Moneymakeover Need financial advice please

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lorrlorr48

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4
Personal details

Your age: 48
Your spouse's age: 48

Number and age of children: 3 kids, 8 years 14 and 15


Income and expenditure
Annual gross income from employment or profession: 40K
Annual gross income of spouse/partner: 50k

Monthly take-home pay:6200

Type of employment: Employee
Employer type: Public service for both of us.

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

We save 200 a month. I'm unsure really where it goes as we don't go out much or spend heaps .

Summary of Assets and Liabilities
Family home value: 410K
Mortgage on family home: 70K
Net equity:?paid 210 for the house.


Cash: 50k in bank
25k in credit union
Unsure what to do with this cash .Any advice?
Value of pension fund: my pension only started 4 years ago with job no private
Husband 10 years with his job he's in the public sector.

Second house worth 210000
Rented tenants pay 1000 rpz
bought for 70k rental covers the loan on the house and car loan 5 years left on it. So making nothing off it but I see it as something for the future .Is this wise ?


Family home mortgage information
Lender: AIB
Interest rate: 4 fixed
Type of interest rate: 5 years fixed, ends by the end of 2026


Other borrowings – car loans/personal loans etc

No credit card
Car loan that second house paid for with the rent
Loan on the second house
combined 40000

I'm thinking about other options like
  1. Investment property ,with the 75 ?
  2. Pay off home mortgage or ho
  3. use and car loan
  4. What to do pay loans or put the money to better use ?
  5. Will have kids going to third level and no plan for this .
Any suggestions would be appreciate . I am worried about the pension situation . Look any help would be great and thanks
 
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lorrlorr48 said:
Investment property ,with the 75 ?
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You're already very (I'd say too much) concentrated in property and would very likely be better off diversifying a lot more.

You should definitely be looking at paying down the car loan which is presumably expensive and unnecessary given your savings.
 
lorrlorr48 said:
Monthly take-home pay:6200

We save 200 a month. I'm unsure really where it goes as we don't go out much or spend heaps .
Click to expand...
You mean that the remaining €6K is being spent every month? You should analyse your expenditure to find out where it goes. I've found it easy to do this by downloading a year's worth of bank and credit card statements in CSV format, importing them into a spreadsheet, and then summing them under the main headings/categories to establish what my actual annual and pro-rated monthly household/personal expenditure is. AI can help too but isn't really necessary unless you want to automate some of the donkey work. But you still have to double check it anyway.
 
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You might want to look at making AVCs to increase your pension cover. If you do then ideally choose a low charges broker/provider and make sure that it's invested appropriately - most likely mostly or all in equities at your ages. There are lots of existing threads dealing with the issue of people with public service pensions boosting their pension cover with AVCs.
 
Not only should you not be considering a third property, you should probably seriously consider selling the existing rental one as you're too concentrated in property and need to diversify more, you say it's making practically nothing, and your reason for holding onto it seems very poorly thought out.
 
I'd say ring fence 50k for 3rd level
Especially for the two older children
If college wasn't in the next 2 years I'd say pay off the home loan and then save 50k for college

Use the 25k to pay off the car loan and keep remainder for emergency fund
Prioritize paying off the home loan over the rental property loan
You know the interest on the portion of that loan that applies to the rental property is tax deductible (but not the portion that applies to the car)
 
You can only tax deduct 40% of rental property mortgage interest. Assuming your marginal rate of income tax is 40%.

You still have to pay 60% of that mortgage interest out of your own pocket or from the taxed rental income.

It's not bad but not as good as it's often represented.
 
Firstly, you should sit down and figure out where your money goes each month. This will help you identify opportunities to reduce, e.g. large petrol/diesel spends could be reduced by switching to an EV, whilst big home energy bills could be offset by an investment in solar PV/battery).

Secondly, you should use your cash to eliminate any personal/car loans.

Thirdly, keep the remaining cash to support college for the kids but make sure you’re getting a decent interest rate on it.

Fourthly, low-cost AVC’s if/when your budget allows.

Others have commented that you’re over-exposed to property, but when you think of a state/public service pension as effectively fixed income bonds, it’s not so bad. I personally would fix my over-exposure by finding a way into global equities via AVC’s rather than sell the property.
 
Start with some basics, review your spending, especially regular monthly payments, full tax review to ensure you are claiming for everything you can.

Secondly, in terms of University, is there one near you or will the kids need to go somewhere to stay over?. The latter is going to cost €12-€15k pa

Personally, I'd focus on paying off debt and use the income from the house to start a college fund. At some stage in the future, you can always sell the rental property and use the cash to fund further education or if the house and car loans are gone, use the rental income to pay for it. I wouldn't invest in any more property, you have a good emergency next egg (probably enough cash to put the first one through college) so I'd focus on the pensions next.
 
Do you recommend how I go about avcs as I'm very unsure about this??.My takeaway is review spending and see where cash is going basics I guess .Pay car loan off.Start saving . I am going to think about the second house and whether to sell or not as I don't see the need to do it now ?
 
lorrlorr48 said:
Do you recommend how I go about avcs as I'm very unsure about this??
Click to expand...
There are lots of existing threads on this - e.g. using a low charges PRSA (maybe via an execution only broker, but it sounds like you might want to pay for advice) for AVCs to supplement one's main occupational pension scheme/cover.
 
Thank you all for your advice . I need to start getting proactive on this . I appreciate everyone taking time to advise. When I look at some of these posts I'm so far behind on all this . Thanks again
 
What are the repayments on the mortgage, the investment property loan and the car loan?
How many years are left on the house investment loan? I can find the other final dates.

Depending on those amounts, you will have a better idea about your regular spending and also how things will improve and by how much when they are paid. As has been suggested, a detailed knowledge of your spend will be very informative for you.

I suggest that you project likely income and expenditure and resulting changes coinciding with significant changes for future years eg when mortgage and loans are cleared; anticipate likely costs of third level in 4/5 year time; include for AVC’s building up to contributing the maximum allowed. On the income side you may want to factor in, the money realised from sale of the second property, if/when you decide to do so.

Clearing the car loan is likely the option to go for initially.

On the positive side, you have a good amount of money on deposit (not clear, if you saved that), relative to your salaries and the fact that you have three children; you also have good equity in the second property. So you are in a reasonable situation and will have choices about realising that equity in the second property. Deciding to take that equity is probably sensible for many reasons; just when.

You both should also look at starting AVCs at some stage, but firstly get a better insight into your spending and how it will change and then prioritise between clearing non mortgage debt, saving for education costs, and starting AVCs.

Specifically on your pension situation, as you are public servants with four and ten years’ service you are members of the Single Pension Scheme, I expect, with a whole of service/career averaging of salary?
My advice to people in your situation, is try to get promotions as early as possible in your career to ensure the best possible final salary figure for your retirement calculations. Easier said than done, but it is a very good era for promotions in parts of the civil/public service. The public service has been characterised by periods of excellent opportunities to progress through the ranks mixed with long periods of stagnation.
 
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