Options to put your money to better use

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

Real estate market

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

Q Dear Scott,

I have $10,000 invested in the share market and $8000 sitting in a high-interest online savings account, which I add to on a regular basis (I earn $2000 a fortnight). I feel like all this money sitting in my savings could be working harder for me. Should I invest more of it into shares or look at buying a property?

Thanks, Aaron

A Hi Aaron,

I agree that your savings should be working harder for you, especially given the massive drop in interest rates since November 2011.

If you're looking at buying a home to live in -- and you're willing to wait four financial years -- you should definitely open up a First Home Saver Account and deposit $6000 a year into the account. If you're happy renting, you should be regularly investing in good-quality stocks. At the moment I like Coca-Cola Amatil, QBE and, of course, my old faithful the Australian Foundation Investment Company.

PAY IT OFF QUICKLY

Q Hi Scott,

I have an investment property that is paying itself off (or, at least, the tenants are). I am considering selling it to buy a shabby house on my dream block of land, in my dream suburb, to knock down and build on it in five to six years (it's part of my 10-year plan).

I am making additional repayments on my investment property, but my accountant has advised that it's better to pay it off slower rather than quicker because of the money I will save in tax.

But I thought it was a good thing to knock down your home loan?

Thanks, Jennifer

A Hi Jennifer,

Your accountant is a moron. The only person getting rich by you paying off your home slowly is your bank manager.

Here's what I want you to do: stay where you are, keep the rental property and continue paying off the mortgage quickly (but make sure you pay off any non-tax deductible debt first) and also save up for a huge deposit so you can pay for your dream house and land without much debt.

Most people overestimate what they can do in a year, and totally underestimate what they can do in 10.

RETIREMENT BOOST

Q I'm 55 years old and have been told I can get a Transition-to-Retirement strategy. What else can I get?

Thanks, Brian

A Brian,

Here's a way to put your Transition-to-Retirement strategy on steroids. Currently, you're able to make a pre-tax contribution of $25,000 a financial year into your superannuation. You'll get slugged 15 per cent as it enters your super, as opposed to your marginal rate (which could be as high as 46.5 per cent).

As of the 2014/15 financial year, anyone over the age of 50 will be able to make concessional contributions of up to $35,000 a year. Try to reduce your take-home pay by the amount you get from your pension, and salary sacrifice the difference. If you can live off less, all the better.

BOND, SHARES THE KEY

Q Hi Scott,

We've just had a baby and have been thinking about starting up an education savings plan with the Australian Scholarships Group. My husband and I worry about the cost of education in the future and this looks like a sensible plan. I have read that you aren't a fan of their offering.

Can you please explain why?

Ashley

A Hi Ashley,

Australian Scholarships Group is by far the largest education savings provider in the country.

That affords them a huge advertising budget and a well-funded public relations outfit that do their best to drown out most things independent advisers (like me) say about them.

ASG charge horrendously high fees. If your child doesn't go on to higher education, the decades of compounding investment gains that you have saved and may have left over, will be stripped from you.

Steer clear of them completely.

Instead, invest in a low-cost investment bond through the AMP, or, alternatively buy Australian Foundation Investment Company (AFIC) shares in the lower-earning spouse's name.