Moneymakeover Early 30's couple looking to make the most out of a unique position.

[Willbo]

Age:
32
Spouse’s/Partner's age:
31

Annual gross income from employment or profession:
€58,000 - limited progression but interesting work and extremely low-stress with excellent perks.
Annual gross income spouse:
€34,000 - high opportunity for career progression with expected earnings rising to €75k+ in the next 5 years

Type of employment:
Both private sector employees

Expenditure pattern:
Natural savers who enjoy getting good value but happy to spend substantial sums on various items or experiences. Probably would be perceived as frugal by many but we are content and do not feel financially strained in any way. Usually save at least €3,000 monthly but this can fluctuate with holidays/christmas etc.

Rough estimate of value of home
€650,000

Mortgage on home
€ 0 - Due to specific circumstances we are in an extremely privileged position to be mortgage free.

Other Assets and Liabilities
€75,000 in cash savings - recently finished a fixed term deposit
€85,000 in diversified international equity portfolio
Two paid off cars at combined value of €30,000

No liabilities

Do you have a pension scheme?
2 years ago I started my pension putting in €10,000 p.a. AVC currently sitting at approx. €22,000 through execution only PRSA @ .75% AMC, 100% equity.
No employer contribution and therefore being placed in AE.

Wife has recently began her pension maxing out 20% plus 6% employer contribution.


What specific question do you have or what issues are of concern to you?
I am very conscious of our privileged situation and want to make the most of it as we have a child on the way. My wife will be taking maternity leave with full wage top-up by employer for the 6 months with scope for extended leave or part-time return giving us substantial flexibility.

Having the housing situation sorted, I am looking for advice on where to best use the savings that we have accrued. I am aware that we have left the pension a bit late but better late than never and am now making up with max contributions even if they are currently at 20% releif. From reading posts here about AE, it seems beneficial to my situation in having it simultaneously with my AVC PRSA.

While the house is paid off, it will need some additional but not urgent work amounting to approx. €20,000 so would be looking to have that set aside.

The main advice I am gratefully asking for is regarding utilising our current situation to best set us up for a comfortable life with early retirement/scaling back around the 55 year mark.

 

[Clamball]

You are in an amazing position financially at your age. You have zero mortgage, making significant pension contributions and saving approx 3K per month.

Your long term financial goals seem assured. Whether this will translate into being able to retire in 25 years time I don’t know. But you should be in a good position to invest in higher risk global stocks on the financial market as part of your pension planning than most people your age.

Once you grow your family childcare costs will be significant and your will be unable to save as much but this should still have plenty to play with. If I were you I would seriously consider purchasing a mobile home or a holiday home and looking into term time work options to maximise family time for the next 20-25 years. Then in 25 years sell the holiday home to fund the early retirement and bridge the gap until the pensions kick in.

You have lots of options, I am sure others will have good ideas too.

 

[Premos]

I would not forget to live in the now. I understand frugal. However leaving on 2.5k a month is quite low (at least if you have higher incomes). Life is short and is for living. Your focus and costs are probably going to be around family for the next 20 years with a child probably costing on average about 1k a month (that is without counting possible reduced hours).
I am not a big fan of holiday homes but definitely a fan of holidays and family holiday time...
If the house improvements will facilitate your life and make your house more comfortable, I would not wait (if feasible with a baby on the way). If you know you need them, you might as well.

 

[Willbo]

Once you grow your family childcare costs will be significant and your will be unable to save as much but this should still have plenty to play with. If I were you I would seriously consider purchasing a mobile home or a holiday home and looking into term time work options to maximise family time for the next 20-25 years. Then in 25 years sell the holiday home to fund the early retirement and bridge the gap until the pensions kick in.

Thank you for the kind words and suggestion. We already have access to two members of extended family in Europe where we can holiday in for a small fee without having to fund maintenance and upkeep so this would'nt be neccesary.

I would not forget to live in the now. I understand frugal. However leaving on 2.5k a month is quite low (at least if you have higher incomes). Life is short and is for living. Your focus and costs are probably going to be around family for the next 20 years with a child probably costing on average about 1k a month (that is without counting possible reduced hours).
I am not a big fan of holiday homes but definitely a fan of holidays and family holiday time...
If the house improvements will facilitate your life and make your house more comfortable, I would not wait (if feasible with a baby on the way). If you know you need them, you might as well.

