Author Topic: Case Study - Aussie looking to make "employees" work.  (Read 2273 times)

AussieLad

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Case Study - Aussie looking to make "employees" work.
« on: February 12, 2017, 11:11:17 PM »
Hi all,

After some useful advice from strangers on the internet regarding the best use of my $$ currently sitting idle.

Life Situation:
Recently married, mid 20's, working full time, renting $350/wk currently in Adelaide metro area. Liking the idea of "hardcore saving".
Have ~$100k sitting in a savings account (1.9%).

Starting to look at the idea of purchasing a house/land (for PPOR or IP).
Though perfectly happy to keep renting if that's the better option for now.

Gross Salary/Wages:
Earning $75,000 with a fully serviced/fueled car on top.
Wife graduated uni end of 2016 and in the interview stage for a few jobs in the $50-60k range.

The question:
- What to do with the ~$100k? (And future savings).

Is it better to:
- Jump into the housing market ASAP?
- Find a better savings account (3.0%) before placing a larger deposit?
- Invest - like the look of a 50/50 split with VAS&VGS?

Thanks in advance!

Adram

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Re: Case Study - Aussie looking to make "employees" work.
« Reply #1 on: February 14, 2017, 05:54:55 AM »
Hi mate,

Welcome to the forums. I'm also from Adelaide 😃

These are questions that are very hard for anyone else to answer because it all comes down to your priorities in life.

If you are looking to buy a house soon, the best thing isn't to chuck the 100K into the market, as markets can drop just as you need the money. Best to decide whether you want a house, how many kids you plan to have, and how big it needs to be, before deciding on what to do with the cash.

JLCollinsnh.com has a good article on why renting is better than buying. Not sure i agree with him, you may however. He also has a great stock investment series, if you havent read it.

if you can find a better interest rate on the savings while deciding, no reason why you wouldnt do that.

VAS & VGS is a pretty common combination here, with maybe a bit of emerging markets in there. People also do a few things to diversify more as the Aust market is pretty concentrated. Maybe look at the EX20 etf, or some of the LICs such as WAM.

Personally i bought a house in inner west a couple years before finding MMM. Planning to pay it off ASAP and then boost the investing more.

Whether you go the housing route over the stock investing is totally up to your preferences, but i would suggest that there is no hurry, and plenty more to read before deciding. Good luck 😃


AussieLad

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Re: Case Study - Aussie looking to make "employees" work.
« Reply #2 on: February 14, 2017, 03:24:23 PM »
Whether you go the housing route over the stock investing is totally up to your preferences, but i would suggest that there is no hurry, and plenty more to read before deciding. Good luck 😃

Cheers mate, I was assuming this was going to be general gist of an answer (even though was somewhat hoping for a magical answer I could follow blindly hehe).
Will have a look at that JLCollinsnh.com article.

Have only really spent the last month reading every FIRE article I can get my hands on (and loving it) - lot's more to read I imagine.

Haha, nice to know there is another in Adelaide!


actionjackson

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Re: Case Study - Aussie looking to make "employees" work.
« Reply #3 on: February 22, 2017, 02:25:39 PM »
I'm big on renting in Australia - even the RBA says that renting and investing in other assets, vs. buying, is pretty much on par. At least with the former, you have the flexibility to move for work opportunities.

- https://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-06.pdf

I'd also suggest reading this article about Australian debt levels as a % of GDP - it's sobering - http://www.theaustralian.com.au/business/opinion/adam-creighton/higher-australian-household-debt-mounts-to-unsustainable-levels/news-story/be4ab3a4286cb0e802f2f396e8a126e7

To me the potential downside risk of the market in Australia is high.

I lived in Ireland when I was out of University, back in 2008. I watched their market crash, and knew plenty of people who had bought into property, who ended up in negative equity. Those Irish who were not locked down to property, moved overseas to where they could find jobs. The others remained, chained to their mortgages for houses, living a pretty depressing life, earning less money than they used to.

If you knew it was definitely going to be your PPOR for the rest of your life, I'd think maybe buy. But you're mid 20's, so that's definitely not a certainty, even if it feels like it may be now. I just think, why take the first $100k that you have saved, and throw it into one highly illiquid basket?

It's tough though - everyone around you is going to harp on with platitudes like 'Rent money is dead money', 'God isn't making any more land' etc. etc. Everyone in Australia that I talk to thinks that property prices won't go down, they might just 'sit flat' for a while. I live in the states now, and they just laugh when I tell them this - it's exactly what they thought.

Worst case scenario is that I'm wrong, and the Australian property market never tanks, and I make money on my stock investments anyway.