Managing Your Money

Managing your money is crucial for your success at saving, but what does it mean?

Do a search for ‘spending diary’, or ‘what I spent this week’. I would argue that out of the 790,000,000 or so results your search engine will turn up, you’ll get a lot of figures, but very few helpful diaries.

Why do I question the usefulness of many of these diaries?

Their purpose is primarily to satisfy curiosity, not help people with budgeting & saving questions. People are endlessly curious about other people’s money, and how they spend it.

Even diaries from the UK, our nearest neighbour, can be too socially & geographically different to give any useful comparative data to someone in Ireland. Our taxation systems, and even housing crises, are still very different.

Fundamentally, these diaries are not YOUR spending diary. They lack all context, and the specifics about your spending that will help you save.

Resources:

There are several spreadsheets and spending diaries you can fill in online, and I recommend any of them, in as much as you have to start somewhere. The one thing most of these diaries miss are areas for more detailed information.

A diary entry for two weeks ago says you spent €12 on lunch. Do you remember what it was? Why you spent that much? ‘€12’ is also a suspiciously round figure. Was it really €11.59, or €12.20? These amounts are trivial, but not if it means that your calculations are out by 41¢, for example. If this happens every week, €21.32 has disappeared on you in the space of a year.

What if your entry was detailed? You’d know you spent €11.59 exactly, where you spent it, and what you bought. You’ve automatically ‘found’ potentially €21.32 this year. This is the beauty of accuracy.

Reasons for Spending:

The next level of detail involves what, and why. You rarely spend this much on lunch, so why was today different? Meeting a friend, forgot your lunch? Or maybe it was a particularly stressful day, and you really needed something to treat yourself. By remembering what you purchased, you can evaluate whether it was worth it.

Meeting a friend isn’t a bad reason to spend a little more. If work is horrible, make sure that the treat that gets you through the day is worth it, and not an expensive, tasteless distraction. And if the reason is that you just forgot your lunch? There’s always the next day to do something different.

When your spending diary includes details of suppliers, whether it’s shops or utility companies, you can begin to track who’s giving you better value. Fundamentally, the money is yours, and you deserve maximum reward when you spend it.

Equally, there are plenty of times when spending has an emotional trigger. It could be an event you’re not particularly looking forward to, and you overspend to compensate. You might find yourself needing an inexpensive pick-me-up purchase when you’ve had a particularly hard day at work.

Tracking your spending in this detail isn’t to make you feel bad, or guilty every time you make a purchase. Understanding how you spend money, and feeling control over your choices will enable you to spend smarter. This all leads to more money for your savings.

I’m asking you to do one thing, essentially: become a nerd about your own money. You earned it, you have a right to control where it goes.

How Tax Reliefs Can Help You Save

Savings can take a while. Don’t become disheartened, tax reliefs could be a way to increase your savings quicker.

If your savings are building slowly, don’t be tempted to spend €4 on a lottery ticket. Revenue might be able to help you supercharge your savings account. Reducing your personal tax liability isn’t just for rich people.

What are Tax Reliefs?

Tax reliefs directly reduce the income on which you pay tax. They may result in you receiving a refund of the tax you’ve already paid. The amount of relief you receive depends on the rate of tax you pay.

If you were paying tax at the higher rate of 40%, your income would be reduced by the relief amount. Then the balance is taxed at 40%. Otherwise it will be reduced by the relief, and the balance will be taxed at the standard rate of 20%.

Here’s an example:

In 2018, Celine had medical expenses of €1,630. She doesn’t have health insurance, but the HSE reimbursed her by €240. All of Celine’s medical expenses qualified for tax relief in this case.

Medical Expenses:€1,630.00
Less
Recovered from insurer:€0.00
Recovered from HSE:-€240.00
Unreimbursed medical expenses:€1,390.00
Tax deductible expenses:€1,390.00

Celine will be entitled to an income tax rebate of €1,390 x 20% = €278

What can I claim for?

There are several surprises on the list, which you can see here. Acupuncture, for example, would be an easy one to miss, and it’s quite a popular therapeutic treatment. The biggest surprise goes to something called Flat Rate Expenses.

Flat rate expenses:

Some professions have flat rate expenses associated with them. The list is here, so you can check if your job is there. Some of the occupations are quite surprising. Shop workers, for example, are entitled to claim €121 in flat rate expenses each year. When I worked in retail I was totally unaware, and with average retail wages, this could make a big difference. The €121 will be deducted from your taxable income, and your tax owed will be recalculated, so €121 x 20% over 4 years = €96.80 is your potential rebate.

You can also claim for your medical expenses over the past 4 years, and even if you’re missing receipts, these receipts can be easier to request from your GP’s office. Remember every time you choked at the cost of your medical letter for work? The cost of your prescription? All these receipts are potentially deductible.

Food as a Medical Expense:

Did you also know that if you are diagnosed as coeliac or diabetic, with dietary restrictions, the food you eat forms part of your medical care? With a doctors letter, you could be able to use your supermarket receipts to claim for the food you need to stay healthy. (This will only be applicable for diabetic and coeliac specific food items.) Special dietary needs can be expensive, make sure you’re not paying more than you need to.


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How do I claim Tax Reliefs?

 


  1. Go to MyAccount on Revenue.ie
  2. Login using your details or register if you don’t have an account.
  3. Select ‘Review your tax 2015-2018’ (you’ll get access to the previous 4 years only)
  4. Choose the relevant year, and select submit for Form 12
  5. Choose ‘Add Tax Reliefs & Credits’
  6. Remember, if you’re jointly assessed with a spouse, you’ll need details for both of you, including P60s
  7. You’ll need receipts for reliefs related to expenses too
  8. Take your time, and make sure you have what you need in front of you

Is it worth it?

