Health insurance covered
Pension fund €250,000 (cheap global equity option (0.2%) Comment: is this good- pension guys answer this
Employer contributes €14,000
Husband contributes €28,750 - (so 43K going into that) Comment: good

Wife age 38
Income 2 €70,000 public sector Comment: Good
DB pension Comment: good. Elaborate more on this
Full time?

3 kids under 10
Creche?
Other?

Home
Value?
Mortgage €700,000
Interest rate is 2.75% Variable (AIB)
Repayment ?
Term remaining ?
Equity

Investment property
Value €350,000
Mortgage €180,000
Interest rate 0.55% (Pepper)
Mortgage repayment?
Rent €1,750 monthly = 21K annually
Costs?
Profit?
Equity: 170K
Debts

A Credit Union 1
€30,000 (€570 a month)
Term?
Interest rate?
Savings?
What did you tell the CU this was for.
What did you use it for

B Credit Union 2
€40,000 (€610 a month)
Term?
Interest rate?
Savings?
What did you tell the CU this was for?
What did you use it for ?

C Bank loan 1
€26,000 (€352 a month)
Term?
Interest rate?
Which bank?
What did you tell the bank this was for?
What did you use it for ?

D Bank loan 2
€30,000 (€600 a month)
Interest rate?
Which bank?
What did you tell the bank this was for?
What did you use it for ?

E Family loan (probably parents, of one or both)
€100,000
- What lead to this loan being given?
- When was it given?
- When do they expect the money back

Comment: 5 large debts, yikes!

Credit Cards - Nil

Comment: Phew !

Investments/Savings

W € 50K bonus, but not if it just goes into general spending
X €80,000 coming back to me from a private company investment that has unwound at breakeven.

Comment: Was the an unwise investment?

Y € 0 savings
Z €100,000 share options (in 2020)

Comment: is this guaranteed? Any risk? Does this mean you actually get 100K the year after next? No matter what?

Plan
B - to clear the €610 a month Credit Union loan
D - plus the €600 a month bank loan D
E - plus €10,000 of the €100,000 loan (to show progress).

Comment: No idea if this is a good idea or not until you fill in the blanks

Question 1

The $64,000 question is whether we should sell the investment property.

Comment: Probably not.

Question 2

Another part of me feels that I want to live life to the max and enjoy a large disposable income because I could be dead in 10 years.

Comments:
- Is the OP the problem spender.
- Someone is a problem, one or both.
- Someone burying their head in the sand and needs to walk up
- Does spouse know extent of debt
- Definitely reckless
- Oddly no mention of life insurance, but probably has death in service benefit, but would need more than that.
 
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Income: 140K + 50K + 70K = 260K
Debts: 700 + 180 + 30 + 40 + 26 + 30 + 100 = ONE MILLION ONE HUNDRED AND SIX THOUSAND EUROS !!!!!!!!!!!!!!!!!
Assets:House? Investment: 170K
Possible cash: 100K + 80K = 180K

The first part of sorting financial mismanagement is being honest. Please fill in as much detail as you can and try and be as honest as necessary without revealing who you are. For starters I hope you are not using your real name.

There is some major problem going on here. Could be expensive tastes, outrageous holidays. And someone is very good at one thing. Accumilating debt. Top marks for that.

Positives are that it's a high earning couple. And this can be sorted I imagine with some serious talking and a proper effort to tackle the debt right now.

Investment is cheap, oddly, with Pepper, why so low. Probably performing well. But so much debt so it may have to be sold.

Maybe the home is worth a lot after all the renovations.

I'm amazed that a family loan was ever advanced.

Worst case scenario: Husband loses job. Presumably a high powered stressful one. Could also burn out.
 
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Thank you.

Those Credit Union loans are all net of savings. All of the bank/Credit Union loans have 8 years to run and average at 8%. I told them that the purpose was home improvements.

There is 30 years to run on the mortgage. The repayment is around €2,950 a month.

My wife is fulltime.

Childcare is around €1,600 a month.

We had saved €350,000 to purchase our new home. €250,000 went on the deposit and we had €100,000 set aside for renovations and furniture. We ended up spending about €350,000, wild I know, although that did include an element of being shafted by a builder). We had it valued at €1.8M recently.

The €100,000 is from parents. There is no immediate pressure to repay it but it gnaws away at me.
 
Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.
 
Sean Bateman said:
There would be no CGT. Our conundrum is whether to trade out of our cashflow issues or to solve them by selling the property. My worry is that a few years from now, we’ll be crying out for an investment like that property.
Click to expand...

My worry would be that you'd use this as a get out and not tackle the issue and just rack up the debt again. How come there is no CC debt? That's odd.
 
Sean Bateman said:
Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.
Click to expand...

I know all about it. And then my husband got fired. Luckily I'd planned for that eventuality from the get go so that we didn't have large debts later in life. That's where you need to get to.

At least your home is worth 1.8 million, I was worried about that. Maybe you should sell that. Have you thougth about it?

Can you go back to each part where I put a ? and put in the details please. Take your time. You will get more feedback from others with more details.
 
Sean Bateman said:
Those Credit Union loans are all net of savings. All of the bank/Credit Union loans have 8 years to run and average at 8%. I told them that the purpose was home improvements.
Click to expand...

Part of facing up to this is giving accurate figures. You must be prepared to go and look for the correct interest rates. I forgot to ask you how much are the monthly repayments. Can you also tell us in the last 3 months your spending on groceries, utilities etc. We need to know where your money is going and how to help you.

I agree with you about the parental loan.

Take a couple of days to get the figures. Whatever is necessary. It's good for you.
 
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