Join our investing community

Unsure about a few things

Discussion in 'Accounting, Tax & Legal' started by Longjeans, 14th Mar, 2015.

  1. Longjeans

    Longjeans Member

    Joined:
    14th Mar, 2015
    Posts:
    5
    Location:
    Central Coast
    Hello & best wishes to all.

    Cutting a long story short, I no longer work (I'm 47) and have been declared permanently disabled.

    I was smart enough to have income protection insurance, which expires at age 65.

    I'm single with no kids and a confirmed bachelor - not in the " I'm a playboy, let's party" sense. Just happy to be alone.

    I have nearly $600,000 to invest and I'm unsure on which direction to take. With all the negative press about some financial planners, I'm loath to engage with that industry, unless I really have to. I haven't lodged a tax return, so, I'll be looking at a reasonable bill. I do have an accountant, but, he's yet to contact me about what I should be doing.

    My only debts are a mortgage on the house that I live in and my car which is under a personal loan (scored 4.5% over 5 years with no residual). I don't have any credit card problems or anything of a similar nature. The mortgage could be paid out, but, with the associated fees, I'll get stung enough to shake.

    A mate of mine is jumping up and down about purchasing gold bullion and hiding it (I'm being serious).

    I'd greatly appreciate any words of wisdom that you might be able to spare please?

    Many thanks & kind regards

    LJ
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    Hi Longjeans,

    I have a similar life and age to you. So the first thing I must say, is don't rush into anything.

    Debt. If you can make a higher return on your investments than your mortgage rate or car rate don't pay them out. If your return on your investments are lower than the mortgage and car pay them out.

    It is a nice a feeling when you own your own house.

    The market. Nobody Knows. Not me, not you, not the fed, not Obama, not Tony Abbot, not financial planners: can predict the future.

    The only thing I can predict with 100% accuracy is the market will go up, and down, and sideways.

    So any investment should have multiple asset classes.

    And the only way to find the asset classes that suit you, is through personal research. It will take a year.

    So to start you off. Read everything on this site about ETFs.


    Johny. :)
     
  3. Longjeans

    Longjeans Member

    Joined:
    14th Mar, 2015
    Posts:
    5
    Location:
    Central Coast
    Many thanks for the reply.

    It's been suggested that I keep my loans "nearly paid out," in the event that I need to borrow money for whatever reason. Because of my situation (being permanently disabled and having income insurance as my only means of an income) obtaining a loan maybe problematic.

    When I obtained my home loan, I initially spoke with a mortgage broker. I was advised that because I was on income insurance, some banks wouldn't loan. I can still walk, but, being discriminated against isn't a nice feeling. I eventually organised my own.

    I've got a lot of time on my hands, so researching investments will be something I will need to do.

    Any opinions or thought on gold/silver or is this potentially venturing into "conspiracy theory" territory?

    Also, I'm not the other person asking for advice on what to do with $600,000. Purely coincidental and no dual forum accounts.

    Many thanks again.
     
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    I have been refused credit and it's not a nice feeling. But, if I can't borrow, I can't get into debt. These days I lend to the state and federal government.

    In my spare time I do a lot of research. Australia is in a better place than most western countries. But the world is interconnected. A bingle will happen sooner or later. We might have it easy. We might have it hard.

    If the doomers are right, the most precious assets won't be gold, it will friends and communities. A farm with good soil and water. Not a bunker and baked beans.

    Grow local food. Sweat equity.

    Gold and silver aren't a business. They don't have any dividends or interest. They don't grow. It costs to store. It costs to insure. They have a place in a portfolio. But not the whole portfolio.

    Assuming you live to 75, then you have to make your money last 30 years. Too many retired Australians are not pricing in risk into their dividend stocks. The only solution is to hold multiple asset classes, reduce debt and live a simple, healthy lifestyle.

    And motorcycles. Gotta have motorcycles!


    Johny. :D
     
  5. Longjeans

    Longjeans Member

    Joined:
    14th Mar, 2015
    Posts:
    5
    Location:
    Central Coast
    Thanks again for the reply. Please don't remind me about motorcycles. I rode for 33 years. Now a memory because of the disability.

    I'm not concerned with not having any credit cards. I only use mine for the points, whereby, I ensure that the account is back to zero because of the interest. I've accumulated a lot of points (mine don't expire for some reason). I have dream of one day driving across the U.S. for a holiday, living simply and taking my time.

    I think that in the event where bunkers/baked beans became an issue, the world isn't a place that I'd want to be living in. Think the 1st Mad Max movie.

    Your last paragraph is my attitude also.
     
  6. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    LJ,
    I would suggest you get a 100% offset account associated with your loan and put sufficient funds in it that your net balance is about $100. In this way you retain the ability to draw on those funds at any time, yet you have reduced your interest on your home loan to practically $0, which is generally a far better after tax benefit than paying a mortgage with after tax dollars.

    Your car loan could be paid out as long as there is no penalty but at 4.5% interest the repayments may not be that high anyway.

    You could look to a passive form of investing, perhaps a combination of defensive stocks (I suggest only a handful that are paying fully franked dividends at around 5% yield or better) and the rest using an index fund and maintain a cash management balance of say $10k to $20k.

    You could use a financial planner to assist or do it yourself. Most accountants are tax return types and have little knowledge of investing. Many financial planners are ex insurance salesmen, so have a knowledge of insurance but not necessarily a knowledge of investing strategies. The best way is talk to some, get recommendations of people you trust and balance that with the knowledge you have and what your instincts tell you.

    As to the ability to borrow again, some lenders will consider permanent disability/income protection payments but not sure why you will want to borrow again. As I said above, if you 'maintain' your existing mortgage and use the offset, you effectively keep your borrowing capacity as it is. It is a more flexible option than paying off your mortgage and having the risk of not being able to borrow again.

    Good luck with it.