So I have just recently come across this blog and the whole idea of being a mustachian.
As a result, I have started to make many changes to my families life - I have gotten a mortgage off-set account to help pay off my home loan sooner. I have called my ISP and managed to get $20 per month cut off my bill. I am still far from a full mustachian lifestyle, but I think for any lifestyle change to last beyond a couple of months, small baby steps are needed.
Anyway, #1 priority is to dump all of our money onto the mortgage and get that paid off ASAP.
We still owe $220k on that (we have a 3br, 2 bath unit) so the idea is to get that all paid.
I have zero knowledge and/or experience of investing money beyond having a couple of term deposits at various times. The forums have been a help, but a lot of the abbreviations and jargon can confuse me:)
I am trying to learn about investing and have done a little bit of reading (with lots more to come) since discovering this blog and way of life.
So my long winded question is:
In Australia, we get taxed on dividends at income tax rates (as far as I know) so obviously investing in shares that pay dividends may not be the best thing.... I understand the need to diversify your investments.
I am a little confused about the 4% withdrawal rule and the investing in index funds.... does it basically work that say if I invest $1m in index funds, I withdraw 4% of that to live on for the year ($40k), but ideally I will be making more than 4% on returns from my index fund, which get re-invested into the index fund so I am never actually touching my principle. Is this correct? Am I missing something?
Thanks