Wondering what my fellow ozbargainers think in this situation. What would you do if you were in this situation.
Background: Young couple 31 & 30 with 2 kids under 2. Combined household income of ~300K.
Assets: PPOR owned outright (Value ~650K), 2 IPs with combined debt of 650K (Current Market Value ~950K).
Savings: 280K (Shares & Cash-offset, excluding Super)
End goal is financial independence with steady income at retirement, no plans to retire in next 25 years at this stage.
Seen a couple of financial planners (Major Banks) and they seem to push for banking funds, I am not sold on them yet.
Here are the few options I think off:
What Next in Life?
Poll Options
- 20Buy another IP (prefer Inner City suburbs this time)
- 2Save for private school for 2 kids, we do have a decent public school in catchment.
- 19ETFs and/or shares
- 24Pay off existing IP debts.
Comments
Pay off all debts. It really is uplifting to say "I owe nobody a dollar".
This IMO. Sure negative gearing is great, but really positively gearing is the only way to really become self sufficient
It probably wouldn't be the most efficient use of money though… that money might be able to work harder elsewhere. It does depend a lot on the person as to how hard they want to push things and their goals…
Both IPs are very close to be positively geared at current interest rates.
Current interest rate, sure. But we are at an all time low in terms of interest rates. What if it doubles, or even triples in the next 5-10 years?
This is very poor financial advice…this is pretty much how the 'poor' stay poor.
poll option # 5 - give money to altomic.
And 5 + 10 % interest cut to AlienC
Poll Option # 6 - all on black… (I meant bikies)
Off topic, FYI it's not grammatically correct to put a space before a question mark (or any punctuation).
thank's for that !
Haha
You have plenty of money, so pay for an appointment with a proper financial planner (ie. one who doesn't work for a bank or have a barrow to push), who will consider all of your circumstances.
You need to think about what you want to do with the money, not just how to invest it.
Property all the way
with 2 kids under 2. Combined household income of ~300K.
Are you a politician?! ;)
I wish I was.
Why would you wish such a horrendous thing!lol :P
You have already completed all you need for a secure and lavish retirement in 25 years.
Spend some time with your little kids. They should be the priority above financial matters now that you have reached a place of security and comfort.
And don't ignore yourselves, either. There is much about life you are lucky to have the youth and riches to explore.This person is posting a very secure financial position with 2 kids and they might retire in 25 years when in reality on their salaries and assets they can spend time with their kids and coast toward an easy retirement earlier than that by keeping on doing exactly what they've been doing so far. Your existing assets will appreciate over time. I'd suggest a few extra low maintenance investment properties - but don't manage them. Capital growth is typically larger than rent income growth.
First of all, congratulations for the achievement.
It's good that you are seeing a planner so that they can work out your goal, investment profile and how much risk you would like to take — it's really something that's different for every individual/family. So you'll expect very different answer here as well, which might not be applicable to your situation.
Personally I am a lazy investor who hate debts. PROP all paid for, don't want to borrow to buy an IP and too lazy to look after it (my wife looks after an IP for her family and it appears quite troublesome when tenant changes). So I'll go for ETF or managed fund where you set and forget.
As of private school fees, depending on the state you are in, many parents might be saving up for high schools. Many prefer independent schools even when their kids are able to get into selective, so keep that option open as well.
Our preference is with Public school for primary and then private/select school for high.
Ur wife manages tenants for the investment property. That breaks the first rule of passive property investing. I'm not going to tell you what a better option is there as she can't see it
The family had that property for over 20 years and it was managed by agents for a period of time. I think she is just sick of their incompetence & she is very picky on the tenants herself.
If I were in your position, I would put it all into a Vanguard (or similar large and reasonable fee provider) fund. Pick your risk profile and keep filling it up. Not a big believer in anything over a primary place of residence.
Just my personal opinion, not financial advice.
Sign up for the Acorn App.
No advice to offer, but just curious - what is your and your wife's profession?
They shoot pigeons at the airport.
