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Speaker 1: My name is Tatasha Bamblet. I'm a proud First Nations

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Speaker 1: woman and I'm here to acknowledge country t Glenn youan

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Speaker 1: Ganya Niana, Kaka yah Ya bin ahaka nian our gay

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Speaker 1: in Mbina yakarum jar dominyamiga Umagahawakawaman damon imlan Bumba bang

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Speaker 1: Gadabomba in and now in wakah ghana on yakraum jar Watnadaa. Hello,

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Speaker 1: beautiful friends, we gather on the lands of the Aboriginal people.

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Speaker 1: We thank acknowledge and respect the Aberiginal people's land that

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Speaker 1: we're gathering on today. Take pleasure in all the land

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Speaker 1: and respect all that you see. She's on the Money

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Speaker 1: podcast acknowledges culture, country, community and connections, bringing you the tools,

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Speaker 1: knowledge and resources for you to thrive.

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Speaker 2: She's on the Money.

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Speaker 3: She's on the Money. Hello and welcome to She's on

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Speaker 3: the Money, the podcast that's here to make sense of

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Speaker 3: all the money things that don't really make sense at all.

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Speaker 3: And one of those confusing things we get asked all

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Speaker 3: the time is about debt recycling. Because it's one of

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Speaker 3: those topics that feel like you'd need a financial advisor

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Speaker 3: to even begin to understand it. That's crazy. We actually

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Speaker 3: have one in our midst. Well, I used to be one,

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Speaker 3: doesn't to be.

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Speaker 4: I reckon.

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Speaker 3: I can flog that dead horse. I think for the

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Speaker 3: at least thirty more years.

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Speaker 2: Okay, well that's good because I reckon, that's how much

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Speaker 2: longer my career has.

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Speaker 3: Oh, perfect at least, Well you might retire early, knowing.

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Speaker 2: You Well, I did retire from financial advice, you actually,

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Speaker 2: so anyway, Well, I'm excited, and of course we.

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Speaker 3: Have ex financial advisor be Tory divide with us today.

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Speaker 2: Hello, which is very exciting because I really love talking

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Speaker 2: about debt recycling and I've been trying to get this

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Speaker 2: episode into the mix for a very long time, but

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Speaker 2: with like scheduling and like topic demands, it just hasn't

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Speaker 2: it yet.

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Speaker 3: Yes, now's our time to shine. I don't understand it

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Speaker 3: at all. So I'm really sorry. That's actually a good question.

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Speaker 2: That's good because I think, oh, we're going to have

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Speaker 2: a mix of people listening to this episode today. So

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Speaker 2: if you picked it up and you're like debt recycling,

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Speaker 2: does that mean I can recycle my debt and like

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Speaker 2: basically chuck it in the trash? And not have it anymore. No,

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Speaker 2: I'm really sorry, this isn't the episode for you. But

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Speaker 2: then there'll be people who have maybe gone down the

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Speaker 2: TikTok wormhole of like debt recycling, and they'll have been

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Speaker 2: in a way sold a dream because I feel like

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Speaker 2: once I explain it, you might be like, wow, why

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Speaker 2: doesn't everyone do this? And the reality is risk. So

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Speaker 2: when I was a financial advisor, this was a very

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Speaker 2: valid strategy that I used with a number of clients. Yeah,

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Speaker 2: but not every client, even though on paper you might go, oh,

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Speaker 2: but v that sounds so incredible. And I also want

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Speaker 2: to say up the top, even though we have an

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Speaker 2: official disclaimer on this podcast as well, this is not

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Speaker 2: financial advice. Past performance cannot be a reliable predictor of

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Speaker 2: future performance. And we're not saying that this is a

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Speaker 2: strategy for everybody. We just want you to understand what

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Speaker 2: it is and then if you're like, oh, that actually fits,

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Speaker 2: this is one of those strategies that I would not DIY. Yes,

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Speaker 2: So this is one of those strategies that if you're like, well,

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Speaker 2: I listened to this whole episode and I got to

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Speaker 2: the end and I thought, this is for me that

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Speaker 2: means you're probably in the financial position to be able

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Speaker 2: to afford advice, at which point I would say, please

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Speaker 2: go and get advice on debt recycling, because if you

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Speaker 2: do it wrong, you will be in a really terrible position.

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Speaker 3: Yes, yes, absolutely, Okay, so we know for sure that

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Speaker 3: it's confusing and it might not be for everyone.

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Speaker 2: But for sal hadn't even explained what it is. We're like,

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Speaker 2: it's not for you.

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Speaker 3: It might be for you.

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Speaker 1: What it is?

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Speaker 3: I used to do it, but did you used to

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Speaker 3: do it? So like elusive, so mysterious. So I guess

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Speaker 3: let's start with the most simple explanation of what debt

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Speaker 3: recycling actually is.

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Speaker 2: Cycling is replacing non deductible home loan debt with tax

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Speaker 2: deductible investment debt.

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Speaker 3: But it's way more complicated than that. It's more complicated

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Speaker 3: than that, and that.

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Speaker 2: So like if you've got a home loan and you're

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Speaker 2: looking at your mortgage and you're like, oh, let's pretend

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Speaker 2: it's like five hundred thousand dollars. You can't claim that

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Speaker 2: on tax, But what you can claim on tax is

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Speaker 2: investment debt if you had it. Okay, Sometimes we use

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Speaker 2: a debt recycling strategy to replace non deductible debt, which

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Speaker 2: is your home loan, with tax deductible debt to build

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Speaker 2: an investment for fait.

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Speaker 3: Okay, okay, okay, okay, So I'll run you through the basics.

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Speaker 3: Thank you.

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Speaker 2: So let's backtrack a little bit. It's kind of like

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Speaker 2: creating a mini business. So if I've got a business,

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Speaker 2: my expense is inside my business before profit. We're not

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Speaker 2: talking about profit because I have to pay tax on that.

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Speaker 2: They are tax deductible. Yes, so I'm basically creating a

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Speaker 2: tiny little business inside my home loan. That is going

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Speaker 2: to mean that some of my costs now to creating

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Speaker 2: wealth can be claimed on tax. It's like the investment property, right,

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Speaker 2: so because it's an investment, you can claim the interest

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Speaker 2: paid as a tax deduction because it was helping you

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Speaker 2: generate wealth. And I think that that's quite sexy.

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Speaker 3: Yeah, that's really really cool. Is how it works.

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Speaker 2: Number One, you have to have a home loan for this,

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Speaker 2: so you can't just debt recycle if you've got personal

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Speaker 2: consumer debt, that's not going to work. You have to

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Speaker 2: have an ow not occupy a mortgage, which is not

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Speaker 2: tax deductible. So that's when you buy a house and

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Speaker 2: you live in and you live in it, it cannot

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Speaker 2: be your investment property. Yes, so that is already tax

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Speaker 2: deductible because it's an investment property, and then they will

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Speaker 2: put it on your personal tax return.

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Speaker 3: Okay.

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Speaker 2: Step two is pay down the loan and build some equity.

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Speaker 2: So paying down the loan means that you'll own more

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Speaker 2: of the property, so you might make extra repayments to

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Speaker 2: reduce the home loan balotant's faster than it's required, So

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Speaker 2: you might have thirty years and you're like, well, if

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Speaker 2: I make extra payments, it will be done in twenty

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Speaker 2: five years. And then once you've got equity, which I

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Speaker 2: think is a concept most people understand. So say you

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Speaker 2: own that five hundred thousand dollar property back, and you

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Speaker 2: coughed up one hundred thousand dollars for your deposit. So

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Speaker 2: when you go to the bank, they go, well, property

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Speaker 2: is five hundred grand. You actually only need to grow

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Speaker 2: four hundred thousand dollars from us. Well, you have one

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Speaker 2: hundred thousand dollars in equity. You can't use that though,

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Speaker 2: because that's your deposit amount. But then you start paying

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Speaker 2: it back and let's say you're down to three hundred

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Speaker 2: and fifty thousand dollars on your mortgage. But you've got

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Speaker 2: this five hundred thousand dollar house, you might have fifty

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Speaker 2: thousand dollars in equity. And that's where people might go, Wow,

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Speaker 2: I can use my equity to buy another house. Yeah,

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Speaker 2: and I don't need to cough up that deposit again,

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Speaker 2: which is quite sexy.

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Speaker 4: Right.

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Speaker 2: Yeah, that's how people might build their investment portfolios through property. Well,

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Speaker 2: instead of doing that, you then borrow against your own

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Speaker 2: mortgage instead of for a house deposit to buy an

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Speaker 2: investment property, you then borrow an equivalent amount against the

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Speaker 2: available equity and invest that money in assets that produce income.

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Speaker 2: So you might go and borrow that fifty grand from

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Speaker 2: the bank, yes, and put it into the share market.

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Speaker 3: I understand. I understand.

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Speaker 2: So you're not buying property, you're not getting another mortgage.

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Speaker 2: You're going, okay, cool, I'm going to borrow against that.

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Speaker 2: I want my equity. I want my equity to help

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Speaker 2: me build wealth, and I'm going to invest it into

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Speaker 2: you know, for example, for you, you would pull it

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Speaker 2: out and put.

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Speaker 3: It on your share seas app. The way my brain's

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Speaker 3: picturing it's like, you know, when you go to like

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Speaker 3: Thailand and you want to borrow a motorcycle and you

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Speaker 3: have to give your license to them as like a deposit.

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Speaker 3: Let's say, yeah, my friend has given me one hundred dollars,

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Speaker 3: and I've given them fifty cents as a deposit, just

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Speaker 3: so they know that they can trust me. Whatever I can't.

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Speaker 3: I can't touch that fifty cents. That's the deposit. But

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Speaker 3: I've paid off thirty dollars of this one hundred dollars.

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Speaker 3: So now with that thirty dollars, I can take it

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Speaker 3: back literally exactly and use it for somebody or something else. Exactly. Okay, exactly,

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Speaker 3: Oh my god, amazing, amazing.

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Speaker 2: But the thing with that is then obviously, if you've

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Speaker 2: pulled out your equity, yeah, your home loan is now

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Speaker 2: back at four hundred thousand dollars. Yes, got you, which

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Speaker 2: is okay, but we need to be very aware of that.

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Speaker 2: This isn't like free money where you go, oh, I've

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Speaker 2: got equity and I pulled it out, hurrah. Like when

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Speaker 2: you pull equity out of a property, your loan is

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Speaker 2: going to increase again. Yeah, so you would have the

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Speaker 2: three hundred and fifty thousand dollars that is still owing

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Speaker 2: on the house, and you would have the fifty thousand

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Speaker 2: dollars that you've pulled out as cash, which would be.

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Speaker 3: Chucked into the mortgage and in the mix.

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Speaker 2: So your debt is back to four hundred thousand dollars,

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Speaker 2: but you've now got fifty grand of cash that you've

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Speaker 2: cashed out of that property that we can now use

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Speaker 2: to build wealth.

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Speaker 3: Okay, sitting to the site.

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Speaker 2: Yeah, so yes, your debt over here is you know,

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Speaker 2: still high, but we've got some flexibility and we've got

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Speaker 2: some ability to create wealth. And for a lot of

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Speaker 2: people who have home loans and I feel like I'm

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Speaker 2: going off my life list, this can be a very

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Speaker 2: attractive option because we're all trying to smash down our homes.

