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Speaker 1: Good morning everyone, and welcome back to Sugar Mama's Fireplay.

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Speaker 1: I am your host financial planner, Canna Campbell, and as always,

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Speaker 1: I'm here every Monday morning at five am to help

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Speaker 1: make sure that you start your week off on an informed, inspired,

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Speaker 1: and most importantly educated note when it comes to achieving

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Speaker 1: all of those very important and very exciting financial goals

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Speaker 1: and dreams. Now today is a start here episode. This

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Speaker 1: is where I give some very general advice as to

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Speaker 1: particular situations and questions that you guys may have to

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Speaker 1: help you start your financial journey, particularly if you're experiencing

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Speaker 1: a block or perhaps analysis paralysis where you don't know

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Speaker 1: what to do or how to get started, so this

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Speaker 1: hopefully helps clear the block. Now. Of course, it is

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Speaker 1: extremely important, particularly with these types of episodes, that you

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Speaker 1: understand that nothing is ever personal advice. This is purely

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Speaker 1: for educational purposes only, and whilst I may talk about

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Speaker 1: different ideas, different strategies, or even mentioned different type of

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Speaker 1: asset classes, please know this this is not personal advice whatsoever.

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Speaker 1: It is essential that you use this to help build

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Speaker 1: your own financial literacy and then you go and take

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Speaker 1: that to a financial planner to discuss with them in

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Speaker 1: relation to your own personal financial situation and of course

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Speaker 1: those exciting financial goals and dream all right, So the

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Speaker 1: other day I received on Instagram a DM and the

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Speaker 1: DM obviously I will not be showing the person's contact details,

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Speaker 1: but it said this, Hi, Canna, I listen to and

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Speaker 1: love your podcast as well as how do they afford that?

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Speaker 1: I have a question. I'm in the process of selling

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Speaker 1: an investment property that is looking like it will give

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Speaker 1: me three hundred thousand dollars in my pocket. The question

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Speaker 1: is what is the best thing to do with that sum.

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Speaker 1: I think the most obvious and potentially safe option is

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Speaker 1: to put it in an offset account against my mortgage.

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Speaker 1: I have approximately one million dollars left on our home.

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Speaker 1: But then I listen to the episode with Your Money

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Speaker 1: mentor that is Peter Thornhill, and started to think about

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Speaker 1: other options that could potentially have some or all of

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Speaker 1: my money working harder for me, for example, buying some

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Speaker 1: shares that pay dividends that I could then eventually learn

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Speaker 1: to live off. Now, my long term goal is to

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Speaker 1: buy a two million dollar house, but that doesn't need

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Speaker 1: to be for the next five to seven years. Is

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Speaker 1: this something that you could potentially answer for me without

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Speaker 1: giving personal advice and keep it general in nature to

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Speaker 1: my situation. All right, So to the person that sent

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Speaker 1: me this question, I'm so glad I'm actually getting the opportunity

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Speaker 1: to actually come back to you and of force again

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Speaker 1: just to really reeriterate. This is general advice only because

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Speaker 1: I don't know what your risk profile is. I don't

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Speaker 1: know what your mortgage is exactly. I don't know anything

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Speaker 1: about your job security, whether you've got superinnuation, what insurance

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Speaker 1: policies you have in place, So please bear that in mind.

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Speaker 1: So the first thing that stands out right immediately to

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Speaker 1: like a sore thumb, is the fact that you aren't ready.