The average refund due can be €1,000. While it can be time-consuming to research your tax reliefs, it’s worth it in the end. As a nation, we under-claim. Specialist Tax Rebate services exist to help you, but they will either charge a fee, or charge based on a percentage of your rebate.

How to manage your taxes in the future:

  • Know what you can claim, from the available reliefs
  • Keep all your relevant receipts, using a receipt tracker, like RevApp from Revenue.
  • View keeping your receipts as part of your monthly and yearly budgeting
  • Don’t put yourself under pressure to understand ALL taxation, just YOUR taxation
  • If you get overwhelmed, ask for help from a rebate service or accountant
  • Remember, you will never regret gaining control over your finances.

Contact Greenway with your financial planning questions!


Explaining Income Protection And Long-Term Renting

Whether you think rent is dead money, or a mortgage is lodestone around your neck, the chances are you’ll spend a long time renting. A recent article in the Independent says renters are incredibly vulnerable, post-banking crash. Can Income Protection help?

If you spend a lot of time on Daft.ie as a renter, one of the best ways to torture yourself is by making comparisons between the cost of your rent, and an equivalent mortgage. It’s a depressing calculation.

Renting Vs Owning

A mortgage holder has the option of serious illness insurance, and mortgage protection insurance, in case of serious illness and death. A renter may have no safety net in the result of a life-changing event.

The age profile and demographic of renters has changed considerably over the past decade. The media may portray long-term renters as young, but many of us are renting with families and responsibilities.

Recent reports show that some of us are paying up to 60% of our income on rent. Anything that affects our ability to work and fund that rental could be catastrophic.

Income Protection & Its Uses

Income Protection is a key strategy to ensure a long-term illness doesn’t derail your family, and future return to work.


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Income Protection is also known as Permanent Health Insurance. It’s a policy that pays out a benefit if you’re unable to work due to an illness or disability, and you don’t have a second job.


Your benefit starts paying out after the ‘deferred period.’ You select this period at the time you apply for your policy, so it’s typically 4, 13, 26 or 52 weeks. The shorter the period, the higher your premium will be.

For example, if your deferred period is 13 weeks, you must be unable to work for 13 weeks before the income protection payments begin. To decide your deferred period, check if your employer offers sick pay, and if so, how much and for how long.

How To Decide On Income Protection?

Is Income Protection the right choice for you? Well, if you:

  • Are self-employed;
  • Won’t receive sick pay from your employer;
  • Don’t have ill-health pension protection;
  • Have dependents who rely on your income;
  • Have no other source of income;
  • Don’t have sufficient benefits to replace your lost income or cover your expenses,

then yes, I think it’s worth looking at.

Before You Apply…

Some employers will offer access to a group Income Protection scheme, but you can take out an individual policy. The cost of your policy will mainly depend on the level of your cover (percentage of income), the deferred period you choose, and the term of your policy.

Aside from the usual factors of age, health, medical history and lifestyle, your job will also affect your premium. Different types of employment are defined as classes between 1 and 5, as some jobs are riskier than others.

For an example, Sinead and Simon are both renting for €2,500 per a month. Like many people, they’re spending over 30% of their income on rent.

Illness Lasting Less Then 6 Weeks

Income Per YearSineadSimonTotals
Full Time Job€36,000  
Full Time Job €30,000 
Total Income  €66,000
Annual Cost Of Rent  €30,000
Cash Remaining
(€3,000 per month)
  €36,000

Sinead earns €36,000 p/a, and Simon earns €30,000 p/a. If Sinead was to become ill and unable to work, she would receive 6 weeks of illness benefit from her employer, and the state illness benefit of €198 per week. (This is deducted from her illness benefit from her employer).

Illness Lasting Longer Then 6 Weeks

After the 6 weeks, Sinead’s employers illness payments would cease. This would leave Sinead and Simon’s annual combined income of €40,296.

Income Per YearSineadSimonTotals
State Illness Benefit
(€198 x 52 Weeks)
€10,296  
Full Time Job €30,000 
Total Income  €40,296
Annual Cost Of Rent  €30,000
Cash (€858 per month)  €10,296

Their rent per year is €30,000, leaving €10,296 for all other bills throughout the year. That’s a scary €858 to live on per month.

Neither Sinead, nor Simon, have family in the county, so moving in with their parents will prevent Simon from working, and Sinead from taking up her job again after her illness.

With Illness Protection In Place

If Sinead has an Income Protection policy, she can insure up to 75% of her earnings.

She pays PRSI, so she is eligible for State Illness Benefit of €10,296. If she insures an income of €20,000 for 20 years, after a deferred period of 8 weeks, Sinead and Simon will have a combined income of €60,296 p/a.

This will leave them with a monthly income of €2,524, a jump of €1,666.

And the cost to Sinead per month for this policy can be as little as €41.27 per month, if she is accepted on standard rates.

Income protection for renters is a sensible choice. Especially if you have no other accommodation alternatives like been able to move in with family.

Everyone should explore the expense & benefits of insuring the cost we all pay each month for our homes. This applies equally whether you’re a renter or a home owner.

Contact us today to find out how Income Protection can protect your rental home.

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Different types of mortgage protection policies.

Where to buy mortgage protection.

Features of each seller & much more.

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