1
00:00:00,600 --> 00:00:03,640
Speaker 1: Welcome back to start here the very special mini series

2
00:00:03,680 --> 00:00:06,720
Speaker 1: within Sugar Mummer's Fireplay, where I answer your real life

3
00:00:06,760 --> 00:00:12,640
Speaker 1: money questions with practical, empowering general advice. Today's question comes

4
00:00:12,640 --> 00:00:15,400
Speaker 1: from a couple in their early forties, and I have

5
00:00:15,480 --> 00:00:18,560
Speaker 1: a feeling that a lot of other couples in similar

6
00:00:18,560 --> 00:00:22,680
Speaker 1: situation we're wondering the same thing that these two are

7
00:00:22,720 --> 00:00:26,920
Speaker 1: thinking about. They wrote, Hi, Canna, We're forty and forty

8
00:00:26,960 --> 00:00:30,400
Speaker 1: two years old. We owe one hundred and forty eight

9
00:00:30,440 --> 00:00:34,240
Speaker 1: thousand dollars on our home loan, have twenty thousand dollars

10
00:00:34,280 --> 00:00:38,519
Speaker 1: in combined hex debt, ninety three thousand dollars in shares,

11
00:00:39,000 --> 00:00:42,960
Speaker 1: twenty thousand dollars in emergency savings, and together we earn

12
00:00:43,080 --> 00:00:47,559
Speaker 1: around two hundred and seventy thousand dollars per annum. Our

13
00:00:47,680 --> 00:00:51,160
Speaker 1: question to you should we be focusing on paying off

14
00:00:51,200 --> 00:00:56,360
Speaker 1: the mortgage, or paying down our student debt, or investing

15
00:00:56,400 --> 00:01:01,600
Speaker 1: more into shares, or perhaps contruyting extra to our respective

16
00:01:01,680 --> 00:01:05,600
Speaker 1: superinnuation accounts. All Right, before I begin, I just want

17
00:01:05,640 --> 00:01:09,400
Speaker 1: to be crystal clear I cannot give you personal financial advice,

18
00:01:09,520 --> 00:01:13,720
Speaker 1: particularly over a podcast episode. However, what I can do

19
00:01:14,000 --> 00:01:17,880
Speaker 1: right now is walking through the key considerations, the pros

20
00:01:17,959 --> 00:01:20,520
Speaker 1: and the cons of each option that you're questioning right now,

21
00:01:20,920 --> 00:01:24,119
Speaker 1: and share some valuable strategies that will help you think

22
00:01:24,160 --> 00:01:27,840
Speaker 1: critically about your goals and the deadline of these goals,

23
00:01:28,200 --> 00:01:31,760
Speaker 1: because this isn't actually about picking the best option, but

24
00:01:32,000 --> 00:01:34,679
Speaker 1: rather it's about finding a way to make all of

25
00:01:34,720 --> 00:01:38,920
Speaker 1: these goals work together in balance, in harmony, and of

26
00:01:38,920 --> 00:01:42,600
Speaker 1: course with efficiency, in a way that makes sense to you,

27
00:01:42,840 --> 00:01:46,600
Speaker 1: and you can see and feel the progress so that

28
00:01:46,680 --> 00:01:49,960
Speaker 1: you're inspired and empowered to keep going from the moment

29
00:01:50,120 --> 00:01:54,720
Speaker 1: you get started. So let's go through absolutely everything that

30
00:01:54,760 --> 00:02:11,160
Speaker 1: you need to be thinking about right now together. All right.

31
00:02:11,240 --> 00:02:13,800
Speaker 1: Step one, Let's start with the foundation, the most important

32
00:02:13,800 --> 00:02:17,799
Speaker 1: foundation being the safety net emergency money. This couple has

33
00:02:17,840 --> 00:02:21,160
Speaker 1: mentioned they have twenty thousand dollars in emergency savings. Now

34
00:02:21,160 --> 00:02:25,800
Speaker 1: that is a brilliant start. However, I want to encourage

35
00:02:26,240 --> 00:02:31,320
Speaker 1: reviewing whether this is actually enough. Think about three realistic

36
00:02:31,440 --> 00:02:35,120
Speaker 1: risks in your life. You know, perhaps a job loss,

37
00:02:35,880 --> 00:02:39,959
Speaker 1: something happening to your houses is uninsurable, a health event

38
00:02:40,720 --> 00:02:43,240
Speaker 1: you know something's again not covered by insurance, or an

39
00:02:43,400 --> 00:02:47,400
Speaker 1: unexpected family expense or even a car expense, and work

40
00:02:47,440 --> 00:02:51,400
Speaker 1: out what the financial impact could be to you. Take

41
00:02:51,639 --> 00:02:54,560
Speaker 1: three of these and look at what that total is,

42
00:02:54,720 --> 00:02:57,600
Speaker 1: and that total can then give you perhaps a more

43
00:02:57,680 --> 00:03:03,440
Speaker 1: personalized emergency buffer to work towards. Remember this safety net

44
00:03:03,520 --> 00:03:07,440
Speaker 1: isn't a rainy day account. It's what protects you from

45
00:03:07,919 --> 00:03:12,880
Speaker 1: undoing years of financial progress in your life. Without having

46
00:03:12,880 --> 00:03:15,959
Speaker 1: emergency money, you run the risk of dipping into your investments,

47
00:03:15,960 --> 00:03:18,480
Speaker 1: like having to sell them down, you know, redrawing off

48
00:03:18,520 --> 00:03:23,040
Speaker 1: your home loan, or even taking on high interest debt.

49
00:03:23,760 --> 00:03:27,000
Speaker 1: So for now, obviously keep this emergency money in an

50
00:03:27,040 --> 00:03:29,880
Speaker 1: offset account because that is typically the smartest way to

51
00:03:29,880 --> 00:03:34,440
Speaker 1: help reduce mortgage interest. But also obviously whilst having immediate

52
00:03:34,480 --> 00:03:38,240
Speaker 1: access to this. But please review that number of twenty

53
00:03:38,240 --> 00:03:41,680
Speaker 1: thousand dollars to see if it is right for you. Okay,

54
00:03:41,960 --> 00:03:44,960
Speaker 1: let's look at the actual options now. So option one

55
00:03:45,280 --> 00:03:49,880
Speaker 1: paying down the mortgage your home loan is what we

56
00:03:49,960 --> 00:03:54,960
Speaker 1: call toxic non deductible debt. It doesn't provide you with

57
00:03:55,400 --> 00:03:59,800
Speaker 1: any tax deductions, it doesn't provide you with any passiving,

58
00:04:00,480 --> 00:04:05,400
Speaker 1: and it drains your cash flow. Here's why it really matters.

