Planning for the next decade, mortgage, college et al

SCurry

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67
Age: 40
Spouse’s/Partner's age: 41

Annual gross income from employment or profession: 42k (public sector)
Annual gross income of spouse: 25k (private sector)

Monthly take-home pay €4,200 between both of us

Type of employment: Public Sector

In general are you:
(a) spending more than you earn, or
(b) saving? <-Saving at the moment thankfully

Rough estimate of value of home: €180k
Amount outstanding on your mortgage: €68k, 12 years left, took a 20 year mortgage.
What interest rate are you paying? 2.6% fixed with UB

Other borrowings – car loans/personal loans etc: Car loan €198 per month. Our other major monthly outlay is health insurance of €170.

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?

Ages of children: 5 and 6

Savings and investments:

Nothing much to speak of. €6k in a UB account but that's it.
I suppose financially after we got married we put all of our savings into buying the house hence we now have a very low monthly mortgage. We were lucky in buying when the market was low in 2012. However I am now conscious of needing to build up funds for down the road.

Do you have a pension scheme?
Yes - Default public sector scheme
Spouse - No, been hard to afford paying into it thus far with part-time working but this is possibly foolish?

Do you own any investment or other property? No

Life insurance: Mortgage protection with Zurich. Death in benefit in the public sector, life insurance for €100k each also with Zurich Life. Costs €50 per month

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

I realise compared to lots of the posts in this part of the forum we are financially under-powered when I see queries around what to do with a spare 100k but overall with modest incomes I think we have done ok, I took a career change and pay cut a few years ago and only recently have climbed back up towards an average full-time salary my spouse is lucky to be able to work part-time around minding the kids, she could certainly be earning more if able to work F/T but we'd certainly much rather her being at home with the kids. You can't have it all.

However I do feel some exposure with regard to any big expenditures needed especially for college. I suppose we took a decision 8 years back to pretty much put all of our savings into buying our home and avail of the more favourable loan to value rates. On one hand this gives me comfort that even on one wage we would manage. However I'd like to get some capital built up now.


Goals:

1) Pay off mortgage by age of 50, this should be no problem all being equal and us staying healthy.

2) College fees, 12 years won't be long rolling around, I know its a hard one to answer but assuming both want to go to college away from home down the road what kind of savings should we be aiming at annually? My initial financial plan relied upon being mortgage free by the time college rolled around but I realise this is a risk (ill health being one) and that having a lump sum on hand to cover much of it would be wiser. That said I am in the life is for living camp and still intend on an annual holiday with the kids and the odd treat to keep morale up! Need to find the happy medium and balance.

3) Spouse pension, she isn't too concerned but I am! I wouldn't like to be reliant on the State pension only. Her company has a scheme where they will match up to 5%, is this a no brainer? As my salary has recovered in the past 12 months I think its affordable now.


Thanks folks
 

Sarenco

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6,176
Pay off mortgage by age of 50, this should be no problem all being equal and us staying healthy.
That would be a fantastic achievement but I'd focus on paying off the car loan first (assuming the interest rate is higher).

Once your debts are all paid off in full, you can really boost your monthly savings to address future education costs, etc.
life insurance for €100k each also with Zurich Life
Do you really need this on top of the death in service benefit?
Her company has a scheme where they will match up to 5%, is this a no brainer?
Yes! Your wife is leaving money on the table by not taking up the 5% match.
 

lledlledlled

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Messages
322
I'd pay off that car loan ASAP and start a savings fund to pay for your next car in cash. No more car loans.

Definately avail of the 5% employer match of your wife's pension. You'll barely notice it each month.
 

SCurry

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Messages
67
Thanks folks for the responses. Fair point re the life insurance/death in service, we had it in place before I started in the public sector. That said we are only paying €40 per month for the both of us life insurance so if I stopped it would only save €20, God forbid anything happened me the missus/kids would have both so I think I will leave it for the small amount it is. I will look into clearing off the car loan yes.

Getting ship shape for when the kids are college age is my main concern now, we're not big spenders and live modestly.

Is there anything to be said for meeting a financial advisor re a 10 year savings plan for this or am I better just picking a long term savings account and setting up a DD?
 

Black_Knight

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Is there anything to be said for meeting a financial advisor re a 10 year savings plan for this or am I better just picking a long term savings account and setting up a DD?
Savings accounts will just lose you money against inflation. An investment fund might be more what you'd be after. More risk than the bank, but the potential for more reward is much greater.

Take that €200 on the car loan, sitting that in the bank every month would be about €28k in 12 years. For 2 kids in college away from home that might get them part way through 2nd year. Granted, you should have your mortgage paid off by then, so there's extra funds freed up there to go towards college, and your wife would be freed up to start working full time if that's an option.

There's a few quick wins you can do to set yourselves up:
  1. Pay off the car loan - Before thinking about overpayments on mortgages, get rid of that higher interest debt.
  2. Get your wife contributing 5% (at least) to her pension. Honestly, she'll barely notice it, and the company throw in 5% for free. She's no F/T, so it'll be slow growth, but the longer it has to grow the more it can.
  3. Mortgage free in 10 years? Just overpay your mortgage with that €200 car loan money every month (once it's paid off). Assuming your interest rate stays the same, you'll be mortgage free in less than 9. https://www.drcalculator.com/mortgage/
FYI, with UB on a fixed rate, you can pay off up to 10% of the balance in overpayments per year. Not sure if it's the end of year balance or start of year balance, but in simple terms, you've 68k remaining on the mortgage, so in 2020 you can overpay an additional €6800, and next year you can pay up to 10% of whatever is left in 2021.
 

Sarenco

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6,176
Is there anything to be said for meeting a financial advisor re a 10 year savings plan for this or am I better just picking a long term savings account and setting up a DD?
I really don't think you need a financial adviser.

For the next eight years, your priority should be clearing all debts. Once you are debt free, you can start to build savings (in the best regular savings account available at that time) to help address future education costs. Simples!

There is no point saving in an account paying minimal interest, while carrying debt at a rate of 2.6%+.
 

SCurry

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Messages
67
I really don't think you need a financial adviser.

For the next eight years, your priority should be clearing all debts. Once you are debt free, you can start to build savings (in the best regular savings account available at that time) to help address future education costs. Simples!

There is no point saving in an account paying minimal interest, while carrying debt at a rate of 2.6%+.
Thanks for the advice folks and it is solid I can see. My instinct is naturally towards building a savings pot now (10+ years out from college so I can mentally say to myself look there is the college fund) however in reality we could probably clear our mortgage in 6 years without much trouble. Currently monthly payment of €468, adding €300 to that would do it. Very tempting. Mortgage done at 46. Now to convince the missus!
 

Blackrock1

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556
if you do that then you can save the 9,200 a year for the next 4 years, and have 36k at the of it with the mortgage paid off as well.
 
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