DINK - how are we doing?

P

puretone

Registered User
Messages
32
Age
Me: 33
Spouse: 33

Employment
Me: Financial services
Spouse: Payments solution

Gross Income
Me: 39k (exc. bonus 3-4K)
Spouse 60k (exc. bonus 2-3K)

Property
Family home: Worth 195k, 117k variable mortgage @ 5.64% Interest only, 16 years left
Holiday Home: Just bought, overseas worth 295k, 178K mortgage @ 5.97% repayment 25 years left

Other Borrowings: None.

Savings
Various savings accounts (6-month bond, regular savings, high-interest earning accounts etc), very liquidable 135K

Pension: Yes

Kids: No

Life Insurance: Mortgage protection LI + CI for both properties, Endowment policies, Death-in-service (both, company provided), PI (husband's only, company provided), medical insurance (both, company provided), etc.

Spender or Saver: Savers

My Question/s: We are savers but may not be smart ones. We can afford to save approx 2.6K every month into our bank accounts but as you see we don't have a good portfolio.

Purchasing a property in my husband's birthplace is probably the most risky and bold investment of all. We don't plan to rent out the property since we will be using it a lot for our holidays.

We could make over-payments into our mortgages or clear off one mortgage, however I personally believe paying towards mortgage is a way of saving and a good cause of suppressing the spend urge. Having accessible 100K+ gives us peace of mind but at the same time it worries me that this doesn't catch up the current inflation rate, therefore we are actually losing money.

We do not have intention of starting a family (perhaps never..) and would like to have a comfortable retirement. However I am not sure how we are doing at the moment. We just save but not with a clear target or strategy in mind.

Any advice would be greatly appreciated.

Thanks and have a peaceful night all.

puretone
 
It makes no sense to have savings while you have borrowings. Would you go into the bank and take out a loan at 6% and then walk across to the cash desk and put it on deposit at 4%? Of course you wouldn't, but that is what you are doing. Pay off the loan on the overseas property as you are getting no tax relief on the interest payments on that.

As you are both working and earning good salaries and as you are saving a lot, you don't need the comfort of a large deposit. You will be saving €3.5k a month after you repay the loan, so you will be able to build up a deposit again if you need one.

An alternative is that you could invest your savings in the stockmarket. With €280k of borrowings and €100k of gross salary, you can handle the risk associated with stockmarket investment. Most people are frightened to buy now but this is the time to buy.

If you do choose to invest in the stockmarket, you should make the maximum contribution allowed to your pension scheme. As you are unlikely to have a short term need for cash.

Brendan
 
You seem to be in a very good position.

It makes no sense to have savings while you have borrowings.
Click to expand...
I disagree with this as a general principle. Cash gives you flexibility and can help you weather any storms, e.g. if one of you lost your job or suffered a significant pay cut you would still be able to meet your mortgage repayments from your savings, without having to rely on the bank to reschedule the mortgage on favourable terms. So it is worth paying a small premium to have 6 or 12 months salary on hand.

But in the current situation, you may not even be paying much if any of a premium to have cash on hand. Many regular saver and fixed rate accounts give a higher return than the mortgage interest rate. Of course DIRT tax will reduce this, but then you are getting some interest relief on your residential mortgage.

That's not to say that you don't have too much money in cash - as you yourself identify, inflation will eat away at this.

I think you need to decide your goals before adjusting your repayment / savings / investment strategy. Are you planning any major expenditures in the future? If you do later have children, would you need to move house? Do you ever toy with the idea of starting a business? Or are you just saving for retirement?
 
Thanks Brendan & MugsGame.

Actually a big chunk of our savings is earning a slightly higher rate than our overseas mortgage at the moment. It matures this December so I will have to find a good product if I decide to keep it as a cash deposit.

Since we've just purchased a house, I've allocated 20K to furnish / re-do some construction work to make it livable. It still leaves me a good cash reserve with a monthly growth.

Apart from an earlish retirement, we don't have any life-changing plans yet. Maybe just a few good trips here and there.

Stock market investment has never occured to me. It just feels that I am not confident enough. Any advice for beginners though?

Thanks!

Puretone
 
You must log in or register to reply here.
Back
Top