Moneymakeover Mid life financial review

[BigBoots82]

Age: 43
Spouse’s/Partner's age: 45

Annual gross income from employment or profession: €150,000
Annual gross income of spouse: €60,000
Monthly take-home pay: € 9,000

Monthly expenses: circa €6,000 (includes the below)

• Mortgage 1650
• 
  
• Gas + Electricity + Bins 175
• 
  
•  Food 600
• 
  
• Creche 650
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• Kids clubs 50
• Life insurance 50
  
  
• Property Tax 50
• Broadband and TV 65
  
  
• Car Insurance and tax 60
• 
  
• Diesel 100
• 
  
• Entertainment/eating out etc 500
• 
  
• Phones x 2 45
• 
  
• Type of employment: Both in private sector
  
  In general are you:
  (a) spending more than you earn, or BREAKING EVEN.
  (b) saving? We are saving
  
  
  Rough estimate of value of home: €450k
  Amount outstanding on your mortgage: €165,000 (13 years remaining) rate is 2.5% fixed for 13 years.
• 
  Do you pay off your full credit card balance each month? Yes, always.
  
  Savings and investments: €88,000 in cash savings (instant access deposit interest of 2.6%). 3,500 in etfs (degiro)
  
  Do you have a pension scheme? Yes, both in DC scschemes10% employer and 25% personal for me. Current total value is €350,000. Partner pays 25% and employer pays 15%. Pension fund amounts to c. 200,000

Ages of children: 2 kids (5 and 7)

Life insurance: We both have policies that pays 4 x Salary on death. Spouse has serious illness cover. I have income protection (75% of salary)

We've spent about 7.5k on holidays a year for the last 2 years.

Questions

Home improvement project under consideration on the forever home. Cost estimate is 150k to 200k and likely would need to rent for 6 months while works ongoing. 75k of the cash on hand would go towards same. Either we defer start time till we can save the balance or we get a (hopefully) low cost home energy upgrade loan and use this with grants to fund. My preference is wait till we finance out of our own resources and maybe cut back on pension contributions temporarily as a source of funding. My spouse thinks let's do now and get the most time in the upgraded house. Any thoughts?

If we are missing anything more generally on the wider picture above, please let me know.

 

[DeeKie]

I’m with the spouse. You will be glad to do it now and you are in a good financial position to do it.

 

[Blackrock1]

It's not getting any cheaper , go for it now and get on with the rest of your life. You can well afford it

 

[_OkGo_]

If we are missing anything more generally on the wider picture above, please let me know

I think you need to take a step back and get some perspective on your situation.

If you were to spend €200k on the upgrade now, you would essentially need to add €125k to your mortgage. That would leave you with a mortgage of €290k on an income of €210k. That is very comfortable for a 43/45 year old.

There is huge value (non-financial) in enjoying the utility of the upgraded or expanded space that you will have sooner rather than later.

You have very well funded pensions, very good income and your lifestyle spend comfortable. The amount you need to spend is very reasonable in proportion to your means. Affordability will not be a problem for you.

Your only mistake, financially, has been the unnecessarily short term on your mortgage. It is much more flexible to take a longer term and then actively overpay.

In your shoes I would:
- Scope the work properly either yourself or with an appropriate professional, e.g. architect, QS
- Get it priced, pick a contractor and get a start date. You'll probably be 6-12 months waiting for someone to start anyway depending on the scale of the job
- Go to your bank and do whatever you need to do to get a mortgage top up loan and if possible, get the full term extended