Financial Advice For Young Couple

Hi guys,

Long time lurker first time poster. I've been analysing and improving our financial situation for the past 6 months thanks to reading the barefoot investor. While his book is very simple and high level, it opened my eyes to a lot of things that I had previously dismissed (such as the share market). I've now read some more advanced books like Motivated Money, The Intelligent Investor as well as spending a lot of time reading this forum. A bit about our financial situation/plan:

My wife and in our early 30's, with a $500K PPOR loan. We're at approximately 40% LVR. We have no other debt (including no credit card) and we're comfortably saving $2K a month into an offset account that is currently at $35K. While the safe and "tax free" return of the offset account is nice, I want to get into the share market now instead of waiting for the home loan to be paid off. Debt recycling seems like a really good strategy to allow us to do this (thanks @Terry_w for all your tax tips). Each time we have $10K additional savings in our offset account (on top of $30K that stays there for emergencies), I would split the PPOR by $10K, pay it down, redraw and invest into one of the old LICs (MLT, AFI, ARG etc) depending on the best discount to NTA at the time. The shares would be in my wife's name as she is in a much lower tax bracket than me.

I would like to see a financial planner to validate the overall strategy, in particular the investment strategy into LICs. I'm concerned we'd be too reliant on the ASX, and wonder if some diversification into something like VGS would be worth while. This is not only for my benefit but mainly for my wife. She's still very cautious when it comes to shares (despite me showing her Peter Thornhill's videos), so having a professional validate this would help us a lot.

My question is (sorry it took so long to get there), do financial planners assist with specific advice like this? I don't need help with insurances, wills, budgeting etc. All of that stuff is already sorted. If there are financial planners like this that exist - can anyone recommend anyone in Melbourne? Thanks and apologies for length of this post!

 

Yes they do. But is it worth the cost?

 

That's the million dollar question I suppose. If i'm able to find a FP that can give once-off advice at a reasonable hourly rate, and their advice sets us up really well and helps with convincing the wife - I would say yes! But it seems like there are a lot of sharks out there so I'm fairly cautious.

 

The trouble is any advice from a planner must be in a statement of advice which tends to make it expensive.

There are some good planners out there though - i just can't think of any in Melb

 

If you want someone to understand about share market don't talk about shares
talk about the business behind it.

does she think commonwealth banks or Woolies or Bunnings is business she want to own if she has money?

Does she use any kitchen ware and has she got any Breville products, does she think it is a good product a lot of people would use, would she want to own a small part of Breville?..

Does she think plumbing works is essential part of every home?, there is a company that made that stuff and you get very rich having a piece of that business for the last 2 decades and maybe a few more decades to come.

does she shop at Westfield malls and does she want a piece of that mall?

Share market is just place where you can invest your money in a lot of business and share their glory and sorrow with them and get rich in the process over a long period of time.

but at the end of the day, you both need to invest in something you are both comfortable with, if she likes properties and sleep better with it then you should not force her to get into shares, it important to have a balance and not be chasing thing outside your comfort zone

 

Thank you. It's really easy to understand when you put it like that. Last thing I want to do is force her but if she hears it from a professional I feel like that will help a lot.

 

Hi @skinner84 ,

There is a adviser that’s a member here @Alex Straker who I recently signed up with. He is QLD based but has not been an issue for me and I’m Sydney based. I was with a local advisor for the last three years. Spoke to @Alex Straker after reading his posts on here and was very impressed with his approach and knowledge. Finished moving our personal and super share portfolios across to his advice service just over a month ago.

Now I will give you my thoughts on what I would do if I was in your position. Personally I would pay of my mortgage first. For me having your home owned outright is priority 1. But I understand the reasoning behind people wanting to invest and aim at getting a return higher then the cost of current mortgage rates. As rates get lower and lower it makes more sense.

In saying that I would keep it simple and go an index like VAS. I would focus on that before looking at international index. That’s purely based on the fact that I would want a dividend yield to at least match or better the interest rate of my mortgage. Hard to get that with international index. Once your VAS holding matches your outstanding loan balance then add in international.
That’s an approach I would be looking at.

 

Thanks @Big Al . I will reach out to @Alex Straker. I definitely want to keep it simple, which is why I like the idea of LICs. Set and forget. And the thing I like about debt recycling is if it's done right, I can pay the house off in almost the same time but have a solid share portfolio at the end of it, and yes, I know it's no guarantee! Always going to be some risk of course.

 

Or the other option is to pull out the equity from your PPOR and invest into IP instead of shares, right? Would your wife be more comfortable with that approach or not, would you?
By my calculations you could borrow say up to 80% LVR so another $500K on $1.25M property. So whether you pull out the funds and borrow with say Bank/Lender 'B' to buy your first IP you would need to educate yourself on. Many books illustrate this old fashioned concept.
How about both of you read a book below, even though old still suggests and investment strategy into property and why. What you need to find out is what investing suits you both, what will make you sleep well at night, and what you wish to achieve from your investing, what $ value, be specific.
It is suggested there how just one IP with PPOR can generate more wealth in the long term....
How to Achieve Wealth for Life
However, is such investing approach suitable to you both?
I am such investor using such strategy for the last 19 years, so we started much later than your ages and have another 11 years to 30 years with investing into RE.
I congratulate you taking the initiative now at such early ages and investing in whatever you decide....for the future!

 

Thank you for the reply! I wouldn't be comfortable with an IP. Mainly because of the extra debt we'd need to take on to get started but also because I don't like the idea of all the extra work that comes with an IP (I.e maintenance, tenants, real estate agents etc.). With shares I get to buy a piece of a real company and let the company do all the hard work. Appreciate your suggestion though.

 

If an FP tries to send me down the high fee/active managed fund path I'll be steering clear. Part of my screening process I guess you could say.

 

I have paid for a "financial planner", and it was disastrous. Check the financial planners qualifications and if they are truly independent.

I have some properties that are no real hassle at all, with long government leases- I haven't spent a cent on maintenance for decades, and they have been updated regularly and present like new. My husband wasn't too keen on IPs after our first dud unit, but was comfortable with these types of properties when we got back into IP. If you want to go shares, I would be starting with businesses that she knows.

 

Has your wife read Barefoot Investor also? If yes, did it resonate with her?

Signing up for his newsletter could be an alternative to going to see a Financial Planner (or something worth doing prior to seeing a FP). In his newsletter he does do some stock analysis and portfolio recommendations.

If you wife is already comfortable with Scott Pape's approach, this could be a way to get her comfortable with share investment??

 

Yeah this is why i'm hoping for once-off strategic advice rather than something ongoing. Happy to then go and do my own research and buy the shares myself like it sounds you have done.

 

Yeah for sure. She definitely felt better about an index/LIC because of the spread of different companies you're investing in - not just one.

 

Max out your super contributions. Pay off your mortgage. Consider debt recycling and/or further geared investments (including property).

 

She has read bits and liked it. I've left the book on her bedside table as a subtle reminder. I watched Peter Thornhill's series of videos with her too - I think that really started to open her mind to it but I still have some convincing to do.

 

That's mostly what our plan is at a high level, except for the super contributions. I understand the tax benefits but I don't like the idea of it being locked up until i'm 65.