59
00:04:05,920 --> 00:04:09,960
Speaker 1: Over a traditional thirty year term, assuming no refinancing, no

60
00:04:10,080 --> 00:04:15,040
Speaker 1: redrawing the interest cost can be absolutely staggering, and no

61
00:04:15,080 --> 00:04:18,480
Speaker 1: one really talks about this. So for example, a six

62
00:04:18,600 --> 00:04:21,440
Speaker 1: hundred thousand dollars home loan at six percent will cost

63
00:04:21,480 --> 00:04:26,600
Speaker 1: you almost seven hundred thousand dollars in interest a loan

64
00:04:27,040 --> 00:04:29,800
Speaker 1: over its life. And you know that's assuming no interest

65
00:04:29,880 --> 00:04:33,760
Speaker 1: rate cuts or interest rates going up. That's more than

66
00:04:34,040 --> 00:04:38,480
Speaker 1: the original loan amount. However, if you pay just an

67
00:04:38,480 --> 00:04:41,520
Speaker 1: extra two hundred dollars per month from the very beginning

68
00:04:41,520 --> 00:04:43,520
Speaker 1: of when you took that loan out, you could actually

69
00:04:43,600 --> 00:04:47,120
Speaker 1: save around about one hundred and six thousand dollars in

70
00:04:47,200 --> 00:04:50,240
Speaker 1: interest and shave almost four years off the term of

71
00:04:50,279 --> 00:04:54,800
Speaker 1: your loan. This is why I always say extra repayments

72
00:04:55,080 --> 00:04:59,040
Speaker 1: is a guaranteed return. So the upsides to paying off

73
00:04:59,080 --> 00:05:01,080
Speaker 1: your home loan are making at a priority. Is obviously

74
00:05:01,120 --> 00:05:06,440
Speaker 1: every repayment reduces the interest immediately and creates risk free

75
00:05:07,040 --> 00:05:10,880
Speaker 1: It also obviously reduces the financial stress and creates an

76
00:05:11,080 --> 00:05:14,400
Speaker 1: enormous piece of mind. Imagine not having a homelan. I mean,

77
00:05:14,560 --> 00:05:17,640
Speaker 1: oh my god, that just feels liberating. And now, of course,

78
00:05:17,720 --> 00:05:21,600
Speaker 1: once it's paid off your monthly repayments that we're obviously

79
00:05:21,600 --> 00:05:24,120
Speaker 1: going towards a homeland and now completely freed up to

80
00:05:24,240 --> 00:05:27,280
Speaker 1: direct into anything you want, whether it be you know,

81
00:05:27,640 --> 00:05:31,560
Speaker 1: investing more aggressively, putting more money into superinnuation, or even

82
00:05:31,600 --> 00:05:35,640
Speaker 1: just perhaps improving your lifestyle, maybe more holidays. You know,

83
00:05:35,839 --> 00:05:39,360
Speaker 1: as you build equity, also, you know, you unlock more

84
00:05:39,400 --> 00:05:42,200
Speaker 1: opportunities for strategies like debt recycling, which I'm going to

85
00:05:42,240 --> 00:05:45,560
Speaker 1: come to in this episode because it's pretty important. It's

86
00:05:45,560 --> 00:05:49,719
Speaker 1: definitely worth considering. There's obviously, you know, two sides to

87
00:05:49,760 --> 00:05:52,560
Speaker 1: every story, and that there are the cons. So the

88
00:05:52,680 --> 00:05:55,440
Speaker 1: trade offs for putting extra money onto your homeland and

89
00:05:55,440 --> 00:05:58,559
Speaker 1: paying that officer. A priority is liquidity. You know, money

90
00:05:58,600 --> 00:06:01,919
Speaker 1: in the mortgage isn't necess necessarily easily accessible unless you

91
00:06:01,920 --> 00:06:05,920
Speaker 1: have a regional facility or an offset account. There's also

92
00:06:06,160 --> 00:06:09,839
Speaker 1: the opportunity cost. You know, mortgages might be six percent,

93
00:06:09,960 --> 00:06:13,039
Speaker 1: but you could potentially earn you know, more than that

94
00:06:13,480 --> 00:06:16,600
Speaker 1: on investments, particularly if you're really good at picking stocks.

95
00:06:16,640 --> 00:06:20,080
Speaker 1: And you know, even your superinhuation is another opportunity cost

96
00:06:20,120 --> 00:06:22,400
Speaker 1: here for you. You know, if it's delivering returns of say,

97
00:06:22,680 --> 00:06:24,600
Speaker 1: you know, eight to nine percent per annum and you're

98
00:06:24,680 --> 00:06:28,800
Speaker 1: paying six percent, there's also obviously the issue of you know,

99
00:06:28,960 --> 00:06:33,520
Speaker 1: lack of diversification. By paying off your home, so much

100
00:06:33,680 --> 00:06:37,360
Speaker 1: of your wealth is actually tied up into the value

101
00:06:37,480 --> 00:06:40,640
Speaker 1: of your property. And this is actually a really big

102
00:06:40,680 --> 00:06:43,920
Speaker 1: concern of mine that so many Australians are so highly

103
00:06:44,000 --> 00:06:46,120
Speaker 1: leveraged in property in the home that they live in,

104
00:06:46,680 --> 00:06:48,920
Speaker 1: they have no other choice but to pay off their

105
00:06:48,920 --> 00:06:51,000
Speaker 1: home loan as quickly as they possibly can, so there

106
00:06:51,040 --> 00:06:53,520
Speaker 1: is no money to put a side to diversify into

107
00:06:53,560 --> 00:06:57,320
Speaker 1: super and to investing. Not necessarily the case for you guys.

