Financial Review - on the right track?

islander222

Registered User
Messages
11
Age: 41
Spouse’s/Partner's age: 40

Annual gross income from employment or profession: 109K (€86k base salary + 11K car allowance + 12K Bonus)
Annual gross income of spouse: €24k (actually its 39K gross salary but taking 2 days parental leave a week currently)

Monthly take-home pay: €6,150 (not including €420 child allowance)

Type of employment: Me: Private Sector
Spouse: Public/Civil Servant

In general are you:
(a) spending more than you earn, or
(b) saving? Yes 1k per month and also recently started a long term college savings for kids (150/month)

Rough estimate of value of home: €260000
Amount outstanding on your mortgage: €174K
What interest rate are you paying? Split 154k @ 1.8% (mortgage move ECB+1.8%) & 20k @ 3.9%

Other borrowings – car loans/personal loans etc: Yes. 1) Car (PCP €342/month, ~15k remaining, 3.9%) 2) Home improvement loan (€350/month, 25k remaining – 7.9%)

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? zero

Savings and investments: 1) €21k on deposit (for Home improvements later this year), 2) ~22K company RSUs vesting over the next 2/3 years, 3) Only recently started college savings

Do you have a pension scheme? Yes
Me: Current company pension (worth ~34K company contributes 7% and I contribute 5% plus recently added 4% AVC) plus previous company pension worth ~60k
Spouse:
Civil Service pension since 2008. This is one of my questions – I tried researching what this pension would look like for her.. Would I be on the right track if I said 7k per annum with some kind of lump sum?

Do you own any investment or other property? No

Ages of children: 11, 5, 2

Life insurance: Yes €400k each and I have DIS benefit of 12 Times salary. Not sure if spouse has anything else from public sector?

My Questions:
So, I only recently got a handle on and started track our finances with the help of Eoin McGee and this forum which is great! Up until then we were spending what we made and I had no idea what exactly we were spending on.
I’ve recently started to see good additional income and bonuses from my job so we’re in a better financial position now but I want to ensure I set out a sound long term plan.
In general I want to prepare correctly for retirement but enjoy living in the now, however, I know we carry too much debt so over the next 5 years I would like to eliminate that as much as possible so that we are saving for what we consume (i.e. cars etc).
But… we are planning a renovation project in the short term so that is going to hurt us and might not be the best idea (we’re going with more of a “want” over a “need” on this one). The plan is to re-mortgage for the max we can get up to 80% of house value – we’ve already engaged an auctioneer and expect to get it valued at ~320k post works. We also plan to roll the 7.9% home improvement loan into the new mortgage and extend the non-tracker portion to the max term (currently 19 years so extend to 26 yrs).

Currently my plans are:
  1. Continue to save for what we consume (changing cars, holidays, any future home improvements) and after year 5/6 only have the mortgage as debt.
  2. This renovation is the last big expense I expect on the house – forever home etc. I had assumed that we should over pay by 100 or 200 on the non-tracker part of the mortgage and eventually pay it off earlier – i.e. by the time we are 60
  3. I contribute 9% currently to my pension and 2k from my yearly bonus. I expect that to remain the case over the next 5 years but once I’ve got a handle on the debt currently servicing our “luxuries” I will look at increasing the monthly contributions and then at least 50% of bonuses ongoing?
  4. I started the college fund with Zurich (Child savings plus) which is 150/month. Child no.1 will be out of college by the time no.2 starts. I probably don’t need to save for the full expense as I expect wages / bonuses should cover. Do people keep one such policy for all children or start a separate policy per child?

Hoping for some validation that I’m on the right track, or if I’m not maybe some additional advice?
And maybe if someone would know more about the expected public sector pension for someone that joined in 2008

Thanks for reading!
 

RedOnion

Frequent Poster
Messages
6,209
Ok, some reading for you.

There are a few threads in the topic of making investments at the same time as carrying debt. Basically it's madness to be borrowing money at 7.9% to invest it outside a pension. Which is what you're doing. It's crazy!

Because you mentioned Eoin McGee specifically, the following is worth a read.

There's a feature of your PTSB mortgage that you might not be aware of, but might be useful in planning for college expenses:

I'd suggest that your own pension funding looks light at the moment.

Can you confirm that your married and jointly assessed for tax?

I'd suggest that you look into creating a family budget, and track exactly where your money is going weekly / monthly. You've got a high income but not a lot to show for it. It's a useful exercise to see where you're spending money unnecessarily, and you might find it easy to cut out waste when you see it.

And prepare yourselves for the shock of the current prices of renovations!
 

islander222

Registered User
Messages
11
Great thanks. Yes married and jointly assessed.
Just to add - my income has significantly increased the last two years - before that, no bonus, no stock. base salary increased by 20/30% over last 2/3 years so that probably accounts for some of the reasons. Hence why I want to start doing things better asap.
Yes - the renovations... shocking.
Regarding my spouses pension - would you have a general idea about that - will it be in good shape for her retirement?
 

RedOnion

Frequent Poster
Messages
6,209
Just to add - my income has significantly increased the last two years
Ah, apologies if I sounded over critical. I've seen first hand how easy it is for spending to quietly increase in line with salary in things you haven't actually planned for. It's always a worthwhile exercise even if you're not trying to cut back.

Regarding my spouses pension - would you have a general idea about that - will it be in good shape for her retirement?
I haven't a clue when it comes to public sector pensions, but there are other posters very knowledgeable on the topic. It's generally quiet on bank holidays, so give it time before you get a response on that.
 

NoRegretsCoyote

Registered User
Messages
3,348
This is one of my questions – I tried researching what this pension would look like for her.. Would I be on the right track if I said 7k per annum with some kind of lump sum?
If she has 40 years service at 68 she will get a pension of 50% final salary integrated with state pension, and a one-off lump sum of 150% of final salary tax free.

So at a salary of €40k that's a lump sum of €60k plus €20k pension. The €20k is the state pension contributory of €13k-ish plus your €7k.

But be careful as if she is on shorter working time arrangements she loses pension accumulation rights pro rata. These can be bought back later though.

The nice thing about a pre-2013 pension is that it is final value-salary-based so a late-career promotion can be very valuable. The Single Scheme for new entrants is based on career average earnings.
 

islander222

Registered User
Messages
11
Thanks for clarifying that, especially what the pre 2013 contributions were as I had struggled to find exactly what that could mean. Now we know we can plan accordingly.
If she has 40 years service at 68 she will get a pension of 50% final salary integrated with state pension, and a one-off lump sum of 150% of final salary tax free.

So at a salary of €40k that's a lump sum of €60k plus €20k pension. The €20k is the state pension contributory of €13k-ish plus your €7k.

But be careful as if she is on shorter working time arrangements she loses pension accumulation rights pro rata. These can be bought back later though.

The nice thing about a pre-2013 pension is that it is final value-salary-based so a late-career promotion can be very valuable. The Single Scheme for new entrants is based on career average earnings.
 

cremeegg

Registered User
Messages
3,615
Some suggestions
1. Pay off the loan at 7.9% now
2. Cancel the college savings plan. (The objective is your overall position not how much you have in which pot.)
3. Put the college savings money against your 3.9% mortgage, or use as 5.
4. Resolve the PCP
5. Save for the home improvements
 
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