Heading into our 40's Zero Savings

J

Jollyman

Registered User
Messages
59
Personal details
Age: 39
Spouse’s/Partner's age: 40
Number and age of children: 4 children – 10 Months, 2 Years, 5 Years & 7 Years

Income and expenditure
Annual gross income from employment or profession: €95,000
Annual gross income of spouse: €53,000

Monthly take-home pay about: €6,600

Type of employment: e.g. Civil Servant, self-employed: Private Company, Wife Civil Servant

In general are you:
(a) spending more than you earn, or Struggling to break even
(b) saving? nothing


Summary of Assets and Liabilities
Family home worth €900K with an €330K mortgage
Pension fund: €200K



Family home mortgage information
Lender: BOI
Interest rate 3%

Value: €900K
Mortgage: €330K

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc N/A
Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? Circa €2k

Car loan: €480 per month
Child Care: €640 a month at only 2 days a week care
Standard household utilities: Electric, Oil, Insurance, TV, Broadband €440 a month

Buy to let properties

Not applicable

Other savings and investments:

Do you have a pension scheme? Company that i work for pay €800 per month into a pension
Savings = €35K Children's allowance in a credit union account
Do you own any investment or other property? No
Other information which might be relevant
Life insurance: €348K cover
Health Insurance €3,600 Annually

One holiday per year Staycations

No frivolous expenditure. Live like hermits. We simply don’t have the spare cash. We are the classic example of what people would outwardly see as ‘successful’


What specific question do you have or what issues are of concern to you?
We took out the mortgage in Jan 2008 at €405k now in 2023 at €331k and 23 years left assume thats the majority of the payments going to the interest over the capital. Still its depressing viewing! We have fixed in 2020 at 3% for 5 years.

What i want from this is to identify what we can do, or where i can free up cash or investment options for the future. Should we use the €35k savings against the mortgage, i really want to lower the duration and save as much as possible on the interest going forward. I know there is possible breaking fees on the fixed term if i was to pay the lumpsum another option is to convert our garage using the €35k which was built to house standards to a self contained flat for rental possibly we are based in a popular coastal area with great views etc

I'm also keen to explore a mortgage top-up or buying a fixer upper somewhere or a local parcel of land for future potential sites is this something that would be possible based on current circumstances.

Like Quote Reply
Report
 
Firstly, you don't have zero savings. You've got 35k in the credit union. You're in a good position for a couple with 4 very young children.

There won't be any break fees at the moment, funding rates are much higher than when you fixed.

In your shoes, I would:
1. Pay off the credit card, and don't use it as a source of funding again except in emergencies.
2. Pay 30k off the mortgage.
3. Refix immediately for another 5 years at 3%. That rate is still available from BOI, but could change any day. This will provide you certainty on outgoings for the next 5 years.
You could shorten the term to 20 years, and have the same monthly payments. You'll be mortgage free at 60.

Forget about land and buy to let's for now. Keep your life simple. Make tax relieved pension contributions instead, you've a lot of headroom to do so.
 
Second thing - track your expenses for a month or two - you need to understand where the money is going. You'll then have options as to what course of action to take. It will give a tremendous feeling of control.

Third thing - once you've set your budget, and determined what you can save, do it via your pension scheme. It's automatic, you get a 40% top up from the tax man, it's maintenance free and compounds tax free.
 
Sell house for €900k. Buy house for €600k. You will then have no mortgage and can divert the mortgage payments to savings and living a little instead of living like hermits.

Living is more important than having an expensive house but living like hermits.
 
PGF2016 said:
Sell house for €900k. Buy house for €600k. You will then have no mortgage and can divert the mortgage payments to savings and living a little instead of living like hermits.

Living is more important than having an expensive house but living like hermits.
Click to expand...
Yes this is tempting me all the time, we bought the site built the house a great location and great views with lots of family history over the past 12 years its hard to convince my wife and im iffy enough also on it, but commercially it makes perfect sense.

Ideally buy a parcel of land and build again with potential for future sites in the location, but I'm not sure how local needs apply if i sell my own and look for a new planning permission etc im sure my kids would qualify for local needs down the line as we would be from the vicinity.
 