108
00:06:57,880 --> 00:07:03,360
Speaker 1: So remember, reducing non deductible debt always helps strengthen your position,

109
00:07:03,520 --> 00:07:09,720
Speaker 1: but it is about balance, not extremes. Now option too,

110
00:07:10,120 --> 00:07:13,160
Speaker 1: you know, should you be paying off the hex help debt,

111
00:07:13,520 --> 00:07:16,600
Speaker 1: So hex debt is a very different type of debt

112
00:07:16,600 --> 00:07:20,520
Speaker 1: here it's not necessarily interest bearing like a credit card

113
00:07:20,680 --> 00:07:23,200
Speaker 1: is or a mortgage, but instead it is indexed to

114
00:07:23,280 --> 00:07:27,800
Speaker 1: inflation once a year. So here's how it works every June,

115
00:07:28,000 --> 00:07:30,600
Speaker 1: and you know, your balance is adjusted by the Consumer

116
00:07:30,640 --> 00:07:34,280
Speaker 1: Price Index the CPI. So in twenty twenty three this

117
00:07:34,400 --> 00:07:39,280
Speaker 1: actually spiked to seven point one percent, which naturally made headlines.

118
00:07:39,320 --> 00:07:42,360
Speaker 1: But fortunately it's back down to I think three point

119
00:07:42,400 --> 00:07:46,360
Speaker 1: two percent. Now, over time, it usually averages lower than

120
00:07:46,440 --> 00:07:53,080
Speaker 1: most mortgage rates or investment returns. So repayments are income contingent,

121
00:07:53,600 --> 00:07:56,320
Speaker 1: and there are payments obviously taken out you know, by

122
00:07:56,360 --> 00:07:59,680
Speaker 1: your employer when you get paid, and they kick in

123
00:07:59,720 --> 00:08:01,800
Speaker 1: when you know it's above the threshold, which is around

124
00:08:01,800 --> 00:08:05,240
Speaker 1: about fifty one thousand dollars a year. Now, the benefits

125
00:08:05,280 --> 00:08:11,000
Speaker 1: in clearing this hex debt is simplicity, you know, one

126
00:08:11,080 --> 00:08:13,800
Speaker 1: less thing to have to think about. You know. I

127
00:08:13,840 --> 00:08:15,080
Speaker 1: know a lot of people who have sent me a

128
00:08:15,120 --> 00:08:17,440
Speaker 1: DM saying that they've paid off their HEX debt and

129
00:08:17,520 --> 00:08:20,320
Speaker 1: it felt, you know, so it's like a huge weight

130
00:08:20,360 --> 00:08:23,160
Speaker 1: off their shoulders and it just cleared the path for

131
00:08:23,200 --> 00:08:25,800
Speaker 1: them to work on exciting goals. Then, of course is

132
00:08:25,800 --> 00:08:29,280
Speaker 1: the emotional relief. You just might want to just get

133
00:08:29,320 --> 00:08:31,840
Speaker 1: it done and get it paid off. And then there's

134
00:08:31,880 --> 00:08:34,280
Speaker 1: the increase in your net pay because your employer is

135
00:08:34,320 --> 00:08:38,160
Speaker 1: no longer taking out HEX repayments. And then of course

136
00:08:38,640 --> 00:08:41,640
Speaker 1: it actually may increase your ability to borrow further down

137
00:08:41,679 --> 00:08:43,760
Speaker 1: the track. A lot of people don't realize this, but

138
00:08:43,800 --> 00:08:47,800
Speaker 1: your HEX debt is calculated in your serviceability when it

139
00:08:47,840 --> 00:08:51,240
Speaker 1: comes to borrowing it's not a huge impact, but it

140
00:08:51,320 --> 00:08:55,079
Speaker 1: definitely goes down as other liabilities that you're carrying right now.

141
00:08:55,520 --> 00:08:58,520
Speaker 1: And of course it gives you a really clean slate

142
00:08:58,679 --> 00:09:01,000
Speaker 1: if you ever want to go back to university or

143
00:09:01,000 --> 00:09:03,720
Speaker 1: do some other sort of tertiorary studies and you're needing

144
00:09:03,760 --> 00:09:07,040
Speaker 1: to borrow again, you're not adding to that twenty thousand

145
00:09:07,080 --> 00:09:10,080
Speaker 1: dollars with the debt. You know, you're starting afresh. And

146
00:09:10,120 --> 00:09:14,079
Speaker 1: there's also I guess the ethical benefits. You know, our

147
00:09:14,280 --> 00:09:17,520
Speaker 1: HEX help debt is only going to continue on working

148
00:09:17,760 --> 00:09:21,480
Speaker 1: and help educate our future generations, which is essential for

149
00:09:21,559 --> 00:09:25,200
Speaker 1: our country and for our economy if we actually respect

150
00:09:25,280 --> 00:09:28,120
Speaker 1: these debts and pay them off in a timely manner

151
00:09:28,160 --> 00:09:32,160
Speaker 1: that we can obviously afford. Now, what is the flip

152
00:09:32,200 --> 00:09:35,600
Speaker 1: side of this, the cons so there's no redraw facility.

153
00:09:35,800 --> 00:09:39,160
Speaker 1: Once you make extra payments to your HEX debt, you

154
00:09:39,240 --> 00:09:42,320
Speaker 1: can't redraw it. It's gone towards that debt. Now, some

155
00:09:42,360 --> 00:09:45,720
Speaker 1: people I'd say, that's a great temptation that's removed because

156
00:09:46,000 --> 00:09:48,480
Speaker 1: it's stuck there. You have to stick to it. And

157
00:09:48,640 --> 00:09:53,040
Speaker 1: obviously the other downside is it's considered to be relatively cheap.

158
00:09:53,120 --> 00:09:54,920
Speaker 1: I don't really like the word cheap maybe more cost

159
00:09:54,920 --> 00:09:59,240
Speaker 1: effective debt in comparison to mortgages or credit cards. So

160
00:09:59,559 --> 00:10:05,079
Speaker 1: whilst is not necessarily a number one top financial priority,

161
00:10:05,200 --> 00:10:09,360
Speaker 1: it still might feel good making a an emotionally based

162
00:10:09,840 --> 00:10:12,840
Speaker 1: decision to pay this off, whether it's strategic or not.

