Priorities and some specific questions

[abc_xyz]

Age: 38
Partner's age: 36

Annual gross income from employment or profession: 70k + ~10k variable bonus
Annual gross income of partner: 44k

Monthly take-home pay: ~€3100 + ~€2500
Type of employment: private sector + private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
€500/month (before take home pay) into SAYE scheme for me plus ~€200/month other savings on average. Partner is saving for on-going college fees.

Rough estimate of value of home: €500k value
Amount outstanding on your mortgage: ~€225k outstanding
What interest rate are you paying? 2.75% variable with AIB
Over pay by €250/month, reducing the monthly amount due. Term has 26 years left.

Other borrowings – car loans/personal loans etc None

Do you pay off your full credit card balance each month? Yes

Savings and investments:
~€10k shares, ~€55k deposit for me. Partner has ~€2k deposit set aside for college fees.

Do you have a pension scheme? ~€190k + ~€45k for partner
I contribute 5% with 5% employer match, which is the max they match. Also I usually make an AVC each year of a variable amount.
Partner has increased contributions and gets 15% contribution from the company.

Do you own any investment or other property?
Partner owns an apartment in country of birth. Never been rented out. Guesstimate of value is €180k, no outstanding loan.

Ages of children: None

Life insurance:
Mortgage protection for me. Also 4 times salary supplied through work. Think partner has similar but have to confirm.

Health insurance:
Both have basic health insurance through work. 2/3 pay in case of long term illness through work. Think partner has similar long term illness but have to confirm.

General situation:
Just got engaged. Planning wedding and kids sooner rather than later. I bought house about one year ago using most of my savings and got LTV under 50% as a result. We plan to upgrade the house within the year. No real idea of what this will cost. Will be due a lump sum from the SAYE around the end of the year (unless I was to keep the shares which have done quite well).

Questions:
- Financially I've been focused on saving for the house for a long time. I've still enjoyed myself/taken holidays/etc but was always careful. It seems things have gone from being simple (save for house) to being more complicated now though with costs for wedding, potential children, house upgrade, pension and whatever else comes up. What should I/we be focused on now?
- What do people recommend on life assurance? I've never bothered previously as I had no dependents. Is company supplied four times salary judged as adequate?
- Should I pay a substantial sum off the mortgage using savings? Have it in the back of my head that this money will go toward house upgrade but think I'll have to top-up the mortgage even with savings. Maybe it makes sense to reduce debt until I actually need it. Partner is not currently on the mortgage but could be added if required for top-up.
- How much is recommended for a rainy day fund? I've always had substantial savings in cash which has provided nice comfort and allowed me considerable freedom financially which I think I've got used to having.
- We're curious how other couples usually manage their combined finances? We currently don't combine our finances.
- Thoughts on the foreign property.

 

[Sarenco]

Hi abc

First off, I think you should be congratulated for getting yourself into such a strong financial position at a relatively young age. Well done!

I don't think anybody can really advise you how you should prioritise your spending decisions (wedding, house improvements, etc) but I do think you should now prioritise maximising your AVCs before paying down your mortgage ahead of schedule.

Your life assurance and income protection cover look adequate to me.

The general rule of thumb is to maintain around six months' of your typical expenses as a cash reserve to address unbudgeted items.

Does your partner use the foreign property much or is it just setting idle most of the time? It probably makes financial sense to sell it and use the proceeds to pay down the mortgage or upgrade the property - although your partner will understandably want to be on title.

I wouldn't be inclined to use your savings to pay down the mortgage if you expect to have to re-mortgage the property in short order to upgrade the property.

I personally don't think there is a universal "right way" for a couple to manage their day-to-day finances - different strokes for different folks.

Hope that helps.

 

[gnf_ireland]

@abc_xyz
I agree with Sarenco here in that you both should take a step back and congratulate yourselves being in decent financial position by the age of 40. Having a 200k pension pot + house at 50% LTV is no mean achievement.

However, I am struggling to understand your monthly expenditure pattern. Between you, you make 5600 euro a month. Just over 1,260 goes on mortgage repayments and 700 odd on savings - that leaves 3600 euro a month [Although I do think the 500 euro odd is coming out before the 3100 number - leaving 4100 a month to play with]. I think you need to sit down and look at where this money is going, as you may be overspending a bit at the moment (all things considered)

Thoughts on the foreign property.

Does your partner use the foreign property much or is it just setting idle most of the time? It probably makes financial sense to sell it and use the proceeds to pay down the mortgage or upgrade the property - although your partner will understandably want to be on title.

My thoughts are very simple - what is your joint view of this property? Having 180k sitting there with no rental income and probably minimal use is a absolute waste. I am sure it was your partners plan to return home at some stage, but this is less likely at this stage. I assume you have discussed where you want to live long term and short term ?
If its not getting any use, I would strongly suggest selling it, paying down the mortgage completely (if you can) and including your partner on the title of the family home. Do not even consider doing it without putting them on the title, as it is a very unfair thing to do at the start of any marriage.

- We're curious how other couples usually manage their combined finances? We currently don't combine our finances.

I personally don't think there is a universal "right way" for a couple to manage their day-to-day finances - different strokes for different folks.

We set up a joint account as soon as we moved in together (just after we got engaged). We have always used this to pay for all household expenses, and we contribute to it according to our means. When my wife went part time, we adjusted our contributions again.
We both have our own current accounts, and a level of emergency funds in our own name, but we also have the majority of longer term savings in joint names
So as far as we are concerned, our finances are combined and that works for us.

