Key Post Top ten suggestions in reviewing your financial affairs

Brendan Burgess

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The following items seem to appear frequently:

1) You should not have savings and expensive borrowings at the same time. If you have money on deposit or other investments consider using it to pay expensive debt such as credit cards, car loans, credit union loans, etc.

2) In particular, it is a bad idea to have shares in a credit union earning interest of 3% while you have a loan with them costing you 9% or more.

3) If you have a repayment mortgage, consider extending the term or switching it to interest only if you cannot meet your monthly outgoings.

4) Have you got a competitive mortgage? Do you know what rate you are paying? Switch your mortgage, especially if you have a low loan-to-value (LTV) ratio. The savings can be very significant. Consider posting your mortgage details in the switcher thread (in the format shown in the first post). You'll get an estimate of the savings you would make from switching to different lenders (or to a different rate with your current lender, which is usually very simple and quick to do).

5) If you are simply spending too much for your current level of income, rearranging your finances won't solve the problem. You need to cut down your spending. You will find some useful tips here. Check out the MABS website for advice or visit them. It's a free service.

6) In particular, you should not be borrowing for luxuries, e.g., a large car or a second holiday if you are overborrowed already.

7) Most people find themselves struggling in the first few years after buying a house. Don't let this worry you unduly. Don't worry that you are not making pension contributions. After a few years, salary inflation will hopefully make the repayments easier to manage.

8) Review your house insurance, motor insurance, mortgage protection policy and travel insurance requirements on an annual basis (or more often if necessary) to ensure the premia are competitive. It's very easy now to get quotes for insurance online and this can help you to judge whether you are getting value for money or not.

9) Are you claiming all the tax reliefs due?
 
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Re: Top ten suggestions

Try to have an emergency fund - set up a standing order of even 20euro a week into an account that you have easy access to and have it as an emergency fund for things such as emergency car repairs, unexpected wedding, etc.
 
Re: Top ten suggestions

Another suggestion is to make sure that your expectations and lifestyle match what you can afford. You shouldn’t normally have to borrow money to live your life. Four issues have come up several times on the makeover pages.

1.....Weddings
e.g. http://www.askaboutmoney.com/showthread.php?t=83038
Most people spend a large amount of money on the big white wedding for several reasons (to have a big party, thats just what you do, I want a day to remember). The minumum to get married is 3 months notice, 2 witnesses and €150 at the local registry office (http://www.groireland.ie/getting_married.htm). Everything else is a choice that should be weighed up with your own financial position. I may sound like being a bit of a kill-joy but the amount that most people spend is astronomically out of proportion to the actual length of the day. One of my friends pointed out that they had spent over €1000 per hour of their wedding day!

The other option mentioned several times (including the thread quoted above) is the Eddie Hobbs method of inviting more people and asking for cash presents only – not everyone’s cup of tea.

2.....New car
http://www.askaboutmoney.com/showthread.php?t=68064
Car loans are a common thread on Money Makeover and the perceived wisdom is that expensive unsecured loans can be a mistake (particularly when carrying savings at the same time). Do you really need the expensive car? Does your partner need one too? Would a cheaper older car do (old is not necessarily ancient)? There are several threads where people have talked about their old banger that was much cheaper and still reliable. (our 13 yr old car is still going strong). You don’t have to keep up with the neighbours particularly if they are up to their eyeballs in debt!

3.....Kids
http://www.askaboutmoney.com//showthread.php?t=74452
This generally comes up from people before they have kids (can we afford them?). Much of the cost of children’s accessories (we have 2 kids under 3 at the moment) is what the parents want for their kids rather than what the kids need. The minimum necessary (two lines in the above thread) is actually very small. Everything else is lifestyle choice. (I may have to revisit this one when our kids get older!)

4.....Renovating the house
http://www.askaboutmoney.com/showthread.php?t=81749
(particularly post #7 from so-crates)
When we moved into our house (in 2003) we didn’t have a bed so we took the cushions off the sofa every night and put them on the floor in the spare room and slept on them (for 2 months). Then we bought a mattress and slept on that for 3 months (with no bed). Living without some of the “essentials” really focuses you on what really is important. You may have to delay the interior of your dream home but you shouldn’t spend money that you don’t have.

All four points are about our high expectations (I want the big house, and car now). Whether this expectation inflation comes from lifestyle programmes on TV, our neighbours, cheap credit (which is disappearing fast) or anywhere else is kind of a moot point. The important thing is to not get sucked in.

anon473
 
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I've seen it mentioned in a couple of threads about loan consolidation. Rolling credit card, credit union loans etc into the mortgage.