I appreciate the sentiment but would consider us to very much be living life with 3-5 holidays/weekend breaks per year including 2 week trip earlier this year in southern Europe. Similarly, we would eat out often enough at least once a week on average with the occasional coffee treat etc. Honestly, I don't know how we would spend more than 2.5k per month on "living in the now" without basically throwing money out the window.

To put it into perspective, by not having the mortgage and if really neccesary, we would only really need 1k to cover the basic monthly expenses including food, bills and transport.

Absolutely agree with the incoming increased costs of childcare if my wife returns to work but hopefully the recent government realisation that childcare costs must be lowered to allow people have more children in order to save the pension crisis will alleviate this.

Similarly with the house upgrades, it would make sense to get that done prior to the new arrival but not sure how feasible that is.

 

[Premos]

Absolutely agree with the incoming increased costs of childcare if my wife returns to work but hopefully the recent government realisation that childcare costs must be lowered to allow people have more children in order to save the pension crisis will alleviate this.

The 1000 a month is not only the childcare. Baby are expensive if childcare. Primary school children are then expensive with activities and perhaps some childcare. Teenagers and young adults are then expensive on their own right.

 

[conor_mc]

Similarly with the house upgrades, it would make sense to get that done prior to the new arrival but not sure how feasible that is.

It might make more sense to wait. Having a kiddo changes your opinions on lots of things, but house layout tends to be close to #1 on that list! Never mind having a second or third!

That said, one piece of advice I offer to folks with a cash pile is to consider solar + battery if your home allows it. 6-7 year payback, then another 15-20 of inflation-adjusted savings beyond that. What’s not to like.

 

[misemoi]

Absolutely agree with the incoming increased costs of childcare if my wife returns to work but hopefully the recent government realisation that childcare costs must be lowered to allow people have more children in order to save the pension crisis will alleviate this.

I would say review how you might manage childcare given your fortunate financial position. Could you consider a nanny, that could provide more flexibility (eg easier to hire someone part time than to find a part time place in a creche, more likely to be able to care for a child with a mild illness etc) It would be more expensive than a creche setting but the difference might be worth it (only you will know that).

Do you have any family who might benefit from your generosity? EG could you pay for a holiday or nice experiences for anyone as a treat? Any relatives or close friends who you could support (eg Patreon)

 

[Duddaa]

In terms of house upgrades, now is the time to do insulation, PV panels, heating or windows, etc before the child arrives if possible and time permits.

Your opinion on internal layouts and refurbishments like bathrooms, kitchens, or other internal upgrades can change when you've kids. Suddenly sharp edges (accidents waiting to happen), crisp white fittings (with crayon drawings) and shiny surfaces (covered in finger prints) aren't so practical. You'll also view storage in a completely different way.

 

[faketales]

I wouldn't worry too much regarding starting the pension late given how far "ahead" you are on the house. The monthly savings seem huge, I would be maxing out pensions, with no mortgage there is no reason not to really.

Honestly, I don't know how we would spend more than 2.5k per month on "living in the now" without basically throwing money out the window.

That seems somewhat tight to me, are some of those holidays at family owned places? At that age I found attending weddings a huge expense, could be a few k a year all in including stags.

recent government realisation that childcare costs must be lowered to allow people have more children in order to save the pension crisis will alleviate this.

Without going political I am not sure this is policy and wouldn't really be betting on any major change in the next few years.

 

[Bronte]

Great age to have children. Wife should make sure she will contribute enough to get a good pension. She might want to stay at home which I don’t advise. 2nd child should be thought around not having two large crèche fees at the same time. Maxing pension now is good. Use tax rules to best advantage. Odd to comment you’re late starting pensions. Good VHI is a must. Life insurance? Funding child education to be considered.

 

[Premos]

2nd child should be thought around not having two large crèche fees at the same time

A lot of primary school children start at 5 (even if 2 years of pre-school before) so could be difficult. With the savings, I would not worry too much about that.

 

[faketales]

With the savings, I would not worry to much about that.

Exactly. Worst case scenario it’s like they have a mortgage for a few years (as opposed to a second as many describe it).

Their total worth must put them in the top 1% for their age?

It seems unlikely that even people with the big salaries in tech would be mortgaged free at that age.

 

[Willbo]

That said, one piece of advice I offer to folks with a cash pile is to consider solar + battery if your home allows it. 6-7 year payback, then another 15-20 of inflation-adjusted savings beyond that. What’s not to like.

