COLUMN: When you've pared your budget to the bone and there's still nothing left

Dear Jill,

“I am a mother of three and trying to come to terms with how expensive Ireland is. We came home in 2010 and ever since have been taking cuts in salaries and costs are going up constantly. My husband works full time and has decent pay. I work part-time (my youngest is only four) yet we struggle to get through each month. Our mortgage is quite high at €1,600 a month. My question is, what are we doing wrong? We don't go out, don't drink or smoke, have stopped entertaining as it is too dear.

“We go on budget holidays to Spain as we can't afford anything else. I can't think of anywhere else to cut our budget as we’ve reduced every item we could think of. Are there many families in this situation? What are we doing wrong? I feel like we failed our children, as we are unable to save for college or give them the future we so wanted when we decided to come back.”

Dear Reader

Your pain and bewilderment is palpable.

I don’t doubt for a minute that you’ve pared your budget to the bone – and before anyone points to your Spanish holiday as another expense you should cut, I’m with you: raising three small children as a (mostly) stay-at-home mum in our damp, grey, debt-ridden island puts a two week break in what is probably a self-contained apartment as part of your ‘essential’, not discretionary spending.

Like so many other families, it sounds to me that what you’re suffering from a chronic lack of income and too high a tax liability. This will be partly alleviated if

and when you return to full-time work, assuming of course that child-care and transport costs don’t decimate your take-home income.

Couples with two incomes qualify for the 20% standard rate income tax up to €67,600 and pay 40% on the balance, rather than 20% tax on only €42,800 if only one spouse works full time (and the other earns less than €24,800.) PRSI, USC, our high VAT rate on so many goods and services, huge excise duty on petrol, alcohol and levies on life, health and general insurance policies all eat away at disposable income.

Sometimes it is very hard to see the wood for the trees so you need to share your despair…in order to limit its toxic affect.

First, I suggest you speak to a MABS.ie adviser in your town who can help you with a formal budget review. (They are not there just to help people in serious debt.) They’ll help review your overall financial position – everything from essential and discretionary spending, your taxes and debt, and savings, education and retirement plans. Valuable tax refunds can be claimed up to four previous years.

You also need to stop dwelling too much on how to pay for an expensive university education that your children may not even want some day. Their future is not yours to give. Instead, cheer yourself up by taking a look at this website, www.apprenticeship.ie Apprenticeship programmes are evolving at a huge pace and include highly skilled and paid opportunities in not just traditional trades but in engineering, IT and financial services. Grants, scholarships, bursaries and even EU financial supports abound as well – see the ‘Student Studying Abroad’ link at www.citizensinformation.ie .

Meanwhile, both you and your husband should get some career guidance and higher training advice which may help increase your earnings. Set modest, realistic income targets for the near and medium term.

Finally, be open to all financial suggestions even radical ones.

According to DAFT.ie Irish house prices are rising by €50 a day. Demand in your county is very high. If your home is in positive equity, downsizing from a €1,600 mortgage could result not just in the release of hundreds of euro for monthly cashflow, but any capital gain you earn would be entirely tax free. This money could help pay off other debt, for training or higher education for you and your husband, and boost neglected retirement accounts.

Best wishes and good luck,

You can read Jill Kerby's 'Your Money' Column every week in the Meath Chronicle