Hi everyone,
I'm really needing some help/advice.
So I'm in my 40's have a partner no kids and we are renting. I have sleepless nights worrying about our future.
Between us we only have savings of about 80k. Should we continue to save for a house/unit/apartment deposit or top up our super and rent for the rest of our lives? I don't want to ask my family or friends for advice as I'm embarrassed with our financial situation. What do we do? I'm lost and have no direction. Thank you kindly.
Thank you very much ill see if the library has a copy.
Note there are two books, the one is to read: The Only Money Guide You'll Ever Need.
Now why would he write ANOTHER book if the first one is titled "the only money guide you'll ever need"
Thank you would you know the author of that? Cheers :)
The Barefoot Investor: The Only Money Guide You'll Ever Need, by Scott Pape. I recommend that you take $12 out of that 80k and buy a copy (from Amazon).
I think that Scott would suggest looking ahead 20 years. If you have put money into super, you will still be renting, and paying for it from your rapidly dwindling super/pension. Because you (initially) have a lot of assets stashed away in your super, you will not qualify for a full pension from Centrelink until you have spent all your hard-earnt money in super. At that point you will be really struggling to pay your rent and live on your Centrelink pension.
On the other hand, if you put money into property, you can live in it and in 20 years time when you are retiring from work, you will qualify for a full Centrelink pension, as Centrelink exclude your home from their asset test. You should plan to pay off your mortgage by retirement time so your outgoings are less by then - if you are not paying rent or mortgage in retirement, you can survive on Centrelink pension. So the benefits are being able to quickly pay off your mortgage at a time of incredibly low interest rates, owning your own property and not being controlled by landlords, and being given free money by the government in a full Centrelink age pension.
@kmwa: People that think that the feds will look after them by topping up the pension are ngmi.
The best gains are made now in high growth assets and not in 20Y.
You are in a far better financial position than most other people. You're not lost, you just haven't decided on what route to take in the future and your options are endless. That will come over time. We can't answer that question for you, but between yourself and your partner, you will figure it out. If not next year then following year. Nothing to lose sleep over, very normal, especially as we await the current inflated market to hopefully stabilise.
Thank you. Reading your comment was like a Dad/Mum providing reassurance to a lost daughter, oh how i needed this. Thanking you graciously.
So what you're saying is that you are not in debt? Sounds alright.
Take some steps that will increase the likelihood of your income increasing more in the future.
Yes, thats correct no debt. Ok got it. Thanking you for taking out the time to respond.
One question to ask yourself is what have you been doing (or not doing) that has caused you to be in a financial position that is keeping you up at night?
Once you know the answer to that, there are two paths to take …
If it's genuinely viable, start doing whatever it is that will make it better (or stop doing what will make it not better). That could be any number of things, and I stress this may be far easier said than done.
Even if there are no viable changes to be made, you need to "keep going". While renting throughout your life is an increasing reality for a lot of people, the simple fact is that, on average, those who own their own home have greater retirement outcomes than those who don't. IMHO opinion, you need to keep striving for that goal. Even if you have to start out with a sh!tty flat on the fringe of the city, trust me, that asset can be invaluable come retirement time. If nothing else, you reach retirement and you have somewhere to sleep every night without the threat of the rent being due or the LL moving you on. That alone can have enormous benefits in retirement.
Hi S7, If i have to be honest, i suffer from an eating disorder and my soul focus was always weight rather than anything else like getting a better job etc. Lacked confidence and self esteem. The regret of wasting my life to an eating disorder is enormous. Getting help for it now though.
Funny you mention getting a shitty flat. Mentioned the exact same thing to my partner. I rather a shitty flat than renting in our 70's and wondering if the landlord will sell the property! Thank you soooo much. At least I'm on the right track with my thought process. Great advice!
Just want to say keep going with everything you sound like you're in the right head space, you will get there and dont let the regret eat you up as you are still very very young. Save for the next 2-3 years and get to 120k - 150k.
My first place was a far from average flat, but i loved it, made the inside really nice, my only regret is selling it now.
Hi DH, thank you for your kind and encourging words. Means alot. Funny thing is getting the best advice from complete strangers..rather than my own family members lol.
Thank you very much!
How much do you guys earn? How much do you pay in rent? Do you have to stay in Melbourne for jobs or family?
Hi B, i earn $40,000 a year and my partner earns about $60,000. We pay $1,600 per month in rent. We dont have to stay in melbourne but its kinda nice being close to family. Thank you.
Focus on increasing both your incomes.
It's great you both have jobs.
Sadly $40k and $60k is on the bottom end of the pay scale.
Yes its pretty minimal. Thank you for your advice. Cheers
1600 sounds cheap for Melbourne. Should speak to a broker about low deposit loans, would be great to be able to get into the market rather than having to pay rent even once retired. I assume you are in an apartment, what are sold prices like in your building and area?
We are living in a house. Sold prices are about 700k. Thank you
Take the plunge and get a house. Gotta start somewhere. Several of my friends started with a very average house but are now in great places.
My feelings about continuing to rent are that it's REALLY hard to pay rent once you hit 65 and stop working.
Thank you. I'm totally on your side on this one. Cheers for the response.