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Speaker 1: You would never want to make a knee jerk, rash decision,

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Speaker 1: particularly with large amounts of money like this. So if

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Speaker 1: you were sitting in front of me, or you were

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Speaker 1: and I were friends having coffee together, my advice would

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Speaker 1: be actually do nothing, do nothing with that money, that is,

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Speaker 1: but use this time immediately to start educating yourself on

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Speaker 1: different investments, understanding what your risk profile is, understanding what's

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Speaker 1: a priority for you, where your values it, and of

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Speaker 1: course the deadlines for all of these goals and of

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Speaker 1: course from the limited information that I have around this

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Speaker 1: person's situation, yes, that does sound like wise advice putting

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Speaker 1: in your offset account or your redraw facility, obviously checking

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Speaker 1: with a bank beforehand in case you're on a fixed term,

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Speaker 1: because there may be some penalties involved. But at least

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Speaker 1: in the meantime that three hundred thousand dollars, which is

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Speaker 1: a lot of money. That three hundred thousand dollars can

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Speaker 1: help you by reducing the interest that you're paying each month,

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Speaker 1: and assuming that you can afford to maintain the same

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Speaker 1: morgage repayments, it will mean that you're actually making a

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Speaker 1: greater progress with paying down your home loan in the

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Speaker 1: meantime whilst that money sits in either the offset account

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Speaker 1: or the redraw facility. But as I said, use this

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Speaker 1: time immediately to get started with building up your own

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Speaker 1: level of financial literacy and education. My next piece of

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Speaker 1: advice would be to read Mindful Money. Now. In Mindful Money,

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Speaker 1: I have a whole chapter dedicated to this idea called

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Speaker 1: debt recycling. No, I'm not necessarily recommending a debt recycling strategy,

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Speaker 1: but it's something that's worth considering, amongst other various wealth

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Speaker 1: creation strategies. So debt recycling allows you to have the

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Speaker 1: best of both worlds. It allows you to continue on

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Speaker 1: working on paying off your mortgage as quickly as possible,

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Speaker 1: saving valuable time and interest, and sometimes that can be

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Speaker 1: into the tens of thousands of dollars, sometimes even hundreds

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Speaker 1: of thousands of dollars of interest. It allows you to

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Speaker 1: diversify outside of the family home. So as you pay

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Speaker 1: down the home loan, you redraw the equity through a

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Speaker 1: separate investment loan, and you would go and invest that

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Speaker 1: in and typically speaking, a high growth asset such as

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Speaker 1: shares or property, that is, two dimensional assets that provide

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Speaker 1: long term capital growth and long term growing passive income streams. Now, obviously,

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Speaker 1: with a high growth investment like shares or property, they

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Speaker 1: tend to be volatile, very volatile, particularly from a surface

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Speaker 1: level shares because you can see the value of a

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Speaker 1: share at any second of the day, where you can't

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Speaker 1: as much with say property, anytime. You can see the

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Speaker 1: value of properties when you go to buy and when

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Speaker 1: you go to sell. Having said that, though, you need

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Speaker 1: to understand that if you are to do a strategy

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Speaker 1: like this, it is a high risk strategy. In Europe

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Speaker 1: using that borrowed money, which comes with risks, lots of risks,

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Speaker 1: risks that definitely can be managed wisely incorrectly. But that

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Speaker 1: money is then used to buy high risk investments. Now,

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Speaker 1: the benefit of doing this is it allows you to

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Speaker 1: obviously diversify, as I said, but it means you're actually

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Speaker 1: making the most of time whilst you're busy focusing on

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Speaker 1: paying off your home loan, that lump sum that you

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Speaker 1: have say withdrawn through your investment loan. And it's important

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Speaker 1: that you get a good quality mortgage broker to set

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Speaker 1: this up for you because you need to make sure

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Speaker 1: you've separated your loan and it's a genuine investment loan

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Speaker 1: so that when it comes to doing your taxes you

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Speaker 1: can see what interest is non deductible and what interest

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Speaker 1: is deductible. But it means, for example, that that three

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Speaker 1: hundred thousand dollars can be withdrawn, so you place it

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Speaker 1: against the homeland, reduce the homeland by three hundred thousand dollars,

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Speaker 1: is then taken back out through an investment loan, and

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Speaker 1: so you now have and your homelan's come down by

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Speaker 1: three hundred but now you have a new investment loan

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Speaker 1: of three hundred thousand, That three hundred thousand dollars could

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Speaker 1: be invested as you wish, and of course is a

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Speaker 1: set You're paying interest on your home loan, and as

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Speaker 1: you are aware, you are paying your normal mortgage of

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Speaker 1: payments on your existing home loan. But you now also

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Speaker 1: need to account for the fact you have a three

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Speaker 1: hundred thousand dollars investment loan, so that three hundred thousand

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Speaker 1: dollars would typically be invested in something that's going to

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Speaker 1: provide long term returns that exceed the cost of borrowing. So,

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Speaker 1: for example, if I am borrowing, you know, an investment

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Speaker 1: loan at six or six and a half percent, I

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Speaker 1: want to make sure that my long term and a

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Speaker 1: keyword being long term here returns will exceed the cost

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Speaker 1: of six six and a half percent, so I'm actually

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Speaker 1: getting ahead financially. Now, the interest on the investment loan

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Speaker 1: is tax deductible, but at the same time, any income

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Speaker 1: I receive through for example, rant or dividends will be

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Speaker 1: taxable as well, so it needs to be managed very carefully. Now, yes,

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Speaker 1: there are lots of risks involved, but the good news

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Speaker 1: is when you understand what you're doing, and you do

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Speaker 1: it in an intelligent way. With the backing of a

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Speaker 1: qualified financial planner, whose licensed and of course an experienced

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Speaker 1: mortgage broker, you can actually proactively manage this type of

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Speaker 1: strategy to make it less risky, things like making sure

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Speaker 1: that your portfolio is properly diversified, making sure that you

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Speaker 1: have a really strong cash flow where you can service

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Speaker 1: multiple interest rate rises on your home loan and of

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Speaker 1: course on the investment loan as well, making sure that

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Speaker 1: you structure the loans for the investment loan in particular,

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Speaker 1: maybe as principal interest rather than in only making sure

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Speaker 1: that you reinvest your dividends if that's something that would

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Speaker 1: work for you to help build up greater equity within

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Speaker 1: your investment portfolio, or using that rent to actually pay

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Speaker 1: down that investment loan, assuming you use that lay to

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Speaker 1: buy a property. So what is allowing you to do

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Speaker 1: is obviously now you don't just own your home. You

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Speaker 1: have your home and you also have a diversified share portfolio.

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Speaker 1: You now own another property that's being invested and rented out,

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Speaker 1: and you get tax concessions along the way potentially and

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Speaker 1: depreciation as well. If you're buying property, So that is

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Speaker 1: something definitely worth considering in the mix of other things,

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Speaker 1: but it's not for everyone. And when I say this

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Speaker 1: is a long term strategy as an absolute minimum, this

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Speaker 1: is ten years or longer. Now, to come back to

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Speaker 1: your comment about investing in shares, and you love the

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Speaker 1: fact that Peter Thornhill has an amazing strategy which is

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Speaker 1: one I personally follow myself about investing in Australian and

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Speaker 1: industrial shares. You could most definitely use this strategy, but

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Speaker 1: that is use that three hundred thousand dollars recycled through

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Speaker 1: your home to build up a diversified share portfolio, and

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Speaker 1: you could have those dividends potentially paid to you to

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Speaker 1: help pay off your home loan off even faster. Or

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Speaker 1: you could have those dividends reinvested just as you say,

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Speaker 1: and then let that portfolio grow and compound over the

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Speaker 1: long run and eventually, you know, one day you can

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Speaker 1: switch off that automatic dividend reinvestment plan and start living

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Speaker 1: off that passive income from that share portfolio. And yes,

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Speaker 1: that would obviously contribute towards your financial freedom and independence.

