Moneymakeover Money Makeover- 37yo

[financialtips]

Your age: 37
Your spouse's age: 35
Partner's age if not married:

Number and age of children: 1 newborn and i have a child from previous relationship (15)


Income and expenditure
Annual gross income from employment or profession: 100k
Annual gross income of spouse/partner: on maternity leave, not returning to work

Monthly take-home pay: Between us it's about 6.5K currently. Will drop once wife doesnt return to work

Type of employment - e.g. Employee or self-employed. - Employee
Employer type: e.g. public servant, private company. - Private

In general are you:
(a) spending more than you earn, or
(b) saving?

I have gotten better at saving- Had struggled during the recession but salary etc have improved over last number of years after a few good career moves (45k to 100k in 8 years)


Summary of Assets and Liabilities
Family home value: 275k
Mortgage on family home: 137k remaining


Cash: 10k- Save about 700 per month as well as renovating house and hopefully adding value.
Defined Contribution pension fund: 27k in pension. I was self employed up to 2018 and tbh wasnt smart with finances at the time as was traveling over and back overseas
Land Property value: 150k :
Small Farming enterprise: Approx 5k Profit per year
Farm Stock Value (Approx 10k)

Total net assets: around approx 300k (Excluding remainder owed on family home and some farm assets like quad etc)

Work change incoming which will likely net me a further 20k per annum that i would like to put into my pension and be more tax efficient.
Farm enterprise is in wifes name. We will be declaring the income and i will avail of remainder of tax credits going forward.


Family home mortgage information
EBS Variable 4.1%

Remaining term: 28 years
Monthly repayment: E640


Pension information

Value of pension fund: 27k currently

Buy to let properties
Value: N/A


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

Having just paid off a 10 year land loan and have an additional E720 per month i had been using for repayments available i was wondering what is the best options for it. Id like to continue to buy land and build up the acreage as an asset to pass down but my wife would like to overpay our mortgage. Would appreciate thoughts on both options?.

Also with a sahm and a part time farm enterprise how can we make this tax efficient. Feel like we are somewhat punished tax credit wise by deciding not to put the child in creche

 

[ClubMan]

Feel like we are somewhat punished tax credit wise by deciding not to put the child in creche

Well, you should benefit from the married/single earner increase in the standard rate band, double personal tax credit, and the home carer tax credit so it's not like you get nothing for your choice to have one parent act as a stay at home carer?

Tax rates, bands and reliefs

This page shows the tables that show the various tax band and rates together with tax reliefs for the current year and previous four years

www.revenue.ie

 

[Premos]

If your wife does not return to work, would your income not decrease by at least €720, so making that additional money no longer available?
What are your calculations in term of your future monthly take home?

I don't know how easy it is to sell land. With one wage coming in, I would increase the saving as 10k is a small rainy day fund. With one income, the risks are higher.
I would also look at insurance if you don't have them into place. (life/income protection)

Defined Contribution pension fund: 27k in pension.

Is that the total fund? If so, I would increase your pension contributions if funds are available.

 

[CharlieMac]

Id like to continue to buy land and build up the acreage as an asset to pass down

I wonder is buying land the best way to build wealth for purposes of enriching the next generation? I suspect just steady contributions in to an ETF over several decades would yield a better, and hassle free, return even if deemed disposal remains.

 

[financialtips]

Well, you should benefit from the married/single earner increase in the standard rate band, double personal tax credit, and the home carer tax credit so it's not like you get nothing for your choice to have one parent act as a stay at home carer?

My calculations are I guess based on the fact the tax credit is lower than that of say a 2 income family on 50k each.

 

[financialtips]

wonder is buying land the best way to build wealth for purposes of enriching the next generation? I suspect just steady contributions in to an ETF over several decades would yield a better, and hassle free, return

I enjoy farming and think its a good environment to raise my family in. The last piece of land I bought would have outperformed an etf I think. Bought 10 yrs ago for 8k per acre. Neighbouring fields sold recently for 22k per acre

 

[Alkers86]

You could also fix the mortgage for a few years if you're not going to overpay given your on 4.1%!

 

[ClubMan]

Bought 10 yrs ago for 8k per acre. Neighbouring fields sold recently for 22k per acre

That's a potential CAGR of 10-11%.
MCSI World Index over the same period: c. 12%
S&P 500: up to c. 15% depending on how dividends are handled

But you'd need to look at your overall "portfolio" and not just one asset holding...

 

[misemoi]

I think the issue with land is how illiquid it can be. The market can be restricted so you might have to wait to get a good price. It depends on when you expect if ever to liquidate it. EG to pay for education costs, or for your retirement etc. If that timeframe is a moveable feast, then selling land to pay for it can work out.

Will you have expenses relating to education for your older child? Have you done out a medium term cash flow including this expense?

 

[financialtips]

Will you have expenses relating to education for your older child? Have you done out a medium term cash flow including this expense?

Older child wants to complete an apprenticeship once finished secondary school so no big expense post 18

 

[BoscoTalking]

Would you encourage one of your children to do the GreenCert in order to be able to avoid tax when the land is passed down?
The one thing about land is that there is no more being made! I can't ever see it being a burden unless its something to fight over when you have passed on, and there is plenty of that.

 

[Bronte]

Id like to continue to buy land and build up the acreage as an asset to pass down but my wife would like to overpay our mortgage. Would appreciate thoughts on both options?.

Well given you're the one earning and she's not should one do that I wonder. If you're both happy with this decision (staying at home) that never made it a source of resentment (I'd be resentful) Has your partner considered what a precarious position it is to be in with no income and losing out on pension rights. There's not much justification for staying at home except for maybe the early years.

You should look at your mortgage rate to get a better rate and maybe bring in the term from ending when you are 65 to 60 or even 55.

The child (boy I presume) heading to a trade is on a good path. There's certainly plenty of money in them and not everyone is suited to college. Frankly given the money the trades are earning I've had a serious rethink about the value of college education. (depending on what you do).

Can't advise on the farming, but you see those rises in acreage, what goes up can go down. But it's your heart's desire so stick with what you know. As long as it makes financial sense. You're doing well. Mortgage is relatively low.

Pensions is what you need to think about. And given there's only one income, income protection (which I consider impossible to get paid out on - so take good advice and read the small print). Life insurance is not mentioned. Very important.

Tax credits for a creche is not a reason to do it. What is best for the family/child should be the decider, unless the finances don't permit it.