Making Cents: Kildare's financial questions answered

Question
How do you find out how many PRSI contributions a person has made?

Answer
There are two ways.

The first is by requesting a contribution statement on MyWelfare.ie.
You’ll need a MyGovID account to make the request and if you don’t have one you can easily create one.

And if you have an account, in order to request the statement, you’ll be asked to provide your (a) ppsn number (b) your name (c) date of birth and (d) your mother’s maiden name.

If your ppsn or date of birth or address don’t match the information held, you’ll be asked to visit your local Intreo office to verify your information.

If you have difficulty using this online facility or you just don’t want to, you can contact the PRSI records customer service team for assistance, and their details are as follows:
PRSI Records, Department of Social Protection, McCarter's Road, Ardaravan, Buncrana, Donegal.
Tel: (01) 471 5898 or 0818 690 690.

Question
I don’t save money on a regular basis, and I’ve never taken finance too seriously. I like to reward myself for working hard so any extra money I’ve ever had is spent on clothes or changing the car or holidays or doing some work around the house. I’m not sure if this is the right approach or whether I should or need to save money. I’m 29 and single and my net take home salary is €2,500 each month. Any advice or guidance would be appreciated.

Answer
Thank you for your question and when you have no obvious reason or goal to save money for, it can be difficult to get into the habit of saving money.

You wonder what’s the point of having money sitting in your account doing nothing when you could be spending it and enjoying it.

However, without wanting to be a killjoy, you do need to start saving a dedicated amount each month in order to build up a sum of money, that’s future purpose may not be obvious at the moment.
And not knowing what that unknown reason is shouldn’t be an excuse to save nothing at all.

The purpose of building up a dedicated savings account is that should something unforeseen happen in the future and you need to get access to a sum of money quickly, you have it.

And I’m referring to what’s commonly referred to in the financial services sector as an emergency fund.

This is money that can be called upon when something unexpected happens like a reduction in your income because of illness, a redundancy, car breakdown, home repairs, a friend or sibling might be struggling financially and you want to help them out, emergency pet care and you have no insurance to cover the cost etc.

And these costs could be greater than your monthly salary and there could be any number of reasons why you might need money, some more obvious than others and hopefully you’ll never have to use the savings you build up, but having the peace of mind knowing that if something did happen to you, is the reason why you should begin to save each month and build up this emergency fund for yourself.
The consequences of not having money is scrambling around looking for perhaps a loan or using high charging credit cards or worse still not being able to get any money at all and having to suffer the consequences of whatever happened to you.

Having a number to aim towards is important and I think €7,000 is a good number for you. And I think setting yourself a goal of getting to this number over the next three years is the right strategy. It means you need to save €194 every month and if you do, in three years’ time you’ll have your emergency fund in place. And if you can add lump sums to it over the year then great, you’ll get there even quicker.

And saving this monthly amount shouldn’t feel restrictive either because you still have plenty of money leftover that you can spend on yourself. And when you get to €7,000 you need to lock it down and any money saved beyond it is yours to spend but anything less you can’t.

And hopefully you’ll never need to use this fund but if you did, having that money set aside and being able to use it if needs be, you’ll look back and think that was one of the best things you’ve ever done from a financial perspective.

Question
Liam, I have a fixed rate with my lender and the rate is 3.1% and I’m paying €600 per month. It’s due for renewal in July of next year and I was wondering should I look at fixing it now or wait until next year? And if I do what could my repayments become?

Answer
I’d recommend that you don’t move from your current fixed rate now because (a) you could be charged a penalty for exiting early and (b) you’d be moving to a higher rate i.e. the same 5-year fixed your current provider is offering is 4.4%.

Interest rates are predicted to fall over the next 12 months, so your timing could be good because the rates on offer now could and should be lower next year, so my advice is to do nothing for the time being and see how things play out with interest rates.

And if by chance rates don’t move up or down and you stayed with your current provider and you locked in at 4.4%, your monthly repayment would increase by €75 from what you’re currently paying. And if rates came down by say 0.75%, and the new 5-year fixed rate became 3.65%, then your monthly repayment would be €31 more than it is now.

Having said all of that, don’t rule out moving lender either next year either and I say that because there is another lender offering a lower rate than yours is. You can get a 5-year fixed rate right now with them of 3.55%, which is 0.85% lower than your current lenders rate for the same fixed period.
And that 0.85% in monetary terms means you’d pay about €50 less each month.

Again, my advice is to do nothing for the time being and hopefully rates will decrease two or three times before your fixed rate expires and if they do you could be locking into a lower rate than you have now and you could end up paying even less not more than your current monthly repayment but that will depend on what way rates will be next July.

So, be vigilant and monitor what your lender and others are offering c. three to four months before you have to make any decisions about what to do when your current fixed rate expires. And that hopefully is a lower rate than your current lender is offering or an even lower rate than that from someone else so again don’t rule out the possibility of moving lenders next year either.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie