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Newbie's Cry for Help!!

Discussion in 'General Investing Discussion' started by m1k3, 2nd Jan, 2008.

  1. m1k3

    m1k3 New Member

    Joined:
    31st Dec, 2007
    Posts:
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    Location:
    Melbourne, VIC
    Hi All,

    So I am a total novice when it come to investing. I need some directions with regards to investments.
    Our situation:
    We're in the 35-40 age bracket and between the wife and myself we earn around 200k a year.
    Due to some ill-advised financial transactions we currently have NIL investments, 150k in Super, 20K in savings @ 6%, 2k credit cards and about 60k in personal loans :mad: and a company that I set up 12 months ago which is not doing anything as I am in full-time work.

    If we tried, we can probably come up with 3-5k a month "spare" cash after meeting all our expenses. What I am currently trying to work out is:
    1. Whether to concentrate on paying off our personal loans first.
    2. Go into shares - via Commsec? if yes, then should I use my company, set up a trust (which?) or trade under my name (for asset protection etc...)
    3. Go into property investment

    Also, should I perhaps talk to a (proper) accountant? I only see mine (tax accountant) once a year and our relationship is such that we forget each others names the moment I walk out the door.

    I came about this site a few weeks ago and am quite impressed.

    All help appreciated

    A Happy and Prosperous 2008 to you all

    Mike
     
  2. dkmc

    dkmc Well-Known Member

    Joined:
    24th Aug, 2005
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    Thats an easy choice for me
    Pay off all personal loans first
    that way you are getting a return on 15-20% after tax on the money you put in - and thats guaranteed
    Maybe keep a little as cash to save as a emergency fund or possibly a deposit
    but aim for getting the personal loan down as quick as possible

    If you have a house - refinance the personal loan to a home loan too - for lower interest rates - but it wont be tax deductable

    Umm if you earn 200k and can only find 5k after expenses
    Then you need to curb your expenses and you attitudes before u start investing
    Go have a read of the millionaire next door.
     
  3. jms

    jms Member

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    3rd Jan, 2008
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    Location:
    Seven Hills NSW
    You and your spouse earn 200K combined ? Wow, I wish we have that here.

    I would pay off the personal loans first quickly, and perhaps cut back on your monthly expenses. If you have 2 cars, maybe sell the other one and just keep one. Sell anything that you don't need.
     
  4. m1k3

    m1k3 New Member

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    Location:
    Melbourne, VIC
    I've been very slack with the finances. I know we're in a fortunate situation income-wise but unfortunately; thats where it stops.

    I got given "How to Legally Reduce Your Tax …without losing any money by Tony Melvin and Ed Chan" for Christmas. Then I bought another book (Making Money made Simple! by Noel Whittaker) and here I am.

    I've been reading this forum almost on a daily basis for the last few weeks and my hats off to you all for contributions. If nothing, its inspires people like me to get off our a$$e$ and do something with our finances.

    All the best to you all for this year and hopefully in 6 - 8 months I can update this thread with a post saying we're out of debt and well into a financially sound future....

    Cheers

    Mike
     
  5. DaveA

    DaveA Well-Known Member

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    Location:
    Sydney, NSW
    36-60k pa is a fairly amount. Its nearly 30% of gross income. Considering tax your effective tax rate would be about 30% and considering the average rent would be 20k a year so theres another 10%. But yes i agree get rid of that personal debt as a priority..
     
  6. HandyAndy888

    HandyAndy888 Member

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    Location:
    Miles, QLD
    Don't cry noobie...all will be well.

    Always try to pay off something first. This will show you that your saving plan actually works and will give you some short term gratification. Following this, its up to you how to proceed, but increasingly I am a fan of diversifying...:) I'm about to go into shares, and I think perhaps its the wisest move atm....however, I am waiting a little to see what happens with this US "crisis"...
     
  7. coopranos

    coopranos Well-Known Member

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    Location:
    Perth
    Take that first $3k - $5k per month you can save and load up on education.
    That will get you a hell of a lot of books on every money management, home finance, and investing topic imagineable.
    Read as many different ideas as you can, and implement the ones that make sense to you to make your own strategy. Buy general investing books to get the principles (Whittaker, Clitheroe, Kohler etc), buy property specific books (Yardney, Lomas, Spann, Chan, etc), buy equity market specific books (Bogle, Buffet-related stuff, Van Tharp, etc), and even some of the more mindset related stuff (Rich dad poor dad, Millionaire Next Door, anything by Jim Rohn - give The Twelve Pillars by Rohn a go, and use the booklist in there are a reference).
    While you are reading them, get rid of your personal debt, as DKMC suggests that is likely to be the best return for your money (particularly in the current share market), and it is guaranteed.
    On that income there is no reason you cant set yourself up exceptionally well in the next 5 - 10 years, even starting from no asset base.
     
