On the right track?

[sceach]

Hi Just after a bit of advice/opinion really, maybe this should be in the investments section so feel free to move.


Ages:
Me: 32
Wife: 30:


Employment sector: Both in secure private sector employment.

Salary me: €65,000. Nett ~€3600 per month.
Salary spouse: €40,000 Nett ~€1600 per month (takes 2 days parental leave per week).

Mortgage Outstanding: €390,000, monthly repayment of €1800
Value of house €250-300,000 (at best)
Other loans: None
Credit card paid off each month: Yes in Full
Children: Two children both in childcare 3 days per week (€650 per month).

Savings and investments:
€10,000 invested in my own ltd company as a sideline, will take this back at years end. Turnover in company good but not going to be retiring from it anytime soon.
€10,000 cash on deposit
Currently saving €400 per month for children’s futures.
Currently saving €600 per month for contingency fund.

Pension: Yes myself and my wife are both members of DB schemes. I also have an AVC worth about €15k.
Life assurance: Standard mortgage protection and death in service benefit.

Question:
We have always been a good at budgeting and saving but wouldn't mind getting some advice re the amount of money we are putting away each month.
We have set a target of how much we want to save for contingency and once we have hit that target may start overpaying mortgage. In the meantime I would be interested to hear if you think we are saving enough for children's future and also where best to put the money as it is just on deposit at the moment at a very low rate. Do people think we are saving too much/not enough? We have about €200 left each week after everything is paid for discretionary spending. Are we saving too much? Don't get me wrong, we are enjoying life and not depriving ourselves or the children of anything. I live very frugally and have no real interest in buying flash gear or expensive clothes. We both prefer to spend money on life experience, travel etc. I know we are in serious negative equity but at the moment have no plans to sell the house as we see it as our home so not really concerned about it too much. We were looking at buying a holiday cottage recently but the purchase fell through. It is something we may revisit in the future.
I guess in summary I am looking for validation that we are doing the right things or if not what should we change and how. I guess I have always been a bit of a worrier when it comes to money.

 

[Greta]

If you have enough to live on, you can't be saving "too much" I'd say you are saving OK but might be able to save a little bit more - discretionary spending of 200 per week seems a bit high, considering you haven't build up your contingency fund yet.

I'd say concentrate on hitting your target on the contingency fund, even before saving for your children's future, THEN start saving for the children and overpaying your mortgage.

Not sure that buying a holiday cottage is really such a good idea. A lot of people are currently advising against purchase of rental properties but at least a rental property brings some rental income, while holiday cottage is just a drain on finances, unless, of course, you are planning to let it out rather than just use it yourself.

With what money were you going to buy a holiday cottage? Do you have a separate amount of money for that? If so, you could use that as contingency fund. Borrowing more for a holiday home while you are that much in negative equity already doesn't seem very sensible.

 

[sceach]

Hi Greta,
Thanks for the reply, the holiday cottage was very low money asking price and I was planning to take the deposit from contingency fund.
I think we will forget about the holiday home for a while now.

 

[Greta]

You are right to forget about a holiday home for a while, as it is such a drain on finances. The initial deposit isn't that much of a problem (though having a solid contingency fund is very important), it's the ongoing mortgage payments, maintenance, utility bills, insurance, rising property taxes... it's just too much pain at the moment.