Ceist Beag said:
Income per month is €6600
Outgoings listed in OP amount to €1560 per month
Add in monthly mortgage repayments of say €2k
That leaves €3k per month unaccounted for. You really need to understand where this money is going.
Click to expand...
Yes ill post the budget, was using a previous money makeover post as a template. Kids activities alone is another €600 a month on top of the childcare, grocery shopping is circa €800 a month now, the cost of living at the moment has really put an additional squeeze on us hence this post.
 
nest egg said:
Second thing - track your expenses for a month or two - you need to understand where the money is going. You'll then have options as to what course of action to take. It will give a tremendous feeling of control.

Third thing - once you've set your budget, and determined what you can save, do it via your pension scheme. It's automatic, you get a 40% top up from the tax man, it's maintenance free and compounds tax free.
Click to expand...
I will get at this tracking tonight and post it.
 
Firstly with four kids you should give yourself some credit. You're not in that bad a financial position. As others have said you've €35k in deposits, that's something.

Start recording your spending so you can see where you're spending your money. Try to avoid cash as it's harder to track. Debit/credit card transactions can be reviewed at the end of the month. Even a couple of months of this should point you in the direction of what you're spending money on.

The savings are a good rainy day fund. However, I'd clear your credit card - it's your most expensive debt (and also relatively small so get rid of the outstanding balance). If you feel like you're struggling perhaps consider getting rid of the card, especially if you can't commit to clearing it every month.

If you're stretched financially I would not reduce the term of your mortgage. Why turn the screws on yourself... Leave the term as it is and overpay those months that you have spare cash. All going well you'll pay off your mortgage as quick as if you had shortened the term but without forcing yourself into a corner.
 
You have yet to turn 40 and already have -

- €570k in house equity(!);
- €200k pension fund;
- Accrued civil servant pension entitlements; and
- €35k in after-tax savings.

I would say you are doing exceptionally well for somebody at your age and stage in life (particularly with four young kids).

If you paid off the credit card and car loans from your credit union savings, your cash flow position would improve hugely.
 
You are going through a very expensive stage of your life and the cost of everyhting is going up, so I sympathise.

You should do a few things
- A very detailed analyssi of where your money goes so you can be ruthless about cutting out expenditure that doesnt add value to your lives. I dont mean cut out all luxuries but think hard about which ones are important and which ones you can drop
- Pay off the CC bill
- Get rid of any notions that you can afford a site or second property in the next decade. Your priorities are ( in no particular order) - pay off your mortgage, continue pension payments, live a good life with your kids, have a bit of a buffer for unexpected expenses. Your current mortgage wont be paid off until you are in your early 60s, why would you take on further loans, even if someone would give you one
 
Jollyman said:
Car loan: €480 per month


One holiday per year Staycations
Click to expand...

What's the balance of the car loan? This should be addressed after the credit card debt is cleared.

Staycations are luxury compared to value that could be had in Spain/Portugal, think outside the box!

You're not doing too bad at all.
 
How are you coming home with only €6,600 per month with those gross incomes? Assuming no pension contribs, you should be bringing in around €8,300 per month? Add in another €560 for child benefit. Should be closer to €9k a month which is a different situation entirely.

Would need to be some mighty AVCs going on which you don’t mention to bring the net income down that far?

If you are only taking home €6,600 then 4 kids and a €900k house (and the running costs that brings), it’s no suprise you aren’t exactly rolling in excess cash.
 
I think the headline here is misleading. You have over 600k in net wealth plus pension value. You are not a hard luck case. If you are struggling on a day to day basis then you really need to consider moving to a 'cheaper' house. With that income and that house value you really shouldn't be struggling.
You are 'successful', you're just not managing your cash flow very well.
 
Jollyman said:
I will get at this tracking tonight and post it.
Click to expand...
If you can get into the habit of doing it every month, you'll also be able to see the impact of the changes you make over time too.

Start hacking away at all expenses - switch utility providers, review subscriptions, and take control - decide what's important (and what's not) to spend your hard earned money on.

You've taken the first step in posting here, and as others have mentioned, you're in a better position than you probably think. Best of luck!
 
nest egg said:
I think a lot of people are guilty of compartmentalising their money - I suspect the OP isn't thinking of the 35k as savings, but likely as a fund for their children's education or similar. It would explain why they didn't pay off the CC using it.
Click to expand...
Exactly this yes we would feel guilty using it.
 
Last edited:
You must log in or register to reply here.
Back
Top