You & partner in 40’s with no kids & savings of $80k? You’re living in heaven! How lucky you are to be in such a great spot.
Nothing wrong with renting, especially now.
Compared to many, your situation is damned good.
Don’t pour your savings into super, you’ll be needing it before that.
Highly likely that in 2, maybe 3 or 4 years property will no longer be expensive as now (imagine mortgage rates at 7 or 8%).
When that time comes, as property prices fall, you’ll be in the perfect spot to take advantage.
Get that $80k up to $150k over the next 3 years and good things will happen for you.
You are so much better off than so many 40 somethings who have credit card debts or loans.
If you maintain your current trajectory, you’ll be very happy with the outcome in a few years
Ohh wow thank you for your feedback. All my siblings have a home and at times it feel like im a failure in more ways than one. Thank you for your positivity and I feel like a little of the swing has been put back in my step. Ill aim at that goal. Cheers to you :)
80k is better than being in debt. You are doing better than at least 20-30% of the population.
Had no idea…we actually thought we were really doomed. Thank you for feedback :)
If you're losing sleep with $80k in the bank on a $100k combined income, what is going to happen when you've just signed up for a $600k mortgage?
But seriously, like all the comments before me, being in the black is a lot better than in the red. Just because someone is in their "own" place doesn't mean they are in a better financial position than yourself. They could have $20k in credit card debt, $50k on a car loan and they're just meeting the minimum payments on their mortgage. A lot of people won't tell you the other side of the coin. You're in a great position, do some reading and research (the barefoot book suggested above is a great starting point) to steady the ship and make a plan to keep moving forward.
I agree, great summary
Thank you! Your post made me smile. Thanks for your advice. Greatly appreciated :)
As morbid as it sounds… if you don't intend to have kids, then why worry about not having property to pass on when you kick the bucket? It's almost liberating in a way. That being said, you 100% need to do your maths to ensure your super and assets are ample enough to ride out retirement. Not owning a home is the single biggest determinant of poverty in the elderly, and the last thing you want is to work until your dying day, because your funds dried up at 65.
Hi SS, would love to pass on the property to my neices and nephew. Equal share. Thank you for your reply :)
Dont worry, if you are living in Australia you'll be taken care of. Plenty of pension supplement funds and rental assistance payments when you retire.
Althought putting money into super is good for tax savings, I'd be trying to save more on the outside first in case you are both either out of work, or try finding a combination.
If you can save $400 a week between you i.e $200 each, maybe put $20 into your super. Of the savings maybe buy some ETFs through selfwealth, just to maybe have $10-$20k in shares, but if your scared of them, then just stick with cash. Interest rate does blow
One option you have that may work for you is the use of the FHSSS, and althought a pain to navigate it is good for you both if neither owned. You can always withdraw this money if you indeed run out of savings without buying a house and pay a 20% penatly which may not be much more than the tax you would have paid anyway. So its a win-win scenario. Have a good read on the rules.
Also would only make sense for money to be put into super once eanring over 45k the tax saving verse risk before hand is not worth it. Instead of salary sacriaficing weekly through your employer or weekly through your own methods, just accumukate it till whoever has gone beyond 45k and start paying then
Ever so helpful. Thank you for being so specific. Love it!
Inflation is exploding, so it's best to invest in assets whether that's a house or ETFs. You're losing money every year in savings as everything gets more expensive around you.
To put inflation in a different way, lets say everything costs the same but imagine an economic monster coming every year to take 6.2% of your money.
Thank you!
People with no expenses other than living costs should consider investing their fiat money in high performing liquid assets. Assets with zero or minimal leverage.
This will allow them to sell when they want and move when they want at a moment's notice.
Start with a 1% DCA allocation and assess the portfolio every quarter.
i bought my first place when i was 20, never really had any sort of savings, just earn and spend … so you're doing pretty good to have saved that sort of money!
as for next steps, i'd suggest getting a house, crappiest house in a convenient area and learn how to renovate (this is OZB after all) … if you can afford land, it's a better option than a nice new unit for resale value (but a lot more work) …
i wouldn't invest in super, even with tax break contributions, it's still investing in a stock market that you have no control over which will be interesting in the next few years with the world the way it is …
if you had lots of free time, you could invest in a business, but you'd need a concept
$80,000 isn't enough for a deposit and taxes will be in the $10,000s.
The capital is better spent in other high-performance markets using zero leverage.
Awesome advise thank you for sharing. This is making me more determine than ever!
You'll look back and think to yourself that you're in a good position now. Since if you purchased a home now, the debt/repayments may make you mentally worse off. But think about the pros and cons if you do purchase a home today or in the future.
Renting at the moment can be very positive in our current climate.
You have no kids, you have a partner willing to get a joint mortgage and you have savings. Even on a rainy day, you can use that savings but ultimately halt your home purchase but at least you have the savings.
I also assume you have no high debts such as a car loan, credit card etc? Then you're in an amazing position.
Keep what you're doing and try keep saving as much as you can. Live frugal if you can
Yes thats correct we have no debts at all. I will def take your advice onboard.thank you so much for taking out the time to reply.
80k! Youre lucky.
Thanks!
40 is the new 20 :) I suggest to read Barefoot book, see if it will make you feel better.