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Speaker 1: So that is definitely something worth learning about. Researching, asking

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Speaker 1: lots of questions and getting some licensed advice from a

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Speaker 1: financial planner about however, I have to say, you've flagged

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Speaker 1: something else with me. It's just very very important, is

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Speaker 1: that note of wanting to upgrade the family home in

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Speaker 1: the next five to seven years. Ideally, when it comes

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Speaker 1: to you know, moving homes and upgrading, we don't want

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Speaker 1: to be taking on too much more debt. We want

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Speaker 1: to make sure that we're not going to be retiring

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Speaker 1: still with a whopping, great big mortgage. We need to

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Speaker 1: be realistic as to the loan that we're take and

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Speaker 1: making sure that we can pay that loan off eventually

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Speaker 1: before retiring. You know, there is nothing worse than, you know,

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Speaker 1: looking at someone's finances and realizing they're still going to

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Speaker 1: have a huge mortgage into retirement and they're going to

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Speaker 1: be forced into a position where they do have to

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Speaker 1: downsize the home. Of course, there are situations that that

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Speaker 1: actually is the best thing for them. That's perfectly fine.

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Speaker 1: But as a financial planner, you're always trying to maximize

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Speaker 1: choice for clients. You want them to be able to

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Speaker 1: pick and choose what suits them best and not ever

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Speaker 1: be backed into a corner because of lack of money

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Speaker 1: or because if they previously made a regretful financial decision.

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Speaker 1: So what would I be thinking about again, sitting if

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Speaker 1: we're having coffee together, I'd be talking to you about,

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Speaker 1: obviously looking at your mortgage story, what are you doing

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Speaker 1: to help pay that mortgage off? What if you could

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Speaker 1: find a way to allow this debt recycling strategy so

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Speaker 1: you're actually getting some tax efficiency and you're building wealth

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Speaker 1: in other areas out of your home. But what can

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Speaker 1: you potentially do to get ahead and actually pay your

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Speaker 1: home off sooner within the next five to seven years.

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Speaker 1: Because if you can sell your home with barely any

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Speaker 1: mortgage at all, that means you've got a huge deposit

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Speaker 1: to pretend to be upgrading. And because you have a

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Speaker 1: huge deposit to potentially be upgrading to that two million

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Speaker 1: dollar home, perhaps that then means that you will have

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Speaker 1: a really small mortgage in buying that two million dollar home.

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Speaker 1: These are all things that you need to be considering.

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Speaker 1: I would then be talking to you about what you

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Speaker 1: have a superannuation. Yes, it is so important to diversify

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Speaker 1: outside of the family home if you want financial freedom

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Speaker 1: and independence, but it's not the be all and end all.

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Speaker 1: Your superannuation is essentially an investment portfolio is just simply

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Speaker 1: locked away by our government because they know we're going

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Speaker 1: to blow it and spend it. So I would be

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Speaker 1: looking at your superannuation and treating that as as much

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Speaker 1: importance as building up an investment portfolio and talking to

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Speaker 1: you about, okay, well you're looking at a debt recycling

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Speaker 1: strategy here that's going to help you save some money.

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Speaker 1: Is there now the opportunity to maybe look at, you know,

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Speaker 1: some salary sacrificing perhaps, and if we look at how

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Speaker 1: much money you've got in superannuation and how much potentially

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Speaker 1: we could put more into superannuation obviously being mindful of

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Speaker 1: the caps that is the limits as to how much

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Speaker 1: you can salary sacrifice and put extra into super because

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Speaker 1: they are her financial year. How much is that going

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Speaker 1: to add value to you wanting to be financially free

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Speaker 1: and independent. And if you loved Peter Thornhill's philosophy, you

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Speaker 1: can actually apply that philosophy with you with your superannuation money.

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Speaker 1: That is, look at the underlying investments within your superannuation

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Speaker 1: and look at potentially after getting advice and understanding capital

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Speaker 1: gains and brokerage and all those important finer details but

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Speaker 1: potentially that superannuation money could be invested in the same

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Speaker 1: way that Peter thorn Hill preaches Australian industrial shares. So

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Speaker 1: there are actually lots of things you can think about

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Speaker 1: and consider in your situation. And I have to say

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Speaker 1: this is because incredible response responsible, but also incredibly important

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Speaker 1: is if you are looking at something like this type

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Speaker 1: of strategy, are you going to look at your insurances?

