Inheritance - debt, savings, life?

Ozeire

Registered User
Messages
6
Hi all,

Due to receive an inheritance of approx 45k (after tax) in the next few weeks. Trying to work out the most sensible thing to do with the money. We'd like to have our first family holiday in over 4 years - approx. 2k and book flights to Australia to see family at the end of this year - approx 5k.

Would like to get other people's opinions as OH and I can't agree. We've been building up careers, studying, had 2 kids and trying to finish house renovations over the last 4 years so money has been scarce! Would like to get back to a positiom where we're not worrying about money every month. We'll both be back to work next month after 9 months of maternity leave so this is based on financial situation from then.

Age: 29
Spouse’s/Partner's age: 43

Annual gross income from employment or profession: €32,000 + €5-10k bonus (working 4 day week so could go up to 40k towards end of the year).
Annual gross income of spouse: €31,000

Monthly take-home pay: approx €4,350

Type of employment: e.g. Civil Servant, self-employed - both private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Will be saving €500p.m. but have to dip into this for things like car service, car tax, etc.

Rough estimate of value of home
Amount outstanding on your mortgage: No mortgage. House value of around 300k.
What interest rate are you paying?

Other borrowings – car loans/personal loans etc: car loan roughly €6.5k to be paid off feb 2020 (shamefully at 14.5% as spouse has terrible credit history and I had no credit history in Ireland), personal loan with CU of €2.5k to be paid off with inheritance as in arrears.

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? €11k over 4 credit cards.

Savings and investments: none, going back to work from maternity leave next month.

Do you have a pension scheme? Yes, approx €35k, contributing 6% employee and 6% employer. Spouse has no pension. Hoping to setup prsa contributing 10% mid year after pay review.

Do you own any investment or other property? No

Ages of children: 2yrs and 8 months

Life insurance: for me - 4x salary through work, $390k through pension in australia. €100k through laya life for spouse.

What specific question do you have or what issues are of concern to you?


Should we use the inheritance to pay off all debt? We don't have any savings at the moment, should we pay all insurance annually with the inheritance so we can save more every month? We have health, pet, house, life and car insurance of €400p.m. Creche fees of €1,400 pm with at least another year before they'll drop to about 1k for another year or 2.
 
Last edited:
Pay off all credit cards immediately, as you are surely being fleeced on APR. Same for car loan and credit union load. So yes, pay all debts first. This is a once in a lifetime windfall to allow you to clear the decks.

By the figures above, that leave you with 45K - 11K - 6.5K - 2.5K = 25K.

Take that 25K and put 6 months living expenses aside into an emergency fund (that you DO NOT dip into). This is to cover emergencies like redundancy etc, not to cover regular bills like car tax and creche. I would estimate very roughly that this should be about 15K, based on having 1.5K per month in creche fees alone.

E25k - E15K of emergency leave you with 10K. Having bills each month on direct debit IMO is really draining, just pay them once and be done. Personally, yes, I pay *all* bills annually. So say E400pm on bills, so that is about E5000 on bills annually. I would put that aside as well. That then leaves E10K - E5K = E5k to spend on the family.

You mention two holidays of E2K and E5K, which is E7K. I think you clip them so they come under E5K in total, based on calculations above. Do not go into debt for a holiday.

That's what I would do anyway!

Hi all,
How do I explain to spouse that if we use a budget we'll actually end up with more money.
This is not a relationship advice forum, that is up to you :D
 
Great advice above. In conjunction with this I would aim to pay off the loans as soon as the inheritance hits your account. This will ensure that you do not get overly comfortable with having the money in an account. I have seen people receive lump sums with the intention of paying off debt but the longer the money sat in their account the harder it became to part with it. I would contact each debt provider in advance of receiving the funds and ask them for a settlement amount.
 
Might be worth checking that life cover through an "through pension in australia" still valid once left scheme and living abroad or perhaps you have checked already?
 
Thanks mtk. Already checked, have it in writing and forwarded to OH just in case.
 
paying health with laya annually reduces cost - i do that
paying car insurance annually also saves you cash as you are charged interest for paying monthly
 
Would it not make sense for the higher earner to remain working and claim all tax credits plus home carers tax credit? This would negate the need for such exorbitant creche fees for a start.The monthly take home pay for the two of you would not be much different .This would allow a better quality of life for the family as a whole.
 