I would like to question the wisdom of doing this.

1. Is the (credit card etc) debt changing from being unsecured to secured on the person's home? (That doesn't sound too good.)

2. If things are getting particularly bad, might it not be a better idea to default on unsecured debt, rather than increasing the likelihood of defaulting on the mortgage because of the larger mortgage debt?
 
Advising people to default is not good advice, whether the debt is secured or unsecured the bank will get it out of you if you have property/assets or a job. So it's irrelevant for many people if it's secured or unsecured. If you have nothing though and the debt is unsecured the worst that can happen you is to be sent to debtors prison (for a day or so, though I think the prisons turn away debtors as they are too full) and in any case most lendors would not waste the costs of chasing someone with no assets.
 
Loan consolidation of short term loans into a mortgage is CRAZY! Paying for your car, an asset which depreciates at a rate of knots, for 20 years!! You will be paying for your 18 grand car for 10 years after it's been reduced to scrap...

Consolidate short term loans into one loan with a duration of the longest term loan you have, aside from your mortgage. For example, a car loan of 18k, a holiday loan of 4k and a wedding budget loan of 6k. The car loan has a term of 5 years and the other 2 have a term of 3 years but have become unmanageable; consolidate them into 1 5 year loan and shop around for a good rate. There are plenty available. Even a 7 or 8 year term is preferable to consolidating them into your mortgage and securing these, what are really trivialities, against the ROOF OVER YOUR HEAD...

Imagine still paying for package holiday you took in 2003 in 2020 or a wedding day in 2001 in 2032............ CRAZY!
 


The best way is to consolidate them into your variable rate mortgage and then overpay as much as you possibly can til the overpayments equal the value of the loans + interest you have put on top of the mortgage. This way you are effectively paying them as quickly as possible but with a much lower interest rate.
 
Try and start saving. It may seem difficult when you are in financial difficulties but even a fiver a week + a change jar could turn into a few hundred euro at the end of the year. Debt management is often a mental thing and the psychological impact of knowing that you are also saving a few bob and are in control is important
 
Revisting my post above and I need to change the prison for debt phrase. It appears quite a number of people are actually being jailing for debt currently. Who is taking them to court and how long they spend in jail and the point of it all I do not know. Maybe somehow these people suddently find the way to pay the debt.
 
Thank you so much for this thread especially the link for the #9. It opened my eyes. Fort example, I had no idea that there was a Tax Relief on Bin charges, Water Charges, Sewage Charges and I think there are many people like me out there. Thank you very much.
 
I find one of the best ways to save money is to strictly confine routine household spending to one or two outings in the week and allow a certain sum for this. My wife usually does the shopping but i have a habit of buying bits and pieces which increases the outlay. I once heard an old man say "dont break a note if at all possible" i find it good advice.
 
Best idea

The best idea will be to tear up the credit card and throw them away. They are the first source of people going into debt because of impulsive shopping habits.
 
Is this still true? Especially for somebody working from home, that could be a big deal

.
 
I never heard of tax relief on those utility charges.
Unless somebody is referring to them being costs that can be written off against rental income by landlords or something?
 
From the opening post, see below;
2) In particular, it is a bad idea to have shares in a credit union earning interest of 3% while you have a loan with them costing you 9% or more

The above was good advice. However is it not true that you have to leave a certain amount in the account when you borrow from the Credit union.
 
I wonder should this thread be reviewed in light of people working from home?
A suggestion would be to review the way your house is now operated/lived in. I can now use the night rate more as I am not rushing out in the morning, therefore I can set the timer for dishwasher and washing machine so that they operate at night, and I have the time to unload them in the morning.
Also, as we are in the house more, I have reviewed the heating and ventilation requirements (we are generating a lot more moisture). I have just replaced the extractor fans in the wet rooms with continuous trickle ones and closed the trickle vents in the bedroom windows. This pulls heat from the living quarters and paradoxically keeps the house warmer (no cold draughts coming in from outside through bedroom windows). It also means the house is ventilated more evenly and mould/moisture is not a problem, which it was in unused rooms.
These are the ones, continous mode, light mode, and humidity stat. Also bluetooth enabled. And about 5% of the price of retrofitting MVHR.

Product Search Results | Vent-Axia

www.vent-axia.com
Practically silent in trickle operation.
 
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