Aussie Firebug

Financial Independence Retire Early

Nothing written below is financial advice. The below questions and answers are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

 

 

Question (3:10)


Hi AFB,

First of all, love your work and Ask Firebug Fridays episodes. So thank you.

I understand your stance on Super as you cannot access any of it until you’re in your 60s, however as potential a first home buyer, I cannot help to consider First home super saver scheme where you can access up to 30k of the pre-tax (salary sacrificed) voluntary contributions you’ve made.

To me, it sounds like a no brainier but please let me know if this sounds like a good deal from the Government from your end or if I am missing anything that may cause me to reconsider.

Thanks,

-Derek

Firebug’s Answer


Hi Dereck,

The FHSSS (woah that’s an ugly acronym) is a great way to save for your first deposit.
My only concern would be that you make sure you check with your employer that your salary sacrifice does not contribute to their Super guarantee. Technically if you SS it can be counted towards the super guarantee and means that your employer doesn’t have to contribute as much. Check this out
Assuming that’s all sweet, just make sure you understand all the obligations and checks you need to get the money out when you need it 👌

-AFB

 

Question (8:54)


Hey AFB,

What is going on with the market atm? LICS and ETFs are way down, are you going to wait for them to drop more or buy now?

Andee

Firebug’s Answer


Hi Andee,

We did buy when the market was down the other month. But the plan has always been to invest consistently each month. We want to stick to this plan no matter what the markets are doing.
I have no idea what’s going on. It’s fun to try to decipher all the worlds economies and predict what’s going to happen next, but I’ve got better stuff to be spending my time on.
I know it’s hard and it’s something I struggle with every day, but try to stay away from market predictions. Stick with the facts and new/changed laws that will have an impact on your wealth.

-AFB

 

Question (12:45)


Hi Mate,

Would love to get your thoughts on debt recycling. Feels like a faster way to get to FI by leveraging equity in a property, but I haven’t heard you talk about it. Would love your thoughts.

Keep up the good work my man. Loving it.

Cheers,

Ryan

Firebug’s Answer


Hi Ryan,

I’m a fan of DR and it’s something I will be utilizing in the future when we eventually buy a PPOR.
If you have a PPOR loan and also have cash that you’re going to invest anyway, I don’t really see a reason not to use DR to turn part of your PPOR debt into an investment debt and therefore tax deductible. It’s a tax minimization strategy first for me.
For example.
Investor A has the following:
  • $200K PPOR Loan
  • $100K lump sum cash from selling an investment property.

If investor A is not interested in paying off any of the loan from the PPOR ($200K) and instead wants to invest that money into ETFs/LICs, DR can be used to reduce tax with no extra risk,

Investor A can use the $100K to pay off part of the PPOR loan. Open a line of credit (LOC) of $100K and use that LOC to invest in the ETFs/LICs.

Investor A has the same amount of debt of $200K and still has $100K invested. The difference being is that they have saved $1,480 in tax (assuming 4% interest rate of LOC and 37% tax rate) because now half of their loans are tax deductible.

Dave at StrongMoney.com wrote a great piece about DR which you can read here.

-AFB

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