25 and making money. Where do I even start?

PistolSquat

Hi all,

Would be grateful if anybody could give me some advice. I've lined up a meeting with an independent financial advisor in Ireland during summer holidays but would like to go in with some sort of an idea of what is going to be (or can be) discussed.

Current situation is I'm 25 y/o, working in the Middle East and in a very fortunate position of earning approx €60k tax free.

Have €1,300 in local CU and also banking with AIB where this is my situation at present:
Current a/c: €700
Online notice 7 day: €2,500 with interest at 0.150%
Online notice 21 day: €5,000 with interest at 0.400%

Currently have an Irish credit card that's not being used. Sending money home quarterly.

Realise that this is an important time which can help greatly in the future, so just want to be prudent. Topics I will probably raise at the meeting and look to learn about include savings accounts, pensions, mortgages, residency issues re DIRT and returning home. I just find myself overwhelmed regarding all of this and don't know where to start so any advice or discussion would be appreciated.

Thanks in advance

JTMan

Few questions:
- Have you told AIB that you are a non-resident?
- What are you saving for?
- Will you come back to Ireland?
- Are you using a Middle Eastern or Irish financial advisory service?

PistolSquat

JTMan wrote: »

Few questions:
- Have you told AIB that you are a non-resident?
- What are you saving for?
- Will you come back to Ireland?
- Are you using a Middle Eastern or Irish financial advisory service?

Thanks for reply JTMan.

-No, just upped and left. Spoke to an employee there recently when I queried my residential status regarding savings and they suggested to speak to Revenue about the implications. Haven't done this yet so have no idea what it might mean for me.
-Nothing specific at the moment, simply earning a wage and have potential to save. Down the line maybe further education, marriage, house. I don't really know!
-Eventually yes. No immediate rush, can see myself away for the next 5 years.
-Financial advisor will be Irish.

newacc2015

Those accounts are offering horrific returns. You can 3% with KBC through a regular saver. Bonkers.ie will tell you the most suitable savings account for your needs.

Wesser

What is your occupation?

How much do you think you will be able to save per annum? Ie what is your rent food utilities travel ents etc? I think it's important to know this figure first.

JTMan

PistolSquat wrote: »

Thanks for reply JTMan.

-No, just upped and left. Spoke to an employee there recently when I queried my residential status regarding savings and they suggested to speak to Revenue about the implications. Haven't done this yet so have no idea what it might mean for me.
-Nothing specific at the moment, simply earning a wage and have potential to save. Down the line maybe further education, marriage, house. I don't really know!
-Eventually yes. No immediate rush, can see myself away for the next 5 years.
-Financial advisor will be Irish.

Normally ... If you prove to AIB that you are non-resident, and if they are okay with a non-resident holding accounts, then you will get your deposit interest tax free. You will then need to declare your deposit interest in the country in which you are tax resident and pay tax there. However, your deposit interest is small and if you kick up a fuss about this then AIB might close your accounts on the grounds that you are non-resident. Also, the country you are present in may or may not have a double taxation agreement with Ireland. Hence, given the small sums involved, it might be best doing nothing.

If you are saving for future expenditure in EUR, then your savings should be in EUR. If you are saving for future expenditure in the middle east, then your savings should be in that countries currency. This is to avoid FX risk. It seems that your future expenditure will be in EUR, hence, you should save in EUR.

- What do you want to know about pensions? Again, as a non-resident, you will struggle to open up an Irish pension product.
- What do you want to know about mortgages?

JTMan

newacc2015 wrote: »

Does accounts are offering horrific returns. You can 3% with KBC through a regular saver. Bonkers.ie will tell you the most suitable savings account for your needs.

The OP is non-resident. KBC normally do not allow non-residents open accounts.

Also, the products on Bonkers.ie are geared towards residents. Most cannot be opened by the OP.

PistolSquat

Cheers for the discussion, I'm learning. I also thought that the interest rates were doing nothing for me.

Wesser wrote: »

What is your occupation?

How much do you think you will be able to save per annum? Ie what is your rent food utilities travel ents etc? I think it's important to know this figure first.

Not to be blunt, but going to dodge occupation question. €25k p/a is the figure I've targeted. For me, it's not so much a question of how much I can save, it's more a question of what to do with it when I send it home.