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Speaker 2: Maybe you are trying to build wealth and you don't

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Speaker 2: have any additional cash flow, but your area has increased

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Speaker 2: in value over the last twelve months, and all of

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Speaker 2: a sudden, you've got some equity and you're like, well,

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Speaker 2: this might actually help me get ahead because I can't

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Speaker 2: invest one thousand dollars a month, like we don't have

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Speaker 2: that free cash flow, but we have some equity in

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Speaker 2: our property and we could invest that and over the

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Speaker 2: long term, this might come out in the wash in

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Speaker 2: a way better Wayeah, once we've got that cash out,

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Speaker 2: and we'll talk about the actual assets that you purchase

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Speaker 2: in a minute. But you earn, you save, and then

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Speaker 2: you repeat. So the investments, ideally, like in a perfect world,

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Speaker 2: generate returns that you then use, along with any tax

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Speaker 2: savings from interest deductibility, to further pay down your remaining

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Speaker 2: home loan. So you take that fifty grand, you put

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Speaker 2: it into your investment account. Your ETF on average will

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Speaker 2: perform it. We all know the Australian share market performs

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Speaker 2: at about ten percent. Ever ever, ever use that as

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Speaker 2: a baseline. But let's pretend it performs at six percent, right,

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Speaker 2: So that performs at six percent. You take that instead

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Speaker 2: of reinvesting the dividends. You take that six percent, you

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Speaker 2: pay off your mortgage.

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Speaker 3: So you withdraw it.

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Speaker 2: Yes, you pull that cash out and pay off your

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Speaker 2: mortgage and we start smashing our mortgage down again. So

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Speaker 2: over time, that fifty thousand dollars that you've put into

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Speaker 2: the share market, you know, it's still fifty grand. It's recycling,

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Speaker 2: it's making you some money. You're taking that money, you're

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Speaker 2: paying off your debt, and hopefully we get to a

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Speaker 2: point where we have another fifty thousand dollars in equity,

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Speaker 2: we can do it again and then have one hundred

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Speaker 2: thousand dollars in our share portfolio. So we're kind of

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Speaker 2: swapping one debt for the other and cashing it out

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Speaker 2: in cash. We're paying back the original loan to make

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Speaker 2: sure that you know we're not screwing ourselves over. But

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Speaker 2: the six percent is important right now because our interest

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Speaker 2: rate is less than six percent. Oh my god. So

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Speaker 2: the debt that you're paying for, so if you've got

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Speaker 2: a good mortgage broker, they will be on it, it

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Speaker 2: will be deaf less than six percent. If not, come

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Speaker 2: and see Zella Money and we will fix that up

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Speaker 2: for you. But on average, we know that you will

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Speaker 2: kind of take some cream off the top of that,

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Speaker 2: be able to pay your mortgage back quicker.

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Speaker 3: But the amount that you're making back from your investments,

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Speaker 3: is that not taxable?

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Speaker 2: Yes, but your interest payable on that now becomes tax

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Speaker 2: deductible because it's an investment. Oh so you're right, you'll

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Speaker 2: have more income, that's fantastic, but you'll also have a

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Speaker 2: tax deductible debt, whereas before you did.

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Speaker 3: Not, Okay, So why would someone debt recycle? Good question.

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Speaker 2: Number one answer is to make money, ye, right, Like

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Speaker 2: if we do the numbers on paper, even on the

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Speaker 2: back of an envelope, your interest rate on your homeland,

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Speaker 2: let's pretend it's five percent. The average rate of return

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Speaker 2: of the Australian share market is ten percent. Yes, we're

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Speaker 2: not going to rely on ten percent. When I'm talking

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Speaker 2: about debt recycling, or when I was talking about debt

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Speaker 2: recycling with my financial advice clients, I'm so conservative. And

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Speaker 2: I'm conservative because I never want you to screw yourself

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Speaker 2: over and I don't want to be party to that either. Right,

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Speaker 2: So we would always use numbers like six percent because

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Speaker 2: that's very conservative. When we're talking about the Australian share market.

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Speaker 2: You might see me say, oh, the average rate of

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Speaker 2: return is, you know, eleven percent for the Australian share

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Speaker 2: market over the last thirty years. But I really like

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Speaker 2: to rely on seven and a half percent when projecting

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Speaker 2: a very vanilla investment portfolio. But when we're talking about

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Speaker 2: debt recycling, because there's another layer of risk. There's your

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Speaker 2: home loan and your cash flow playing about I drop

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Speaker 2: it down again to about six percent, just to make

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Speaker 2: sure we're all merry and bright, like, I just don't

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Speaker 2: want anyone to be in a financial pickle. And if

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Speaker 2: the numbers don't work at six percent, then I would say,

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Speaker 2: please don't do it, because it's probably too risky because

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Speaker 2: if the market changes or we you know what the

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Speaker 2: interest rates have done recently. Yes they're dropping now, but

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Speaker 2: they went through the roof. Can you imagine somebody who

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Speaker 2: was like, Okay, this works for me, but only if

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Speaker 2: the share market returns eleven percent and then their mortgage

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Speaker 2: interest rate doubled, Like, oh no, that would be stressful.

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Speaker 2: They might have been forced to sell their home or

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Speaker 2: like change their strategy, or sell down their entire investment

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Speaker 2: portfolio that they've just invested money in when the market's off,

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Speaker 2: thus losing a heap of money so that they can

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Speaker 2: save the house, and they're in a worse off financial position.

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Speaker 2: We don't want that for our community back. So that

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Speaker 2: is why we're conservative. It's not because I'm like, oh,

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Speaker 2: just be conservative. No, It's because I'm trying to save

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Speaker 2: your asspect yep. Obviously, because you're making money in the

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Speaker 2: share market and you're taking some of that money and

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Speaker 2: putting it on your mortgage in addition to your regular repayments.

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Speaker 2: You will probably and I have to use words like

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Speaker 2: probably or maybe your can because can't say guaranteed, you

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Speaker 2: will probably pay off your home faster. Sure, runny in

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Speaker 2: it gives you the opportunity to diversify further than just

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Speaker 2: having property. You get to go into other asset classes

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Speaker 2: and build an investment portfolio sooner, because, as I said before,

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Speaker 2: if you've got a get you usually pretty hamstrung. But

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Speaker 2: let's be honest, like we are chucking all our free

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Speaker 2: cash flow there, especially in this economy. So to then go, hey, Beck,

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Speaker 2: have you got an extra five hundred dollars or one

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Speaker 2: thousand dollars to invest in the share market? You're like, no, Queen,

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Speaker 2: I have to pay off my mortgage first, and then

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Speaker 2: I'll do that. Yeah, totally say on the show all

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Speaker 2: the time. The value is time in the market, not

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Speaker 2: timing the market. So the sooner you get started, the

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Speaker 2: better off you are.

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Speaker 3: And so not both they say or lost does That's

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Speaker 3: what I was trying to think. No, got you, got you,

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Speaker 3: got you.

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Speaker 2: We also do it obviously previously mentioned to convert part

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Speaker 2: of the home loan interest into tax deductible investment interest.

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Speaker 2: That's going to lower your tax bill.

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Speaker 3: Money win.

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Speaker 2: Obviously, I want you to be in a better financial position,

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Speaker 2: and something like this could help to improve your long

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Speaker 2: term wealth creation. And the other thing, which is probably

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Speaker 2: a little bit more complex and something that people aren't

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Speaker 2: looking at, but I definitely do, is to hedge against inflation. Okay,

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Speaker 2: And just to like quickly explain that because I always

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Speaker 2: think it's really important, because I've probably said a million

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Speaker 2: times on the show, if you're just saving your money,

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Speaker 2: you are going behind. There is a concept that says

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Speaker 2: a dollar today is not worth a dollar tomorrow. So

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Speaker 2: if you are offering me a dollar back, I have

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Speaker 2: more value in that dollar today if I go, yeah,

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Speaker 2: just give it to me now than if you gave

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Speaker 2: it to me in a month or a year or

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Speaker 2: ten years, because the cost of goods and services rises

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Speaker 2: over time. So today, if I took that dollar to

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Speaker 2: the shops, I could buy more than I could do

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Speaker 2: with that dollar, not if it had any interest or anything.

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Speaker 2: It's just like a straight dollar in a year, yep. Right,

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Speaker 2: So a dollar today is worth more than a dollar tomorrow.

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Speaker 2: And we know that over time, inflation reduces the value

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Speaker 2: of money. So if you borrowed at a fixed rate

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Speaker 2: and then use that money to invest in assets that

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Speaker 2: actually grow above the rate of inflation, the real value

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Speaker 2: of your original debt decreases with inflation, while your investment

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Speaker 2: potentially increase, meaning that you're paying off tomorrow's debt with

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Speaker 2: today's cheaper dollar. Got you. We're using money that we

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Speaker 2: don't currently have to invest to be ahead.

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Speaker 3: In the future. It does sound like a good deal.

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Speaker 3: I mean, making money is good. Huh. So why are

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Speaker 3: you always saying that people who wanted it recycle shoud

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Speaker 3: get professional advice first? If it's like you know, it

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Speaker 3: kind of feels like.

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Speaker 2: A kind of logical because you're just swapping one for

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Speaker 2: the other, Right, Yeah, I guess you're paying interest on

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Speaker 2: your debt and you can't deduct that.

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Speaker 3: That's just a cost.

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Speaker 2: But on the flip side, you'll be making interest in

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Speaker 2: the share market. Yeah, well, swapping one for the other.

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Speaker 2: And I want to make money, and I'm happy to,

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Speaker 2: as we've said a million times on the show, happy

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Speaker 2: to pay tax because if I'm paying tax, I'm making money.

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Speaker 2: More tax I'm paying the more money I'm making and

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Speaker 2: that's a really good deal. People don't like talking about

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Speaker 2: tax positively though when they can't manage their cash flow,

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Speaker 2: because they go, oh my god, I got this big

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Speaker 2: tax bill and it's like, well, that tax money was

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Speaker 2: never yours to spend, but you did.

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Speaker 3: Now we're in a pickle.

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Speaker 2: Sure, so it sounds simple, and it sounds logical to

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Speaker 2: swap one for the other and go, what a clean

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Speaker 2: little switch a room money win. And when you first

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Speaker 2: hear about it, and that's why I said, some people

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Speaker 2: listening to this could have gone down the TikTok wormhole.

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Speaker 2: You might think, well, why isn't every single person doing this?

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Speaker 2: Why isn't everyone using their equity to get ahead? But

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Speaker 2: the reality is, debt recycling is a really high risk strategy.

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Speaker 2: There are so many different places along the road where

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Speaker 2: this could go wrong or this could fall off track.

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Speaker 2: In a perfect world, the return on your investments needs

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Speaker 2: to be higher consistently than the after tax cost of

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Speaker 2: your homeland.

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Speaker 3: Got you, got you, got you.

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Speaker 2: So let's say you're borrowing at I'm going to use

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Speaker 2: the same example numbers because I'm just a consistent early

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Speaker 2: Sometimes when I'm talking to ex financial advice clients. They're like,

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Speaker 2: I listen to your podcast sometimes and it's just like

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Speaker 2: going back in time, Like you still use the same examples,

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Speaker 2: And I'm like, don't out me, Like, I just have

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Speaker 2: my numbers in my head.

