On Thursday the European Central Bank increased interest rates by a half percentage point, meaning that the thousands of tracker mortgage holders in Ireland will see their payments rise automatically by exactly that half percentage point.
Trackers are set at a fixed margin above the European Central Bank (ECB) rate. So, you could have an ECB+1% rate, for example.
Mortgage holders on fixed rates will not see a change, while those on variable rates will see an increase but the amount will not necessarily be the exact half percentage point.
Reading reports of how much the interest rate increase will mean to an average mortgage holder doesn’t inform what it means for your own mortgage, so I encourage you to check yourself.
You need three basic figures to get your monthly premium: interest rate, capital outstanding, and remaining term in years and months.
You can ring up your lender for this information if it is not apparent from your documentation. Then use a mortgage calculator.
There are numerous online calculators out there such as the one on the Competition and Consumer Protection website (www.ccpc.ie) but most lenders have them also.
Once you have this information you can make decisions about fixing, switching, or just holding tight and riding out the storm.
Is it school time already?
As we are basking in the tropical summer heat, it may be difficult to think about the back-to-school scramble and all the expenditure it entails, but it is creeping up fast.
The financial stress on families will be huge this autumn and it pays to at least plan a bit so when school starts you are ready to go.
The Irish League of Credit Unions did a survey recently that shows that parents are spending nearly €1,500 per secondary school child, with 63% of parents finding it a financial challenge and some going into debt because of it.
They report that the number of Dublin parents resorting to credit cards to cover back to school costs is 31%, which is concerning.
The hidden costs like “voluntary contributions”, which 71% of schools seek, add to the burden.
With this in mind, it is worth spending a bit of time planning in advance how to tackle these costs.
Make a master list of things you need
Now is the time to do this. Write down and start putting prices on everything.
A list can be stuck up on your kitchen wall, acted on and ticked off as you go along, giving you a bit of satisfaction.
Uniforms, books, lunchboxes, stationery, bags, and of course sports gear are the main items.
For each item, look first to try to get it for nothing, then second hand, then something on sale and keep at it until you have ticked off everything well before start day.
Free and second-hand
The little ones grow fairly quickly and you might be fighting a losing battle trying to get away with the same size uniform as last year.
If their school shorts are beginning to look like hotpants, it is a good time to act and your kids will thank you for saving their blushes.
First, see what you can get for nothing or a reduced price. Many schools operate a uniform exchange.
I recently picked up one for my daughter for a contribution to charity.
Consider all the other families who have older kids and are looking to get rid of perfectly good stuff.
Contact the school to see if there is any exchange programme going on. It is good karma to also seek out others who you can pass things on to.
Stay connected
68% of parents shop online for school supplies but this convenience may not be the best value.
Parents' WhatsApp groups are great for getting information on where to go for any deals or bargains or swaps.
Most school classes have one. If you are not in one, why not set one up? You will be surprised what you can pick up. Check out community Facebook pages that allow people to give away things for free; schoolbooks, uniforms and other things included. Join up to these groups and you can keep an eye on what is being offered. You can also let it be known if you are in search of certain items.
School books
The average cost of secondary school books is €211, up €15 since last year.
Most would have received the new book lists for the new year already so, again, the first stop is the school to see if they are doing any swaps or exchanges or even to give you advice on websites or the best places to go.
Check out www.schooldays.ie which gives fantastic information about where to get books, how much they cost and how to minimise costs with vouchers, discounts etc.
Back to School Allowance
Finally, those in receipt of certain social protection payments or in education and training support schemes or with income below a certain amount can avail of this payment.
The Government gives a yearly once-off allowance to help with back-to-school clothing and footwear costs. This allowance is €160 per child aged 4-11 and €285 per child aged 12-22.
The good news is that for 2022 this is being increased by €100 for each eligible child bringing it to €260 and €385 respectively.
If you have not received a letter by June 21 of this year confirming automatic payment of this allowance in July, check your eligibility by visiting www.mywelfare.ie.
Over 65?
There are certain financial benefits from the State for those who reach this milestone age and beyond.
Apart from the obvious things like free travel at 66, there are changes in how much you will have to shell out to the Revenue:
- Taxation. When you hit 65 your income tax is subject to exemptions, below which you will not pay tax. For example, if you are single or widowed, you will not pay tax if your income is below or at €18,000 gross or €36,000 if a couple. If you are caring for children, you will also get a higher exemption for them, €575 for each, going up to €830 after the first two. While tax credits are a good thing and reduce your tax liability if there is one, they are no good to you if you are below the exemption level.
- No DIRT. Deposit Interest Retention Tax, or DIRT, is tax on your deposits, levied at 33%. Now you might be thinking that this is pretty useless, as current interest rates are so minimal so paying 33% of almost nothing is strangely almost nothing. But interest rates are rising and deposit interest will rise in time also. Back in 2009 they were hovering around 5%, so €100,000 on deposit would have meant a DIRT bill of €1,650.
- PRSI. You stop paying PRSI once you hit 66. This would typically be 4% of gross income.
- Age Tax Credit. While credits are useless if you are under the tax exemption, if you are paying income tax and are over 65, they will reduce the tax you pay. Along with the list of possible credits available, an age tax credit kicks in at 65 and this can mean a reduction in tax of €490 for a couple and half that for a single or widowed person.
- USC. The dreaded tax on all earnings, increasing as a percentage the more you earn, is limited to a top rate of 2% for those over 70 and earning less than €60,000.
As always, do a small bit of research on your current situation. There is a lot of information out there but my suggestion would be to talk to a real human being, those in the Citizens’ Information Bureau being a great first step. See www.citizensinformation.ie for an intuitive and informative website.
Give your wallet a rest - have a no-spend day
Did you ever leave the house planning not to spend anything only to return later with your wallet a lot lighter?
These days when money is tight, and only getting tighter, consider having a no-spend day.
This will leave more in your bank account and will make you think a bit more about what is really essential and what is just spending for the sake of it.
Stretching it out for a few days gives even more benefits.
Of course, you need to spend on certain things like your utilities, mortgage and bills, but do you need to buy food, coffee, snacks, clothes today?
When I leave my house I run through my keys-wallet-phone checklist, but now I am starting to leave my wallet at home.
If I don’t have it, I can’t use it. It is a psychological break with habit and I’m not denying that it is difficult.
If you have kids, a no-spend Saturday is pretty difficult, but not impossible. Feed them before you go out, tell them you are leaving your money at home so there is no temptation.
There are many, many enjoyable things you can do free of charge: walks, parks, beach, library, playgrounds, family visits.
Believe me you will feel a little victorious at the end of the day.
It will also give you increased insight into your spending habits and behaviours, and it may help you make better spending decisions the following day.
Call the Money Advice & Budgeting Service on 0818 07 2000
Morgan O'Connell is the first financial coach in Ireland holding the Certified Financial Planner Accreditation. He specialises in goal setting, time management and financial education. Contact him at morgan@arrowcoach.ie.
