Need advice on better money management

J

JJMerry

Registered User
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3
Hi

Visit this site a lot but first post. Would appreciate advice - at crossroads and need advice on next step to better money management and a few large financial decisions regarding work on our home. Documented everything as best I can. Any questions please ask.

Age:
40
Spouse’s/Partner's age:
43
Children: 2, aged 6 & 9

Annual gross income from employment or profession:
E100k / E4,994 per month after tax
Annual gross income spouse:
E25k / E1,541 per month after tax
Child Benefit:
E280 per month
Mortgage TRS E56 – ending December 2019

Total incomings: E6,852.70

Spending: E5,580 p/m currently

Type of employment:
Me: Private sector
Spouse: Charity – part time

Expenditure pattern:
Consider ourselves cautious… never had credit cards until recently when one was required to hire a car.

Until this year we have not had the extra money to save with crèche fees. Wife’s job changed so now in position to work around school hours and pay minimal childcare.

Had substantial pay raise at work recently so looking at best way to save approx. E1,500 per month - or if we cut costs possibly more?

Biggest outgoing after mortgage is paying elderly mothers mortgage. Two siblings assisting also. Mother was left in bad financial situation and brought us up alone. My upbringing makes me very cautious about money - terrified of not having at least one months wages in the bank at all times.

Rough estimate of value of home
E490k (Dublin – recently valued)
Mortgage on home
E245k – 21 years left
Mortgage provider:
AIB
Type of mortgage: Variable 2.95%

Other borrowings
Car paid outright – 10 years old and will need upgraded soon. Not fussed on year just reliability.

Credit Union College Masters loan – 5.5% Education Loan.
E3,585k remaining (paying E200 per month) and E1400 in shares

Family obligation:
Assisting parent with paying mortgage.
Paying E600 per month.
2.5 years remaining.

Credit Card: Do you pay off your full credit card balance each month?
Yes – rarely use it.

Savings and investments:
E6,000 saved in regular current account

Do you have a pension scheme?
Yes, 2 years old, Company contribute E500 per month. Includes death in service.

Paying UK National Insurance contributions towards UK state pension as started working life there. Current Estimate £159 per week in 2045 but Brexit who knows?

Wife has PRSA with employer. No death in service. PRSA started 18 months ago. 5% of salary, plus same contribution from her E186.00 p/m

Also paying UK National Insurance contributions towards UK state pension. Current Estimate £159 per week in 2042

Has a UK Group Personal Pension Plan from former employer worth £15k in 2040

Do you own any investment or other property?
No.

Childcare: Was paying crèche / after school fees last 9 years. Wife now able to work mostly around school hours so bulk of childcare fees gone. Minimal annual fees now of E100 per month annually.

What specific question do you have or what issues are of concern to you?
1. Need to reorganise finances including leaving Ulster Bank where we both bank (Considering KBC – open to suggestions) and setting up proper savings account which will earn money. No college accounts started for kids. Worried for future.

2. We can be saving a lot more now and want to set this up so money not flittered away monthly. Also need to reorganize direct debits etc and get better deals on household bills. Can make reductions on household bills, buying lunches out etc.

3. Are our pensions enough?

4. Can we get a better mortgage deal? If changing mortgage and banks but need to apply for finance do we need to do this before changing bank accounts?

Any plans to move or do work on the house?

Have a problem with the house (inherited bad kitchen extension which needs addressed sooner rather than later – quoted E30k to do what we would like).

Considered remortgaging as way to raise funds to address this but clueless as to whether this is best way forward. Appreciate advice here.

1 x car owned outright but 10 years old and starting to give problems – need to consider car with higher years soon.

Both been keeping spending diaries and on same page regarding finances:

Spending roughly E5,580 per month on everything.

Can provide documented breakdown if it helps, but I think i've included the main items above.

Thanks for your time.
 
Pay off your loan tomorrow with your savings. You don't need to be paying interest.

If you must change the car buy a 3 or 4 year old car with cash from savings. Not a loan.

Make a budget. Stick to it. Spend your salary on paper first before you spend it in real life.

Your parent should have had their mortgage paid off by now. Take a serious lesson from this. Pay off your mortgage as soon as you can. You don't want your children to go through the same. This is a very sad situation but at least there is only two years left. You shouldn't have been put in that position.
Borrowing more is rarely the best way to get ahead financially. Save for your kitchen. Never borrow again. You don't need to.

Don't buy into the high valuation on your home. Do not "release" equity. Releasing equity "traps" you and your family.

I've been following Dave Ramsey's baby steps. He's a bit preachy but if you can get over that his advice is simple and solid. It's working for me but that's because I've bought into it.
  • Baby Step 1 – €1,000 to start an Emergency Fund
  • Baby Step 2 – Pay off all debt using the Debt Snowball
  • Baby Step 3 – 3 months of expenses in savings
  • Baby Step 4 – Invest 15% of household income into retirement
  • Baby Step 5 – College funding for children
  • Baby Step 6 – Pay off home early
  • Baby Step 7 – Build wealth
Steps 4,5 & 6 can be done at the same time.

Prior to following D.R. I thought debt was normal. Debt should be a last resort except for your home.
 
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You've obviously researched a lot, and you're asking all the right questions.

Excluding mortgage, loan repayment, and helping parent, you're spending approx 3,470 per month? With low childcare and no expensive car I'd think there might be a few expenses to review if you're serious about saving some money.

JJMerry said:
4. Can we get a better mortgage deal? If changing mortgage and banks but need to apply for finance do we need to do this before changing bank accounts?
Click to expand...
You could switch to <50% LTV with AIB (2.75%) for the cost of a valuation report. AIB have free banking for the account the mortgage is paid from.

Otherwise, switch for a better rate to UB or KBC. They'll need 6 months of statements, so just keep things tidy if you switch accounts - avoid missed DDs etc.

JJMerry said:
Any plans to move or do work on the house?

Have a problem with the house (inherited bad kitchen extension which needs addressed sooner rather than later – quoted E30k to do what we would like).

Considered remortgaging as way to raise funds to address this but clueless as to whether this is best way forward. Appreciate advice here.
Click to expand...
If you need to do the work (immediately, before you can save to do it), equity release is best way to do this. No point borrowing at personal loan rates, but set up a standing order to pay extra off the mortgage. Don't be paying for your new kitchen units over 20 years!

JJMerry said:
Family obligation:
Assisting parent with paying mortgage.
Paying E600 per month.
2.5 years remaining
Click to expand...
If this is ongoing, get tax advice. A deed of covenant might provide you some tax relief.

JJMerry said:
setting up proper savings account which will earn money. No college accounts started for kids. Worried for future.
Click to expand...
Nothing is going to 'earn money' at the moment, without taking on some risk.
There's a discipline aspect to this - the best risk free after tax return is paying your mortgage. But don't do it at the expense of having no cash.
Work out how much you think you'll need for college fund, and when. It's easier to advise re goals - do you need 5k per year, but not for another 10 years kind of thing. You might need say 40k, but you don't need it all the day the oldest leaves school.
 
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[QUOTE="
If you need to do the work, equity release is best way to do this. [/QUOTE]

The best way to do this is to save up for it.
Do you want your children to be paying your mortgage some day. This is what the real cost of borrowing for the kitchen could be.
 
Laughahalla said:
The best way to do this is to save up for it.
Do you want your children to be paying your mortgage some day. This is what the real cost of borrowing for the kitchen could be.
Click to expand...
I've amended my post so the context of my comment is clearer.
 
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