JTMan wrote: »

Normally ... If you prove to AIB that you are non-resident, and if they are okay with a non-resident holding accounts, then you will get your deposit interest tax free. You will then need to declare your deposit interest in the country in which you are tax resident and pay tax there. However, your deposit interest is small and if you kick up a fuss about this then AIB might close your accounts on the grounds that you are non-resident. Also, the country you are present in may or may not have a double taxation agreement with Ireland. Hence, given the small sums involved, it might be best doing nothing.

If you are saving for future expenditure in EUR, then your savings should be in EUR. If you are saving for future expenditure in the middle east, then your savings should be in that countries currency. This is to avoid FX risk. It seems that your future expenditure will be in EUR, hence, you should save in EUR.

- What do you want to know about pensions? Again, as a non-resident, you will struggle to open up an Irish pension product.
- What do you want to know about mortgages?

Thanks for this, appreciated.

Regarding pensions, I'm clueless to the point where I don't even know what I want to know, if that makes sense. I've read another thread in this forum where somebody was starting at 30. General consensus is that the earlier you start, the better. Also different employers and different matching contributions but this does not seem to be applicable to me. So what do expats do? Why do you say I would struggle? What are the issues?

Re. mortgage, is sending home money quarterly enough to show regular saving? Would I need to show statements from here? I'm just trying to put myself in the best possible position upon return.

JTMan

Yes, the earlier you start a pension the better. Irish pension products are aimed at Irish residents. Tax benefits for pension contributions are also only available for Irish tax residents. You may need to get local financial advice, in the country your are living in, about pensions. Ideally, if at all possible, your pension savings would be EUR and you need an easy way to transfer this back to Ireland at a later date. Reality is (1) you might struggle to open a EUR pension in the Middle East (I would speculate) and (2) you might struggle to transfer the pension back to Ireland in the future (again, speculation). Hence, you might simply be best keeping savings 'ringfenced' for your pension. When you get back to Ireland, you could put this into a pension.

To get a mortgage, normally, due to brand new regulations, you need to be able to prove regular income (and also savings) in EUR, not non-EUR currencies. When you get back to Ireland, you will need to be have income in EUR and savings in EUR to apply for your mortgage. Provided you get a job when you come back, this should not be an issue.

Bigus

PistolSquat wrote: »

Re. mortgage, is sending home money quarterly enough to show regular saving? Would I need to show statements from here? I'm just trying to put myself in the best possible position upon return.

See that's the question , to do what on return ?

Personally,me being double your age and having seen first hand the scams that pensions are ( as a former huge employer), l'd say that the only pension worth having is a state one, because every other one is eaten up with management fees regulation changing legislation inflation etc.etc. Ultimately they never ever seem to work ,with my apologies to anybody in the sector, but worldwide pension funds often are chronically underfunded or even collapse regularly .(Google them)

With this in mind the (imho) best pension is paid-for , PROPERTY,with rental income, be it commercial or even residential, second best would be mortgaged property with surplus rental income, because unlike pension cash it can't be eaten up with fees and YOU own it so less people to make a mess of it.

My suggestion because you're 25 and had the balls to uproot go out and earn that money tax free , plus the fact that you can, "at the moment afford to lose it ", for a year or two , would be to go after something high risk high return and return to Ireland with a pile of cash that will be many multiples of your savings.

I'd aim for double or triple /quadruple or tenfold , depending how inventive you are and how hard YOU want to work your cash , and feck the institutions, because every time you engage an institution loads of people have to earn their salary with your money.

So I'd say gather the first few bob together and find maybe an irish trader through the grape vine internationally based and give them carte blanch to go risky with a big share for them of the uplift. Unfortunely a lot of established guys like this won't take less than 1M , but I'm sure there's somebody competent starting off the take 25 k.

Alternatively use your first 25 k to wheel and deal directly yourself either importing or exporting from the Middle East in luxury goods or whatever you have knowledge of ( hence the other posters question of what your occupation is)

Ultimeatly you see it's YOUR money , so the best one to look after it is YOU and don't get false comfort by giving the So called experts control of it , all this will do is give you false comfort and expense.

Good luck

Chris_5339762

Use to to buy a house when you get home. That way, no mortgage or rent. Or much, much less of a mortgage than you'd have otherwise.

Merowig

Save it and invest it - e.g. with a Blackrock or a Vanguard ETF via a broker in your middle eastern country. The fees will be most likely less than for an Irish Pension product! Or find a better savings accounnt - the current interest rate is a joke

And save for a house.

