On the spending – I’ve broken it out below for transparency
(I was hesitant to do this as I didn’t want to get into a debate on every item, but given the feedback it’s probably more useful to show it in greater detail.)
Fair play
@StepByStep , that is a really great breakdown and I hope you now realise that by doing so you are already in a much better place. Stripping out your mortgage and car loan, your annual spend is ~€58k. Even allowing for some new costs in retirement like paying your own health insurance, there will also be other costs that fall away like fuel as you'll no longer be doing a regular commute.
I think your initial €70k estimate was overly cautious, you are probably more in the €60-65k range which is great. You will easily be covering that by your late 50's and can really consider early retirement or stepping back as you see fit
The last time I'll say it (I promise
) but there is still more value to be had from what you are spending money on without impacting your lifestyle. The obvious one is the gym/PT spend. March in and demand a discount for being a loyal customer. You are paying €5.5k so you should be able to get 10-20% off.
So c. €43k all in.
The sinking funds are something we only set up this year
I personally dislike pots/pockets. It doesn't matter where it sits, whats important is the total and €43k is about right for you. Generally speaking the emergency fund rule of thumb is 3-6 month of expenses which is €20-40k for you.
Your money management is excellent but a better approach to you is having access to credit (without necessarily using it). You should both have credit cards with decent limits and both have credit union accounts for easy access to loans. If there was ever a time when you actually had a shock bill of €20-30k, you can easily manage it. You don't need to build up small individual sinking funds.
I would be inclined to gradually reduce this and see how comfortable you are at €40, 35, 30, 25k. Starting at your next paycheck, get rid of the remaining car loan, you really don't need it. The following month, make your AVC's for last year. After that, knock €5k off your mortgage.
This may not be for everyone but a few years ago we stopped "saving". Instead we track our account values. We are very comfortable with what we spend money on so don't need a designated savings pot. If account values get a little too high, the money is paid against a mortgage or used for AVC's etc
Income and expenditure,
Annual gross income from employment or profession: €81,463
Annual gross income of spouse/partner: €102,000 plus bonus (this year was €12k, but varies)
Monthly take-home pay: €8,373 (after pension contributions; I contribute 1017, my spouse contributes 1423)
Rent a room income: €5,400 (€600/month for academic year)
Type of employment: Both employees in private sector
Something maybe not mentioned yet but are you taking advantage of all work related perks if they are available? ESPP's, wellness benefits, work related discounts etc
Pensions:
If jumping up to the regular 25% contribution is too much of a shock, then ease yourself up to it. Add 1-2% extra each month after you have made the AVC's for last year. The regular contribution is also better for budgeting as you don't need to make a large AVC out of net pay and claim back the refund.
You didn't mention an employer contribution, is there one? If not, maybe it is something for your next salary/year end review
Maybe you already know this but your allowable pension contribution is 25% of
total remuneration. If you check your EDS from revenue, your gross pay is base salary, BIK's, health, bonus and any other income benefits you receive. It's not just 25% of base pay
Family home mortgage information
Lender: ICS
Interest rate: 2.1%
Type of interest rate: Fixed for 5 years
If fixed, what is the term remaining of the fixed rate: 14 months
Remaining term: 12 years 2 months
Monthly repayment: €1735 (this is an overpayment of €150)
Minor point but your mortgage figures seem a little off. For a monthly payment of €1585 @2.1%, your term should be slightly shorter or your principal should be slightly higher.
Again, you don't need to do anything drastic with your mortgage, with the €150 overpayment you are already on track to clear it in just under 11 years. But if you do decide to increase this after pension contributions, you can use this calculator to look at the impact of accelerated payments or ad hoc lump sum payments
Mortgage calculator with graphs, amortization tables, overpayments and PMI
www.drcalculator.com
I’ll be honest, it does feel a bit uncomfortable putting it all out there like this. We don’t feel like we live a particularly luxurious lifestyle, but we fully recognise that we’re in a position to spend on things that matter to us and that we don’t have significant financial pressure.
Continue spending on what's important to you. You are in a great position to achieve your goals and do what you want to do in life. You have the means to do a lot of things. Being uncomfortable is a growth mindset. You can now proceed with clarity and confidence.
The changes you need to make are small and "tidying up around the edges". Like your pension, you are already maxing AVC's but switching to maxing regular contribution just makes budgeting more straightforward.
