That sounds like a perfectly viable plan, given your long-term financial objectives. However, as already pointed out, it does leave you very exposed to the housing market, interest rates, etc.I am thinking we could buy 3rd house for 300k with 150k mortgage and rent out existing house for 1300-1400 per month. So, in the long term after the mortgages are paid I would have rental income of about 3k before tax per month which means I could cut down to 4 day week maybe.
I don't see income protection as an optional extra - it's expensive but critical IMO.I dont have income protection is one thing I guess.
- Far too much in cash. I know you are looking at property and so intend to use it. How much should be left in cash depends on the security of your occupation, any short term needs ie those 11 year old cars may start causing problems soon.
What are the plans for your kid's education? Do you intend them to go to fee paying schools and then onto university? If so, you are looking at €100,000 in fees. That needs to be looked at. Better to have it set aside rather than paying it out of cashflow each year.
Hi Steven,
I'm just wondering what your thinking is behind not paying school/uni fees out of cash flow. There would be similarities between my circumstances and Aristotle's and I'm planning that when the time comes I'll have sufficient cash flow to do this. I know the risk that circumstances might change and the cash flow might not be there but as other investments have been made the contingency plan would be to use these. Is there something else to it that I'm not seeing?
Thanks
I am struggling to find other users for the cash. I am putting about €17k AVC per year into my pension so I feel I have enough going into equities for the long term.
The tracker rates are so low its hardly worth paying off a lump sum.
I did, at one stage have 130k in shares I invested in directly via a custody account but found I really couldnt do well in it and it was taking too much time reading and trying to do better. Off the 165k cash I mention I still have €28k of it in various shares actually.
If and when interest rates go up to 4% I think I would pay lumps off then.
Use capital markets to pay for some of your school fees. By taking it out of cashflow, you work for 100% of the cost of school fees. Invest now and the growth of capital markets over the long term will partly pay for their school fees.
Depending on people's situation, it is likely they will have a child care cost up to the point the child enters secondary school. It is unlikely most would have a primary school child on their own from say 2:30 until the parents arrive home from work. In those cases its likely that the school/uni fees can easily be absorbed from cashflow - one cost just offsets the other oneI'm just wondering what your thinking is behind not paying school/uni fees out of cash flow. There would be similarities between my circumstances and Aristotle's and I'm planning that when the time comes I'll have sufficient cash flow to do this. I know the risk that circumstances might change and the cash flow might not be there but as other investments have been made the contingency plan would be to use these. Is there something else to it that I'm not seeing?
OP's kids are currently 3 & 5 - so chances are have just entered primary school. That means its 8 years before there will need to be a drawdown on private secondary fees. Is it good to compartmentalise funds for a period >5 years. Surely the funds should be saved as part of medium term savings and used as required if & when. Whether you call it education fund or savings fund, does it make a difference until closer to the time. OP may end up considering moving house or anything in that window. 8 years is a lot time with kidsUse capital markets to pay for some of your school fees. By taking it out of cashflow, you work for 100% of the cost of school fees. Invest now and the growth of capital markets over the long term will partly pay for their school fees.
It makes no sense now with ECB being very low, but there are 18 years left in it. Any over-payment now will definitely see benefits when the ECB starts to rise.Not paying a lump sum into a tracker makes sense if you are making better use of the money. If you are not getting a better return (and you most likely aren't with it on deposit), it better to reduce your mortgage.
OP's kids are currently 3 & 5 - so chances are have just entered primary school. That means its 8 years before there will need to be a drawdown on private secondary fees. Is it good to compartmentalise funds for a period >5 years. Surely the funds should be saved as part of medium term savings and used as required if & when. Whether you call it education fund or savings fund, does it make a difference until closer to the time. OP may end up considering moving house or anything in that window. 8 years is a lot time with kids
I had the same discussion last year on the below thread - and my kids are the same age. I ended up clearing down the education fund I had at that stage, paying it against the mortgage and replacing it with a general medium term savings fund !
https://www.askaboutmoney.com/threads/financial-resolutions-for-the-new-year.201887/
I also note that most people here say the minimum investment term for equities should be ~7 years. OP will need access to some of the funds in 8 years. Does that change the view in any way?
It makes no sense now with ECB being very low, but there are 18 years left in it. Any over-payment now will definitely see benefits when the ECB starts to rise.
Absolutely agree with this - its more the medium terms saving strategy, and reviewing it periodically. School/Uni fees just becomes part of the medium term expenses - similar to maybe buying a new car or doing up the house.You can have the education fund mixed in with other savings alright. It's more about the planning for future fees and getting capital markets to do some heavy lifting. When he has 2 kids in school, that's €12k - €14k a year of net income that will have to be found. Wouldn't it be nice to already have that taken care of?
Absolutely - subject to the risk appetite of the person.If you invest the money and have the potential for higher returns, then invest the money instead, even if it falls in value in the short term. Or put it in a pension and get tax relief.
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