House has almost been paid off... Where to now? (Aussie)

[nas555]

Hi all,

I'd appreciate any advice you have for me - My wife (32) and I (28) have a bit over a year left until our Melbourne property (which we live in) is paid off.  I thought it was about time to come with a plan for what to do next, now that I'll have to actually start thinking about how to invest my money rather than just throwing it in our offset account!

We've got a few long term goals we're trying to achieve:

• Eventually purchase a bigger place - we both enjoy our small apartment and are in no rush to do this, but we would like a bit more space some day.  Unfortunately this is difficult in Melbourne since we like living close to the city, so we would be looking at $1m (or potentially more) for this
• Early retirement - both of us would like to retire by the time we turn 50, and potentially transition into part time work earlier (perhaps by the time we turn 40)
• Take a 1 year career break (at the same time) within the next few years or so
• Keep spending money on the things we enjoy! (travel/sports/hobbies/etc)

Here's a high level summary of how we're looking (figures are per month, income is after tax and does not include employer super contributions).  Luckily our expenses will continue to drop off as the interest payable each month on our mortgage gets smaller:

Household Income: $11,000 per month (I earn $92k before tax, wife earns $83k, and we receive some share dividends)
Household Expenses: $4,000 per month

Assets:
        House (owner occupied): $450,000
        Cash in offset account: $210,000
        Shares: $21,000 (Mostly VAS and some shares from a company share plan)
        Superannuation #1: $45,000
        Superannuation #2: $85,000
        1x Motor vehicle: $8,000

Liabilities:
        Mortgage: $315,000

I've been mulling over a few scenarios - paying off our current place and then start investing in the share market, buying a larger property and renting it out for a few years before moving in, perhaps even salary sacrificing in superannuation (although government tinkering makes me a bit reluctant to do this), etc.

Any advice would be much appreciated - thanks!

[Kyle Schuant]

I think, fellow Melburnian, you didn't get any answers because you didn't say what you wanted to achieve. With savings of $7k a month you can do all sorts of things. It's all about what you want to achieve, for example do you want children? An investment you can live off in years to come? Open a business and employ others? Further your education? Change careers? Take a sabbatical as you mentioned? etc.

Nobody can tell you how you should live your life, once you decide then we can tell you how best to achieve it.

[Goldy]

It seems to me that you will need to pick one of your dreams and go for that.  Do you want to retire early or do you want to upgrade your house to a 1M city dwelling.  What is the interest rate on your current loan?

[Luckyvik]

Think about salary sacrificing up to the 25k/yr cap each to build your post 60 stash. Hard to beat paying 15% tax in super vs 34.5% outside (37k-87k tax bracket), instant 19.5% return, better in your pocket than in the ATO's.

 The govt is not planning on increasing tax on contributions anytime soon. What's the worst that the govt can do, charge you the same as what you pay in tax now? Unlikely but that's the worst case scenario.


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