When you are returning and paying Irish taxes you can then transfer yearly parts of your savings into a pension product - If you get later in Ireland a job there the employer is matching your contributions from your salary with his own contributions - do this - and you can add the delta from 20% and the pay roll deducted contributions then to the pension fund.
An Irish Pension product doesn't make sense now if you don't pay Irish taxes.

Merowig

Bigus wrote: »

See that's the question , to do what on return ?

Personally,me being double your age and having seen first hand the scams that pensions are ( as a former huge employer), l'd say that the only pension worth having is a state one, because every other one is eaten up with management fees regulation changing legislation inflation etc.etc. Ultimately they never ever seem to work ,with my apologies to anybody in the sector, but worldwide pension funds often are chronically underfunded or even collapse regularly .(Google them)

http://www.irishtimes.com/business/personal-finance/how-safe-is-your-state-pension-five-ways-the-benefit-may-be-cut-1.2597941
That for the state pension.
Defined Benefits schemes are underfunded - defind contribution schemes don't have that problem.
Fees are indeed a problem - but you can shop around.
Private Pensions are working.

Though as previously stated - it is not a topic now for him in my opinion.

phantom_lord

Bigus wrote: »

See that's the question , to do what on return ?

Personally,me being double your age and having seen first hand the scams that pensions are ( as a former huge employer), l'd say that the only pension worth having is a state one, because every other one is eaten up with management fees regulation changing legislation inflation etc.etc. Ultimately they never ever seem to work ,with my apologies to anybody in the sector, but worldwide pension funds often are chronically underfunded or even collapse regularly .(Google them)

With this in mind the (imho) best pension is paid-for , PROPERTY,with rental income, be it commercial or even residential, second best would be mortgaged property with surplus rental income, because unlike pension cash it can't be eaten up with fees and YOU own it so less people to make a mess of it.

Or the much better option of just going for a personal index tracked fund.

newacc2015

Merowig wrote: »

Save it and invest it - e.g. with a Blackrock or a Vanguard ETF via a broker in your middle eastern country. The fees will be most likely less than for an Irish Pension product! Or find a better savings accounnt - the current interest rate is a joke

And save for a house.

When you are returning and paying Irish taxes you can then transfer yearly parts of your savings into a pension product - If you get later in Ireland a job there the employer is matching your contributions from your salary with his own contributions - do this - and you can add the delta from 20% and the pay roll deducted contributions then to the pension fund.
An Irish Pension product doesn't make sense now if you don't pay Irish taxes.[/QUOTE

+ 1 on the Vanguard ETF. Since I presume OP is paid in a currency linked to the US Dollar. Meaning he wont have the currency risk from month to month

PistolSquat

Merowig wrote: »

Save it and invest it - e.g. with a Blackrock or a Vanguard ETF via a broker in your middle eastern country. The fees will be most likely less than for an Irish Pension product!

phantom_lord wrote: »

Or the much better option of just going for a personal index tracked fund.

Thanks for the replies. This is the point in the discussion where I start to get lost, but will investigate!

Merowig

PistolSquat wrote: »

Thanks for the replies. This is the point in the discussion where I start to get lost, but will investigate!

http://www.investopedia.com/articles/01/082901.asp
http://www.investopedia.com/terms/e/etf.asp
http://www.investopedia.com/articles/mutualfund/05/060605.asp

https://investor.vanguard.com/home/

Zenify

As others have posted I would agree not to go with a private pension. The reason why people are told to start them young is purely to start saving young, you seem to be able to do this without the need of a scheme. They are good in a way to avoid tax but this is not applicable to you either.

As others have said invest the money in funds or stocks. There are many methods to do this with different levels of risk. Lots of info online.

However...... I don't save my money in stocks or funds. I have taken a boring safe method of low rate bank interest. Because I'll be happy with a basic return and I don't have to be rich in the future. A good living will do me. So match your investment to your goals.

ixus

You're doing things the wrong way around. Keep your money out of the country and become a non-resident over a three year period. Investigate the details on becoming a non-res, don't bother with a financial adviser on savings. Seek a tax consultant or accountant with knowledge on this.

Save outside Ireland. No pensions or investments. Zero. Provides far more opportunities in the long run. Make the break and don't be fearing it. This is the smart play.

Don't bother with investing money in funds or any such thing either. Save your cash, earn as much as you can and use it for business or investment opportunities in the future.

What currency are you earning in? If say it's USD, send it to a USD savings account with HSBC in Isle of Man or something to that affect. None of this is illegal as you are non-resident.