163
00:10:13,840 --> 00:10:18,560
Speaker 1: Option number three investing more into shares. All right, So

164
00:10:18,600 --> 00:10:20,920
Speaker 1: this couple has already mentioned that they have ninety three

165
00:10:20,920 --> 00:10:24,440
Speaker 1: thousand dollars in shares, which is a brilliant start. Now,

166
00:10:24,480 --> 00:10:28,040
Speaker 1: assuming a dividend yield of five percent per annum, this

167
00:10:28,160 --> 00:10:31,120
Speaker 1: could be generating a passive income stream of around about

168
00:10:31,160 --> 00:10:34,720
Speaker 1: four thousand, six hundred and fifty dollars per year in

169
00:10:34,760 --> 00:10:38,960
Speaker 1: passive income. So that is money working for this couple

170
00:10:39,080 --> 00:10:42,160
Speaker 1: without them having to physically lift a finger. And the

171
00:10:42,160 --> 00:10:43,880
Speaker 1: more passive income that we have in our lives, the

172
00:10:43,880 --> 00:10:46,480
Speaker 1: more financial freedom we have, you know, that's the ultimate goal.

173
00:10:47,200 --> 00:10:50,720
Speaker 1: So what are the benefits of investing more into shares? Well,

174
00:10:50,760 --> 00:10:54,480
Speaker 1: obviously you've got that long term growth opportunities. You know,

175
00:10:54,920 --> 00:10:57,400
Speaker 1: on average, you know, depending on which charts you look

176
00:10:57,440 --> 00:10:59,840
Speaker 1: out and watch data and obviously which asset class, but

177
00:11:00,400 --> 00:11:04,079
Speaker 1: historically shares you know, return between seven to eleven percent

178
00:11:04,200 --> 00:11:08,120
Speaker 1: per annum over you know, a twenty thirty forty year period. Also,

179
00:11:08,480 --> 00:11:11,680
Speaker 1: you're earning passive income through the dividends, which you know,

180
00:11:11,920 --> 00:11:14,360
Speaker 1: as a shareholder you can decide whether you want to

181
00:11:14,400 --> 00:11:17,880
Speaker 1: reinvest them or just take them as cash flow. And

182
00:11:17,920 --> 00:11:19,920
Speaker 1: perhaps you can use this cash flow if you wanted

183
00:11:20,000 --> 00:11:22,079
Speaker 1: you to help pay off your mortgage, you know, off sooner.

184
00:11:22,160 --> 00:11:25,079
Speaker 1: So you aren't just relying on your income. You're also

185
00:11:25,160 --> 00:11:27,240
Speaker 1: relying on the dividends that are coming in each year

186
00:11:27,280 --> 00:11:29,960
Speaker 1: to help pay that mortgage of faster. You've then obviously

187
00:11:30,040 --> 00:11:33,640
Speaker 1: got flexibility, you know, unlike superannuation, you can access the

188
00:11:33,640 --> 00:11:37,079
Speaker 1: money within your share portfolio at any time before retirement.

189
00:11:37,120 --> 00:11:39,040
Speaker 1: The government has no control over this, which can be

190
00:11:39,160 --> 00:11:43,680
Speaker 1: very liberating. And of course importantly you're diversifying beyond the

191
00:11:43,720 --> 00:11:45,400
Speaker 1: family home. Not all of your money is tied up

192
00:11:45,440 --> 00:11:49,200
Speaker 1: in that one massive asset. You know, you're tapping into

193
00:11:49,360 --> 00:11:52,920
Speaker 1: two dimensional, three dimensional assets that provide income, capital growth

194
00:11:52,920 --> 00:11:58,400
Speaker 1: opportunities and growing passive income opportunities. So the downsides we

195
00:11:58,440 --> 00:12:01,720
Speaker 1: want to look at this accurately and evenly for both sites.

196
00:12:02,000 --> 00:12:04,880
Speaker 1: So obviously volatility, you know, I don't know what your

197
00:12:04,960 --> 00:12:06,680
Speaker 1: risk profile is. I'm going to assume it's a growth

198
00:12:06,720 --> 00:12:09,240
Speaker 1: or high growth. But you know, and hopefully you're aware

199
00:12:09,240 --> 00:12:11,560
Speaker 1: of this, but the share market can drop, you know,

200
00:12:11,600 --> 00:12:15,120
Speaker 1: twenty to thirty percent in a pullback or a correction

201
00:12:15,240 --> 00:12:18,400
Speaker 1: or a downturn. So if you're using shares as your

202
00:12:18,400 --> 00:12:22,200
Speaker 1: wealth creation strategy, you need time, and you need patients,

203
00:12:22,679 --> 00:12:25,360
Speaker 1: and also you need a lot of sort of mental resilience,

204
00:12:25,640 --> 00:12:27,640
Speaker 1: you know, not getting caught up in the herd mentality

205
00:12:27,679 --> 00:12:31,800
Speaker 1: and panicking and selling during downturns. There's also the tax.

206
00:12:31,880 --> 00:12:36,240
Speaker 1: So yes, you know you're earning dividends, but you have

207
00:12:36,280 --> 00:12:38,040
Speaker 1: to pay tax on those dividends, and if you do

208
00:12:38,160 --> 00:12:40,280
Speaker 1: decide to sell, you've got to pay obviously capital gains

209
00:12:40,280 --> 00:12:44,200
Speaker 1: tax as well. However, I will also mention depending on

210
00:12:44,240 --> 00:12:47,360
Speaker 1: what you've invested in, if it's Australian shares and they

211
00:12:47,400 --> 00:12:50,160
Speaker 1: pay franking credits, that's obviously going to help reduce that

212
00:12:50,520 --> 00:12:54,240
Speaker 1: annual tax burden on the income. Then of course there

213
00:12:54,320 --> 00:12:58,320
Speaker 1: is the inefficiency. Now this is really important this one. Here.

