Vow to be smart with investments
IF you have a burning money issue, or want to win a fight, put your questions to Barefoot Investor.
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Q: I’m 29 and getting married next month, and I want to sort out my investments before the big day. I have two investment properties, along with my home, which I owe $150,000 on. So, should I hold on to them, or sell them, pay down my principal place of residence and be debt free at the beginning our married life together? Michael
A: Hi Michael. You sound like quite a catch: there aren’t many 20-something blokes with three properties. Now the only reason I’d be advising you to sell either investment property is if you believe you could get a better return somewhere else with your money. If you bought well in the first place, and you have strong cashflow, I’d hold the properties for the long-term, and focus on paying down your mortgage. The most important advice I can give you is to drop the “I”. From now on don’t do anything until you’ve discussed it with your future wife. She gets an equal vote in your financial decisions from now on. Remember, happy wife, happy life.
Q: In three months my fiance and I are getting married, and we’re slowly paying off the wedding costs each fortnight. Our household income is $210,000 a year. We’re paying off our mortgage and have $20,000 in our offset, and $8600 in a Mojo. We owe about $5000 on our credit card. I’m thinking about taking out a personal loan for $7000 at 9 per cent over five years, to pay off what we will still owe for the big day. What do you think? Nicole
A: I think you’re having your bridezilla moment. If you borrow the money you’ll pay around $1800 in interest. That’s ridiculous. Take the money out of your Mojo account and pay off your credit card. Then over the next three months save as much as you possibly can, while also finding ways to cut your wedding costs (hint: cut the photographer, the DJ, but not the booze). Work as a team, and you’ll be fine!
Q: I’m 60 years old and plan to work until retirement age, but I’m worried my investment approach is too conservative. I have $630,000 in an industry pension fund, 20 per cent capital guaranteed and 80 per cent stable. I also have $35,000 in an industry super fund, with 100 per cent capital guaranteed. My wife has $35,000 in a retail fund, split 50/50 in conservative and diversified options. Are we being too safe with our money? Roger
A: Hi Roger, Yes, you are. It sounds like you’re worried about losing your money in a stock market crash. That’s totally understandable. But you’re going about it the wrong way. There are actually two risks you need to guard against: the next stock market crash and inflation eroding the value of your savings. There’s no magic wand that can get it 100 per cent right. But a conservative start would be to have at least three years of living expenses sitting in cash after you retire — if you’re really nervous, stretch it to five years — and invest the rest in good quality Aussie shares that pay fully franked dividends.
Originally published as Vow to be smart with investments
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