maybeperhaps
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4.1% SVR BoI, 22 years left
Thinking about switching mortgage provider to get a better SVR - AIB @ 2.75 looks attractive.
Where are you saving this? Does this include pension, or is it separate regular savers? If regular saver AND you are paying 4.1% on a mortgage, you are basically borrowing at 4.1% to save at 0.05%. I would stop saving this and redirect it to mortgage overpayments and/or towards pension for your spouse. You should only have about 6 months expenses in emergency fund, anything more in cash/savings is really a waste, if you have debts.Saving
Me, ~12k a year. Spouse, ~8k a year
You are also planning to upgrade the car. I agree you can spend as much or as little as you like on one. What is the annual mileage etc? We upgraded both of our cars last year and put a nice hole in the pocket, but at least it is done now for another while !!E15k on a car seems a little high, how old is current one and what mileage? You could get replacement for E10K. Lash the E5k saved into spouse pension as lump sum.
I am not as clear-cut as Sarenco on this, but I do think your partners pension needs a boost. Try pump it up to the max permitted for a few years and then look to target the mortgage again. Personally, I think you can do both, as I do believe there is capacity in the spend to save some more.To me the answer is pretty clear-cut - at your age and income level, you should prioritise your pension contributions ahead of paying down your mortgage (I'm going to assume you will move yourself off your current extortionist rate!).
The first thing that jumps out at me is your mortgage rate. 4.1% - yikes!
You shouldn't be paying anything like 4.1% at your LTV. If you do nothing else, get that sorted ASAP - either switch to AIB @2.75% variable or fix at a lower rate with BOI. Pronto!
You should really move your €20k cash reserve into an instant access deposit account. Deposit rates are pretty lean at the moment but you might as well earn some interest on that amount, however trivial. Even small amounts compound over time.
Incidentally, at your ages I think your pension funds should still be predominantly invested in global equities (perhaps around 80%), with the remainder in cash/bonds. The exact allocation between different asset classes is really a point of detail - your contribution rate is far more important.
Ok, now we're into the crux of your question - should you use your monthly "excess" cash-flow to pay down your mortgage ahead of schedule or should you max out your pension contributions?
To me the answer is pretty clear-cut - at your age and income level, you should prioritise your pension contributions ahead of paying down your mortgage (I'm going to assume you will move yourself off your current extortionist rate!).
If you want free money, stop thinking and start doing - paying 4.1% is crazy at the moment. If you are doing overpayments, I agree AIB 2.75% is best option.
I would put the max from spouse (20% based on age) pension, as it is small.
E15k on a car seems a little high, how old is current one and what mileage? You could get replacement for E10K. Lash the E5k saved into spouse pension as lump sum.
You always have to look at what your future plans are. When you know what they are, you can work backwards and allocate your funds accordingly. So what do you want to do in the short, medium and long term?
How stable are your jobs or if you got made redundant, how quickly can you find another one?
You are also planning to upgrade the car. I agree you can spend as much or as little as you like on one. What is the annual mileage etc? We upgraded both of our cars last year and put a nice hole in the pocket, but at least it is done now for another while !!
Before you think of either pension or mortgage overpayments you will have to build up some cash reserves again (after car spend). The general consensus is 6 months spend - yours would be 29,000 euro (6500*6 - 10,000 savings)
I am not as clear-cut as Sarenco on this, but I do think your partners pension needs a boost. Try pump it up to the max permitted for a few years and then look to target the mortgage again. Personally, I think you can do both, as I do believe there is capacity in the spend to save some more.
And think you should be saving into regular savers accounts and notice deposit accounts rather than the current account !
I will let someone else comment on how good or bad it is for early 40's.I agree, pensions need attention, particularly my spouse's. Regarding my pension buildup of ~150k - how does that compare for my age, 42? Bit on the low side, should have started AVCs earlier?
Ok so the savings are not really 20k but higher - but not structured. I think it would make sense for you to do a clear budget out especially on the joint account spending. Does the 2k a month cover all household costs such as bills, food, mortgage, medical, fuel (petrol/diesel) etc?We have ~6.5 take home pay a month between us and live a comfortable but not extravagant lifestyle. Monthly spend in general would be fairly low, apart from 2 holiday weeks a year. We both get paid into our current accounts and also have a joint current account that we put 1k a month each into to cover mortgage and bills etc. We typically allow the funds in these current accounts grow, always aiming to have a minimum of 20k available as an emergency fund. Periodically then when there is a ‘spare’ 10-15k available we have been overpaying the mortgage. So even though I mentioned that we save ~1.5k between us a month, or ~20k a year, it would be more than that, just not tracked very well as build ups have been spent on overpaying the mortgage and home improvements etc. Thinking about it, if we tracked it properly, with our current mortgage/avc payments structure, we probably have the ability to save ~40k a year.
6 months EXPENSES - so exclude the amount you save etc. Its basically if you lost you job or became ill how long could you survive financially without starting to come under pressure.Therefore, with current lifestyle etc, would it be advisable to have ~20k or ~39k set aside as our 6 month emergency fund?
Just keep in mind you can still pay into a pension for 2017, so if you want to give it a boost, keep an eye on the closing date for that.Definitely my partner’s pension needs attention – we should be able to bump this to the max and increase mine from 5% AVCs also. It will take a bit of calculating, but once we upgrade the car and build up savings again, in 6 months time or so, we could even have enough income to overpay the mortgage a little each month also – if there are any spare monthly funds.
Unfortunately, no it doesn't! Your mixing mortgage, bills and leftover in the one account, so as you have found out, its impossible to know how much is going where. You would be better to have separation. I suggest you complete something like the following:There were questions about our savings and mortgage overpayments. Basically this is what we have been doing, hope it answers most of the questions:
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