214
00:12:59,080 --> 00:13:04,439
Speaker 1: You are still through your mortgage non deductible debt, so

215
00:13:04,520 --> 00:13:06,920
Speaker 1: if you were to go and sell these shares, and

216
00:13:06,960 --> 00:13:09,320
Speaker 1: again this is not advice, I'm just looking at different

217
00:13:09,360 --> 00:13:11,640
Speaker 1: ideas for you to consider. If you were to sell

218
00:13:11,679 --> 00:13:15,600
Speaker 1: those shares today and pay off your home loan, you

219
00:13:15,600 --> 00:13:17,960
Speaker 1: know you'd be knocking a good sixty six percent off

220
00:13:18,000 --> 00:13:19,960
Speaker 1: your home loan. But of course you'd need to obviously

221
00:13:19,960 --> 00:13:23,000
Speaker 1: account for you know, the capital gains tax being triggered,

222
00:13:23,520 --> 00:13:27,160
Speaker 1: and of course you know brokerage costs, So you would

223
00:13:27,440 --> 00:13:29,920
Speaker 1: not do this. You'd go and speak to your accountant

224
00:13:29,960 --> 00:13:31,400
Speaker 1: and get it, you know, a rough estimate as to

225
00:13:31,400 --> 00:13:34,160
Speaker 1: how much capital gains tax would be triggered and whether

226
00:13:34,200 --> 00:13:38,240
Speaker 1: that's right for your long term financial goals. But technically

227
00:13:38,240 --> 00:13:40,760
Speaker 1: there is an inefficiency. You want to try and minimize

228
00:13:40,760 --> 00:13:44,880
Speaker 1: your personal debt, maximize your investment debt. So to answer

229
00:13:44,880 --> 00:13:49,280
Speaker 1: this question, yes, investing is incredibly powerful, but you know,

230
00:13:49,920 --> 00:13:54,320
Speaker 1: does it this particular strategy fit alongside your debt and

231
00:13:54,360 --> 00:13:58,920
Speaker 1: your super goals? Perhaps not necessarily, And then of course

232
00:13:58,920 --> 00:14:03,320
Speaker 1: there is option number for contributing to SUPER. So for

233
00:14:03,400 --> 00:14:06,640
Speaker 1: people in their forties, superinuation is one of the most

234
00:14:06,679 --> 00:14:11,280
Speaker 1: effective tools for building retirement wealth and I will happily

235
00:14:11,320 --> 00:14:15,079
Speaker 1: share with you it is probably the second most important

236
00:14:15,080 --> 00:14:18,200
Speaker 1: financial strategy that Tom and I implement in our own

237
00:14:18,280 --> 00:14:20,720
Speaker 1: personal lives and for the record, we also have a

238
00:14:20,720 --> 00:14:24,600
Speaker 1: debt recycling strategy as well. But you know, for us,

239
00:14:25,120 --> 00:14:28,200
Speaker 1: it makes a lot of sense to utilize this environment

240
00:14:28,240 --> 00:14:30,840
Speaker 1: to help build wealth up. And these are the reasons

241
00:14:30,880 --> 00:14:35,760
Speaker 1: why it's tax effective. Concessional contributions, you know, which is

242
00:14:35,840 --> 00:14:40,440
Speaker 1: money going into superannuation it taxed at fifteen percent, which

243
00:14:40,480 --> 00:14:44,480
Speaker 1: is often far lower than the average marginal tax rate

244
00:14:44,480 --> 00:14:47,960
Speaker 1: that an Australian pays right now. Also, the income that

245
00:14:48,200 --> 00:14:51,680
Speaker 1: is generated from the assets within Super are also taxed

246
00:14:51,720 --> 00:14:56,000
Speaker 1: at a maximum rate of fifteen percent. And then capital

247
00:14:56,040 --> 00:14:58,360
Speaker 1: gains tax also tax at fifteen percent, but sometimes I

248
00:14:58,400 --> 00:15:01,120
Speaker 1: can be ten percent if you've held that sent beyond

249
00:15:01,280 --> 00:15:05,160
Speaker 1: twelve months. But with that tax rate on the income

250
00:15:05,200 --> 00:15:07,520
Speaker 1: of fifteen percent, that can actually sometimes be wiped out

251
00:15:07,560 --> 00:15:11,280
Speaker 1: completely if you've got franking credits attached to Australian Industrial

252
00:15:11,320 --> 00:15:15,560
Speaker 1: shares in your assets within Super. So there are some

253
00:15:15,600 --> 00:15:22,720
Speaker 1: significant tax savings alone right there for utilizing Super. And

254
00:15:22,760 --> 00:15:25,360
Speaker 1: then because you don't have that eroading impact of tax,

255
00:15:25,440 --> 00:15:28,480
Speaker 1: you know, greater compounding growth opportunities and you've got those

256
00:15:28,480 --> 00:15:32,200
Speaker 1: contributions coming in through your employer. You know, even SAUL

257
00:15:32,280 --> 00:15:37,880
Speaker 1: ones can really snowball significantly and really increase your superannuation

258
00:15:37,960 --> 00:15:40,640
Speaker 1: account balance when you're ready to retire in your sixties.

259
00:15:41,400 --> 00:15:45,080
Speaker 1: Also when you are looking at contributing to super there

260
00:15:45,160 --> 00:15:48,560
Speaker 1: is a really great sense of peace of mind knowing

261
00:15:48,600 --> 00:15:51,000
Speaker 1: that your retirement is secure. You're not going to be

262
00:15:51,040 --> 00:15:54,480
Speaker 1: retiring poverty, You're going to be retiring comfortably and on

263
00:15:54,520 --> 00:15:56,360
Speaker 1: your own terms, and you're not going to be reliant

264
00:15:56,400 --> 00:16:00,720
Speaker 1: on the government hopefully. Now the downsides, okay, this is

265
00:16:00,760 --> 00:16:05,800
Speaker 1: also really important to understand. Lock up. Once your funds

266
00:16:06,040 --> 00:16:10,480
Speaker 1: are in superannuation, in that superanneration environment, you cannot access

267
00:16:10,520 --> 00:16:15,160
Speaker 1: them until you meet preservation age. Now here's the other

268
00:16:15,400 --> 00:16:19,560
Speaker 1: I guess, curveball. The rules can change. Yes, our governments,

269
00:16:19,560 --> 00:16:21,760
Speaker 1: as we're seeing right now, are starting to tweak the

270
00:16:21,800 --> 00:16:26,480
Speaker 1: superannuation laws, which naturally makes people feel nervous. And then,

271
00:16:26,480 --> 00:16:29,000
Speaker 1: of course you've got the issue with competing goals here.

272
00:16:29,520 --> 00:16:32,360
Speaker 1: You know, you may want to actually and I don't

273
00:16:32,400 --> 00:16:34,760
Speaker 1: know the details the final details of your goals here,

274
00:16:34,840 --> 00:16:36,840
Speaker 1: and you may do not even have any particular goals,

275
00:16:36,840 --> 00:16:41,240
Speaker 1: but you may actually want to retire before age sixty,

276
00:16:41,440 --> 00:16:44,440
Speaker 1: you know, before you can actually access your superannuation money.

