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Hello and where to start??

Discussion in 'Introductions' started by nicc73, 31st Dec, 2007.

  1. nicc73

    nicc73 New Member

    Joined:
    15th Nov, 2007
    Posts:
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    Location:
    Sydney, NSW
    Hello,
    My name is Nicole and I stumbled upon this forum when I decided that, as a stay at home mum, I should perhaps use the internet for good (ie. learning something) not evil (ie. shopping!) - and perhaps keep my brain active.

    I thought that perhaps I could do some research about how my husband and I should invest our hard earned $$....any advice forthcoming from the many on this forum who seem to know so much would be welcome!
    So far I have read 'Making Money made Simple' - that is pretty much the extent of my knowledge.

    Our situation is this:
    Both 34yrs old, 1 little boy, probably think about number two in 6-12months
    I stay home, husband works, income around $250K

    Around $300k equity in our home, with $380k mortgage and $80k in our offset acct. Will probably need to think about larger home within 3 yrs.

    No other investments except a few AMP shares and my husband is participating in a share plan at work - some options he has been given and also some he has been given the right to purchase in the future - so no risk - if they don't go up, he doesn't purchase....as far as I can ascertain.

    What I am trying to find out is:
    What other books to read, other ways to educate myself?
    What is the best first step for us to take - should we pay off home first then invest - or start investing now? Shares or IP? I'm thinking of starting with a fund or two till I learn more.

    I will keep trawling the forum to find answers and insights but should you feel inclined to post any suggestions for me, they would be much appreciated.

    Happy New Year!!:)
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You are in a great position already - well done.

    I wouldn't consider paying down the home before you start to invest - you can do both in parallel.

    There are plenty of great books out there about investing in real estate - Jan Somers is one author I recommend for people starting out. You can get into more advanced stuff later.

    As for shares vs property - difficult to tell. One possible strategy is to buy a couple of IPs, wait for them to grow in value, refinance, and then use the equity you've built up to invest in shares once the markets settle down a bit. Just a suggestion!
     
  3. tailcat

    tailcat Well-Known Member

    Joined:
    18th Jun, 2007
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    Location:
    Yeppoon
    Nicole,

    Welcome.

    Whilst it is still the old year......

    Can I (slightly) rub your nose in a couple of points, just to make you think about them....

    How much tax are you paying....... (Learn to make better use of this `dead' money. This would tend to suggest you need to think about investing in property)

    What have you done with 250K for the last few years? What do you have to show for it........ If the answer shocks you then can I suggest you address this .....


    Careful consideration of the above may help direct your research.

    (Of course, I could have completely missed the mark, in which case my apologies.)

    All the best for the new year and the adventures it holds for you.

    Tailcat
     
  4. nicc73

    nicc73 New Member

    Joined:
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    Location:
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    Thanks Sim, thanks Tailcat for your replies.
    We are in a good position but as you suggest tailcat, we really could have done more with our money. We have been a bit too relaxed - although we pay quite a bit extra off our home loan and paid for all the renovations we did on our home outright.

    I would certainly like to look into minimising my husbands tax payable - is an IP the best/only way? - suppose we should see a good tax advisor
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Hi Nicc,

    As Sim said an IP is a possible strategy. Basically borrow to invest, whether it be an IP or managed funds or shares.

    Other strategies can include salary packaging cars, laptops, mobile phones, etc. The equity options can also be used as collateral for margin lending. Also salary sacrificing into super for your "LONG" term wealth is potentially possible.

    Also don't forget about insurances.

    I'd suggest speaking to a financial planner rather than a "tax consultant"/accountant, financial planners help client's plan for future rather than accountants looking at what you've done.

    Cheers,

    Dan

    PS This is general information. Speak to your FPA registered Financial Planner before making any investment decisions.
     
  6. The Stig

    The Stig Well-Known Member

    Joined:
    3rd Dec, 2007
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    Location:
    Central Coast NSW
    Hi Nic,

    I was going to say as well, control your spending. That is the most important point.

    Secondly, I would get some insurances for your husbands income.

    Third, salary sacrifice for super is a good idea to minimise tax.

    Forth, for investing, if I was going to start all over again I would do indexing 50/50 with the property and stock markets. Low fees and you don't have to worry about beating he market.

    Then as you get better and better at these disciplines get more sophisticated.

    Some of the best investment education I got was from John Burley and Robert K. who wrote the Rich Dad, Poor Dad series of investment books.

    Look forward to talking to you more about what you learn.

    Cheers
    The Stig
     
  7. Rod_WA

    Rod_WA Well-Known Member

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    Location:
    Inglewood, WA
    Hello Nicc,
    If I can add my thoughts too...

    There are a number of well known authors/journos/personalities who suggest you work hard to pay off your home and then consider investing. I completely disagree with them!

