Moneymakeover Advice needed on our financial situation.

Hi all,

Not sure if this is the right place to be positing. I am 35 and my wife is 33. We have a combined household income of 150K. We have a 7 year old son with additional needs.

Mortgage is 246K at 2.45% for the next 3 years. Mortgage is due to be paid off in January 2043 but I intend on trying to clear this early. We are over laying 300-500 every month.

We have a car loan with 2K left on it.

We have 18K saved in a 2 year super savers account with BOI on 3%.

We also have 8K in a regular savings account with BOI, again at 3%.

We have been saving our sons children's allowance in to a credit union account we set up for him which has roughly 9K in it.

I have 60K in my pension with Irish Life. I am paying 15% in to this with my employer paying 5%.


Any advice is welcome.

Do you have any specific questions about your position?

You'll probably get a better response posting in the Money Makeover section of the forum and following the posting template there.

balders93 said:

You'll probably get a better response posting in the Money Makeover section of the forum and following the posting template there.

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Thanks for the response. I'm looking for comments on my current financial position and advice as to what to do with savings.

My goal was to build up enough savings to buy a second home and rent the one we are in currently within the next 3-5 years.

COBNOB2017 said:

My goal was to build up enough savings to buy a second home and rent the one we are in currently within the next 3-5 years.

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Why do you want to take on more debt?

Your pension is underfunded. I assume that your wife has no pension as you didn't list it as an asset.

Put more money into your pension would be the start. And forget about buying a second property that will be a cost to you until the mortgage is paid off.

In addition to what @Steven Barrett says, in my opinion it makes little sense to have €35K in savings while carrying a €2K car loan and a significant mortgage with 18 years left on the term. It would make more sense to me to use some or all of the savings to reduce your debt and/or boost the pensions.

In my opinion aiming to concentrate even more of your household net worth in a single asset class and geographic region (Irish domestic property) in your situation makes little sense from a risk/diversification perspective. I don't get why so many people seem so obsessed by bricks and mortar to the detriment of building a diversified portfolio.

As ever with a Money Makeover it would make sense to analyse your incomings and outgoings to understand where your money is going, if/where savings can be made, what your baseline essential household expenditure is/should be, and to help plan for how you can best reduce your debt, fund your pensions and build a diversified portfolio to cater for your family's short, medium and long term financial/life goals.

What’s the split of your combined 150k incomes?

After putting together a rainy day fund, general advice would be to prioritise AVC’s (at 40% relief) over mortgage overpayments, and mortgage overpayments over long-term investments outside a pension, unless there is an identified short- to medium-term need you are saving for. But you also have the circumstances of your son’s additional needs to consider, do you have an outline of what the financial considerations there might be? e.g. House modifications, medical treatments, etc.?

Our plan was to buy a second property to move in to and rent our existing home and have it as an income for us if we need to retire early or take a step back from our careers to care for our sons.

Our son is autistic and has a high level of needs. We also like the idea of it being there for him when we are gone as morbid as it sounds.

I've only recently increased my pension contributions from 6% to 15% with employer contributions at 5%. My wife works for the HSE and pays in to a pension but is unsure what she is paying and also pays in to something called supper annuation.

My gross salary is 100K and my wife's is 50K.

Appreciate all the advice.

COBNOB2017 said:

I've only recently increased my pension contributions from 6% to 15% with employer contributions at 5%.

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You should increase this to the 20% limit for your age group.

COBNOB2017 said:

Our plan was to buy a second property to move in to and rent our existing home and have it as an income for us if we need to retire early or take a step back from our careers to care for our sons.

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You could have no mortgage (if you stay where you are and pay it off early) or you can have a rental income but with a new, presumably bigger mortgage to consume that income. Have you done the maths on this? I’m not convinced at all about the accidental landlord route in this market. Generally, it’s good advice to sell high rather than buy high! If you do want to move, use the proceeds from selling your first house to reduce your mortgage size, allowing you to make more advantageous (imo) AVC’s.

COBNOB2017 said:

We also like the idea of it being there for him when we are gone as morbid as it sounds.

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Are you sure about this? Who would manage the investment property on his behalf and to his benefit?

You shouldn't consider buying a second home.

The best way for you to future proof yourselves is:
1. Create a good pension
2. Pay off your mortgage

That way, if you are mortgage free and have a good pension say at 45, one of you could quit your jobs, or both of you could go part time.

Don't take on any extra debt. Work on funding your pensions, and paying off your mortgage. Once you've done that you'll have minimal expenses and the potential to cut back on work.

