5 year financial plan - comments?

sinbad75

Registered User
Messages
27
Age: 32
Spouse’s/Partner's age: 33​

Annual gross income from employment or profession: 52k
Annual gross income spouse:62k​

Type of employment: permanent​

Expenditure pattern: We save 1350 a month, mortgage, bills and food, plus fuel = 3234, remainder - 1868 gets spent on insurance, car upkeep, holidays, house improvements (we built 2 years ago, lots of outstanding jobs to finish)
Rough estimate of value of home 600K
Mortgage on home 270k
Mortgage provider:AIB
Type of mortgage: Tracker for 88k, fixed for remainder
Interest rate: fixed at 3.45% for another 1.5 years, tracker - not sure, lowest one they have though​

Other borrowings – none​

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?​

Savings and investments: have a total of around 12000 euro between us in respective company share schemes. Also, SSIA matured, have 37000, being drip fed currently in high interest regular savers accounts (AIB and EBS)​

Do you have a pension scheme? Yes - one non contributory, also paying 7% AVC and one contibutory (15% in total, 5% from company, 10 % from husband​

Do you own any investment or other property? no​

Ages of children: one on the way​

Life insurance: mortgage, and both have 3 times salary with work​


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

I have 2 specific queries.
Firstly, I would like to set up a college fund for our impending arrival, I'm thinking 20,000 of the SSIA money into a Quinn fund - any comments on this welcome.

Secondly, we have just started to track our monthly expenditure, and the house will be finished very soon, so should have approximately 2500 a month to invest. I am thinking of switching mortgages when the fixed mortgage period is up, in 18 months time, to an offset mortgage, by my calculations, this would allow us to pay off the mortgage in approx 5 to 7 years. I would like your opinions on this also. This mortgage would be for approx 250K
 

GeneralZod

Registered User
Messages
1,198
Your plans seem good and you've no obvious things wrong like running a credit card balance. Tracking expenditure is always a good idea.

What happens to your combined income after you have your first child and do you have a plan to cover child minding costs?

With your combined income you should be able to clear that mortgage in the timescale envisioned if you continue with sound budgeting.
 

Brendan Burgess

Founder
Messages
44,887
I am not a great fan of separating out your money into separate bits by setting up a fund for one's child. This should be part of your overall savings and investment strategy. For example, it might be better paying the €20,000 off your mortgage than putting it in a fund. In 19 years' time, you can pay for the education from your general savings and investments.

There is an emotional security in having a child's fund set aside. But what happens if you need this money in 3 years' time to help you move house or pay for unforseen medical expenses or to take a career break? You won't want to touch the fund and so you will borrow money, which makes little sense.

I don't think that an offset mortgage will help you much. The rate is higher and when you do the arithmetic, they tend to suit only self employed people who might have €100k in the current account one month and nothing the next. Your income and savings are regular and so you should be looking for the cheapest mortgage which it seems that you have.
 

sinbad75

Registered User
Messages
27
Thank you both for your comments.

Childcare costs - haven't thought this one out fully, the going rate around here is 600 a month, so should be able to budget it in.

Just on the college fund - its taken quite a bit of self discipline to get to where we are, and to tell you the truth, unless the money is compartmentalised, I don't trust that we wouldn't just spend it!

As for the offset mortgage, am I correct in thinking that you put your monthly surplus in a savings account ( firstactive offset), and that you can still take this money out if you need it?

Paying extra off a regular mortgage wouldn't allow us to access the cash if it was required, and therefore we wouldn't pay the extra off the mortgage...self discipline again!

If you have any further thoughts, they are much appreciated
 

Brendan Burgess

Founder
Messages
44,887
The Key Post on Offset Mortgages is very old. There are two on offer at the moment:

Best Offset Mortgage

NIB4.99%(5.11%)

First Active 5.3% APR.


As you are probably borrowing at 4.6% from AIB, moving to First Active would be very expensive for you.

Keep an emergency fund in a Quinn Life low cost unit linked fund. If you need a lot of extra cash, increase your mortgage. It's not that expensive to do.

Brendan
 

sinbad75

Registered User
Messages
27
Thanks for the advice Brendan. After careful consideration, we have decided to put an extra 1000 euro against the current mortgage, and keep a contingency fund as well. Just one question, I'm confused about how to approach the bank re paying off extra. If I ask to pay against the principal, does this mean that the term will be reduced, and is this the best way to approach this?

thanks again.
 
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