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
Hey mate,
Just quickly, Very close to finishing my finance degree and after learning so much about stocks over the past 8 months along with your blog and videos has opened my mind up to a whole new can of worms in terms of investing.
Firstly, I just wanted to say thanks for clearing a few things up with me that I was unsure about and secondly, I was wondering if you have like a template, like your net worth one, that you could send me. I’m looking at buying my first stocks at the end of the month (all my money is in a term deposit until then haha) and would like to use a template similar to yours to track my progress. No worries if you can’t just thought I’d ask.
Cheers
Riley
Firebug’s Answer
Hi Riley,
So glad you’re enjoying the blog mate 🙂
You can get my net worth sheet by filling out the below form and I’ll email it to you. I have removed all my personal details from it but you’ll get the picture.
Youtube video that explains how to use the net worth sheet.
-AFB
Question
My partner and I are currently paying an additional 50% onto our mortgage per month to get it down as fast as possible.
We are now looking into the option of buying an investment property. Is it better to keep paying down our mortgage at this rate or should we be putting that money into our offset for additional money for the deposit?
There seems to be a lot of information regarding first deposits and then allocating money to ETFs/shares but not a lot for second deposits. Any advice would be greatly appreciated!
Mary
Firebug’s Answer
Hi Mary,
I like to put down a minimum deposit of 20% to avoid paying LMI (Lenders Mortgage Insurance). Once this has been paid for investment properties though, I don’t like to pay any more off the loan. I dump all additional funds into the offset which gives me flexibility and easy access in case I need it.
The banks are currently making it harder though because they have jacked up the interest rate for I/O (interest only) loans and the difference between them and P/I (principal and interest) are becoming significant now.
If I were you, I would only put down a 20% deposit (to avoid LMI) and use the rest of my spare money to pay down the PPOR.
Why? Because your PPOR interest is not tax deductible but the investment properties loan interest is! I always want my loans to be backing an asset so I can claim it on tax.
Paying off your PPOR is what I would do.
-AFB
Question
Hello!
I’m a dual US/NZ citizen with no US savings and a small NZ superannuation. I now reside in Australia and am new to Australian superannuation. I am 51 and registering for the first time and seeking advice on preferred providers. It seems the FI community prefers Australian Super and Host Plus. Other suggestions, pros and cons? I started late and lost a significant amount of money when my late husband was ill, so focusing on intensive saving. I really enjoy your podcast and am excited to have found you.
Also, are there restrictions or considerations for me as a dual US/NZ citizen and Australian permanent resident when signing up for Self Wealth? I’m very keen to begin investing in EFTS/index funds.
Thank you,
Michelle
Firebug’s Answer
Hi Michelle,
Welcome to Australia! I’m sorry to hear about your late husband and financial losses. But as you’ve mentioned, it’s never too late to start! I’m definitely no expert in this area so I would like to preface this with not financial advice and also do your own research.
If I were you, I would find out the rule about when you are able to access your Super. Are you planning to retire in Australia and are you currently working right now?
If the answers to both of those questions are yes. I would look into salary sacrifices as much money up to the cap ($25,000) into Super because it offers the best tax advantages.
There are special rules for New Zealand citizens that you may allow you to transfer any Super between NZ and Aus. See this article HERE.
There’s Super for temporary residents leaving Australia also which you may want to look into.
Australia Super and Host Plus are great options. To be honest, I haven’t done a whole bunch of research in this area as Super for me is not going to help me retire early and I focus on strategies outside Super. But for your circumstances (nearing preservation age) I would be investigating Super options for sure. You can’t go too wrong for any industry Super Fund as long as the fees are kept to a minimum.
As for the SeflWealth part. Speak to the guys there (they are fantastic with support). I don’t know the answer to this specific query but they will!
I hope that helps
-AFB
Hey mate, you are late today!! Hahahahaha
It became part of my Friday morning routine to check this wonderful Q&A
Thanks for the great tips!!
Had a bit on last night haha. Thought I’d use the public holiday to get this episode up this morning but it came out a bit later than originally anticipated.
Isn’t it better to pay the IP deposit amount into PPOR redraw (redraw not offset) then withdraw it out to use for the investment property, thereby recycling the non-deductible debt into deductible debt?
This can work too. But be careful with this strategy in the current market. The banks are not releasing equity or redraw as easy as they once did.
Debt recycling can be used to great effect which I would like to cover in another post. But for this question, I’d thought I’d keep it simple.
I thought with Debt Recycling, you would need to take out a separate loan? Not just mere a redraw?
Yes, Fire Bug, please do one dedicated post about DR!!
Re your comment about current bank’s reluctance on releasing redraw, when I saw this, I was like holy [email protected] Have told my missus before not to make extra repayments, but to just put in offset..
I don’t think you need a separate loan at all. Unlike an offset, a redraw is considered paying down your actual loan, so when you re draw it back out, I believe it is now considered to be using equity from your home to invest, making it tax deductible.
I know the banks are making it harder to withdraw equity, but it would be pretty messed up if really is the case that you can not redraw funds out of an account that you paid money into over and above your minimum repayments into something specifically there for the purpose of being able to then “redraw” it back out. I suspect this may not be true but who knows in the current banking environment.
I would keep the money in an offset until ready to make the IP purchase, and then when ready to actually buy, call them up and record the phone call where they agree you can then redraw, then put it in and take it out immediately before they had a chance to change the rules. Not doing it this way just seems insane to me. You miss out on an assload of free money.
Haha. This has just widen my perspective on DR. But I guess my concern is the fact that now your detuctible interest is indistinguishable from your non duductible one. I know you can use a spreadsheet track separately. But just not sure whether the tax man will buy it lol
Have you bought more LICS now AFB?
Yep 😏
Next net worth update will reveal all
Hey Mate,
I stumbled across your blog a few weeks ago while I was mid way through setting up my own, I was surprised to learn there is already a thriving FIRE community in Australia.
Out of the half a dozen websites I now check weekly, I must admit that this one has been one of the most educational and inspirational for myself.
Please keep up the good quality content, it has been rather satisfying learning about shares as it is a whole new investment beast to me.
Regarding Michelle’s question, I would suggest she checks out the book by Barefoot investor as that has a lot of information that can help those close to retirement. Also to consider is the US foreign income source cap, as exceeding that means double tax may apply ie paying in US and Aus.
I got my net worth spreadsheet from thedeepdish.org
I’ve made my own mods since then but it’s a really great spreadsheet.
Hi. Love your blog. Just clicked on the Youtube link and it opens “How to Buy ETF’s” which is great, but I was hoping to learn about the Net Worth spreadsheet. Any chance you could update the link? Thank you.
I talk about the spreadsheet at the start of that video mate.