That's actually a great idea to use some funds now plus with the grants still being available seems a no brainer. While our household usage is low with one (soon to be both) of our cars being EV it makes a lot of sense.

Having a kiddo changes your opinions on lots of things, but house layout tends to be close to #1 on that list!

Yup we are coming to that conclusion also about just doing some little bits and seeing how we get on before tackling the bigger changes. So many sharp edges around that you wouldn't even consider...

The monthly savings seem huge, I would be maxing out pensions, with no mortgage there is no reason not to really.

That is what we are currently doing but I am just unsure if it's the right way to go given that together we are just at 20% tax relief. Based on my rough calculations it still makes sense to max them and more so my wife who gets an employer contribution.

That seems somewhat tight to me, are some of those holidays at family owned places? At that age I found attending weddings a huge expense, could be a few k a year all in including stags.

We do not perceive it as tight and don't actively save or forego items/experiences so are lucky in the sense that are content that way. I should have specified that the monthly savings would be at least 3k in 10/12 months of the year with the latter being substantially lower due to holidays or the likes of weddings which are all around us and we very much enjoy

 

[Willbo]

Great age to have children. Wife should make sure she will contribute enough to get a good pension. She might want to stay at home which I don’t advise. 2nd child should be thought around not having two large crèche fees at the same time. Maxing pension now is good. Use tax rules to best advantage. Odd to comment you’re late starting pensions. Good VHI is a must. Life insurance? Funding child education to be considered.

Our plan (as much as thats worth anything) is to have 2 under 2 as thankfully, the childcare fees being at the same time would have a much lesser impact due to lack of a mortgage as faketales has mentioned.

My comment on being late to pensions stems from the majority of my peers having started some 5-8 years ago once they began working as they would be enrolled in employer schemes with contributions. My employer did not offer that so in that sense I was "late" to the pension party when compared to others around me but understand that it's not too bad in the grand scheme of things.

Thank you for the other suggestions, must look into healt insurance for family as currently have individual plans. Similarly given the lack of mortgage life insurance/income protection was placed on the back burner and should revisit with children on the way.

 

[faketales]

I should have specified that the monthly savings would be at least 3k in 10/12 months of the year with the latter being substantially lower due to holidays or the likes of weddings which are all around us and we very much enjoy

A more general point, personally I think "savings" and all expenses numbers are best looked at on a yearly basis than monthly. We could be "saving" money for 8 months then have major outgoings for 4 months such as insurances, property tax etc. I find there is no typical month particularly once owning a house.

 

[Premos]

As you have the finances, I would organise as much help as you can to make life easier with children. (nanny, cleaner...). Working life can become difficult and long-term, one is better staying on the workforce and outsourcing some other tasks.

 

[misemoi]

2 under 2 as thankfully,

Being out the other end, having a small age gap was tough in the early years (including financially) and has paid dividends now as they are older. They have similar activities, they are in the school system together etc. Obviously it is not always a choice and it is a very personal one but if you can try to picture life at every stage, not just the baby years it can really help in that decision making about family planning.

 

[misemoi]

.

 

[Willbo]

A more general point, personally I think "savings" and all expenses numbers are best looked at on a yearly basis than monthly. We could be "saving" money for 8 months then have major outgoings for 4 months such as insurances, property tax etc. I find there is no typical month particularly once owning a house.

Fair point and while only an average over the past 2 years or so, this would drop the monthly savings to approx. €2,700. Having said that, a one off spur of the moment purchase like a summer project car or the like can throw that out the window so wanted to give an idea of savings pattern.

As you have the finances, I would organise as much help as you can to make life easier with children. (nanny, cleaner...). Working life can become difficult and long-term, one is better staying on the workforce and outsourcing some other tasks.

Not something we considered greatly as my initial reaction is it would be weird having a stranger in the house be that for cleaning or minding. Guess that's just because its a new concept to me.

Being out the other end, having a small age gap was tough in the early years (including financially) and has paid dividends now as they are older.

Without sounding too naive given no experience of raising a child yet, I think we would be happy to take on the challenge of them now while younger and more capable to cope with the exhaustion etc. Have experienced and seen the benefits of having siblings be closer to age but oubviously could be out of our hands so fingers crossed.

 

[Willbo]

As I mentioned in the subsequent discussion, what would people's opinion be on maxing my pension with no ER contributions and being at 20% rate given our joint assesment status. The alternative being investing into the stock market and hoping for deemed disposal to be scrapped within the next 8 years.