Start to think about Superannuation as a preferred investment tool.
You know time is ticking away and that you should consider putting funds away, but ongoing living expenses inhibit the savings pattern.
- “Where do we cut to save some funds and invest…?”
- “The current set of investment options all look pathetic maybe a term deposit is the best option…..?”
- “What should we do now for the kids…?”
Case Example I:
Message: Isolate and Consolidate expenses and trim where possible.
Carl & Lyn are 48 and 44, with a small mortgage and 2 late stage teenagers, one in high school and one just starting Technical College.
Carl Earns $70,000 in IT as a Programmer; while Lyn earns $30,000 year as a part time teacher.
The mortgage is only $40,000 but the house is worth about $650,000, this is their third. They worked their way up the value tree by buying and doing up each house as they went, Carl is a reasonable home handyman.
They have acquired a number of disparate insurance policies with different companies, an old investment bond (originally started as an investment strategy 17 years ago), and a half a dozen superannuation policies (all in contradictory investment strategies cancelling one another out).
The combined income after tax is $82,000 but is all spent on usual living expenses, and mortgage with only small savings to show.
Our recommendations in this case were as follows:
- Rationalise the insurance policies and lower the payments being made. Look to move some insurance inside super.
- Consolidate the super and choose 1 common strategy for both partners.
- Use the funds in the investment bond as tax effectively as possible transferring the tax benefits into other investments, tax effectively. Saving 15% upfront – that is as good as a 15% return in year 1 alone.
- With identified surplus income now focus on eliminating the remaining mortgage at a faster rate.
In 3 – 4 years the mortgage will be eliminated and with the kids both “off their hands” Carl and Lyn will commence an early version of the 55 – 65 year old’s strategies.
One option we recommended - that they decided against – was to sell the newish car (3yrs old) for $20,000 and buy an older but lower cost car for $12,000.
The $8,000 savings would assist with paying off the mortgage more quickly and then focus on the Superannuation a few years earlier than originally planned.