- How much is recommended for a rainy day fund? I've always had substantial savings in cash which has provided nice comfort and allowed me considerable freedom financially which I think I've got used to having.

I would have been very much the same way in the past. But I realised last year I was carrying way too much cash and should pay the rest against the mortgage/pension. We now carry a rainy day fund of 6 months expenses, and the rest is 'savings' if that makes sense

- Financially I've been focused on saving for the house for a long time. I've still enjoyed myself/taken holidays/etc but was always careful. It seems things have gone from being simple (save for house) to being more complicated now though with costs for wedding, potential children, house upgrade, pension and whatever else comes up. What should I/we be focused on now?

This is something you really do need to discuss together, but a few comments I would make
1. You talk about kids - I assume you have had that chat with your partner? Have you discussed what the proposed childcare arrangements would be? Your partner is going to college so I imagine wants to focus on the career, as do you I imagine? What about part time work, what about the length of maternity leave to take etc? Or even before then, have you discussed about what happens if there are fertility issues - would you both consider IVF etc. All of this should be factored into the health insurance discussion also
2. Your partners pension is a bit on the low side. You should look to make AVC's to boost this up a bit if you can to the maximum (while availing of the higher rate tax). I always think the lower income partner should be given a chance to have a decent pension pot too
3. You have a decent pension for your age, but I think 10% contribution may be low overall. You might want to see if you can rise this a bit
4. 50% LTV is decent, but if you go back to remortgage will you go above that? Need to be careful there on what you do. I also think you need to consider what you want to do re house upgrade? What state is the house in now? How much upgrading are you doing and for whom? What if you have no kids? The needs of a couple without kids and with them are very different !!! We bought a lovely Willis & Gambier lille dining table set when we got married and moved into the house. It got used about 5 times (2 christenings, a family dinner, a dinner party and a NYE dinner) before we ended up selling it as it was just so unpractical for a family with young kids. Instead the space is now a playroom

Will be due a lump sum from the SAYE around the end of the year (unless I was to keep the shares which have done quite well).

Personally I am not in favour of these SAYE schemes as you end up over-leveraged in one company !


In the short term, I would simply review your spending patterns, discuss your joint management of finances and your upcoming lifestyle choices you have to make, and then simply hoard cash in the short term. After you are married (and have a nice honeymoon), I would they see if kids appear and at that stage decide on what direction the house upgrade should take. But, talking to your partner and more importantly asking them about their plans for the house abroad is very important. You need all of that on the table before you get married. I am told the majority of domestic fights are about finances (or so the group I done the pre-marriage course told me)
*Note* if the house is a E/F/G BER rating, then this is a different matter !

 

[stantheman]

I followed some advice I got on here OP which I found useful. I used any funds on deposit & not required in the near term to pay down the mortgage while maintaining a 6month rainy day fund.
You don't say how much you're putting in as AVCs but on a 7k (10% of 70k) contribution, you have built a really good pension pot.
For combined finances, we have a joint account and each lodge money at the start of each month to cover creche, household bills, groceries, property tax, etc. The rest of our cash (what little is left!) is our own

 

[abc_xyz]

Thanks for the feedback, it's appreciated. There a few things there for us to consider.

- Partner is already contributing €500/month AVC since we've moved in together. I'll look at increasing the overall amount going into my pension - the initial theory once I started the current job was to put in the minimum to gain the maximum from the company and put the rest in via a one-off AVC at the end of the year. I've done this the last couple of years though the amount has only been 2.5k and 5K I think. My own pension is at it's current level because since I when I started working I put in the maximum allowed for a few years on the basis that I'd miss the money least (since I was coming from not earning any money at all).
- We'll examine expenditure (and savings) because as @gnf_ireland says the numbers don't seem to add up.
- Another discussion about the foreign property is warranted. Obviously any decision has to something both are happy with. Regarding putting partner's name on the title - I had assumed once we were married this wouldn't make a difference? Can the partner's name go on the title without going on the mortgage? Probably I have some research to do there.
- Some good questions about the upgrade work for us to consider. Some of the work is just due to the age of the house (eg. rewiring) but other work would be to have it the way we would like it (eg. open plan kitchen/dining room). BER would be D I think.
- Rainy day fund fund measured in expenses makes sense. I had always been thinking in terms of income.

 

[Sarenco]

I'll look at increasing the overall amount going into my pension - the initial theory once I started the current job was to put in the minimum to gain the maximum from the company and put the rest in via a one-off AVC at the end of the year.

That works fine as a strategy - the longer you have your money in the market the better but you have to balance that with your need to stay reasonably liquid/flexible.

My point was really that you should prioritise (or re-direct) your €250pm mortgage "over payments" to your AVCs. You already have a low LTV mortgage rate.

If you can afford to pay down your mortgage ahead of schedule and maximise your pension contributions, then more power to you. However, if you have to choose between the two, I would prioritise maxing out your AVCs over paying down your mortgage at this stage.

Another discussion about the foreign property is warranted

I would suggest you proceed cautiously here - I'm guessing that your partner may well have an emotional or psychological interest in maintaining a foothold in his/her country of birth. Put coldly, keeping your future spouse happy will become an important part of your financial plans!

Your partner would indeed gain rights on marriage under the Family Home Protection Act but it's not quite the same thing as being on title. It may be worth arranging a consultation with your solicitor once you have decided how you would like to proceed - while you're at it you might get your wills drawn up!

Finally, enjoy your wedding - there's more to life than personal finances!