I have been reading the MM blog and this particular thread, among many other sources, in recent months as I try to provide myself with a financial education. My wife and I have been discussing the bigger picture and I would really appreciate some feedback/wisdom from these parts!
Background:
I am 37, my wife is 30. We moved to Australia from Ireland last year. We live in Sydney. Both working full-time. I earn $125,000 and she earns $90,000 (both ex super). At the moment, after rent and all other expenses, we manage to save $5,000 monthly. We have a budget and minimising outgoings is a continuous project. Happy to report we're on the same page when it comes to what we want out of life, including financially.
We came from Ireland with very little, around €50,000 in pension funds left behind and some 'get started' money. We plan to stay here in Sydney and are planning accordingly when it comes to our finances. I have no idea if (and how) we would transfer that Irish pension money into Super, but that's another day's work!
We have managed to save $63,000 dollars to date, all of it an ING savings maximiser account. We have no debts (bought a car cheaply here with cash).
Our main goals:
- To start a family (hopefully next year)
- To provide for our future here in Australia
Our main challenges:
- Starting a family is expensive in so many ways - lots we don't even know about yet! (Loss of earnings, childcare etc.)
- We are on the back foot already when it comes to Super, savings etc. given our respective ages... especially mine!
- Property prices in Sydney
In our favour:
- We have good jobs
- We are committed to each other and our future together - willing to make sacrifices
We have discussed the following in terms of our approach:
- Building an emergency fund for unforeseen events (can come from existing savings)
- Happy to keep renting for the foreseeable future as to buy reasonably close to where we both work would be far too expensive. The median price for a basic two-bed unit is comfortably more than $1 million. Renting that same unit costs around $700 per week. To move to a place where that same unit costs $800,000, for example, we would both spend three hours plus a day commuting and these areas are also far more exposed in a downturn. There's also the issue of building the required deposit (we wouldn't feel comfortable at less than 20%). Overall, we are not comfortable with planning to purchase right now, but not ruling it out at some point in the future - if the stars align!
- Considering salary sacrifcing to Super, especially for me, to kick start that fund. If (hopefully when) my wife has to go on maternity leave and all that follows, I could also contribute to her Super to keep it moving forward. We are aware of the concessional cap and I could try make the most of it, especially if there is a pay rise in my future.
- Investing money for the future. This is critical for us, I feel. Obviously this is an area where people can debate ETFs and approaches all day long, but ideally, I would like to keep this as simple as possible, especially as we are interested in a set and (not quite) forget long-term option(s), where we are contributing steadily and consistently towards a future income. In this regard I think one of the old-school LICs while not very exciting may be a suitable option for us, using a dividend reinvestment plan. Vanguard, of course, is another popular option and offers the potential (if we were exposed heavily to Australia via an LIC and Super) to diversify somewhat and focus more on capital growth (again using a DRIP). These would be investments we intend to not even consider touching for at least 20 years. Despite my slight misgivings about the market right now, I am not interested in trying to time it, but just getting started.
- Last consideration is IF there is income left after we build an emergency fund and start investing for our future (via salary sacrifice to Super and otherwise, as outlined above) should we also looking at directing some of our income to a high interest bank account for slow and steady home deposit building, so that it remains a live option for us, despite us feeling the time/market etc. is not right at the moment (and we don't have enough cash!). Homes in Sydney will never be cheap and, who knows, if we decide to move elsewhere in NSW or Australia some day it could be useful then too.
Thanks for reading and, in advance, for any thoughts you share.