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Speaker 3: These things work.

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Speaker 2: So I've capt how things work at five percent and

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Speaker 2: at seven and a half percent. If you asked me

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Speaker 2: about six and a half percent, I'm like, those numbers

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Speaker 2: don't live in my head.

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Speaker 3: Shah No.

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Speaker 2: But let's say you borrow at five percent, right, just

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Speaker 2: to use round numbers and things that maybe Victory Devine

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Speaker 2: is comfortable with. And you're in a thirty percent tax bracket,

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Speaker 2: which most of us are after tax, that interest effectively

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Speaker 2: costs you only three and a half percent instead of five. Okay,

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Speaker 2: so you've dropped that interest rate from five to three

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Speaker 2: and a half percent, which sounds very sexy. Sure that

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Speaker 2: means your investment needs to consistently return you more than

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Speaker 2: three and a half percent per year just to break even.

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Speaker 3: Yeah.

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Speaker 2: So if the market for some reason one year was

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Speaker 2: completely off and your share portfolio returned one percent, maybe

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Speaker 2: you're behind, and that can be scary. But when you

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Speaker 2: have a good logical financial plan and backup options and

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Speaker 2: someone on your team helping to make sure that this

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Speaker 2: works properly not as much of an issue. But if

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Speaker 2: you're raw dogging it and doing it on your own,

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Speaker 2: I can promise that when that time comes, you're not

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Speaker 2: going to have that plan and that strategy in place.

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Speaker 2: If they don't, you're losing money, got you, And the

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Speaker 2: gap between what your investments are earning and what you're

398
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Speaker 2: paying in interest just don't add up, and you're not

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Speaker 2: actually in a better financial position. So unless your returns

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Speaker 2: BECK are comfortably higher than that over the long term,

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Speaker 2: debt recycling won't actually create a financial benefit, which is

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Speaker 2: why when I was a financial advisor, debt recycling wasn't

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Speaker 2: a short term strategy. It was always a long term strategy.

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Speaker 2: So we're doing debt recycling minimum ten years because you

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Speaker 2: know how I say, you would never invest in the

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Speaker 2: share market for less than ten years, because you know

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Speaker 2: the share market ebbs and flows. We need to be

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Speaker 2: able to smooth all of that out. And the only

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Speaker 2: thing that can do that for us is time. Yep,

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Speaker 2: you can't do it by picking good investments. Because Beck,

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Speaker 2: if you could just pick good investments, I'd be so rich. Yeah, yeah,

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Speaker 2: I'd be filthy rich. It wouldn't even need a podcast.

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Speaker 2: That's a lie. I'm a white girl with a podcast.

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Speaker 3: I need to keep it. You need it.

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Speaker 2: But even if that maths works on paper, real life

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Speaker 2: isn't smooth.

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Speaker 3: No, Like you know what It's like.

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Speaker 2: You can make a budget and then at the end

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Speaker 2: of the month, you're like, how did.

420
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Speaker 3: I blow that?

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Speaker 2: That is so crazy? I got invited out to drinks

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Speaker 2: four times and I went all four times. I'll get

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Speaker 2: back on the savings train next month. So it's not

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Speaker 2: that the share market is going to screw you around.

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Speaker 2: It's not that your homeloann is going to change. Life

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Speaker 2: is bumpy. Life is lumpy. What happens when life happens

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Speaker 2: and you have a child. What happens if you want

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00:20:34,240 --> 00:20:37,159
Speaker 2: to say, for a marriage, What happens if you just

429
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Speaker 2: want to go on a big holiday or you want

430
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Speaker 2: to buy your partner a really fancy big Christmas gift.

431
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Speaker 2: Like life gets in the way, and we've already seen

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Speaker 2: zooming out and looking at actual economics, we've already seen

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Speaker 2: a lot of volatility in the global markets while Trump

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Speaker 2: has been back in power. It's psychotic, Beck, I know

435
00:20:56,080 --> 00:20:58,520
Speaker 2: you don't follow it. But like, girl, no, I know,

436
00:20:59,080 --> 00:21:03,080
Speaker 2: investment tea is piping over there, like it is so

437
00:21:03,400 --> 00:21:08,000
Speaker 2: interesting watching then basically set fire to everything. Sure, it

438
00:21:08,240 --> 00:21:10,800
Speaker 2: drives me insane, but also I can't look away. I

439
00:21:10,920 --> 00:21:14,440
Speaker 2: literally can't look away. So if we have another market dip, yeah,

440
00:21:14,640 --> 00:21:18,760
Speaker 2: your investments in your share portfolio could fall really sharply.

441
00:21:19,000 --> 00:21:20,320
Speaker 3: Sure, and while your.

442
00:21:20,280 --> 00:21:23,840
Speaker 2: Debt stays exactly the same, that doesn't necessarily put you

443
00:21:23,880 --> 00:21:25,800
Speaker 2: in the best position. Does that mean it's a bad

444
00:21:25,920 --> 00:21:28,919
Speaker 2: thing long term? No, because we build in a buffer

445
00:21:29,000 --> 00:21:33,080
Speaker 2: for volatility and all of that fun stuff. But that's

446
00:21:33,200 --> 00:21:37,960
Speaker 2: the core risk, right, Like you're using borrowed money to invest.

447
00:21:38,440 --> 00:21:41,880
Speaker 2: It wasn't cash that you go, it's down so tomorrow, Beck,

448
00:21:41,920 --> 00:21:45,160
Speaker 2: if you logged into your share portfolio and you saw

449
00:21:45,240 --> 00:21:48,640
Speaker 2: that your investments were down, let's pretendless speed dramatic. Your

450
00:21:48,680 --> 00:21:52,400
Speaker 2: investments are down fifty percent. Sure, you feel gross, right,

451
00:21:52,520 --> 00:21:53,280
Speaker 2: Like that's not good?

452
00:21:53,440 --> 00:21:55,080
Speaker 3: You're like shit, like arry.

453
00:21:55,320 --> 00:21:57,440
Speaker 2: Yeah, but like we're not going to sell because like

454
00:21:57,520 --> 00:21:59,439
Speaker 2: we know enough about investing to know we still own

455
00:21:59,440 --> 00:22:02,639
Speaker 2: the same amount of shares and over time it'll come back, right, totally,

456
00:22:02,800 --> 00:22:05,760
Speaker 2: But what if that money was borrowed? Yeah, you think

457
00:22:05,800 --> 00:22:07,960
Speaker 2: about the additional layer of stress that you've got. You're like, well,

458
00:22:07,960 --> 00:22:12,240
Speaker 2: what is stressful? I am now paying back the same amount. Yeah,

459
00:22:12,600 --> 00:22:14,200
Speaker 2: that I have to pay back for that money that

460
00:22:14,320 --> 00:22:17,880
Speaker 2: I borrowed and it's not even performing. That's even more stressful. Yeah,

461
00:22:18,000 --> 00:22:20,760
Speaker 2: right than just seeing your share portfolio go down. And

462
00:22:20,880 --> 00:22:24,120
Speaker 2: we need to take that into consideration. So when you're

463
00:22:24,240 --> 00:22:28,520
Speaker 2: using borrowed money to invest and when markets go against you,

464
00:22:29,000 --> 00:22:32,520
Speaker 2: that magnifies the downside, it makes it even worse. So

465
00:22:32,720 --> 00:22:35,240
Speaker 2: you still have to repay the loan. The loan doesn't

466
00:22:35,320 --> 00:22:38,000
Speaker 2: care about what the market is doing. They're like, no, no, no,

467
00:22:38,119 --> 00:22:40,040
Speaker 2: we had an agreement over here. You don't just get

468
00:22:40,080 --> 00:22:43,720
Speaker 2: out of paying interest because your market's down. That was

469
00:22:43,840 --> 00:22:46,919
Speaker 2: your choice, baby cakes. So even if your returns completely

470
00:22:46,960 --> 00:22:51,560
Speaker 2: disappear or worse go negative, that's all you. And that's

471
00:22:51,560 --> 00:22:54,800
Speaker 2: why I'm like, ah, it's a bit risky, it'll be

472
00:22:54,920 --> 00:22:57,679
Speaker 2: guaranteed to happen because I can almost guarantee. The comments

473
00:22:57,720 --> 00:23:00,440
Speaker 2: on Spotify today are going to have people being like,

474
00:23:00,640 --> 00:23:02,880
Speaker 2: dert recycling is amazing. I've been doing it for years.

475
00:23:02,880 --> 00:23:05,520
Speaker 2: I don't know why she's so negative. I'm not being negative.

476
00:23:06,080 --> 00:23:08,520
Speaker 2: I just need to tell you all of the risks

477
00:23:08,840 --> 00:23:10,800
Speaker 2: and put on the table a very clear picture so

478
00:23:10,880 --> 00:23:12,800
Speaker 2: you can make a decision that works for you. And

479
00:23:12,880 --> 00:23:15,200
Speaker 2: if it works for you, queen, that's because you're high risk.

480
00:23:15,560 --> 00:23:16,120
Speaker 3: That's cool.

481
00:23:16,520 --> 00:23:19,000
Speaker 2: But can you imagine all the really conservative people listening

482
00:23:19,040 --> 00:23:21,040
Speaker 2: to this going, Oh, I thought because it was my

483
00:23:21,160 --> 00:23:22,800
Speaker 2: home loan and it was like a bit more of

484
00:23:22,840 --> 00:23:26,800
Speaker 2: a conservative like solution. Sure, but in reality it's actually

485
00:23:26,880 --> 00:23:29,320
Speaker 2: more risky than just investing cash into the share market.

486
00:23:29,720 --> 00:23:31,840
Speaker 3: So what else do we need to be aware of?

487
00:23:32,400 --> 00:23:34,680
Speaker 2: You want me to be more negative? You want like

488
00:23:34,880 --> 00:23:37,520
Speaker 2: more like bata By stories. You're just like, you know what,

489
00:23:37,840 --> 00:23:40,240
Speaker 2: let's fire these people up in the Spotify comments.

490
00:23:40,600 --> 00:23:41,480
Speaker 1: Yeah, yeah, yeah.

491
00:23:42,040 --> 00:23:44,639
Speaker 2: Interest rate changes is a good one to talk about.

492
00:23:44,920 --> 00:23:47,280
Speaker 2: They can have a really big impact on your cash flow,

493
00:23:48,040 --> 00:23:51,280
Speaker 2: as we already know, because they directly affect whether debt

494
00:23:51,359 --> 00:23:54,440
Speaker 2: recycling is going to stack up financially or not. Like,

495
00:23:54,480 --> 00:23:58,080
Speaker 2: if your interest rate increases, right, you could go from

496
00:23:58,119 --> 00:24:01,159
Speaker 2: paying one thousand dollars a month on your mortgage to

497
00:24:01,320 --> 00:24:03,840
Speaker 2: twelve hundred dollars on your mortgage. Where is that extra

498
00:24:03,920 --> 00:24:06,800
Speaker 2: two hundred dollars going to come from? How does that work?