277
00:16:44,440 --> 00:16:47,480
Speaker 1: So that's really important consideration that's got to be weighed

278
00:16:47,600 --> 00:16:53,040
Speaker 1: up here. So yes, superannuation is also incredibly powerful, but

279
00:16:53,680 --> 00:16:58,000
Speaker 1: it's not about maximizing it at the expense of losing

280
00:16:58,040 --> 00:17:01,640
Speaker 1: out on everything else. It is one one important piece

281
00:17:01,880 --> 00:17:06,560
Speaker 1: of a big puzzle. So what are other strategies that

282
00:17:06,680 --> 00:17:11,080
Speaker 1: I think you should be considering or getting personal advice on. Well,

283
00:17:11,520 --> 00:17:13,359
Speaker 1: I mentioned at the beginning of this episode, and that

284
00:17:13,560 --> 00:17:17,720
Speaker 1: is debt recycling. This is a more advanced approach and

285
00:17:17,840 --> 00:17:21,040
Speaker 1: it is essentially where you pay down your mortgage but

286
00:17:21,080 --> 00:17:24,440
Speaker 1: then redraw the funds and invest them the funds that

287
00:17:24,480 --> 00:17:27,040
Speaker 1: are made available through a separate investment loan, but into

288
00:17:27,160 --> 00:17:29,879
Speaker 1: income producing assets such as buying more shares for your

289
00:17:29,880 --> 00:17:34,160
Speaker 1: share portfolio, and over time this can be really powerful.

290
00:17:34,160 --> 00:17:36,200
Speaker 1: And as I said, it's one strategy that we use

291
00:17:36,320 --> 00:17:39,440
Speaker 1: Tom and I ourselves. So as the mortgage is shrinking,

292
00:17:39,880 --> 00:17:43,680
Speaker 1: the investment loans are growing. But the key difference here

293
00:17:43,800 --> 00:17:47,719
Speaker 1: is that the investment loan interest is actually tax deductible

294
00:17:47,800 --> 00:17:51,280
Speaker 1: and that money is being used to produce passive income.

295
00:17:52,320 --> 00:17:56,639
Speaker 1: It is a way of building wealth over the long run,

296
00:17:56,840 --> 00:18:00,320
Speaker 1: but also whilst allowing you the space to continue on

297
00:18:00,400 --> 00:18:03,320
Speaker 1: working on paying off your mortgage. As quickly as possible.

298
00:18:03,920 --> 00:18:07,760
Speaker 1: It is definitely a more complicated and a higher risk strategy,

299
00:18:08,119 --> 00:18:14,800
Speaker 1: and it absolutely requires really careful advice from an experienced

300
00:18:14,840 --> 00:18:17,040
Speaker 1: mortgage broker who needs to set this up for you

301
00:18:17,200 --> 00:18:19,760
Speaker 1: correctly the right way the first time, but also a

302
00:18:19,800 --> 00:18:23,200
Speaker 1: financial planner who has a lot of experience in managing

303
00:18:23,240 --> 00:18:26,440
Speaker 1: this type of strategy and knows exactly how to educate

304
00:18:26,520 --> 00:18:30,760
Speaker 1: you around navigating these risks in a proactive manner that

305
00:18:30,800 --> 00:18:33,600
Speaker 1: makes it really safe and secure for you to the

306
00:18:33,600 --> 00:18:36,880
Speaker 1: best of your ability. And in my book Mindful Money,

307
00:18:36,880 --> 00:18:39,119
Speaker 1: which I highly recommend, I actually share, I think about

308
00:18:39,160 --> 00:18:43,119
Speaker 1: seven different ideas to help you use this strategy in

309
00:18:43,160 --> 00:18:48,000
Speaker 1: an almost bulletproof way. So you're going to have to

310
00:18:48,000 --> 00:18:52,640
Speaker 1: be really clear about understanding this the risks but also

311
00:18:52,680 --> 00:18:55,120
Speaker 1: the benefits. And you also need to be really clear

312
00:18:55,119 --> 00:18:59,080
Speaker 1: with your hex debt or as will not or actually

313
00:18:59,280 --> 00:19:02,359
Speaker 1: both of you look at maybe boosting those emergency money

314
00:19:02,600 --> 00:19:06,280
Speaker 1: before you even consider doing this. So you may see

315
00:19:06,280 --> 00:19:08,119
Speaker 1: a financial planner and they may say, Yep, that's a

316
00:19:08,160 --> 00:19:11,879
Speaker 1: great idea, Cannas on the money here, but before you begin,

317
00:19:12,080 --> 00:19:14,560
Speaker 1: let's play off that heck stead and let's boost up

318
00:19:14,560 --> 00:19:16,720
Speaker 1: that emergency money. If you're hearing that sort of advice

319
00:19:16,760 --> 00:19:20,760
Speaker 1: from a financial planner, I'd say you're in safer hands

320
00:19:21,480 --> 00:19:25,720
Speaker 1: now for the right household and you're at the right

321
00:19:25,880 --> 00:19:29,119
Speaker 1: stage of life. You know, a debt recycling strategy can

322
00:19:29,160 --> 00:19:33,640
Speaker 1: be seriously a game changer. But for others it's not right.

323
00:19:33,800 --> 00:19:37,440
Speaker 1: It doesn't sit with their risk appetite, it doesn't work

324
00:19:37,480 --> 00:19:41,000
Speaker 1: with their time frames, and it doesn't work emotionally. It's

325
00:19:41,040 --> 00:19:44,360
Speaker 1: just unnecessarily stressed in their life. And the people who

326
00:19:44,480 --> 00:19:47,000
Speaker 1: it's not right for. So this is why you need

327
00:19:47,080 --> 00:19:49,720
Speaker 1: to make sure you're getting advice that guides you but

328
00:19:49,800 --> 00:19:54,399
Speaker 1: also educates you at all times. So what is the

329
00:19:54,560 --> 00:19:58,880
Speaker 1: answer here, Well, there isn't just one. The real answer

330
00:19:58,920 --> 00:20:01,720
Speaker 1: is you don't have to actually choose one strategy. Here

331
00:20:01,840 --> 00:20:03,479
Speaker 1: is not a matter I should we do this or

332
00:20:03,520 --> 00:20:08,560
Speaker 1: that or that or that. It's actually something more bigger

333
00:20:08,560 --> 00:20:10,840
Speaker 1: than that and better than that. It's about finding a

334
00:20:10,880 --> 00:20:15,800
Speaker 1: strategy that blends all of these goals at the same time.

