Have you factored in the cost of privately educating your child?
Paying off cheap debt, if you can comfortably afford the repayments is a poor allocation of capital
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The mortgage in Monaghan will be for handy money for a fine house
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Your rate of interest on your mortgage is prob about 3%. If you put your over-payment into a passive investment fund you could prob expect 5% or higher over the period and you would have the flexibility to access that cash if needed. That could always be put as a lump-sum against the mortgage at a later date. Downside is there is likely some short-term risk which you might need to ride out but if you’re steadily contributing into that every month it should be less volatile.
Pension is a better use again but the downside is that you don’t have access until older age.
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If my lad, as is likely, gets turfed out of his current school at which you, believe it or not, get kicked out if you don’t get an average of an A grade at GCSE, I currently plan to send him to school in Ireland, though tbh, when it comes down to it, I doubt I could bear it. He seems perfectly happy with the idea.
Have you his name down for Clongowes?
What should I be doing with it?
If I have 7 (seven) things to do in work and 3 of them are relatively unimportant, I often just do them anyway to get them out of the way. I don’t like clutter and I just like to be rid of stuff that’s hanging around. I have the same mindset with debt. I like to pay it down asap possible. But please advise me.
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Have you mortgage protection life insurance?
Yes.
Then from the point of view of risk, you should be putting the money you are thinking of using to pay down the debt into a fund as @tallback says. If you pop your clogs or the life partner does, the mortgage will be cleared in its entirety and all of the funds you used to pay down the debt will have been for nought and you or the life partner, as the case may be, will be unnecessarily impoverished.
Only piece of advice on this fund is to keep it very liquid, for when the rainy day arrives.
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yes
This. Madness to make a substantial financial decision with this unknown. It doubly exposes you to the issue with (Im assuming) your income also reliant on UK economy.
Grest post from @Fagan_ODowd
If you need a mortgage yes
In theory it is. But the physcologial appeal of reducing debt is individual. You can reduce the debt now, but when you have cash in 15 years time to pay into pension the clock will be against you for growth of your fund.
This is good advice if you place a significant premium on immediate access to the cash. Otherwise you are giving up 50c in the euro by not putting it into your pension
Saving in a fund means you are investing after tax income into the same fund with same risks as a pension, and need to pay tax on the upside on your investment
I’d be concerned about what’s coming down the tracks in terms of further pension levies. The civil servants who advise the Minister for Finance appear to have a particularly bloodthirsty disregard for the pension needs of the private sector.
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Generic advice alert
Your priorities should be in the following order some might not apply to you, but how and ever
- Pay off any high cost debt first, car loans, credit cards etc. they are all a rob. Anything above 4% in the current environment falls into this category.
- If you are paying a mortgage above 4% at the moment, switch providers or fix it. Probably the single best investment of your time you can make at the moment is to ensure you are a paying a low mortgage rate. It’s an absolute pain in the hole, but it’s also an absolute no brainer. Most banks are offering a decent fixed rate at the moment, so if you are on a higher variable rate it literally only takes a phone call and a few forms.
- Build up a nest egg in cash, enough to pay at least a years mortgage payments, ideally two. In case you lose your job, get sick, have an unexpected cash outgoing etc. Keep it on deposit with easy access at first, if over time you build it up to level whereby you don’t need access to all of it, even in an emergency, then put it on a term deposit to get a better interest rate. At the moment there is fuck all interest rates to be gotten so this is pointless, this will change in time as all things do. This is your not to be touched money. Hopefully in twenty years time this money won’t have been touched and the mortgage will be down to a very manageable level so it will pay for college fees etc.
3b. While building up your “not to be touched money” also save up for regular expenses such as holidays, car repairs, buying a new car or whatever. The reason for this pot is so you have money not to go near the “do not touch money”, and you avoid ending up having to take out high cost debt which will only set you back in the cycle. - Once you’ve all this done which would probably take a good few years then you can start pumping the money that was going to savings into your pension. Most employers will match your payments to some extent and it’s tax free at point of entry so it make sense.
- If you are fortunate enough to max out your pension at some point, then you can look at investing outside of it.
I do not believe most average people require an investment portfolio outside of their pension.
Even wealthy people shouldn’t look at this until their pension is maxed out. Dividends, Capital gains etc. are all tax free in your pension so it is by far the most efficient place to have your investments. It’s also tax free on the point of entry and some employers will match your payments.
Do not over think pension investments.
Depending on your age you should have a large proportion of your investments in equities. They are probably overpriced at the moment but you’ll average in over the years at expensive prices (like possibly now) and at cheap prices in the middle of a recession. Invest in an ETF of equities rather than a fund if that option is available. ETF’s are cheap as chips. Most funds are a rob and will probably under perform over time.
You need to be very careful on fees for your pension some places will absolutely gouge you on management fees and then again on fund fees, this will seriously erode the value of your pension over time. The difference between 1% of overall costs and 2% of overall costs per annum could be the equivalent of tens of thousands by retirement.
As you get older you should reduce your exposure to equities and put more into “safe” assets like bonds and deposits.
There is little to no place for commodities, property and alternative investments in most investors portfolios. You likely don’t understand them and there’s a good chance the fella selling it to you won’t either.
As it stands I don’t think anyone should have any exposure whatsoever to bonds in their portfolio. I won’t bore you with the details but suffice to say bonds are very expensive at the moment, and unlike equities that won’t even itself out over time. The safe portion of your portfolio should probably be in cash at the moment I would say. There’s some fella on Newstalk (I think) that gives generic pension investment advice who reckons everyone should have a 60/40 equities bond split in their portfolio. This is the type of terrible generic pension advice you get from brokers, most of whom genuinely do not understand what they are selling you and will charge you a fortune for the privilege.
Normal you should never have cash in your pension or a very small amount, but in the current basically zero inflation environment it’s fine.
The reason you shouldn’t pay down your mortgage is that it’s generally cheap debt, and over time inflation should take care of a lot of it. In twenty years time for example with reasonable inflation a €1,000 a month mortgage payment should be the equivalent of say €600 in those times. You should all things being considered be earning more money then than you are now and other expenses should be dropping. As I said there is almost zero inflation at the moment but that means interest rates are rock bottom as well so it’s much of a muchness really.
If I won the lotto in the morning I still wouldn’t clear my mortgage.
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The levies wont wipe out the massive tax reliefs but its a valid concern