499
00:24:07,119 --> 00:24:09,240
Speaker 2: Is that meaning that you're like a little bit more

500
00:24:09,280 --> 00:24:12,879
Speaker 2: hamstrung because we've also further leveraged that debt, Like you

501
00:24:13,000 --> 00:24:15,159
Speaker 2: can't just pull out some equity at that point, like

502
00:24:15,240 --> 00:24:20,120
Speaker 2: it's already been used. So this strategy was very appealing

503
00:24:20,160 --> 00:24:23,320
Speaker 2: when I was a financial advisor, right like when I

504
00:24:23,520 --> 00:24:28,800
Speaker 2: was a financial advice which is so terrifyingly eight years ago,

505
00:24:29,119 --> 00:24:31,560
Speaker 2: like when I was really really in it whole decade

506
00:24:31,880 --> 00:24:34,239
Speaker 2: lettax try. Like I was looking at this the other

507
00:24:34,320 --> 00:24:36,840
Speaker 2: day because someone was like, how old is Zella, Like

508
00:24:36,960 --> 00:24:38,960
Speaker 2: how old is your mortgage working business? Because I feel

509
00:24:38,960 --> 00:24:41,080
Speaker 2: like it's been in the background for so long, And

510
00:24:41,160 --> 00:24:43,240
Speaker 2: I was like, oh, actually, let me let me have

511
00:24:43,320 --> 00:24:45,480
Speaker 2: a look, because like there's been some like business changes

512
00:24:45,520 --> 00:24:48,480
Speaker 2: over the time, like I've got new entities, so like

513
00:24:48,800 --> 00:24:50,600
Speaker 2: you know, if you look at my ABN, it'll be like, oh,

514
00:24:50,800 --> 00:24:55,879
Speaker 2: established in XYZ, it's ten years bick. That's crazy, I know,

515
00:24:56,720 --> 00:25:01,280
Speaker 2: like time flies when you're doing finance. But when I

516
00:25:01,480 --> 00:25:04,159
Speaker 2: was an active financial advisor, this was a very sexy

517
00:25:04,200 --> 00:25:07,160
Speaker 2: strategy for a lot of my clients because we had

518
00:25:07,560 --> 00:25:11,879
Speaker 2: a period of very low interest so from like twenty

519
00:25:12,080 --> 00:25:15,480
Speaker 2: ten to maybe twenty twenty one, you could borrow money

520
00:25:15,560 --> 00:25:18,520
Speaker 2: for like three percent. So home loans were like three percent,

521
00:25:18,680 --> 00:25:22,760
Speaker 2: and that's really sexy, even leveraged like share portfolio options.

522
00:25:22,840 --> 00:25:26,280
Speaker 2: Different conversation. They were really low interest and the markets

523
00:25:26,320 --> 00:25:31,439
Speaker 2: were returning more than seven percent consistently. The maths maths there, Yeah, totally,

524
00:25:31,480 --> 00:25:33,960
Speaker 2: that makes sense. I had lots of clients that would

525
00:25:34,000 --> 00:25:36,880
Speaker 2: be like, this makes sense and that type of gap

526
00:25:36,960 --> 00:25:38,280
Speaker 2: you go money in.

527
00:25:38,720 --> 00:25:40,120
Speaker 3: Yeah, I'm not sure.

528
00:25:39,960 --> 00:25:42,600
Speaker 2: What's going to go on this year with interest rates,

529
00:25:42,880 --> 00:25:45,120
Speaker 2: but we will see because we've seen them last year

530
00:25:45,200 --> 00:25:47,840
Speaker 2: drop a few times, but then the market got a

531
00:25:47,880 --> 00:25:51,480
Speaker 2: bit rocky. Trump's crazy, all of that fun stuff. But

532
00:25:52,160 --> 00:25:56,440
Speaker 2: recent peaks in interest rates have seen people paying even

533
00:25:56,560 --> 00:25:59,760
Speaker 2: seven or nine percent on their mortgages and they didn't

534
00:25:59,760 --> 00:26:00,840
Speaker 2: have a t or if no one signs up to

535
00:26:00,880 --> 00:26:03,320
Speaker 2: a nine percent mortgage going, oh a good deal, But

536
00:26:03,680 --> 00:26:05,840
Speaker 2: they were forced into it because their interest rates just

537
00:26:06,000 --> 00:26:09,600
Speaker 2: increased after COVID and then the numbers wouldn't have been

538
00:26:09,640 --> 00:26:14,040
Speaker 2: stacking up. So this is where a financial advisor steps

539
00:26:14,160 --> 00:26:17,680
Speaker 2: in and makes sure that you're financially sound. So I

540
00:26:17,840 --> 00:26:20,320
Speaker 2: know a lot of my clients because to be honest,

541
00:26:20,320 --> 00:26:22,520
Speaker 2: I'm just friends with them now. A lot of them

542
00:26:22,560 --> 00:26:26,280
Speaker 2: who were debt recycling during the like late twenty tens

543
00:26:26,800 --> 00:26:31,840
Speaker 2: through to twenty twenty one. Those people often wound down

544
00:26:31,960 --> 00:26:34,800
Speaker 2: their debt recycling plan because they were like, wait, interest

545
00:26:34,880 --> 00:26:36,840
Speaker 2: rates are going up, this is a little bit more risky.

546
00:26:36,960 --> 00:26:39,399
Speaker 2: We're not going to leverage that even further. Yes, we've

547
00:26:39,440 --> 00:26:40,879
Speaker 2: got a bit more equity, but we're not going to

548
00:26:40,880 --> 00:26:43,280
Speaker 2: take that out anymore. But they're working with a financial

549
00:26:43,320 --> 00:26:46,080
Speaker 2: advisor to make that financial strategy really work for them

550
00:26:46,160 --> 00:26:47,480
Speaker 2: instead of going, what do we do?

551
00:26:47,680 --> 00:26:48,280
Speaker 3: How do we do it?

552
00:26:48,440 --> 00:26:50,399
Speaker 2: Because everything sunshine and rose is when you set it

553
00:26:50,480 --> 00:26:53,720
Speaker 2: up perfectly. Yeah, but what happens when the market shakes?

554
00:26:53,800 --> 00:26:56,720
Speaker 2: What happens when things move? What happens when your leveraged

555
00:26:56,720 --> 00:26:59,480
Speaker 2: option isn't as good as it used to be and

556
00:26:59,600 --> 00:27:01,760
Speaker 2: you need someone there to help you through that. Because

557
00:27:02,200 --> 00:27:04,760
Speaker 2: now your borrowing costs are much higher. It is so

558
00:27:05,000 --> 00:27:08,440
Speaker 2: much harder for your investments to outperform the tax and

559
00:27:08,560 --> 00:27:11,280
Speaker 2: the fees and everything else associated. So you're not just

560
00:27:11,359 --> 00:27:14,080
Speaker 2: building in like oh yeah, it's cut clean. It's still

561
00:27:14,119 --> 00:27:17,400
Speaker 2: going to pay tax because you're making money on that investment.

562
00:27:17,600 --> 00:27:19,840
Speaker 2: It's still going to pay your loan repayments. We just

563
00:27:19,920 --> 00:27:21,719
Speaker 2: need to make sure it's all coming out in the wash.

564
00:27:22,240 --> 00:27:25,360
Speaker 2: And then there's the fact that it adds I would say,

565
00:27:26,160 --> 00:27:29,080
Speaker 2: a very clean level of complexity to your finances. No

566
00:27:29,200 --> 00:27:32,399
Speaker 2: longer is it cashing cash out if you are not

567
00:27:32,520 --> 00:27:36,920
Speaker 2: good at record keeping, and it is not like you're

568
00:27:37,000 --> 00:27:41,560
Speaker 2: not making clear and consistent records for your bookkeeper or

569
00:27:41,600 --> 00:27:44,240
Speaker 2: for your accountant. You probably don't have a bookkeeper unless

570
00:27:44,240 --> 00:27:46,760
Speaker 2: you're a business owner, but for your accountant, right, you

571
00:27:46,840 --> 00:27:50,040
Speaker 2: could actually lose the tax deductibility of the interest altogether

572
00:27:50,119 --> 00:27:51,960
Speaker 2: because you haven't tracked it well. And if you haven't

573
00:27:52,000 --> 00:27:54,600
Speaker 2: tracked it, we can't claim it. Yeah, okay, And if

574
00:27:54,640 --> 00:27:56,520
Speaker 2: I can't claim it because we haven't tracked it, what

575
00:27:56,680 --> 00:27:58,080
Speaker 2: was the point in bothering.

576
00:27:57,840 --> 00:28:00,399
Speaker 3: Because that was where the benefit was totally.

577
00:28:00,720 --> 00:28:03,119
Speaker 2: And I've seen that so many times because people just

578
00:28:03,320 --> 00:28:05,840
Speaker 2: don't keep clean records. And then it's twelve months later

579
00:28:05,840 --> 00:28:07,359
Speaker 2: and they haven't done their tax return and they're like,

580
00:28:07,560 --> 00:28:09,560
Speaker 2: I can claim a heap, and I'm like, cool, where's

581
00:28:09,600 --> 00:28:12,119
Speaker 2: the information? Sure, They're like I don't know, And I'm like, well,

582
00:28:12,160 --> 00:28:14,280
Speaker 2: if you can't find it, I can't claim it. Yeah,

583
00:28:14,520 --> 00:28:16,640
Speaker 2: I see, not that I'm an accountant, but like I've

584
00:28:16,680 --> 00:28:19,760
Speaker 2: had these conversations before with people. I'm like, well, you

585
00:28:19,840 --> 00:28:21,879
Speaker 2: need to take that to your accountant. They're not going

586
00:28:21,960 --> 00:28:24,280
Speaker 2: to claim it if you can't prove it. You can't

587
00:28:24,280 --> 00:28:27,720
Speaker 2: be like, oh yeah that was tax deductible cough. Like

588
00:28:27,840 --> 00:28:31,359
Speaker 2: the ATO doesn't put up with that Unfortunatelyause I'd be

589
00:28:31,400 --> 00:28:34,760
Speaker 2: pulling swift is left, right and center, and i would

590
00:28:34,800 --> 00:28:37,880
Speaker 2: say maybe like trying to wrap this up real quick,

591
00:28:38,040 --> 00:28:40,240
Speaker 2: but it's not quick because I really like talking about it.

592
00:28:40,280 --> 00:28:40,880
Speaker 3: I'm so sorry.

593
00:28:41,800 --> 00:28:45,280
Speaker 2: Maybe the biggest risk of all is that if things

594
00:28:45,320 --> 00:28:46,920
Speaker 2: go badly back, Yeah.

595
00:28:46,920 --> 00:28:48,880
Speaker 3: You're putting your home on the line, got you. Yeah,

596
00:28:48,960 --> 00:28:49,440
Speaker 3: that's true.