335
00:20:16,400 --> 00:20:18,600
Speaker 1: You know, doing a little bit of everything in an

336
00:20:18,680 --> 00:20:23,280
Speaker 1: efficient way. You know, paying extra onto the mortgage, making

337
00:20:23,359 --> 00:20:29,359
Speaker 1: superannuation contributions, perhaps, you know, some salary sacrificing, investing consistently

338
00:20:29,560 --> 00:20:32,320
Speaker 1: whether it be through a debt recycling strategy or setting

339
00:20:32,400 --> 00:20:36,600
Speaker 1: up a regular investment plan, or even a gearing regular

340
00:20:36,680 --> 00:20:40,199
Speaker 1: investment plan, which is another option that's potentially available for you,

341
00:20:40,560 --> 00:20:45,359
Speaker 1: and of course eventually clearing that hextet. But it's about

342
00:20:45,400 --> 00:20:48,639
Speaker 1: doing it in a way that is incredibly efficient, but

343
00:20:49,720 --> 00:20:54,719
Speaker 1: most importantly sustainable for your lifestyle and in alignment to

344
00:20:54,760 --> 00:20:57,399
Speaker 1: your goals and your risk profile. So here are the

345
00:20:57,440 --> 00:21:01,280
Speaker 1: next steps that I strongly recommend you follow because you're

346
00:21:01,280 --> 00:21:04,160
Speaker 1: in this really sweet, great sweet spot where you could

347
00:21:04,160 --> 00:21:06,720
Speaker 1: really change your financial life if you get some great advice.

348
00:21:07,240 --> 00:21:10,800
Speaker 1: So number one, get really clear about your goals. You

349
00:21:10,840 --> 00:21:13,919
Speaker 1: haven't actually shared with me what your goals are. You know,

350
00:21:14,119 --> 00:21:16,000
Speaker 1: you know whether you want to retire at certain age,

351
00:21:16,000 --> 00:21:18,399
Speaker 1: how much income, you know what your risk profile is.

352
00:21:18,440 --> 00:21:21,600
Speaker 1: So get clear understand what is important to you. You

353
00:21:21,640 --> 00:21:24,600
Speaker 1: know what what are the biggest priorities, and you know,

354
00:21:24,640 --> 00:21:27,120
Speaker 1: if you don't know, look at what excites you. You know,

355
00:21:27,320 --> 00:21:29,440
Speaker 1: is it freedom from debt, is it the idea of

356
00:21:29,480 --> 00:21:31,679
Speaker 1: an early retirement, or is it about you know, the

357
00:21:31,760 --> 00:21:33,840
Speaker 1: comfort and peace of mind. You know seeing lots of

358
00:21:33,920 --> 00:21:37,879
Speaker 1: savings in your bank account. You know, money loves clarity.

359
00:21:38,000 --> 00:21:42,159
Speaker 1: And definition. Next is is get a financial planner, and

360
00:21:42,200 --> 00:21:44,720
Speaker 1: get a financial planner to run some numbers with you.

361
00:21:44,760 --> 00:21:47,200
Speaker 1: When you see a financial planner, they will look at

362
00:21:47,240 --> 00:21:49,880
Speaker 1: not just one strategy you recommend that, they will show

363
00:21:49,880 --> 00:21:52,600
Speaker 1: you how they have compared a couple of different strategies

364
00:21:52,600 --> 00:21:55,080
Speaker 1: and they will show you the numbers where they've looked at,

365
00:21:55,080 --> 00:21:58,639
Speaker 1: for example, or prioritizing paying off your mortgage and you know,

366
00:21:58,680 --> 00:22:01,760
Speaker 1: a regular ongoing gearing strategy, or they've looked at a

367
00:22:01,800 --> 00:22:04,800
Speaker 1: strategy where it involves paying off your mortgage but also

368
00:22:04,800 --> 00:22:08,560
Speaker 1: looking at an aggressive salary sacrificing or superannuation strategy. They

369
00:22:08,560 --> 00:22:10,920
Speaker 1: will show you the numbers and they will show you

370
00:22:10,960 --> 00:22:14,320
Speaker 1: the projections so you can then compare these and you

371
00:22:14,359 --> 00:22:18,280
Speaker 1: can then make really great, wise sensible decisions that are

372
00:22:18,400 --> 00:22:21,640
Speaker 1: right view. The other thing I would recommend whilst you're

373
00:22:21,680 --> 00:22:23,920
Speaker 1: searching for a financial planner, and if you want to

374
00:22:23,960 --> 00:22:29,280
Speaker 1: send me a DM asking for some recommendations, please don't hesitate.

375
00:22:29,320 --> 00:22:30,920
Speaker 1: I have a couple of financial planners that I'm happy

376
00:22:31,119 --> 00:22:33,840
Speaker 1: to recommend, you know, and there's no incentive for me whatsoever.

377
00:22:33,920 --> 00:22:39,159
Speaker 1: But you know, whilst you're interviewing financial planners, I recommend

378
00:22:39,320 --> 00:22:42,320
Speaker 1: again coming back to that emergency money number and looking

379
00:22:42,359 --> 00:22:44,600
Speaker 1: at is twenty thousand dollars enough or do you honestly

380
00:22:44,640 --> 00:22:46,840
Speaker 1: need to maybe look at increasing it in the meantime

381
00:22:46,880 --> 00:22:50,399
Speaker 1: whilst you're shopping around. And then you haven't mentioned this,

382
00:22:50,480 --> 00:22:52,480
Speaker 1: but I don't know if you have this in place

383
00:22:52,560 --> 00:22:54,320
Speaker 1: or not, But I just I want to make sure

384
00:22:54,320 --> 00:22:56,400
Speaker 1: that you're aware of it, because I think it would

385
00:22:56,400 --> 00:22:59,040
Speaker 1: be negligent of me not to mention this. But protecting

386
00:22:59,040 --> 00:23:02,280
Speaker 1: your lifestyle, I'm talking about person insurance. Do you have

387
00:23:02,320 --> 00:23:04,880
Speaker 1: income protection? Do you have trauma cover? How much life

388
00:23:04,880 --> 00:23:07,679
Speaker 1: and TPD cover have you both got? You know, you

389
00:23:07,720 --> 00:23:10,159
Speaker 1: really want to protect your financial situation so that if

390
00:23:10,200 --> 00:23:12,720
Speaker 1: something happens in the blink of the eye, which things

391
00:23:12,840 --> 00:23:14,320
Speaker 1: do happen in the link of an eye, we all

392
00:23:14,359 --> 00:23:18,480
Speaker 1: know that your hard work so far to date is

393
00:23:18,560 --> 00:23:22,200
Speaker 1: never undone, is never jeopardized, is never you know, back

394
00:23:22,240 --> 00:23:24,960
Speaker 1: to square one again, starting from scratch. This is really

395
00:23:25,000 --> 00:23:27,639
Speaker 1: important to not just this couple, but for everybody listening.

