How does David or ‘Rachael’ or ‘Jodie’ or Tanya pay down their 500,000 mortgage?

Yes this is the question we have been asking since we spoke to all four families in recent weeks? They also have families with David having 3 daughters & Tanya & ‘Rachael’ each planning to increase from one son.

Lets revisit Making your dreams come true the six secrets to Financial Freedom to help you realise there is a way out of DEBT faster.

We know that families need at least 5000 per month to live on without any extras such as following Junior Masterchef to Disneyland. That is 60Kp.a. + after taxx just to meet reasonable basics.

A 500,000 DEBT [i.e. 4 letters] is designed to take 25 years and on a bank website that means 3,695 p.m. @7.5% on a standard variable home loan. Total interest paid over the loan is 608,486 according to the site. When we add the 500,000 principal that is a lotto prize 1.1m going to the bank.

Hence the advice we took 30+ years ago to buy bank shares. Profits this year for the big 4 banks have been 6.3+ Billion each. Thank you.

Remember also that DEBT might last longer than the relationship & hence there is much less time if any were to start again.

Hence David or ‘Rachael’ or ‘Jodie’ or Tanya need to earn 105,000 after taxx to survive & to pay down their DEBT in 300 months.

At the end of 300 months what will they have? They might have paid off the house if they haven’t renovated or moved house or replaced the car several times.

Of course they will have their super. However their super won’t be much as the average retirement lump sum  today is only 154K. As David & ‘Rachael’ & ‘Jodie’ & Tanya are 30 to 40 then yes they will have much more. They might even have in today’s numbers another 500K, the governments ‘benchmark’.

So they supplement the aged pension with say 25K p.a. from their super. Are they all working so hard for that outcome?

Let’s be very aware that big government makes the rules & super suffers from legislative risk & it is very possible it may be later changed so that it is only  used as an income stream. I.e. no lump sum to pay down the remaining DEBT.

It also has preservation rules & can only be accessed with difficulty e.g. after 26 weeks of Centrelink payments.

Hence David & ‘Rachael’ & ‘Jodie’ & Tanya need to revisit their thinking. They could always do as Lisa our taxx agent suggests i.e. rent their best friend’s house next door.

Yes that would make their DEBT taxx deductible. However that option would be for very few. There are others who suggest a SMSF with an investment property in it. We have heard of such in the booming mining areas but what happens when the mine, as they do by definition, is finished. Banks also require a LVR of > 50% for such loans. Remember houses are ‘like spouses they require money & makeup.’

So how do you have the taxx man subsidise your DEBT?

If David or ‘Rachael’ or ‘Jodie’ or  Tanya need 104K net of taxx then they must earn a gross 145K. They must pay 34.2kp.a or 855K in Taxx to the ATO  over the next 25 years.

What happens when ‘Rachael’ & Tanya take a pregnant pause. Does the bank do similar?

Yes there is a solution to their challenge & it is our PCMS or personal cashflow management system. It isn’t suitable for many as the above numbers suggest a family income of 150K. We need some saving to capture & maximise.

We don’t like rental property with another big DEBT & do tenants pay the right rent & care for your asset? Hugh just now told us that his rental property sol for 310K & not the 390K estimated 3 years ago.

Of course most are in this position & it is in their best interest to not leave it until it is too late as we believe this real life case is.

Why not read our ‘Making your dreams come true. The six secrets to Financial Freedom’.

Make it happen & Make a Plan & we have been suggesting this strategy PCMS  for 17 years.

Welcome to call us on 07 3848 1088 or email or visit our websites

John McAuliffe