597
00:28:49,520 --> 00:28:50,880
Speaker 2: Like at the end of the day, it's not about

598
00:28:50,960 --> 00:28:54,720
Speaker 2: the cash flow, it's not about the benefit. It's the ultimately,

599
00:28:55,160 --> 00:28:58,240
Speaker 2: we're not just putting share money into the share market,

600
00:28:58,640 --> 00:29:00,720
Speaker 2: and if we lost, it would be a because like

601
00:29:01,600 --> 00:29:04,400
Speaker 2: life happens, and I'm not saying that's a valid outcome,

602
00:29:05,000 --> 00:29:07,400
Speaker 2: but like, you're leveraging against your family home. And I'm

603
00:29:07,400 --> 00:29:10,680
Speaker 2: assuming you bought your family home for the same reasons

604
00:29:10,760 --> 00:29:13,000
Speaker 2: most people do, and that is security. It is to

605
00:29:13,040 --> 00:29:15,320
Speaker 2: put a roof over your family's head. It is to

606
00:29:15,440 --> 00:29:20,480
Speaker 2: create that level of security that you craved. H Most

607
00:29:20,560 --> 00:29:23,560
Speaker 2: people who have properties that they live in aren't living

608
00:29:23,560 --> 00:29:24,840
Speaker 2: in them because they're like, oh, this is a great

609
00:29:24,880 --> 00:29:27,280
Speaker 2: wealth creation strategy, because your family home is not. A

610
00:29:27,360 --> 00:29:32,480
Speaker 2: wealth creation strategy can be because it might increase significantly

611
00:29:32,560 --> 00:29:33,120
Speaker 2: in value.

612
00:29:34,000 --> 00:29:36,240
Speaker 3: Back to access that value, you have to sell it.

613
00:29:36,720 --> 00:29:38,880
Speaker 2: Yeah, And like, if I've just bought my family home

614
00:29:38,920 --> 00:29:41,600
Speaker 2: and it's my dream family home, it doesn't matter whether

615
00:29:41,640 --> 00:29:43,640
Speaker 2: it's worth ten dollars or ten million dollars, I don't

616
00:29:43,640 --> 00:29:46,560
Speaker 2: want to move house. Yeah, I don't want to like downsize.

617
00:29:46,920 --> 00:29:51,560
Speaker 2: Downsizing valid strategy, but not for most people once they've

618
00:29:51,640 --> 00:29:54,360
Speaker 2: reached the goal of buying their dream home. Right, of course,

619
00:29:55,320 --> 00:29:59,360
Speaker 2: you're leveraging your biggest asset to invest, and that carries

620
00:29:59,560 --> 00:30:03,440
Speaker 2: very very real consequences if markets drop, or your situation changes,

621
00:30:03,560 --> 00:30:06,160
Speaker 2: or things aren't going as smoothly and as vanilla as

622
00:30:06,240 --> 00:30:09,200
Speaker 2: they could. So I would say, and this is why

623
00:30:09,200 --> 00:30:12,400
Speaker 2: I'm so not negative, but just apprehensive and want you

624
00:30:12,480 --> 00:30:15,000
Speaker 2: to have all of the like pieces of the puzzle

625
00:30:15,080 --> 00:30:18,560
Speaker 2: to make a decision. And that's why you should never

626
00:30:18,680 --> 00:30:21,320
Speaker 2: use this strategy just because it sounds clever, or because

627
00:30:21,320 --> 00:30:23,640
Speaker 2: you've watched a TikTok or because you're like, I really

628
00:30:23,720 --> 00:30:26,120
Speaker 2: want a huge tax break and this is so smart

629
00:30:26,200 --> 00:30:29,280
Speaker 2: it works out on paper. You need to fully understand

630
00:30:29,320 --> 00:30:31,960
Speaker 2: the risks and be completely comfortable with them before you

631
00:30:32,080 --> 00:30:32,360
Speaker 2: dive in.

632
00:30:32,600 --> 00:30:34,240
Speaker 3: So I feel like, let's take a really quick break

633
00:30:34,320 --> 00:30:37,719
Speaker 3: because I think that's a lot to absorb. And when

634
00:30:37,760 --> 00:30:39,520
Speaker 3: we come back, let's get into the juicy stuff. How

635
00:30:39,560 --> 00:30:47,360
Speaker 3: do you actually debt recycles successfully? Okay, we're back, and

636
00:30:47,480 --> 00:30:49,760
Speaker 3: so first half this episode we really got into the

637
00:30:49,800 --> 00:30:52,400
Speaker 3: nitty gritty of it. If you still unsure, I want

638
00:30:52,400 --> 00:30:54,520
Speaker 3: to know who does a suit and what other information

639
00:30:54,560 --> 00:30:55,120
Speaker 3: can you give us?

640
00:30:55,360 --> 00:30:57,920
Speaker 2: Okay, So there are two sides to this, and if

641
00:30:57,960 --> 00:30:59,719
Speaker 2: you want a debt recycle, you need to look at

642
00:30:59,760 --> 00:31:02,320
Speaker 2: both your financial situation. We need to have a look

643
00:31:02,320 --> 00:31:06,320
Speaker 2: at your personality and your behavioral type. And personally, I

644
00:31:06,360 --> 00:31:09,240
Speaker 2: wouldn't be considering it if it doesn't fit both. Okay,

645
00:31:09,280 --> 00:31:11,360
Speaker 2: So like, if financially you're like, oh, that makes sense,

646
00:31:11,600 --> 00:31:13,520
Speaker 2: and I really want to take a risk because I'm

647
00:31:13,520 --> 00:31:14,040
Speaker 2: not really.

648
00:31:13,880 --> 00:31:16,600
Speaker 3: A big risk take up. Nope, you're out. Okay, you're out.

649
00:31:16,600 --> 00:31:18,760
Speaker 2: It has to match both, and if it doesn't match both,

650
00:31:18,800 --> 00:31:20,400
Speaker 2: it's not your strategy, and that's fine. We'll find a

651
00:31:20,440 --> 00:31:22,680
Speaker 2: different one for you to create wealth. Sure from a

652
00:31:22,840 --> 00:31:27,000
Speaker 2: financial perspective, debt recycling might suit you, and I've done

653
00:31:27,040 --> 00:31:29,360
Speaker 2: a list so that I can smash it out for you.

654
00:31:29,440 --> 00:31:31,160
Speaker 3: Beck, Yes, it might suit you.

655
00:31:31,360 --> 00:31:33,920
Speaker 2: If you're a homeowner and you have available equity, yeap

656
00:31:34,160 --> 00:31:37,760
Speaker 2: white suit you. If you have stable, predictable income, if

657
00:31:37,800 --> 00:31:42,160
Speaker 2: you already have really strong budgeting habits, positive cash flow,

658
00:31:42,440 --> 00:31:45,160
Speaker 2: know what's coming in, know what's going out. You don't

659
00:31:45,200 --> 00:31:48,200
Speaker 2: have a budget, don't even consider this, sorry, Like, if

660
00:31:48,240 --> 00:31:50,840
Speaker 2: you don't know what's coming in and coming out, you're out.

661
00:31:51,560 --> 00:31:54,400
Speaker 2: You have to have an emergency fund. That's not a

662
00:31:54,560 --> 00:31:57,000
Speaker 2: legal requirement, that's a victoria requirement. If you do not

663
00:31:57,080 --> 00:31:59,000
Speaker 2: have an emergency fund, I will not allow you to

664
00:31:59,120 --> 00:32:03,480
Speaker 2: do this. In addition, you don't have consumer debt, Like,

665
00:32:03,560 --> 00:32:06,560
Speaker 2: you don't have high levels of personal or consumer debt.

666
00:32:06,600 --> 00:32:09,640
Speaker 2: So like you're not relying on a credit card because

667
00:32:09,680 --> 00:32:11,959
Speaker 2: that would go in direct opposition to you being good

668
00:32:12,000 --> 00:32:15,640
Speaker 2: at cash flow. You have a long term investment horizon,

669
00:32:16,040 --> 00:32:17,960
Speaker 2: so you're like, okay, cool, Like, I know this isn't

670
00:32:18,000 --> 00:32:18,840
Speaker 2: a two year strategy.

671
00:32:18,920 --> 00:32:21,120
Speaker 3: I know this is a ten plus year strategy.

672
00:32:20,760 --> 00:32:23,320
Speaker 2: And I'm in for the long haul and you can

673
00:32:23,400 --> 00:32:26,440
Speaker 2: afford to meet all of your loan obligations even if

674
00:32:26,520 --> 00:32:30,080
Speaker 2: the interest rate increases or if the market dips, like

675
00:32:30,160 --> 00:32:32,280
Speaker 2: and we need to map out both of those situations,

676
00:32:32,360 --> 00:32:34,600
Speaker 2: Like what happens if interest rates increase and you have

677
00:32:34,640 --> 00:32:36,600
Speaker 2: to pay more for your loan? Okay?

678
00:32:36,680 --> 00:32:37,480
Speaker 3: Could you still afford that?

679
00:32:37,480 --> 00:32:39,320
Speaker 2: And you go yeah, great, no worries like, I mean

680
00:32:39,360 --> 00:32:41,520
Speaker 2: you don't want to, but yes I could. And on

681
00:32:41,560 --> 00:32:43,239
Speaker 2: the flip side, what if the market dips and we're

682
00:32:43,320 --> 00:32:45,680
Speaker 2: not generating that income to pay off your loan?

683
00:32:45,800 --> 00:32:46,040
Speaker 3: Quicker?

684
00:32:46,120 --> 00:32:49,200
Speaker 2: What happens then I still financially sound you'd be like annoyed,

685
00:32:49,320 --> 00:32:50,560
Speaker 2: but financially.

686
00:32:50,080 --> 00:32:51,440
Speaker 3: Sound, Okay, we can go ahead.

687
00:32:51,960 --> 00:32:56,640
Speaker 2: Then from the personality and like the behavioral side, it

688
00:32:56,800 --> 00:32:59,880
Speaker 2: might suit you if you are comfortable taking on a

689
00:33:00,200 --> 00:33:04,080
Speaker 2: more risk, so like I would not be talking to

690
00:33:04,240 --> 00:33:06,560
Speaker 2: somebody about this strategy if they've never invested in the

691
00:33:06,600 --> 00:33:07,080
Speaker 2: share market.

692
00:33:07,160 --> 00:33:09,160
Speaker 3: I need you to have that experience before.

693
00:33:09,400 --> 00:33:11,840
Speaker 2: Doesn't mean you need to have invested thousands and thousands,

694
00:33:11,880 --> 00:33:13,520
Speaker 2: but I want to see that you know, you know

695
00:33:13,600 --> 00:33:15,840
Speaker 2: what the market does, how it works. You maybe have

696
00:33:15,960 --> 00:33:17,920
Speaker 2: toyed with it a few times. You might not have

697
00:33:18,000 --> 00:33:21,000
Speaker 2: had the cash flow to keep that consistent, but you're

698
00:33:21,160 --> 00:33:24,600
Speaker 2: comfortable taking on risks so that market volatility doesn't make

699
00:33:24,640 --> 00:33:27,640
Speaker 2: you panic or lose sleep. You need to be a

700
00:33:27,720 --> 00:33:29,800
Speaker 2: long term thinker and you're not going to be tempted

701
00:33:29,800 --> 00:33:32,480
Speaker 2: to bail out early when a downturn happens and you're like,

702
00:33:32,520 --> 00:33:34,200
Speaker 2: oh my god, this is not what I signed up for.