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Speaker 1: Are you going to look at the safety nets that

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Speaker 1: you have in place? Do you have the right amount

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Speaker 1: of emergency money set up? How much do you have

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Speaker 1: in your redoor facility already? How secure is your job?

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Speaker 1: Do you have any income protection policy? Do you have

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Speaker 1: life and TPD cover? Do you have a trauma policy?

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Speaker 1: If you are looking at taking on additional risk, whether

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Speaker 1: it be through a loan, whether it be through a

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Speaker 1: career path and new investment, you've got to always come

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Speaker 1: back to looking at your safety nets and looking at

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Speaker 1: as to how do you best proactively protect your financial

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Speaker 1: future but also your financial wellbeing and your family's financial wellbeing.

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Speaker 1: It is really important because life can change in the

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Speaker 1: blink of a night and the moment you get a

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Speaker 1: test result or the moment an ambulance is called, or

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Speaker 1: the moment something doesn't feel well, it's too late to

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Speaker 1: go and apply for those insurances. You want to be

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Speaker 1: on the front foot with reviewing your personal insurances and

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Speaker 1: making any changes necessary with the guidance of a financial planner.

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Speaker 1: So essentially, yes, you can look at having the best

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Speaker 1: of both worlds. But a debt recycling strategy is something

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Speaker 1: definitely I would consider and learn more about if it's

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Speaker 1: right for you. If you learn about it and go,

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Speaker 1: you know what, is fascinating. But I don't feel comfortable

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Speaker 1: taking on that type of risk right now. That's perfectly fine,

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Speaker 1: and in fact, I think that's great that you can

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Speaker 1: recognize that. The important point here is that you know

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Speaker 1: and understand what debt recycling is, and you know that

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Speaker 1: it is an option for you, because in six months

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Speaker 1: time or even six years time, you might come back

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Speaker 1: to this idea and go, you know what, I actually

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Speaker 1: think this is now the right time to do it,

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Speaker 1: and I now feel ready and I know all the

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Speaker 1: risks involved, and I also know all the right ways

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Speaker 1: to actually manage this risk. And as I said in

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Speaker 1: Mindful Money, I have a whole list of different sort

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Speaker 1: of you could call safety nets to go through to

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Speaker 1: make sure that you can cross check everything you've done

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Speaker 1: to protect this type of strategy so that it works

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Speaker 1: for you in the safest way possible. Of course, not bulletproof,

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Speaker 1: but it significantly reduces those risks. I would then also

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Speaker 1: recommend that you go and grab a copy of Motivated

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Speaker 1: Money so that you can really understand before you make

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Speaker 1: any investment decisions, whether we property or shares, the difference

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Speaker 1: between the two different asset classes and how they work,

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Speaker 1: and the pros and cons for each of those, so

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Speaker 1: that when you do look at this strategy, whether it

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Speaker 1: be through a debt recycling strategy or whether it's be

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Speaker 1: a simple lump sum of that three hundred thousand dollars,

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Speaker 1: you can do so understand what in what you're doing.

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Speaker 1: But with any type of high risk investment such as

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Speaker 1: shares or property, you need to know these are long

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Speaker 1: term investments. So a period of five to seven years,

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Speaker 1: in my personal and professional opinion, is not really long

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Speaker 1: enough to see that money working for you. It's not

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Speaker 1: about timing the market, it's about time in the market.

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Speaker 1: So if you do commit to a property strategy or

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Speaker 1: a share portfolio strategy, you need to be giving it

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Speaker 1: a minimum, an absolute minimum of ten years or longer,

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Speaker 1: and talking and coming from myself personally and professionally. When

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Speaker 1: I buy shares, I don't buy them thinking I'm going

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Speaker 1: to own them for twenty years or thirty years. I

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Speaker 1: actually buy them knowing that I'm going to hold them

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Speaker 1: indefinitely because for me, when I'm acquiring an investment asset,

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Speaker 1: I am buying a passive income stream, and I am

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Speaker 1: buying a growing passive income stream through industrial shares. So

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Speaker 1: I have zero interest in actually ever selling those investments.

