Author Topic: Ideas on what to do with my 1st 7,000 euros in savings  (Read 1941 times)

Irish in Valencia

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Ideas on what to do with my 1st 7,000 euros in savings
« on: January 06, 2017, 08:35:08 AM »

 Hello all,
 You seem like a great bunch, anyways here is our situation.
I am 30 years old, living in Castellon de La Plana, Spain with a lovely wife and newish baby. I opened a Language School 3 years ago and it is going ok. Wife (Primary school teacher) is off work for the year so we are living on 1 salary for the next 6 months- we have done our maths and are ok financially
Our Debt
We have a 29.5 year mortgage which comes to 98,085 euro. interest is  2% - Variable mortgage
We owe a further 41,000 euro to my grandfather (this money was borrowed to qualify for mortgage)  Repaying 400euro a month no interest
Our Savings
This year we have saved a total of 7000 euro in cash - Normally I'd have found ways to spend this but I am a very recent convert to your moustachionistic ways.
I don't want to keep the money in cash/ savings as it is likely to be spent, mortgage prepayment is a very real option but the drawback is that interest is so low. Investing in Spain sees you crippled by taxes. Index funds are a nice idea but I don't see it working out with the tax situation.
Any help here greatly appreciated,
Yours Andrew

aspiringnomad

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Re: Ideas on what to do with my 1st 7,000 euros in savings
« Reply #1 on: January 06, 2017, 10:16:18 PM »
I'd make sure you have a comfortable emergency fund then put the rest towards paying your grandpa back; especially given how limited your alternatives seem, but even if that weren't the case it's probably what I'd do.

WerKater

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Re: Ideas on what to do with my 1st 7,000 euros in savings
« Reply #2 on: January 07, 2017, 05:54:06 AM »
Investing in Spain sees you crippled by taxes. Index funds are a nice idea but I don't see it working out with the tax situation.
Can you expand on that? From what I could find quickly, taxes in Spain do not seem worse than in Germany (a bit better, actually) And investing is certainly worthwhile here.

In any event, for now I second to pay back your grandfather (after setting up an emergency fund), simply because it is the Right Thing To Do, in my opinion.

SwordGuy

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Re: Ideas on what to do with my 1st 7,000 euros in savings
« Reply #3 on: January 07, 2017, 07:45:00 AM »

Unless the taxes are 100+%, investing is always better than not investing if your goal is FI...

How long can you live on 7k euros?   If you were injured in an accident or got sick and could not work for awhile - and couldn't take care of the baby (or yourself) for some months so your wife couldn't go back to work either - how long would that money last? 

You really want to have your bases covered for at least 6 months.  All that doesn't have to be in cash, but it needs to be available in bits as needed over a 6 month timeframe.   Is your business very seasonal?  Is summer is a much busier time than winter?  If there were domestic unrest and no one wanted to come to Spain for classes one summer, would you need enough to carry you thru to next summer?   

Is your grandfather very well off or is that 41k a whole lot of his stash??  If he really needs that money back asap, then you know what to do.   If not, then you can balance paying him off faster (still the right thing to do) with upping your emergency fund to cover the inevitable down times in the business cycle.

Personally, I prefer to pay back family as soon as possible - particularly a no interest loan.   Family aren't generally in the business of loaning money to others.   Your financial situation has caused them a hassle and it's only right to make that hassle go away pronto.  They put you ahead of their plans for that money, it's only right that you put them ahead of your plans, too.  (While still making sure your finances are being managed responsibly.)


Irish in Valencia

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Re: Ideas on what to do with my 1st 7,000 euros in savings
« Reply #4 on: January 07, 2017, 11:13:51 AM »
Thanks people.
Done some thinking and  I'm looking at 3000 back to grandfather - he isn't extremely rich but the money he loaned us is a small fraction of his savings. 3000 into the mortgage and a further 1000 kept in checking a/c for an emergency fund.
As for question on investing I'm going on what my bank manager has told me.
My business is open just 10 months a year but I have my 2 months downtime taken into account.
Thanks folks for advice, much appreciated.

WerKater

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Re: Ideas on what to do with my 1st 7,000 euros in savings
« Reply #5 on: January 08, 2017, 07:44:07 AM »
Thanks people.
Done some thinking and  I'm looking at 3000 back to grandfather - he isn't extremely rich but the money he loaned us is a small fraction of his savings. 3000 into the mortgage and a further 1000 kept in checking a/c for an emergency fund.
Good call.

Quote
As for question on investing I'm going on what my bank manager has told me.
I suggest that you research this question for yourself. Bankers (just like other people who want to sell you stuff) will tell you all kinds of things if it suits them.