703
00:33:35,160 --> 00:33:37,680
Speaker 2: I know, you have to ride that roller coaster through

704
00:33:37,800 --> 00:33:40,800
Speaker 2: the low bit. That's how it works. You need to

705
00:33:40,840 --> 00:33:43,680
Speaker 2: be pretty financially disciplined. So I need to make sure

706
00:33:44,560 --> 00:33:47,760
Speaker 2: that you're not going to go and dip into your

707
00:33:47,880 --> 00:33:51,760
Speaker 2: investment loans because, like often, what we'll do is cash

708
00:33:51,800 --> 00:33:54,360
Speaker 2: out that fifty grand put it into an investment account,

709
00:33:54,360 --> 00:33:56,760
Speaker 2: because we don't dump fifty grand into the share market

710
00:33:56,840 --> 00:34:00,320
Speaker 2: all in one go. But that means that you beck

711
00:34:00,360 --> 00:34:02,960
Speaker 2: would have access to fifty thousand dollars in cash because

712
00:34:02,960 --> 00:34:05,960
Speaker 2: maybe we've decided to dollar cost average that money into

713
00:34:06,000 --> 00:34:09,000
Speaker 2: the market, and we're doing two thousand dollars a month

714
00:34:09,080 --> 00:34:11,680
Speaker 2: into the market until all of that fifty thousand is invested,

715
00:34:11,719 --> 00:34:13,839
Speaker 2: because we don't want to dump fifty thousand dollars into

716
00:34:13,840 --> 00:34:16,480
Speaker 2: the market on day one, Okay, but you would have

717
00:34:16,600 --> 00:34:19,320
Speaker 2: access to those funds. Can we guarantee that you're not

718
00:34:19,360 --> 00:34:21,839
Speaker 2: going to go and dip into those funds and be like, well,

719
00:34:21,880 --> 00:34:24,920
Speaker 2: what's two grand? It doesn't matter to fund your lifestyle

720
00:34:24,960 --> 00:34:28,600
Speaker 2: spending because I don't want you seeing it and being like, actually,

721
00:34:28,680 --> 00:34:30,880
Speaker 2: if we pulled that out, great, I know it's for investment,

722
00:34:30,920 --> 00:34:32,720
Speaker 2: but we could take five grand to go to Thailand

723
00:34:32,800 --> 00:34:33,400
Speaker 2: for two weeks.

724
00:34:34,000 --> 00:34:36,040
Speaker 3: It's not for you, baby, No, it's not for you.

725
00:34:36,200 --> 00:34:39,359
Speaker 3: That's okay, that's okay. Not everything is for us, that's true.

726
00:34:39,440 --> 00:34:42,719
Speaker 2: But educationally, we need to know about it, and then

727
00:34:43,000 --> 00:34:45,279
Speaker 2: it's your job to work out if that works or not. Yes,

728
00:34:45,400 --> 00:34:46,960
Speaker 2: And that's why I have to be like, would you

729
00:34:47,120 --> 00:34:49,080
Speaker 2: go and Dippy dip into that? Because if you would,

730
00:34:49,200 --> 00:34:51,000
Speaker 2: you're eating away at your returns and it actually just

731
00:34:51,080 --> 00:34:54,200
Speaker 2: negates the whole purpose of this entire exercise. Got you,

732
00:34:54,560 --> 00:34:57,440
Speaker 2: I need to make sure that you've got enough willpower

733
00:34:57,760 --> 00:35:00,560
Speaker 2: to reinvest the dividends and tax savings into your home

734
00:35:00,640 --> 00:35:03,520
Speaker 2: loan instead of spending them, because what will happen is

735
00:35:03,840 --> 00:35:06,440
Speaker 2: your investment portfolio is going to generate returns and it's

736
00:35:06,480 --> 00:35:08,520
Speaker 2: going to be dumped into a bank account somewhere. I

737
00:35:08,680 --> 00:35:10,880
Speaker 2: need to make sure that that money that's been dropped

738
00:35:10,880 --> 00:35:12,920
Speaker 2: into that bank account does go to your loan, not

739
00:35:13,040 --> 00:35:14,960
Speaker 2: you go, oh, did you see babe that we got

740
00:35:15,040 --> 00:35:17,600
Speaker 2: like five hundred dollars in dividends. Maybe we just don't

741
00:35:17,600 --> 00:35:19,400
Speaker 2: put it on the loan this month. Maybe we like

742
00:35:19,680 --> 00:35:24,640
Speaker 2: go and have a fancy dinner or do a staycation. No,

743
00:35:25,200 --> 00:35:27,160
Speaker 2: they're not for you to touch. This needs to be

744
00:35:27,200 --> 00:35:30,120
Speaker 2: a well oiled machine where everything that goes into them

745
00:35:30,239 --> 00:35:32,879
Speaker 2: non touchable. Everything that comes out of there goes back

746
00:35:32,960 --> 00:35:36,920
Speaker 2: into the system. Otherwise the system doesn't work. Otherwise you

747
00:35:37,000 --> 00:35:39,960
Speaker 2: are not debt recycling. So if you can't be trusted,

748
00:35:40,040 --> 00:35:42,440
Speaker 2: that's okay, But this strategy just won't work for you.

749
00:35:43,480 --> 00:35:47,880
Speaker 2: And ideally you're somebody who does value structure. So as

750
00:35:47,920 --> 00:35:50,120
Speaker 2: I said before, it needs to be a well oiled machine.

751
00:35:50,320 --> 00:35:51,800
Speaker 2: You can stick to a plan. You're not going to

752
00:35:51,840 --> 00:35:54,600
Speaker 2: self sabotage, you're not going to put yourself under stress.

753
00:35:55,120 --> 00:35:58,479
Speaker 2: And this literally only works if.

754
00:35:58,400 --> 00:36:01,160
Speaker 3: You know touchy, No, touchy, not touchy. We're not taking

755
00:36:01,200 --> 00:36:03,440
Speaker 3: the money out. That's a long term investment. We're not

756
00:36:03,640 --> 00:36:05,520
Speaker 3: taking out. We're not taking the cream off the top

757
00:36:05,600 --> 00:36:07,920
Speaker 3: of it. No, No, that's to pay your mortgage.

758
00:36:08,000 --> 00:36:11,680
Speaker 2: The entire purpose relying on recycling is to get that

759
00:36:11,800 --> 00:36:15,040
Speaker 2: fifty grand yes, example would be one hundred, could be

760
00:36:15,080 --> 00:36:17,759
Speaker 2: four dollars, yes, get that fifty grand into the share market,

761
00:36:17,800 --> 00:36:20,160
Speaker 2: build a share portfolio, and pay off your mortgage.

762
00:36:20,239 --> 00:36:20,520
Speaker 3: Quicker.

763
00:36:20,680 --> 00:36:24,000
Speaker 2: Yes, the other stuff that's not your business, you go

764
00:36:24,160 --> 00:36:25,160
Speaker 2: do that with your cash flow.

765
00:36:25,480 --> 00:36:27,800
Speaker 3: What about if you are someone who was listening to

766
00:36:27,880 --> 00:36:29,799
Speaker 3: those two lists, he kind of sounds like them.

767
00:36:29,920 --> 00:36:30,320
Speaker 4: What do they do?

768
00:36:30,440 --> 00:36:31,319
Speaker 3: Like, how do they set them up?

769
00:36:31,480 --> 00:36:33,320
Speaker 2: Well, you were shaking your head, So I'm assuming this

770
00:36:33,400 --> 00:36:34,799
Speaker 2: isn't a question where you're like, yeah, like.

771
00:36:34,840 --> 00:36:35,560
Speaker 3: That's so for me.

772
00:36:36,239 --> 00:36:41,120
Speaker 2: Yeah, cannot relate, but that's okay. Yes, first, not a surprise.

773
00:36:41,400 --> 00:36:43,799
Speaker 2: If that's for you, we're going to get advice. Yeah,

774
00:36:43,960 --> 00:36:46,440
Speaker 2: I'm so sorry to be that guy. This is not

775
00:36:46,719 --> 00:36:48,759
Speaker 2: something that you just do on your own. It is

776
00:36:48,920 --> 00:36:55,319
Speaker 2: a complex system that needs support, and I would very

777
00:36:55,400 --> 00:36:58,640
Speaker 2: highly recommend speaking to a financial advisor who fully understands

778
00:36:58,719 --> 00:37:02,800
Speaker 2: debt recycling. Ask them before you talk to them, because

779
00:37:02,840 --> 00:37:07,799
Speaker 2: some financial advisors are against debt recycling. Some financial advisors

780
00:37:08,200 --> 00:37:11,320
Speaker 2: do not believe in it as a valid strategy because

781
00:37:11,360 --> 00:37:13,680
Speaker 2: it incurs a lot more risk and they go not

782
00:37:13,800 --> 00:37:16,520
Speaker 2: on my books, Like, I'm not having you take that

783
00:37:16,680 --> 00:37:20,040
Speaker 2: risk as a client of mine. Absolutely not. I would

784
00:37:20,160 --> 00:37:22,040
Speaker 2: make sure that they do that. If you don't have

785
00:37:22,120 --> 00:37:24,520
Speaker 2: a good financial advisor, go to my website. She's on

786
00:37:24,560 --> 00:37:26,320
Speaker 2: the money dot com, and I will match you with

787
00:37:26,520 --> 00:37:29,520
Speaker 2: one at no cost to you. Literally, I will match

788
00:37:29,600 --> 00:37:31,600
Speaker 2: you like and I'm not just saying, oh, I give

789
00:37:31,640 --> 00:37:34,320
Speaker 2: you a reco Like, you submit a full form of

790
00:37:34,400 --> 00:37:35,879
Speaker 2: what you want to do. You tell me you want

791
00:37:35,880 --> 00:37:37,880
Speaker 2: to do debt recycling, and you tell me your income,

792
00:37:37,960 --> 00:37:40,360
Speaker 2: and you tell me like your savings and stuff, and

793
00:37:40,960 --> 00:37:42,719
Speaker 2: my team and I will look at that and match

794
00:37:42,800 --> 00:37:46,080
Speaker 2: you with the financial advisor that fits. Because it's really

795
00:37:46,160 --> 00:37:48,520
Speaker 2: hard to find a financial advisor these days. And I've

796
00:37:48,600 --> 00:37:51,440
Speaker 2: just got my little trusted panel of people that I

797
00:37:51,600 --> 00:37:55,160
Speaker 2: haven't added to in probably like four years. Maybe there's

798
00:37:55,200 --> 00:37:57,759
Speaker 2: one coming, but I'm making them work for that. Oh.

799
00:37:57,920 --> 00:37:58,400
Speaker 3: Absolutely.

800
00:37:59,040 --> 00:38:03,480
Speaker 2: You could even talk like preliminarily to a tax accountant

801
00:38:04,200 --> 00:38:06,920
Speaker 2: to confirm that the interest will actually be deductible in

802
00:38:06,960 --> 00:38:09,160
Speaker 2: your situation, because there are some situations where it's not.

803
00:38:10,000 --> 00:38:11,480
Speaker 2: And if you've already got an account, and you could

804
00:38:11,480 --> 00:38:12,759
Speaker 2: be up the phone and be like, hey, beck, I

805
00:38:12,840 --> 00:38:16,200
Speaker 2: was just wondering, think you about debt recycling, and they'll

806
00:38:16,239 --> 00:38:18,320
Speaker 2: have all of that information from your tax return and

807
00:38:18,400 --> 00:38:20,920
Speaker 2: like what properties you own, etc. To be able to

808
00:38:20,960 --> 00:38:22,680
Speaker 2: give you a pretty good idea of whether it's even

809
00:38:22,800 --> 00:38:26,840
Speaker 2: worth talking to a financial advisor. Next, let's be conservative.