  8. dkmc

    dkmc Well-Known Member

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    Perhaps you should start tracking expenses
    When you dont know what your spending things on this is a useful exercise
    Automatically deduct a set amout to pay your debts off
    Automatically deduct a certain amount for savings
    spend whats left over

    Use a spreadsheet or something like quicken or ms money or some shareware programs

    Look at your monthly expenses like mobilephone, phone bill, internet, foxtel, gym, gardener etc - cut some to a lower plan or eliminate all together
    Do you really need it
    Cutting recurring expenses makes a big difference
    Do you really need to buy a new car if you are thinking about it
    - thats probably where a lot of people stuff up
    keep upgrading cars - a depreciating asset
     
  9. Nigel Ward

    Nigel Ward Team InvestEd

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    Some top-shelf advice from DKMC!

    I'm a bit skeptical of management gurus, but Peter Drucker says "what gets measured gets managed". That is absolutely true of expenses. If you don't know where the money goes then you'll never find the free cash flow which is the foundation of investment.

    Cheers
    N.
     
  10. Glebe

    Glebe Well-Known Member

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    Why do you have $20k in savings earning 6% when you have a personal loan of $60k that is probably costing you 12%??

    Mike, throw every single spare dollar you have on the personal loan. With the $20k and your savings of $4k per month that's 10 months of repayments.

    Report back when you've got the job done.
     
  11. Rod_WA

    Rod_WA Well-Known Member

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    And bugger, the interest on the savings is taxed, whilst the personal loan is not deductible!
     
  12. Rebecca V1.0

    Rebecca V1.0 New Member

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    Sydney
    Even better than spending $5000 on books....

    Join your local library for FREE

    I bet they have 90% of the excellent books previously recommended for your reading pleasure :D
     
  13. voigtstr

    voigtstr Well-Known Member

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    Hobart
    I agree, pay down your debts, dont spend 5k on book, pay it off your debts, do a budget in excel where your debts are the first thing that gets a payment on your pay day. Get your knowledge off these forums, (perhaps buying one or two paperback investment education books per month). I was busting to invest big time... but my motorbike loan gets the big bucks before investing in funds or shares or saving for the next house.
     
  14. DaveA

    DaveA Well-Known Member

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    does anyone want to ask if the personal loan was used for the investing decisions which went back. Maybe he could be still deducting it if it was capital losses...

    However doesnt matter, regardless need to pay of asap in my opnion
     
  15. The Stig

    The Stig Well-Known Member

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    Location:
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    No, because he says they have nil investments and he puts the :mad: icon after his statement I guess.

    First thing I would do is get at least 7% for your 20K IF you intend to keep that money for emergencies. If not, use it to pay off the 60k debt.

    To pay off the debt as fast as possible get yourself a copy of "Money Secrets of the Rich" by John Burley and go to page 300 and follow the Debt Elimination Plan. If you can't find the book anywhere, you can contact Pow Wow Events International. They distribute it.

    (I would write it out but I think it could be a breach of copyright. Plus, it would take me far to long to write the plan out.)

    That should keep you busy for 2008 I think.
     
  16. samaka

    samaka Well-Known Member

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    I think you're cool if you only do 10% of the copyrighted text - but IANAL.
     
  17. The Stig

    The Stig Well-Known Member

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    what does IANAL mean ?? :eek:

    I am not a lawyer???
     
  18. crc_error

    crc_error The Rule of 72

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    I recon he should pay down non-deductable debt first (excluding PPOR).

    Then invest the $5k a month into a portfolio of quality managed funds. I suggest he pays the $3000 to a financial planner and gets a proper plan done.

    To suggest he reads books etc, is good, but he wont have the experience to make correct decisions at the start, and since the OP is getting on in age, he can't afford to get it wrong.

    He should attend a 'welcome to wealth' seminar from Freeman Fox. Its usually free, or changed at $48. I believe they will send it to you on DVD as well.

    With such a large income, it might be worth while to buy a property to get the negative gearing benefits, and get him into the market straight away with a decent sum of money.

    Property to buy, would be a house as close to the city as possible. but don't over extend, so some cash flow is left over for shares investment.
     
  19. Jacque

    Jacque Team InvestEd

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    Sydney
    Hi Mike and welcome to the forumm :)

    Some great advice from those already here- and I second the opinion to reduce your personal debt as a priority and track your spending. Quicken is a wonderful software programme for doing this- we've used it for years and it's scary when you read the reports and see how much you've spent on what. When we were budgeting we were amazed (and disgusted at times!) on how much we spent in certain categories... it's so true that the more you earn the more you tend to spend on your general lifestyle.

    I also commend your awakening to want to invest at this point in your life- the time to begin is when your income is high and your expenses generally lowest. Pay yourself first and live within your means. Once you begin investing and are on track to increasing your asset base through growth, there's no turning back- it's addictive :)
     
  20. m1k3

    m1k3 New Member

    Joined:
    31st Dec, 2007
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    Location:
    Melbourne, VIC
    Thanks everyone for the replies - a lot of good pointers.

    I aim to get one or 2 books a month and get on from there. My excel is working overtime; am aiming to clear everything off in 8 months, sell off my "spare" car and try and get sorted out soon.

    My 20k is currently sitting at 6%, might use 10 of that to reduce debt and leave the rest for emergencies.

    As suggested by The Stig, I have already ordered "Money Secrets of the Rich" by John Burley.

    Thanks all


    Cheers
    Mike