I agree with the others - be sensible, pay debts and have a rainy day fund. But if you and your partner aren't in full agreement - take into account which of you inherited the money! If my husband inherited a large sum, I'd be happy for him to have a bigger say in spending the money, especially the fun stuff like holidays.
 
@Ozeire I would just like to re-enforce what others have said here. This is a change for a new beginning for you as a family so you need to be very careful about how you do it. First thing, before anything else is to pay down all your debts - totalling 20k. You should try and get a haircut on those numbers, so negotiate hard with them. Tell them you are thinking of moving back to Australia and would like to clear your financial situation before you go, and ask them if you are to arrange a single settlement now what would the figure be. Innocently ask if the debt is secured on anything? Its likely its unsecured debt so they may be willing to negotiate on it. Personally, I would be aiming for at least a 10% haircut, especially on the credit cards.

At that point, look to put at least 15k away into an account you have to make a very conscious effort to access, ideally send a letter in writing to move the funds to your current account. This needs to be the emergency fund and needs to be treated for real emergencies as discussed above. Ideally two signatures needed to transfer the money across to avoid temptation.

This leaves you with 10k roughly. I am not going to say not have a holiday and not visit your family in Australia. I am going to say the opposite and go do these things, just be careful with the timing. Also consider the type of family holiday you want to have with a 2 year old and a baby. The baby is easy to travel with - the 2 year old much more difficult. Also think of when/where you want to go, the heat of the summer months and the massive premium cost of peak season between June and August (inclusive). I would suggest mid-late September or early October as it can still be quite pleasant for children and there are good deals to be had. The trip to Oz I will leave with you :) But do see if there are any airlines which offer very cheap fairs to 2 year olds and be careful of the childs birthday on the return date !
I would not say to blow the 10k on this though, and try target at least 4k or so left over that will be used solely for annual expenditure such as health insurance, car tax, insurance, car service etc. The trick is then to pay 350 a month into a regular savers account, so next year you have another 4k to pay the annual expenditure and keep the cycle going. This assumes 4k is your budget for annuals.

Irrespective of the inheritance, a critical step though is to do a proper household budget for the family, taking into account all monthly, annual and ad-hoc expenditure. As a family you need to understand where your money is coming from and going to. There is lots of talk above about saving and later dipping into it, starting PRSA's etc. You need to have a proper financial plan to show yourselves what your options are, how much you expect to have left each month (and the regular savers for annuals is a monthly expense) and you can then decide what to do with it - whether it be save it or put it into a PRSA.

I think you seriously need to consider what your childcare arrangements are and what will work best. There is a chance that a one income family may actually work better for you in the short term - no idea in the long run as it depends on the careers you both work in. Keep in mind the transfer of tax credits, the home carers tax credit etc. You need to do the maths to see how it works. Having two in childcare at the same time is expensive, and also need to understand if one is sick etc who is taking the hit to mind them. Its not easy and it really cannot be left on one persons shoulders to take the full childcare burden when they are sick.

The final point I would make is your spouse has 100k life assurance cover. You have two children under the age of 3 who are likely to be dependents for the next 20 years. That works out at around 5k a year. Is this really sufficient cover ??
Pensions are also a concern, but probably harder to fix in the short term. You are not unique in this regard.
 
Thank you everyone for your input. OH has spent the last few years retraining in a new field so hopefully wages will increase significantly over the next 5 years or so. Neither of us have any interest in staying home full time so creche fees are unavoidable for the forseeable.

I have taken all suggestions on board and will push for all debt to be paid off and insurances paid for the year. If you try to negotiate a lump sum payout and they agree to a lower amount does that have a negative effect on you credit history?

I'll also look into increasing life insurance for the OH.

We're going to sit down and do a budget again when we have a final figure for the inheritance.

Thank you!
 
€45k isn't an awful lot of money in today's world, but if you hadn't got it you'd find it very difficult to put together, so don't waste it now. As regards the tax credits, etc, that others have mentioned? Are you a married couple or living together? It may impact on the tax situation, etc.
 
@: Noproblem we're married. I didn't think it would make much of a difference transfering tax credits?
 
not like its a particularly large sum OP so pay off your debts , that car loan is off the charts in terms of repayments
 
Back
Top