810
00:38:27,440 --> 00:38:32,480
Speaker 2: It's cool to be conservative. Always use really realistic conservative

811
00:38:32,680 --> 00:38:37,279
Speaker 2: return estimates, not the best case assumptions, because it's so

812
00:38:37,440 --> 00:38:39,080
Speaker 2: exciting to be like, oh my god, like over the

813
00:38:39,239 --> 00:38:42,520
Speaker 2: last thirty years the Australian share market's return to eleven percent.

814
00:38:42,920 --> 00:38:45,200
Speaker 2: Let's base it on that. We under promise and we

815
00:38:45,360 --> 00:38:49,200
Speaker 2: over deliver, even for ourselves. So we know what the

816
00:38:49,280 --> 00:38:51,080
Speaker 2: average rate of return of the share market is. But

817
00:38:51,200 --> 00:38:54,640
Speaker 2: in my calculations I would always use a minimum of

818
00:38:54,760 --> 00:38:57,440
Speaker 2: six percent. I wouldn't really try to go above that.

819
00:38:57,480 --> 00:38:59,439
Speaker 2: If it doesn't work at six percent, I just don't

820
00:38:59,480 --> 00:39:01,560
Speaker 2: think you should be doing it. But again, what's my

821
00:39:01,600 --> 00:39:05,200
Speaker 2: opinion worth? Who knows and stress test your numbers. So

822
00:39:05,360 --> 00:39:07,719
Speaker 2: what I mean by that is, can you still make

823
00:39:07,760 --> 00:39:10,880
Speaker 2: your repayments if interest rates rose by two or three percent?

824
00:39:11,880 --> 00:39:15,160
Speaker 2: Can you still deal with this situation if your investment

825
00:39:15,239 --> 00:39:18,279
Speaker 2: overnight dropped by twenty percent? What would that look like

826
00:39:18,400 --> 00:39:22,200
Speaker 2: stress test is so important. And then we're starting small

827
00:39:22,239 --> 00:39:24,800
Speaker 2: and scaling up. So you might have fifty thousand dollars

828
00:39:24,840 --> 00:39:27,720
Speaker 2: worth of equity that you can access, you might apply

829
00:39:27,920 --> 00:39:30,080
Speaker 2: for a loan. And by the way, mortgage brokers can

830
00:39:30,160 --> 00:39:32,280
Speaker 2: do this, so my team at Zella Money can actually

831
00:39:32,320 --> 00:39:35,360
Speaker 2: help you access the funds. So beyond getting the advice,

832
00:39:35,480 --> 00:39:37,520
Speaker 2: you actually need someone to help you pull the money

833
00:39:37,520 --> 00:39:40,959
Speaker 2: out of your loan. And good mortgage brokers don't charge

834
00:39:41,000 --> 00:39:43,920
Speaker 2: you for that privilege. They'll like, restructure your stuff won't

835
00:39:43,920 --> 00:39:46,320
Speaker 2: cost you anything. The financial advice will load. Just to

836
00:39:46,360 --> 00:39:49,600
Speaker 2: be very clear, start small and scale up, so we

837
00:39:49,760 --> 00:39:52,560
Speaker 2: might work with you to go. Okay, Beck, we've had

838
00:39:52,600 --> 00:39:54,880
Speaker 2: a look. You can access fifty thousand dollars.

839
00:39:54,719 --> 00:39:55,320
Speaker 3: Worth of equity.

840
00:39:55,640 --> 00:39:57,880
Speaker 2: Let's request fifty thousand, but we're not going to use

841
00:39:57,920 --> 00:39:59,279
Speaker 2: it all at once. We just don't want to have

842
00:39:59,400 --> 00:40:01,840
Speaker 2: to reapply and reapply every time. We want to step up.

843
00:40:02,280 --> 00:40:04,720
Speaker 2: So the bank says, yep, no worries, Beck, We'll release

844
00:40:04,760 --> 00:40:07,239
Speaker 2: fifty thousand dollars of equity. We'll put it in your

845
00:40:07,280 --> 00:40:09,920
Speaker 2: offset tomorrow, so it's sitting there in your offset. We

846
00:40:10,040 --> 00:40:12,160
Speaker 2: might just leave it there for a long time and

847
00:40:12,280 --> 00:40:15,080
Speaker 2: we might just do five grand. See how we go

848
00:40:15,280 --> 00:40:17,560
Speaker 2: for a few months, and then have a little conversation.

849
00:40:18,239 --> 00:40:20,200
Speaker 2: This is with not your broker, this is with your

850
00:40:20,239 --> 00:40:23,200
Speaker 2: financial advisor. Yeah, about stepping it up and maybe over

851
00:40:23,239 --> 00:40:25,279
Speaker 2: the next twelve months we get that fifty thousand dollars

852
00:40:25,320 --> 00:40:27,920
Speaker 2: into the market. But it might not happen immediately. And

853
00:40:28,000 --> 00:40:30,200
Speaker 2: if they're a good financial advisor, that never dump fifty

854
00:40:30,239 --> 00:40:32,240
Speaker 2: grand into the market for you on day one anyway,

855
00:40:32,719 --> 00:40:35,880
Speaker 2: So don't go all in from day one. You might

856
00:40:35,920 --> 00:40:38,680
Speaker 2: want access to the funds and access to the equity

857
00:40:38,760 --> 00:40:42,200
Speaker 2: from day one, but begin with a very small investment loan.

858
00:40:42,480 --> 00:40:44,879
Speaker 2: Begin with small amounts into the share market and see

859
00:40:44,920 --> 00:40:47,160
Speaker 2: how it impacts your cash flow, see how it impacts

860
00:40:47,239 --> 00:40:50,480
Speaker 2: your mindset, and then you can build over time your

861
00:40:50,600 --> 00:40:56,600
Speaker 2: comfort and your confidence levels before like dialing up your strategy. Sure, okay, okay,

862
00:40:56,840 --> 00:41:00,279
Speaker 2: got you. And then obviously talk to a good mortgage broker. Well,

863
00:41:00,520 --> 00:41:02,960
Speaker 2: because a mortgage broker is going to set up the

864
00:41:03,040 --> 00:41:06,000
Speaker 2: right loan structure for you. So maybe you will talk

865
00:41:06,040 --> 00:41:08,520
Speaker 2: to your mortgage broker and use a split loan or

866
00:41:08,640 --> 00:41:12,359
Speaker 2: even a separate investment loan to keep like personal debts

867
00:41:12,400 --> 00:41:15,239
Speaker 2: and loans separate for your investments to keep track of

868
00:41:15,360 --> 00:41:19,640
Speaker 2: usage and have really clear tax deductibility like records, and

869
00:41:19,800 --> 00:41:21,960
Speaker 2: a good mortgage broker will be like, oh, beck, I

870
00:41:22,080 --> 00:41:24,480
Speaker 2: do this all the time, no worries, And it's so

871
00:41:24,600 --> 00:41:26,879
Speaker 2: funny because like we talk about this all the time

872
00:41:26,920 --> 00:41:28,719
Speaker 2: in our office. Like we'll have clients who want to

873
00:41:28,760 --> 00:41:31,880
Speaker 2: do debt recycling. We'll be like, so, have you got advice? Well,

874
00:41:31,880 --> 00:41:34,480
Speaker 2: who's your financial advisor? Just checking before we do this

875
00:41:34,600 --> 00:41:36,960
Speaker 2: that you're in a good financial position, because like, I

876
00:41:37,080 --> 00:41:39,160
Speaker 2: just don't want you in the worst possible position. But

877
00:41:39,160 --> 00:41:41,400
Speaker 2: if you're like ticking all the boxes, we've got the

878
00:41:41,480 --> 00:41:43,640
Speaker 2: right loan structure and the right strategy to make sure

879
00:41:43,680 --> 00:41:45,960
Speaker 2: it's clean and efficient and it does the right thing.

880
00:41:46,680 --> 00:41:49,719
Speaker 2: And then obviously you have to pick investments. It's not

881
00:41:50,120 --> 00:41:51,800
Speaker 2: as easy as like being like, oh, we got the

882
00:41:51,880 --> 00:41:55,680
Speaker 2: equity when bam, thank you, ma'am. Stick to And this

883
00:41:55,880 --> 00:41:58,640
Speaker 2: is not advice, but hypothetically, if I was going to

884
00:41:58,680 --> 00:42:02,200
Speaker 2: implement this strategy, I would be sticking to income producing

885
00:42:02,320 --> 00:42:07,680
Speaker 2: investments like shares or ETFs, because the entire purpose is

886
00:42:07,760 --> 00:42:11,520
Speaker 2: to use the income produced from those assets to generate

887
00:42:11,640 --> 00:42:15,160
Speaker 2: accessible income that is then tax deductible. So, like you

888
00:42:15,239 --> 00:42:17,239
Speaker 2: know how we've done podcasts before and you guys can

889
00:42:17,320 --> 00:42:19,279
Speaker 2: go look them up. We will even link them in

890
00:42:19,320 --> 00:42:22,240
Speaker 2: the show notes. But we've talked about like the difference

891
00:42:22,280 --> 00:42:26,000
Speaker 2: between an income producing ETF and a growth focused ETF.

892
00:42:26,440 --> 00:42:29,320
Speaker 2: If you are investing in a more growth focused ETF

893
00:42:29,440 --> 00:42:33,080
Speaker 2: and like over time it increases in value, that's great,

894
00:42:33,200 --> 00:42:35,080
Speaker 2: But where's the income to pay off the home loan

895
00:42:35,160 --> 00:42:38,160
Speaker 2: that we were implementing this entire strategy. For sure, I

896
00:42:38,239 --> 00:42:40,920
Speaker 2: want to get paid so I can pay off my mortgage.

897
00:42:41,120 --> 00:42:43,640
Speaker 2: Otherwise the strategy doesn't make sense. And that's where you

898
00:42:43,760 --> 00:42:45,600
Speaker 2: might really want to have a good chat with a

899
00:42:45,680 --> 00:42:51,000
Speaker 2: financial advisor to pick the right investments to complement your strategy. Yep,

900
00:42:51,160 --> 00:42:54,399
Speaker 2: because if I went all in on growth investments, so cool,

901
00:42:55,239 --> 00:42:58,680
Speaker 2: I'm looking at my investment portfolio, it's worth more. Haven't

902
00:42:58,680 --> 00:43:00,600
Speaker 2: been able to pay off any of my mortgage though,

903
00:43:00,719 --> 00:43:02,759
Speaker 2: And was that not the entire purpose? Yeah?

904
00:43:02,840 --> 00:43:03,080
Speaker 3: Got you.

905
00:43:03,800 --> 00:43:05,800
Speaker 2: I would then be forced to sell down some of

906
00:43:05,840 --> 00:43:08,600
Speaker 2: those assets to take some of that income.

907
00:43:08,840 --> 00:43:09,759
Speaker 3: And put it over there.

