You have no consumer debt and a small mortgage. If you are wise you will keep it this way. You can't go too far wrong following the below steps in order
1)I would avoid debt like the Corona Virus.
2)Build three to six months of cash as an emergency fund that will could cover your basics if one or both of you lost your job,
3)15% of household income into a pension
4) Savings account for children's education, a small bit each month
5) Any surplus pay off your house - 35 years seems way excessive. On a relatively small mortgage like you have it should be done in 15 years or less
No. The interest savings on your early mortgage repayments are far greater than any risk adjusted after tax income you'd receive on savings. It's a psychological thing of having separate 'buckets' of money, but it makes zero financial sense to have savings and borrowings.Have I done the wrong thing?
No. The interest savings on your early mortgage repayments are far greater than any risk adjusted after tax income you'd receive on savings. It's a psychological thing of having separate 'buckets' of money, but it makes zero financial sense to have savings and borrowings.
Rather than putting money into a savings account for kids education does it not make more sense to pay off mortgage as early as possible?
I've heard it said often recently that putting kids education money into a savings account means it loses it's value and is not worth anywhere near as much by the time they go to college. You'd have to invest it.
But if you clear the mortgage early before they get to college you would have spent less overall on mortage interest and with your mortgage cleared you can put the money you were paying towards your mortgage for their education now.
That's what I switched to. Will clear my mortgage 3 years before my eldest goes to college and will have made a huge saving overall on the mortgage.
Have I done the wrong thing?
You'd have less than 40k. There's something called tax that you have to pay on the investment returns.example.
€150 per month after 18 years at growth of 4% should give you almost €50,000.
Rather than putting money into a savings account for kids education does it not make more sense to pay off mortgage as early as possible?
I've heard it said often recently that putting kids education money into a savings account means it loses it's value and is not worth anywhere near as much by the time they go to college. You'd have to invest it.
But if you clear the mortgage early before they get to college you would have spent less overall on mortage interest and with your mortgage cleared you can put the money you were paying towards your mortgage for their education now.
That's what I switched to. Will clear my mortgage 3 years before my eldest goes to college and will have made a huge saving overall on the mortgage.
Have I done the wrong thing?
You are doing a great job, I would say you are way ahead of most people just by asking these questions and taking on board the varying advice. There is no one right answer.
Paying your mortgage off early gives a lot of satisfaction and freedom.
Trying to cash flow college expense from your wages might be difficult (or it could be easy) in ten years time. Nobody know's what they will be doing in 10 years time but 100 euro per month invested could take the sting out of paying for it when the time comes.
Everybody (most) will at some stage come to retirement age.
You can do a bit of everything in different ratios. e.g. 2% of income into education savings, 15% of income into retirement saving i.e. pension and some other percentage into paying off the house.
There is no one right answer but by doing / starting down this path you will be ahead of most people.
You'd have less than 40k. There's something called tax that you have to pay on the investment returns.
Or alternatively, pay 150 extra off your mortgage. Assume a rate of 2.5%, and your mortgage balance will be 40k lower. Risk free.
What you're suggesting is borrowing money at 2.5% (or whatever your mortgage is), to invest it, in the hope of making a taxable return.
Using capital gains exemptions for married couple? You said to use ETFs.There is a simple way to structure investing €150PM it so that you can earn over €2500 per year without paying any tax on it
Inferior on a risk adjusted basis? Keep in mind you've a 0.8% tracker. The OP is paying 2.9% on their mortgage.It works for me. Paying €150 pm off the mortgage for 18 years is far inferior to putting it into
OP here - I (shamefully) didn't keep an eye on this after the initial set of messages, so thanks for all the replies since - lots of food for thought. We've since had baby number 3 so have been a bit wrapped up in the meantime
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