396
00:23:28,200 --> 00:23:31,440
Speaker 1: And again I can't stress enough the importance of seeking

397
00:23:31,560 --> 00:23:36,480
Speaker 1: professional personal advice, not a f influenza. Not going by

398
00:23:36,520 --> 00:23:39,520
Speaker 1: this particular podcast episode or one of my podcast episodes,

399
00:23:39,840 --> 00:23:42,960
Speaker 1: seeing a financial planner, having a private appointment with them

400
00:23:43,240 --> 00:23:45,840
Speaker 1: and getting them to do a statement of advice where

401
00:23:45,840 --> 00:23:48,640
Speaker 1: they can model these different strategies for you, compare them

402
00:23:48,680 --> 00:23:53,680
Speaker 1: side by side, and you can see what opportunities lie

403
00:23:53,720 --> 00:23:56,080
Speaker 1: ahead for you in your future, and you can start

404
00:23:56,119 --> 00:24:00,240
Speaker 1: to act and get started now. So this is a

405
00:24:00,320 --> 00:24:02,240
Speaker 1: lot of pleasure doing this particular episode, as it is

406
00:24:02,280 --> 00:24:03,840
Speaker 1: for all of them, but this one, I just am

407
00:24:03,880 --> 00:24:06,000
Speaker 1: excited about your future because I can see there's so

408
00:24:06,160 --> 00:24:08,520
Speaker 1: much potential for you if you can get advice and

409
00:24:08,520 --> 00:24:11,879
Speaker 1: get cracking. You've got a really high income, you've got

410
00:24:12,080 --> 00:24:15,919
Speaker 1: a really manageable home loan, you've already made a fantastic

411
00:24:16,320 --> 00:24:20,280
Speaker 1: start with your share portfolio, you're already in a position

412
00:24:20,280 --> 00:24:24,240
Speaker 1: of financial strength. And it's not about sacrificing one goal

413
00:24:24,320 --> 00:24:26,560
Speaker 1: for the other here, which I hope you now see.

414
00:24:26,680 --> 00:24:29,400
Speaker 1: It's about aligning all of them so that you can

415
00:24:29,440 --> 00:24:34,159
Speaker 1: move forward on every single front of your life. So

416
00:24:34,560 --> 00:24:37,920
Speaker 1: thank you so much to this listener for sending in

417
00:24:37,960 --> 00:24:40,160
Speaker 1: this very thoughtful question. And I know it's a question

418
00:24:40,200 --> 00:24:41,720
Speaker 1: that a lot of other people have, you know, will

419
00:24:41,800 --> 00:24:45,400
Speaker 1: really resonate with, and as so many of my listeners

420
00:24:45,440 --> 00:24:48,320
Speaker 1: are in their thirties and forties and beyond, And in

421
00:24:48,359 --> 00:24:50,840
Speaker 1: the meantime, for everybody else who listened to this episode

422
00:24:50,880 --> 00:24:53,600
Speaker 1: and found it helpful, can you please do me two

423
00:24:53,760 --> 00:24:56,520
Speaker 1: huge favors. I would be incredibly grateful, the first thing

424
00:24:56,600 --> 00:24:59,080
Speaker 1: being send this episode to a friend or a loved

425
00:24:59,080 --> 00:25:02,080
Speaker 1: one that's you know it might be wondering the same

426
00:25:02,200 --> 00:25:05,919
Speaker 1: questions right now. And then, of course, can you please

427
00:25:06,080 --> 00:25:08,240
Speaker 1: take a moment to leave me a rating and review?

428
00:25:08,440 --> 00:25:10,879
Speaker 1: Every single rating and review really means a lot to me,

429
00:25:10,920 --> 00:25:13,040
Speaker 1: because it means that I am helping you, I am

430
00:25:13,080 --> 00:25:15,439
Speaker 1: of value, I am of service to you, and you

431
00:25:15,520 --> 00:25:18,320
Speaker 1: get to listen to this for free, and a lot

432
00:25:18,320 --> 00:25:21,320
Speaker 1: of these things I make in my own free spare time.

433
00:25:21,840 --> 00:25:24,920
Speaker 1: And in the meantime, if you have a question yourself

434
00:25:24,960 --> 00:25:28,159
Speaker 1: that you are dying to ask me, and you'd like

435
00:25:28,200 --> 00:25:31,520
Speaker 1: me to put it forward for our start Here miniseries

436
00:25:31,560 --> 00:25:34,439
Speaker 1: within Sugar Mama's Fireplay, please make sure you send me

437
00:25:34,520 --> 00:25:38,280
Speaker 1: a DM on Instagram at sugar Mama tv or Canna

438
00:25:38,320 --> 00:25:41,480
Speaker 1: Campbell Official. I'll even leave my email address in the

439
00:25:41,560 --> 00:25:45,159
Speaker 1: podcast notes as well as an important episode about how

440
00:25:45,200 --> 00:25:48,840
Speaker 1: to find the best financial planner for you. All right, everyone,

441
00:25:48,880 --> 00:25:51,679
Speaker 1: thank you? So much for listening to today's episode. I

442
00:25:51,720 --> 00:25:56,360
Speaker 1: will catch you next Monday morning on Sugar Mama's Fireplay.

443
00:25:56,480 --> 00:25:59,879
Speaker 1: Thank you for listening, and have a fantastic weekend. Chaffing,

444
00:26:11,960 --> 00:26:13,440
Speaker 1: she s