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Speaker 1: I want to hold them for the long run because

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Speaker 1: if I sell those investments, I'm essentially cutting off my

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Speaker 1: passive income stream and cutting off my financial freedom and independence.

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Speaker 1: So coming back to that point, if you don't want

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Speaker 1: to take on a debt recycling strategy, you definitely can

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Speaker 1: consider using that three hundred thousand dollars to invest and

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Speaker 1: build up a diversified investment portfolio. But please do not

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Speaker 1: go into it thinking you need that money back out

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Speaker 1: in five to seven years, because there will be market volatility,

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Speaker 1: short to medium tone market volatility, and you are running

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Speaker 1: a great risk of seeing that portfolio temporarily being less

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Speaker 1: than that three hundred thousand dollars when you actually need

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Speaker 1: that money to be able to achieve your other goal

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Speaker 1: of upgrading the family home to around two million dollars. So,

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Speaker 1: as you can hear, there is a lot to consider.

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Speaker 1: You've got to consider debt recycling. You've got to consider

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Speaker 1: potentially a simple lump sum investment. You've got to consider

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Speaker 1: your time frame, You've got to do a risk profile.

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Speaker 1: You've also got to consider the cash flow of servicing

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Speaker 1: an investment loan, and of course those per small goals

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Speaker 1: of wanting to upgrade the family home and whether you

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Speaker 1: don't necessarily really want to do it in five years,

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Speaker 1: seven years, but perhaps you're happy to wait even longer,

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Speaker 1: or perhaps you want to do it sooner. There is

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Speaker 1: so much to consider. But in summary, to help you

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Speaker 1: get started and to help you find some sense of

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Speaker 1: clarity and to help find your feet so that you

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Speaker 1: can get started, can I recommend that you start with

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Speaker 1: a mindful money number. That is, ask yourself how much

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Speaker 1: income would you like to receive in passive income to

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Speaker 1: have financial freedom independence. Take that number and then work

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Speaker 1: back from there. By doing this, you can understand the

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Speaker 1: power of that three hundred thousand dollars and how it

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Speaker 1: can be invested or used in alignment, a positive alignment

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Speaker 1: to helping you achieve that particular passive income goal by

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Speaker 1: doing that, the right strategy, the smart strategy, the intelligent strategy,

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Speaker 1: the strategy that matches your risk profile and your comfort

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Speaker 1: levels when it comes from investing will start to become

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Speaker 1: apparent as you go down the financial literacy education path.

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Speaker 1: So to this very special listener, thank you so much

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Speaker 1: for sending through your question to me. I really help.

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Speaker 1: This particular episode has really got you thinking and you

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Speaker 1: actually understand there are lots of different options available for you,

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Speaker 1: but you've got to understand the importance of time and

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Speaker 1: the importance of long term being patient and allowing your

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Speaker 1: money to work for you in an efficient way. But

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Speaker 1: the sooner you get started in educating yourself and understanding

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Speaker 1: all the different pros and columns that come from various

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Speaker 1: different strategies, you will see that actually what you want

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Speaker 1: to achieve is quite possibly within your financial reach and

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Speaker 1: you can quite possibly have the best of all worlds

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Speaker 1: and achieve all of your financial goals and dreams. So

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Speaker 1: thank you everyone for listening to this start here mini series.

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Speaker 1: Let me know what you think of this, and of

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Speaker 1: course please don't hesitate to send through your questions to me,

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Speaker 1: always keeping in mind that my answers are always going

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Speaker 1: to be general in nature, and for your financial educational person,

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Speaker 1: this is only This is sugar bombus fight h