IT Security and Corporate Taxation.
just wondering.. who contributes the bigger slice?
Are you both maximising super contributions? Seems like you don't need the disposable income and won't anytime soon?
Equity & Growth
Everything you need is here - https://www.youtube.com/watch?v=KmGnl7quDbY#t=0m19s
Remember to diversify your bonds..
Do a Permaculture Design Course.
What Next in Life?
Post some damn deals!
get a cat
Buy rare Pepes.
The rarer the better.
BT financial services did a great job managing my dad's money. He's grown his net worth through investments by 20% in 2.5 years. I say let the experts do the work, especially if you're strapped for time.
keeping grinding - get promoted
keep saving
ETFs and property
max out super salary sacrifice up to concessional cap
ask more questions about purpose and life
get depressed
get therapy
retire earlySimilar position here, although older and more (and older) kids, but no IPs and savings are basically all in the much more expensive home.
Assuming you don't plan to move (eg house too small when kids get older and/or possibly getting another kid or two and potentially lose some income there) then another IP may be an idea. Maybe look at commercial property if you haven't already. I'd also suggest looking at increasing super payments as it's a pretty reasonable way of making tax effective savings.
Going to a bank for financial advice is better than nothing, and probably better than asking an online forum of random people who generally are more interested in getting cheap eneloops, but yes they will most likely direct you to products they have there. Not saying that banking funds aren't good, but in general you're better off buying shares in the bank itself. IF you want professional advice, find a good independent financial advisor.
But from this random person:
- Put more into your personal super - whoever takes more time off to look after the kids (usually the mum, but not always) make sure that they are not being penalised for doing so
- Review what you may be doing over the next five years family wise - if you might be getting another kid and/or moving to a bigger house - then adjust your financial plan to allow for that
- If you're not moving, and after all the above has been taken into account and you have money left over for investment then consider either another IP possibly considering commercial (in particular if you may not need to access the funds quickly in the future) or expanding your shares (if you might need to get to the funds quickly).
- If your local public school is good, then I agree wouldn't worry about private schooling at least not for primary school. Allow however some money for private tutoring for your kids if it turns out there are specific areas they might help with.
Cheers
The most dramatic thing about this post is how you can earn capital city incomes but not live in a capital city priced home. Pretty much everyone I have ever met has grown their housing with their incomes, to at least some degree. Care to share your secret? Especially where to find housing in this price with good nearby schools?
We live in bit outer Western Suburbs of Melbourne (under 25Km). Moved to this decent sized home 6 years back and it tick all boxes for us. Housing is still considerable affordable in Western Suburbs of Melbourne. A couple of schools are decent in area, yes they are not comparable to a top private or select schools but they are comparable to catholic/semi-government schools.
Read http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim…
TLDR: Optimise spending, save more (shares, property, whatever), achieve financial independence much quicker, retire earlier if you want.
If possible slow down at work. Retiring sounds good but if u don't have time consuming hobbies/interests u might get bored easily. Work 3-4 days and have longer holidays, visit relatives or friends overseas/interstate.
Your PPOR, for your income and current asset position, should be a bigger percentage of your assets. Upgrade to a place from $1-1.5M., mortgage and all, enjoy the extra luxury, and if you buy well, it will increase in value at least at the same percentage rate as your current residence, but in money terms, twice as much every year. Tax free. The rest of your set-up sounds very good, as does pretty much all the other ideas here. Years ago, when I was about 32, I overheard someone say 'own 3 properties outright by the time you are ready to retire, as well as a good PPOR, and you own your financial future'. I did, and I do. Not bragging, esp. as luck played a big part as I did this when the market was increasing madly - but it's still and always great. As said, this is not advice from a professional.
Sell everything retire now
move to the country on 10 acres
I think that you should not put all your eggs in one basket. That is to say, you should pay off your existing IP debts and then think of investing somewhere else. If you indulge in new financial plans without clearing up your existing bills then you can get into difficulty.
I say shares to diversify