You don’t have to have a Crystal Ball

As the economy continues to grow and inflationary pressures increase, the Irish central bank has been raising interest rates in recent months. This has significant implications for individuals looking to get a mortgage or who already have a mortgage, as it means that their monthly payments are likely to increase. For those with a variable-rate mortgage, the impact of rising interest rates can be particularly severe, as their monthly payments can fluctuate based on changes in the interest rate. It’s important for individuals to understand the impact of rising interest rates and take steps to prepare for the increased costs.

In the blog we are going to look at different ways individuals can cope with rising interest rates.

Talk to a Financial Advisor

One of the key things that individuals should do when facing rising interest rates on their mortgages is to talk to a financial advisor like Alpha Wealth.  We can help you understand your options and develop a plan to cope with the increased costs.

Fixed Mortgage

Another strategy is to consider a mortgage with a fixed interest rate, rather than one with a variable rate that can change over time. This can provide more certainty and stability for individuals, as they will know exactly what their monthly payments will be for the life of the loan. We can help you compare different mortgage options and choose the one that’s right for you and put you in contact with a Mortgage Broker that we trust.

Extra Payments

You can make extra payments on your mortgage, either on a regular basis or whenever you have extra money available. This can help reduce the overall amount of interest they pay on their mortgage and pay off their debt faster.

Reduce Discretionary Spending

Individuals can also try to reduce their other expenses, such as by cutting back on discretionary spending or finding ways to save money on their monthly bills. This can free up more money to put toward their mortgage payments and help them cope with the rising interest rates.

Investing

Saying ‘I do’ to saving for your wedding

It’s one of the most important and joyful days of your life. A celebration with your nearest and dearest, which means it can also be one of the more expensive days you’ll share as a couple. Therefore, you need to start saving for your wedding.

So, how can you avoid being overwhelmed by it all? It’s quite simple really. Once you have said ‘I do’ (or even before, if you know it’s coming), commit to a solid savings plan. This will help you save for your wedding.

After you’ve laid out your plan you can focus on what’s truly important; a special day to remember with your family and friends.

How much will your wedding cost? (saving for a wedding)

First things first, you need to decide how much you’ll need. The dress, the flowers, the photographer, the hen, the stag, the venue, the food, the band, the list seems endless. And of course, it all needs to be paid for!

It’s easy to get bogged down in the detail at this point, so… don’t. Be realistic about what you can afford. According to weddingsonline.ie survey, the average cost of a wedding in Ireland comes is approximately €25,000 (honeymoon included). You will need to sit down together and decide what it is you want. Get quotes from suppliers so that your savings goal will be accurate.

Now, with an exact figure of how much the special day will cost, write it down. Put it on the fridge.,on your screensaver, or on a post-it at your desk. Having an exact amount to aim for will make this whole process easier. The key to the exercise is: be specific. An important note here, make sure you budget for extra expenses. 50% of couples spend more on a wedding than they had planned, according to weddingsonline.ie. Having a little extra on the run up to the big day will make the world of difference to your stress levels and ensure you don’t blow a hole in your budget

Now that you know how much everything will cost and you have itemised your budget, here comes the tricky part: you need to stick to it.

Yes, the flower displays with orchids from Peru on the TV last night are gorgeous but they’re not in the budget. A trip to Spain for the hen would absolutely be a blast, but that wasn’t in the budget either. Anyway, the weekend in Killarney that you have budgeted for will be even better craic!

Saving means money (saving for a wedding)

For better or worse, the money has to come from somewhere. It can be hard to see where you can make savings to fund your big day. While it may not be the most exciting way to spend an evening, spend an hour or two each week with your spouse-to-be reviewing your budget. Share a takeaway and a bottle of wine. Make a date of it.

First things first, record your cash flow. Each week make a note of everything you spend. Try and find some outgoings that you can reclassify as unnecessary expenses – that coffee and bagel every morning (€5 x 5 days a week x 4 weeks a month = €100 per month). Reducing a few of these will get you well on the way to hitting your target.

Bill Gates is one of the world’s richest people, earning about €328 per second.

By the time you read this article, he will have earned about €200,000.

We know how he made his money, as Microsoft is a huge corporation.

You might be thinking that Mr Gates can afford to be wasteful with his money and dry himself with €50 notes, but the opposite is true. He actually gives away almost all of his income to charity. He has donated €30bn since 1994. Nonetheless, he remains one of the richest people in the world because he, or more precisely his money manager Michael Larson, manages the wealth extremely well.
We ordinary mortals can follow a few of his strategies.

The first is is to live within one’s means.

Mr Gates owns three Porsches, one of which is worth €200,000, but this represents less than 0.001% of his wealth. The lesson here is to be mindful of going into excessive, unmanageable debt for a depreciating asset. I am not anti-debt but I would be mindful of offers such as PCP car finance deals that sound too good to be true. They can cause problems down the line. It took Mr Gates seven years and €54m to build his 66,000 sq ft mansion. He didn’t have to borrow to finance the project but if he had, I am sure he would have shopped around. If I were managing his finances, I would have recommended he fix his mortgage for the next five to 10 years with the strong probability that interest rates would rise over the following 60 months. Personally, I think fixing for five to 10 years makes a lot of sense for first-time buyers. Of course, the debt to avoid at all costs is credit cards. Mr Gates once said: “If I borrowed money at 18% or 20%, I’d be broke.” Paying over 22% on say a balance of €2,000 on a credit card will cost €37 a month in service costs alone, according to Zurich Life. Another lesson we can learn from Mr Gates is to avoid having all your eggs in one basket.

Diversification is extremely important.

His investment portfolio has grown by about 11% a year since 1975. It includes a private island, a private commercial plane, and a lot of antiquities. For average folks the message is still the same: Split your savings and investments into different asset classes that can stand up to various financial storms. Irish people were and still are obsessed with property ownership despite the boom-bust cycle. Ironically, Mr Gates would have the same wealth if he had kept it all in the Microsoft shares he owned at the start of the company over 40 years ago. But it would be a sleepless daredevil to have carried that much wealth in one company. Some of his investments have been duds and some have been resounding successes. The one very important message is he has taken a longterm view, following his close friend Warren Buffett’s views of longterm investing: “Only buy something you would be perfectly happy to hold if the market shut down for 10 years”.

The point here is that investing and saving is not for the short term.

Those that expect quick gains are likely to be very disappointed. If you saved €150 a month for the last five years, you would have grown your savings to €10,333. If you started to save €300 a month 10 years ago, your savings would have grown to €47,440. Mr Gates plans to give most of his money to charity when he dies. He is not leaving a great deal to his children because of the taxes they would have to pay. Making donations to qualifying charities reduces his inheritance tax. There are ways of reducing the tax bill facing your children. One is to “gift” your children up to €3,000 each year, per child, which falls outside of the gift or inheritance tax net. This is called the small gift exception and is a handy way of passing money (though not necessarily directly at the time) to children. Given that you can gift this money every year and it can be given by each parent, this can add up to a lot of money that will fall outside of the tax net.