Kiwi Case Study-Where to Next?

[Kiwi Mustache]

Life Situation:
I'm male, 27 and about to start a new job and find a new house/room to live in and share with flatmates/housemates. I'm single, previously engaged and actively dating to find a compatible partner. I live modestly but splurge every now and then on experiences that I get lots of happiness from. I'm not materialistic at all. I've been interested in finance and investing for over a decade.

Gross Salary/Wages:
My new job that I'm starting in late January is $60k NZD. I've previously been on $54k for the past two years.  My take home pay will be $46k after taxes and kiwisaver.

Pre-tax deductions:
I'm in a nationwide superannuation system called kiwisaver, which puts 3% ($1800) into annually.

Other Ordinary Income:
I get approx $600 dividends pre tax/$400 post tax annually from my share portfolio.

Rental Income, Actual Expenses, and Depreciation:
I own an investment property that is negatively geared approximately $6k annually. Most people will look on this as a very bad decision, but in Auckland where I live, practically no freehold real estate is neutral or positively geared. I could invest outside of Auckland, but I choose not to as I consider Auckland to be the hub around which New Zealand grows.

Adjusted Gross Income:
$40.6K

Current expenses (Monthly):
Rent: $693
Share of Utilities (electricity/water/internet): $95
Insurance (car): $14
Mobile Phone: $29
Food: $672
Petrol: $246
Car Related Expenses: $28
Health/Medical: $24
Clothing: $34
Dining Out/Restaurants: $43
Travel/Experiences: $112
Gym/Cycling/Hiking Costs: $94
Birthday/Xmas Gifts: $23
Total Expenses: $25k
Total Savings: $17k (40% of take home income)

Assets:
Investment Property: 750k
Stock Portfolio: $16k
Kiwisaver (accessible at 65 years old): 24k
Money in Bank Accounts: $400

Liabilities:
Investment Property Fixed Loans: $590k
Investment Property Flexible Credit Loan: $44k

I'm going to be taking home $3.4k more each year with my new job. My living expenses should stay the same or decrease this coming year. I can particularly cut down on:

- Eating out (these were going on dinner dates).
- Travel and experiences (included sky diving and a few other blow outs after my relationship ended).
- Clothing (which I required for new hiking boots and work clothing).
- People may say my food expense is really high for a single person, which works out to be $155 per week. However, I do 2-3 hours of exercise a day, so eat a lot of food. It's fruits, vegetables, meats, tubers, nuts, etc so not cheap packaged stuff.

My goals for 2016 are:

- Save 20k of my take home income of $46k (43.4%)
- Get my revolving credit mortgage down to 30k
- Beyond that I would like to buy another investment property or my own home (if I have a partner by then) in 3-5 years time based on forecasts for my income to grow and capital growth in my current property.

I feel like my next goal is to buy a second rental which is 3-5 years away so wondering what is next in terms of things to continually improve on. My long term dreams are to have enough income/assets to allow my future wife to stay home to raise children if she chooses to and also to be able to travel overseas in my 40's/50's when my future children are grown up as my parents have done.

[former player]

Hi there, Kiwimustache.

Everything looks pretty good, except that investment property.  Do you have a date in mind for when you stop losing money on it?  Is it a property you would ever move into, for instance when you have a partner/family, so that it has value to you over the purely financial?

I would strongly suggest not getting a second rental while your first is losing money, particularly if you are going to add the expense of a family at any time.

Otherwise, carry on with the good work.

[MonkeyJenga]

- People may say my food expense is really high for a single person, which works out to be $155 per week. However, I do 2-3 hours of exercise a day, so eat a lot of food. It's fruits, vegetables, meats, tubers, nuts, etc so not cheap packaged stuff.

Is there any other way to cut this down? It's 8k a year, which means saving $200,000 just to support food spending.  That's around 10 years of predicted savings. Do you buy organic? Throw food out? Pay close attention to sales, buy bulk, cheap cuts of meat, in season produce, etc? I would be very motivated to figure out options here. (And was, I had even higher spending. I stalk leftovers at my work and have considered gleaning.)

[Sparkie]

I've never really understood the Aus/NZ facination with negative gearing.  Why invest in something that loses money, so you can save some tax on your earnings?

Ultimately, any investment is there to provide a future income once you stop working. So if it isn't producing an income (its currently costing you $6k) whats the point. Speculating that someone will pay more for it in years to come is just speculation, especially when you buy in after years of price increases.

If I offered you a partnership in my new business, for a buy in figure of just $500k, the first thing you'd ask is how much profit/ money you'd make. If I told you it'd be nothing; infact we'd be losing $6k a year but you could get some of that back in tax, would you still be interested? Would I be able to convince you by telling you I hoped to sell the business in a few years and get our money back?

Like I said, I dont get it. Each to their own, but I'd be ditching the debt, saving, and investing surpluses. Leveraging up on property that loses you money seems odd.  Sell it, invest the $100k equity in something that actually produces a return, and you'll be better off.

[kiwigirls]

Hi  IMO Food and petrol costs look high and are an area you can focus on if you want to increase savings.   Reducing your spend on meat might help, eating seasonally etc.  Petrol cost is high - do you have a reasonable commute to work?  Have you considered moving closer so you can bike to work?  You have a flexi facility so the best place to put your savings this year is on the flexi facility to reduce your debt.  With our (omparatively high)interest rates its hard to beat the tax free risk free return of paying down debt.