Buying a second home will just eat away at your potential savings. Whatever mortgage you take out, you end up paying approx 50% EXTRA in capital and interest e.g. if you take out 100k would pay back 150k over approx 30 years (its a rough estimation)

The world of finance often tries to overcomplicate things - for the majority of us it's really simple. Avoid debt. Pay into a pension as much as you can. Pay off your mortgage as quickly as you can.

COBNOB2017 said:

Our plan was to buy a second property to move in to and rent our existing home and have it as an income for us if we need to retire early or take a step back from our careers to care for our sons.

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Why do you think that concentrating the bulk of your family's resources in a single asset class/geographic region (Irish residential property) is the most suitable strategy for your family's needs? I certainly don't think it is.

Thanks for all the advice.

With regards to my current financial situation for my age, would I be doing ok?

It really doesn't matter how you compare with others or with some benchmark/average.
What matters is whether or not you have in place sound plans for financing your family's short, medium and long term goals.

COBNOB2017 said:

With regards to my current financial situation for my age, would I be doing ok?

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Agree with @ClubMan, your financial situation should be measured against your family’s needs/wants.

But, your salaries are good, mortgage is in a very good position for your age, rainy day fund is covered, public sector pension building up, your private pension is a bit light but plenty of time to make it up.

Solid 7/8 out of 10 before even considering your family circumstances are probably more challenging than most. Well done!

Hi @COBNOB2017. As @conor_mc mentioned above... do you realise your employer's 5% match of your pension contributions does not stop you making AVCs up to 20% of your gross salary? Effectively you can now contribute 25% of your gross salary.. 20% from yourself and 5% from your employer.

Likewise your wife could make AVCs up to 20% of her gross income (less whatever she is contributing already in to her occ. pension scheme e.g. the Single Pension Scheme perhaps?)

I understand where you are coming from in wishing to make provision for an independent living arrangement for your child down the line. It might be a better choice to use investment options other than property to build wealth, offering less risk, greater returns, which along with well funded pensions could give you greater financial flexibility in making the most appropriate choice for you and your child's needs. They might be very different in 20 years time from what you expect they will be from the present day vantage point.

COBNOB2017 said:

Our plan was to buy a second property to move in to and rent our existing home and have it as an income for us

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This rarely makes sense, especially in today's market where I'm assuming your current PPR already has a large capital gain.

Most people don't really understand the impact of the CGT exemption or the impact of unnecessary PPR borrowing on the net return of the rental. You take all the risk with very little reward. See a more detailed explanation here:

COBNOB2017 said:

We also like the idea of it being there for him when we are gone as morbid as it sounds.

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You probably need to plan a little more than most in case something happens to either of you in the next 20 years. The solution is not not a rental property

You need to have an appropriate level of life insurance that pays out on each death (dual life policy I think). It's a small premium to ensure that one of you could afford to be around full time carer as an single parent

Your are doing well for your age and circumstances so in order of priority, I would suggest:
1. Ensures wills are made and guardians named (ask your chosen guardian first).
2. Make AVC lumpsum for 2024 up to your full 20% limit.
3. Clear the car loan from savings.
4. Review your life insurance needs. You will have mortgage protection already and probably both have death in service benefit so figure out what level of additional cover you need.
5. If applicable, make sure you are availing of all supports, financial and non-financial, for your child.
6. Increase regular pension contributions to 20%
7. In January, make AVC lumpsum for 2025


After all of the above, continue overpaying your mortgage with any leftover cash but it is already comfortable so don't overpay at the expense of sacrificing some lifestyle.

If in 5-10 years you still feel like being a landlord, you can reassess but you should not rent your existing PPR, buy a property specifically for rental.

On a side note, your pension contribution is 20% of all income liable for income tax, i.e. salary, bonus, health, other BIKs etc. Check your Employer Detail Summary on Revenue.ie to get the right figure

CharlieMac said:

It might be a better choice to use investment options other than property to build wealth, offering less risk, greater returns, which along with well funded pensions could give you greater financial flexibility in making the most appropriate choice for you and your child's needs.

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I still think they should stay away from investing until their mortgage is cleared or close to cleared, and their pensions are fully funded every year.

Seaniemed said:

I still think they should stay away from investing until their mortgage is cleared or close to cleared, and their pensions are fully funded every year.

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Thanks again for all the advice. If im contributing 15% to my pension could someone please explain what an AVC is? It is showing on my pension that I have a 1% AVC.