Again, get better advice in this area.

Chunky_Monkey

ixus wrote: »

You're doing things the wrong way around. Keep your money out of the country and become a non-resident over a three year period. Investigate the details on becoming a non-res, don't bother with a financial adviser on savings. Seek a tax consultant or accountant with knowledge on this.

Save outside Ireland. No pensions or investments. Zero. Provides far more opportunities in the long run. Make the break and don't be fearing it. This is the smart play.

Don't bother with investing money in funds or any such thing either. Save your cash, earn as much as you can and use it for business or investment opportunities in the future.

What currency are you earning in? If say it's USD, send it to a USD savings account with HSBC in Isle of Man or something to that affect. None of this is illegal as you are non-resident.

Again, get better advice in this area.

is that you david cameron

CelticRambler

The OP may not be officially non-resident in Ireland at the moment if he just "upped and left" so that's something to clarify with either the Revenue or a financial advisor.

Like Bigus, I'm close to double the OP's age and now highly cynical of pension plans, private or state. When I was young, single and relatively well remunerated I signed up for a private pension with Irish Life (UK) thinking it'd be easy to transfer it back to Ireland when I un-emigrated in due course. I also contracted out of the UK state pension to boost my personal pot. I only kept the contributions up for about five years, but looking back I see what a pointless exercise it was. Irish Life was sold, SERPs was cancelled, the projected return was reduced from around 10-12% to 1-2%, and I changed my mind about living in Ireland. Even on the relatively small sum I invested, the supposed beneficial effect of compound interest should be significant over twenty years; it's not. My son has had a much better return on the money he got as a baby that we put into savings bonds for him.

Now I'm working in France (well, from time to time) and have no choice but to pay heavily into the state pension, which we've just been told will run dry in 2027 - just as I hit 60; great! At the moment, I'm told that I can "easily" transfer the private pot I've got in the UK to an equivalent French scheme, but who knows how that might change post-referendum, or "just because ..." and in any case, I see plenty of UK-dependent pensioners getting themselves in a twist over exchange rates and not knowing exactly how much they'll be getting in Euros next month.

But I'm not too worried, because I *did* follow the suggestion above to put my later money into property. It makes a *huge* difference to your financial and mental health to be able to just buy a (family) home for cash and have zero mortgage repayments. Everything and anything else can be negotiated, reduced, postponed or just done without if/when the need arises, and whatever you earn is yours to spend/save as you like.

So in your situation, having clarified the tax domicile, I'd keep my savings as "local" as possible and split them into one part guaranteed return, one part risk-but-maybe-high return, with the intention of buying property (one or more) when I knew where I was going to live out the later part of my life.

Merowig

ixus wrote: »

You're doing things the wrong way around. Keep your money out of the country and become a non-resident over a three year period. Investigate the details on becoming a non-res, don't bother with a financial adviser on savings. Seek a tax consultant or accountant with knowledge on this.

Save outside Ireland. No pensions or investments. Zero. Provides far more opportunities in the long run. Make the break and don't be fearing it. This is the smart play.

Don't bother with investing money in funds or any such thing either. Save your cash, earn as much as you can and use it for business or investment opportunities in the future.

Not everyone is an entrepreneur and wants to have his own business. And you contradict yourself. First you advise not to invest - later you say to save it for investment? Now what?

What currency are you earning in? If say it's USD, send it to a USD savings account with HSBC in Isle of Man or something to that affect. None of this is illegal as you are non-resident.

Again, get better advice in this area.

Interest rates are on a historical low - so inflation will eat savings away.

Merowig

In regards to residency and taxes:
http://www.citizensinformation.ie/en/money_and_tax/tax/moving_country_and_taxation/tax_residence_and_domicile_in_ireland.html

CelticRambler

Merowig wrote: »

Interest rates are on a historical low - so inflation will eat savings away.

Inflation is at an historical low too. You can get safe savings products with returns greater than inflation, so you still come out on the right side.

It's also possible to manipulate your own "personal" inflation - changing service providers, buying habits, etc. coupled with experience and using your track record to negotiate other charges down. It comes back to managing your money for yourself because its your money, as someone said above.

ixus

Merowig wrote: »

Not everyone is an entrepreneur and wants to have his own business. And you contradict yourself. First you advise not to invest - later you say to save it for investment? Now what?


Interest rates are on a historical low - so inflation will eat savings away.