    That is a low risk option, but with low risk tends to come low rewards. I have an uncle who pronounced at a family get-together a year ago, aged around 60, "Ahh, I'm debt free!" And a second uncle (I have a few of them!) whispered, "More fool you."

    As a useful comparison, uncle #1 is worth his home, his two Mazdas, and his dinghy, while uncle #2 is worth about $20m.

    If I could start over, I'd have been investing from age 3, and borrowing to invest from age 18. Unfortunately my parents are from the low risk school of thought (never did pay off their home, separated 15 years ago, Dad on a pension with rent assistance, and Mum still paying a mortgage and working 25 hours a week at age 72).

    We started late (now aged 38/36, bought PPOR 10 years ago, first IP four years ago, first shares 3 years ago). Two kids (6/3 now) so our situation is similar to yours... combined income half of yours though!

    Now $1.1m in property, $500k ASX200 shares, $150k PPOR debt, $550k investment debt for net assets $900k (>$1m including super). Currently on track to pay off PPOR in four years.

    What to invest into? I agree with Sim, an IP is a great starter, and then shares or MFs to diversify (although many people swear by property, property, property!). But you already have a significant property and are looking to move up, so maybe one IP is a sensible starter, and then you'll have > $1m property. You will easily be able to setup a decent line of credit for shares or MFs, mitigating the need for margin lending in the near term.

    In the future - after your move to your bigger house - you might consider moving your shares into a margin loan, which will free up your LOC funds for another IP or further shares/MFs, or maybe increase your gearing to speed things along.

    One further point: the $80k in the offset should not be considered spending money!!! It is your hard earned, and can be now be left to work itself. Better compounding for you rather than for Ms Mercedes Benz. I say this because there is a psychological difference between cash in an offset vs home loan buffer. I know this because my wife sees a difference - she's happy to dip into the savings in the offset, but she won't touch the buffer!!

    Insurance? you bet. Look at your super funds as an insurance option... may save you $. Life insurance for your husband is a must, plus income protection is a very good idea (IPI is tax deductible). And you might like to keep an amount of cash in the offset for a rainy day... Personally I believe in three month's gross pay - this will get you through any crisis (you'll probably find that any income protection insurance will have a waiting period, eg 3 months!)

    Now by coming into this forum you've entered a world of active investors, but we've all got ideas and stories to tell, so be actively involved and bounce your ideas around. You'll get a varied response, but we are all very receptive and eager to help.

    Which part of the country are you in, if I might ask?
     
  8. The Stig

    The Stig Well-Known Member

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    Her location says Sydney.
     
  9. Rod_WA

    Rod_WA Well-Known Member

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    Oh yeah! Thanks for pointing out the bleeding obvious, which I missed.:eek:
     
  10. nicc73

    nicc73 New Member

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    Location:
    Sydney, NSW
    Thank you all for your replies - all extremely helpful. Rod, your 'similar' situation and what you've achieved are a great inspiration, thanks for taking the time to tell me.

    Seems to be some common threads in the replies:

    Income insurance - he has some, we will work out what and make sure there are no 'gaps'
    Salary sacrifice to super - he does, don't want to do any more, 65 too far away
    Borrow to invest - NOW - start with an IP - I think that might be the easiest thing to get our heads 'round to start with.
    See a financial adviser
    Read some more books!
    Contain spending - I know what you mean Rod about the money in the offset - we have free redraw so I will talk to husband about transferring it - I am a bit too free with the CC.

    One last question
    Is it worth or even possible me putting approx $2k with a monthly top up of $250 (my family tax benefit money) into a managed fund or similar - just to dip my toes in the water - or should I just chuck it on the homeloan?

    Will let you all know how I'm getting along - thanks again.

    Nicc:)
     
  11. samaka

    samaka Well-Known Member

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    I would say yes. That way when you get serious about it you already know how it works - and you're accustomed to the volatility of unit prices.
     
  12. The Stig

    The Stig Well-Known Member

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    Location:
    Central Coast NSW
    You can retire earlier earlier than 65.

    My father inlaw has retired at 56 and is getting an income from his super.
     
  13. tailcat

    tailcat Well-Known Member

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    Yeppoon
    This is one good way to start taking control.

    You can think of it as a forced saving scheme. It is going to be harder to get at this money, especially when you OD on the CC, The guilt trip should be a little harder.....

    Secondly, you are learning the the ropes. There is a world of difference between the `I can do that' theory of reading to `I did it!, Oh OK that is what happens....'

    Thirdly, you will learn an awful lot about yourselves very cheaply. (I'm going through this myself at the moment.)


    This is just one alternative. If you do decide to buy an IP then you will have to workout whether or not to explore the shares/MF option or redirect the money into the IP.

    Tailcat
     
  14. AsxBroker

    AsxBroker Well-Known Member

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    The minimum age is 55 and retiring from the workforce. You can also start an allocated pension and still be working at 55 though there is the maximum limit of 10%. We've discussed Transition to Retirement in other posts.

    Cheers,

    Dan