908
00:43:10,080 --> 00:43:13,520
Speaker 2: I don't want to sell my assets, no, So make

909
00:43:13,640 --> 00:43:16,920
Speaker 2: sure that you're doing the right thing for your strategy,

910
00:43:17,680 --> 00:43:20,040
Speaker 2: and then I just have to say it. Please, just

911
00:43:20,200 --> 00:43:22,880
Speaker 2: don't pick speculative stocks now. It's not the time to

912
00:43:22,960 --> 00:43:25,200
Speaker 2: focus on satellite. It's not the time to focus on

913
00:43:25,280 --> 00:43:28,600
Speaker 2: crypto or vacant land or non income producing assets. It's

914
00:43:28,680 --> 00:43:31,520
Speaker 2: not because I don't recommend them. It's because that's not

915
00:43:31,719 --> 00:43:35,440
Speaker 2: aligned to a debt recycling strategy. The entire purpose of

916
00:43:35,480 --> 00:43:39,200
Speaker 2: a debt recycling strategy would be to invest in assets

917
00:43:39,280 --> 00:43:42,279
Speaker 2: that pay you so you can take that money and

918
00:43:42,480 --> 00:43:47,520
Speaker 2: pay your mortgage money. Win for everybody. Absolutely, I said before,

919
00:43:48,000 --> 00:43:51,120
Speaker 2: be organized, be disciplined. This isn't for people who are

920
00:43:51,200 --> 00:43:54,560
Speaker 2: relaxed with doing their tax in that rhymed maybe I

921
00:43:54,560 --> 00:43:57,239
Speaker 2: should Oh my god, I'm going into children's books next.

922
00:43:57,760 --> 00:44:00,880
Speaker 2: Do keep really detailed records. Every will draw down on

923
00:44:01,040 --> 00:44:05,000
Speaker 2: the loan must be clearly linked to an investment. I

924
00:44:05,040 --> 00:44:06,920
Speaker 2: don't care if it's in a spreadsheet. I don't care

925
00:44:06,960 --> 00:44:09,280
Speaker 2: if it's written down on a big piece of paper.

926
00:44:09,600 --> 00:44:11,520
Speaker 2: You are making sure that you are tracking it for

927
00:44:11,760 --> 00:44:15,080
Speaker 2: your accountant. Because it's not tracked, it's not claimed. If

928
00:44:15,120 --> 00:44:17,160
Speaker 2: it's not claimed, why did we bother with the strategy?

929
00:44:17,719 --> 00:44:19,520
Speaker 2: And then I would say, making sure that we are

930
00:44:19,560 --> 00:44:23,399
Speaker 2: also reinvesting all dividends and tax refunds.

931
00:44:23,800 --> 00:44:24,759
Speaker 3: Okay, that's not for you.

932
00:44:25,239 --> 00:44:27,160
Speaker 2: That's not a new handbag, that is not a holiday

933
00:44:27,680 --> 00:44:30,520
Speaker 2: into your home, loan or back into investments. Do not

934
00:44:30,800 --> 00:44:33,719
Speaker 2: use any of the income that is generated from these

935
00:44:33,800 --> 00:44:36,560
Speaker 2: investments for your lifestyle spending. It's not for you.

936
00:44:36,719 --> 00:44:40,640
Speaker 3: Remember though, number one rule, no touchy, no touchy.

937
00:44:40,760 --> 00:44:43,520
Speaker 2: And then last, but not least, because I feel like

938
00:44:43,600 --> 00:44:45,200
Speaker 2: I've been a little bit randy at you for this

939
00:44:45,280 --> 00:44:48,359
Speaker 2: second half, because I'm like, the people just want the information. Yeah,

940
00:44:49,040 --> 00:44:51,640
Speaker 2: review and adjust regularly. Huh So you can't just not

941
00:44:51,719 --> 00:44:53,400
Speaker 2: set and forget. I'm so sorry. This is not a

942
00:44:53,440 --> 00:44:55,480
Speaker 2: set and forget strategy. And that's why I'm like, you

943
00:44:55,560 --> 00:44:57,880
Speaker 2: need to be consistently keeping records. You need to be

944
00:44:57,960 --> 00:44:59,640
Speaker 2: on top of this. This is not for people who

945
00:44:59,680 --> 00:45:04,400
Speaker 2: are not proactive with their investment plans. Check in on

946
00:45:04,480 --> 00:45:09,160
Speaker 2: your progress minimum every year, at least every six months,

947
00:45:09,640 --> 00:45:12,160
Speaker 2: or reassess sooner. If interest rates are changing, you're seeing

948
00:45:12,200 --> 00:45:14,759
Speaker 2: that on the news, make sure that it's still good.

949
00:45:15,120 --> 00:45:17,520
Speaker 2: Make sure that you're always checking what your bank is

950
00:45:17,640 --> 00:45:20,920
Speaker 2: doing in terms of interest rate increases or decreases. I

951
00:45:21,040 --> 00:45:23,360
Speaker 2: want you to be looking at your investment performance or

952
00:45:23,400 --> 00:45:26,040
Speaker 2: even if you're just like, lifestyle situation changes, what does

953
00:45:26,120 --> 00:45:28,560
Speaker 2: that look like should we put back on this strategy?

954
00:45:28,680 --> 00:45:30,560
Speaker 2: You know, maybe you get a salary increase and we

955
00:45:30,600 --> 00:45:32,920
Speaker 2: actually want to put more in just making sure it's

956
00:45:32,960 --> 00:45:35,960
Speaker 2: still working for us. And then if you need to

957
00:45:35,960 --> 00:45:38,919
Speaker 2: adjust your strategy, that's okay, but like, let's be aware

958
00:45:38,960 --> 00:45:41,800
Speaker 2: that that's going to happen at some point. If you

959
00:45:41,920 --> 00:45:44,560
Speaker 2: think that this is set and forget forever, you are diluted.

960
00:45:44,880 --> 00:45:48,400
Speaker 2: And that's why it is so popular for people to

961
00:45:48,960 --> 00:45:53,360
Speaker 2: use their recycling in cycles or in bursts. So we

962
00:45:53,480 --> 00:45:57,160
Speaker 2: might do this fifty thousand dollars, and yes, your equity

963
00:45:57,239 --> 00:45:59,680
Speaker 2: might increase over time, but let's not add to it

964
00:45:59,760 --> 00:46:02,000
Speaker 2: for a while. Let's wait until we're a little bit

965
00:46:02,040 --> 00:46:04,879
Speaker 2: more cash flow positive. Let's you know, not go all

966
00:46:04,960 --> 00:46:07,840
Speaker 2: in on day one. It gives you the ability to

967
00:46:07,960 --> 00:46:11,239
Speaker 2: adjust your strategy and keep things going over time. So

968
00:46:11,400 --> 00:46:14,840
Speaker 2: like people who debt recycle, maybe they were debt recycling

969
00:46:14,920 --> 00:46:17,560
Speaker 2: in twenty eighteen and they haven't done it since then,

970
00:46:17,960 --> 00:46:19,280
Speaker 2: they're like, yeah, we debt recycled.

971
00:46:19,280 --> 00:46:21,000
Speaker 3: We've got this share portfolio's plotting along.

972
00:46:21,080 --> 00:46:22,800
Speaker 2: Like the plan was to keep going, but the interest

973
00:46:22,880 --> 00:46:25,520
Speaker 2: rates changed, but now they might be like, oh, the

974
00:46:25,600 --> 00:46:28,320
Speaker 2: interest rates are going down, and they might be creating

975
00:46:28,360 --> 00:46:31,640
Speaker 2: a strategy to like now in twenty twenty six, debt

976
00:46:31,680 --> 00:46:35,640
Speaker 2: recycle again doesn't mean that you're consistently pulling from your mortgage.

977
00:46:36,200 --> 00:46:38,800
Speaker 2: We just make strategic decisions in the right direction.

978
00:46:39,040 --> 00:46:41,720
Speaker 3: So it sounds like it's a pretty good maybe idea

979
00:46:41,760 --> 00:46:44,080
Speaker 3: for some people and maybe not so much for others.

980
00:46:44,120 --> 00:46:46,600
Speaker 3: But I think, just yeah, for.

981
00:46:46,640 --> 00:46:49,080
Speaker 2: You, right, Like some people are like share markets not

982
00:46:49,160 --> 00:46:50,799
Speaker 2: for me, and I'm like, okay, they're probably the wrong

983
00:46:50,840 --> 00:46:53,360
Speaker 2: place to have that conversation, really, but it's not for you.

984
00:46:53,480 --> 00:46:54,799
Speaker 3: That's okay, that's okay, But.

985
00:46:54,880 --> 00:46:57,080
Speaker 2: I want to give you all the information to make

986
00:46:57,200 --> 00:46:59,800
Speaker 2: an educated decision that is in your best interest.

987
00:47:00,120 --> 00:47:02,279
Speaker 3: Totally. Well, I think it's a great place to leave it.

988
00:47:02,600 --> 00:47:05,560
Speaker 2: I agree, because I'm getting a sore throat, and to

989
00:47:05,600 --> 00:47:07,800
Speaker 2: be honest, I could keep going on and on about it,

990
00:47:07,960 --> 00:47:11,680
Speaker 2: but I really really think that this strategy can work

991
00:47:11,760 --> 00:47:14,760
Speaker 2: for some people. But it's probably not the magic solution

992
00:47:15,160 --> 00:47:18,160
Speaker 2: that is currently being made out on TikTok sure, and

993
00:47:18,280 --> 00:47:21,719
Speaker 2: it's not some genius solution that's only just come up.

994
00:47:21,760 --> 00:47:24,799
Speaker 2: It's been a very tried true tested solution over time,

995
00:47:25,160 --> 00:47:26,720
Speaker 2: talk to a financial advisor police.

996
00:47:26,840 --> 00:47:29,200
Speaker 3: Honestly, the most wise words come out of your mouth

997
00:47:29,360 --> 00:47:29,839
Speaker 3: all the time.

998
00:47:29,960 --> 00:47:31,960
Speaker 2: I don't know, I'm just so sure of it. Anyway,

999
00:47:32,000 --> 00:47:35,200
Speaker 2: let's leave it there before it all comes crashing down, guys. Also,

1000
00:47:35,440 --> 00:47:37,320
Speaker 2: on that note, if there is a topic that you

1001
00:47:37,400 --> 00:47:39,680
Speaker 2: want Beck and I to tackle, please leave it in

1002
00:47:39,760 --> 00:47:42,760
Speaker 2: the comments below and we will see you on Friday.

1003
00:47:43,160 --> 00:47:44,640
Speaker 3: Have a good week, bye, guys.

1004
00:47:50,520 --> 00:47:53,120
Speaker 4: Bid By shared on She's on the Money is generally

1005
00:47:53,320 --> 00:47:57,080
Speaker 4: nature and does not consider your individual circumstances. She's on

1006
00:47:57,160 --> 00:48:00,560
Speaker 4: the Money exists purely for educational purposes and should not

1007
00:48:00,719 --> 00:48:03,680
Speaker 4: be relied upon to make an investment or financial decision.

1008
00:48:04,080 --> 00:48:06,520
Speaker 4: If you do choose to buy a financial product, read

1009
00:48:06,560 --> 00:48:09,800
Speaker 4: the PDS TMD and obtain appropriate financial.

1010
00:48:09,480 --> 00:48:11,240
Speaker 3: Advice tailored towards your needs.

1011
00:48:11,640 --> 00:48:15,520
Speaker 4: Victoria Divine and Sheese on the Money are authorized representatives

1012
00:48:15,600 --> 00:48:18,160
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1013
00:48:18,360 --> 00:48:21,359
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1014
00:48:21,520 --> 00:48:24,960
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