There is no contradiction. My remarks are pretty clear, don't invest in funds or any such and save for opportunities in the future. Ireland has a pension deficit timebomb. The only reason. People put money into pensions is tax incentives. The OP doesn't have that requirement. Having cash on hand for an investment opportunity in the future. Is different to paying monthly, or quarterly into some fund or etf. You generally get hit for fees and hidden charges.

Becoming non-res offers opportunities. If the OP is going to be away 5 yrs, it makes sense. Explore dual citizenship if the country is popular among Western nations.

I'm a Trader, I know where inflation is and the markets are. If the OP saves their cash in a highly rated bank outside Ireland, they will do just fine in the 5yr term.

If the OP saves 25k per annum @0% for 5 yrs, I believe they will be in a financially sound position. Better than locking that up in some pension fund, Irish savings account, or long term invesyment fund after fees are detucted.

Merowig

CelticRambler wrote: »

Inflation is at an historical low too. You can get safe savings products with returns greater than inflation, so you still come out on the right side.

It's also possible to manipulate your own "personal" inflation - changing service providers, buying habits, etc. coupled with experience and using your track record to negotiate other charges down. It comes back to managing your money for yourself because its your money, as someone said above.

Inflation is low for Europe - but not for Dubai, where I assume the OP is based for the next 5 years.

For your own case I wouldn't transfer your UK pension fund to France if you want to have a lump sum:
http://www.telegraph.co.uk/pensions-retirement/financial-planning/10-european-countries-for-british-retirement-living-costs-proper/french-flag-flying-with-the-eiffel-tower-in-the-background/

Zenify

The whole resident/non resident thing is really for capital gains tax and inheritance tax. Nothing big here if op is planning on coming back to Ireland.

CelticRambler

Merowig wrote: »

For your own case I wouldn't transfer your UK pension fund to France if you want to have a lump sum

Thanks for the suggestion. It's not of immediate relevance so I'll review the situation when the time comes. My point was that, at the time I signed up, I had a nice strategy lined up for myself. Ten years later, myself, the pension provider and the regulatory climate had all changed direction. I *do* believe in long-term investing, but I no longer believe that classic pension funds are the way to do achieve this.

Merowig

You have a self directed PRSA Option with Davy which can be "cheap". Sure one can always have the bad luck that the market crashed just in the moment you want to retire.

The only reason which is speaking for PRSA/ Funds is the tax incentive - and employers top up. It is free money basically.

I agree that diversification is important.
I am paying off a mortage in my homecountry. My fiancee has two appartments (both paid) in her home country. I have an old PRSA, a DC fund I am paying currently in, I have a significant amount in shares (I will start again buying monthly from May onwards) and also cash savings.
I am already eligible for the Irish state pension (and also for the state pension in my home country) (and I make contributions towards the pension scheme in my home country every time I am there for reserve training.)

CelticRambler

Merowig wrote: »

You have a self directed PRSA Option with Davy which can be "cheap".

Me? Or the OP?

I have no financial links with Ireland (other than a company directorship) so PRSAs are out. Worse, I live and work in France so have no real say in who gets chunks of my money for no good reason. I had a demand for pension contributions a few years ago that amounted to 275% of my income for the year! :eek: (plus another demand for a further 133% of my income for social charges, and a relatively modest 10% for professional affiliation fees ... this feckin' country ... :mad: )

lcwill

I have been in a very similar situation to the OP - living overseas with tax free salary since my early 20s.

Forget about pension schemes - if you have a tax free salary most of the benefits of pension schemes disappear. The high fees are only worth it for the tax deductions which are irrelevant for you.

You are in an amazing position which if handled well could change your life forever.

First priority for anyone in your situation is to save as much as you can, even if it is just piling up in your bank account.

What comes next depends on the individual and the opportunities available

For me I wanted to secure some passive income as my work was very unstable and I didn't know how long the good times would last. I also wanted a foot on the Irish property ladder in case I eventually came home.

However there is no rush to invest - I didn't actually do anything beyond saving for 5 years by which time I had amassed enough savings to buy a small apartment in Dublin (bottom of the recession in late 2012) which gave some passive income and the foot on the property ladder.

Looking back this has been a good investment, but I would have been better off putting all those savings in the stock market and riding the huge increase in stocks after the financial crisis.

I probably should have taken a more balanced approach and kept 50% of savings on deposit for a potential house purchase and invested 50% in a few different ETFs.