Help with what to do with a windfall

Hi Guys and Girls,


I'm a long time lurker, dropping in and out to read the enormous amount of valuable information and discussions posted on this forum.

I've finally set up an account and I was hoping to put a question or two to the forum as i've found myself in a rather fortunate scenario.

Basically, ive come into some money after joining a new company and i'd like some advice on what people would do if they were in my situation.

Some details:

I'm 32y.o, married, no kids

I owe the bank about 550k on my PPOR, it's probably valued at around 650-700k

I have $1.4mill worth of stock in a public company. $700k of this stock is escrowed till i retire.

At the end of June I will have the chance to sell 50% of my holding in this stock if i wish to. This non-escrowed component of my holding can be sold at any time after June.

I have a loan of $120k for this stock.

The stock was purchased in Dec 2013.

Basically, I was wondering if I could please get the boards opinion on what they would do if they were in my position.

The main thing I was considering doing was to sell the 50% non-escrowed component in Dec 2014 (after holding stock for 12 months for tax purposes) and along with our savings pay off the mortgage on our PPOR

not very sexy, i know, but paying off all our non-deductable debt seems like a smart, albeit conservative thing to do?

We would then have no debts and a lot more disposable income to invest rather than sinking into the mortgage.

Anyway, I'm very interested in hearing the boards thoughts on various other options etc. All advice is appreciated.


-please advise if you need any further info to help give advise


Thanks a lot.
 
Do you have any other debts?
What goals do you have? ie are you looking to retire soon?

Getting rid of the mortgage maybe an ok step dependent on the above. Alternatively, it could offset the mortgage meaning your repayments drop significantly while you work it all out. If it were me, I'd rather use it as downpayments on multiple investment properties so as to broaden the asset base which will lead to early retirement.

Sitting with a mortgage broker to work out what scenarios are possible might be a good idea.
 
Thanks for your response mate.

No other debts, just the home loan and the loan on the stock itself.

Aside from my PPOR and this stock i have no other assets.


-My profession is one with a very secure income. My income in 2yrs will be approx 500k/yr. My wife will be making around 100-150k/yr for the next 5 yrs or so and then will be in for a pay jump into that 500k/yr range.

-I do have lofty financial goals, but primarily I am working towards my "dream home" PPOR. In Adelaide, this would likely cost around $3million. This is more important to me than having a stable of IP's. I recognise this is not the smartest thing to do from a wealth creation point of view. Of course, if i can do both, then that's great.

I suspect this goal of mine will be scoffed at from forum members.

-I prefer "set and forget" investments.
 
I'd be concerned about holding that much money in a single stock, so I'd be selling half at the very least to diversify. As DT suggests, putting the proceeds in an offset account while you think about other options to invest it.
 
Pay off PPOR, take out LOC against PPOR invest in IP or Diversified stocks, buy and hold, reinvest income/dividends, pour in your excess job income from you and spouse and in 10 years at the $ you are talking you will be laughing. Purchase dream PPOR and you will still have plenty of income producing assets and huge asset to LOC against if you want. That's how my simple mind sees it. No warranty! :)
 
Not enough information to give give advice on the shares. The stock you own has either skyrocketed in value from $120k to $1.4m in a few months or you have been gifted the majority of the shares. To sell or hold the stock depends on the quality of the company and how you think it will perform in the future - we have no idea unless you name the company. I'd speak to a professional if I were you.

Your family income will shortly be $1,000,000 p.a, this income will put you amongst a very very very very very small percentage of the population. Why worry about selling the shares to pay your PPOR debt - they will both be chicken feed to you soon. Just wait a couple of years and pay out your home loan with the cash from your income, borrow some more money and buy your dream home and more investments. Repeat and repeat and repeat and so on.

With all due respect to you and the forum members - someone about to earn $1m a year should be seeking out the best financial advisers in the country and get a loan term financial plan in order.
 
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Not enough information to give give advice on the shares. The stock you own has either skyrocketed in value from $120k to $1.4m in a few months or you have been gifted the majority of the shares. To sell or hold the stock depends on the quality of the company and how you think it will perform in the future - we have no idea unless you name the company. I'd speak to a professional if I where you.

Your family income will shortly be $1,000,000 p.a, this income will put you amongst a very very very very very small percentage of the population. Why worry about selling the shares to pay your PPOR debt - they will both be chicken feed to you soon. Just wait a couple of years and pay out your home loan with the cash from your income, borrow some more money and buy your dream home and more investments. Repeat and repeat and repeat and so on.

With all due respect to you and the forum members - someone about to earn $1m a year should be seeking out the best financial advisers in the country and get a loan term financial plan in order.


Thanks for replying mate.

-I was offered the shares at a significant discount as part of recruitment

-In answer to your question about selling 50% of the stock to pay off PPOR, i guess it's just to give financial flexibility immediately and prob due to non-tangible reasons like the psychological bonus of not having a home loan etc. bit of a fluffy reason, i know.

-i agree with your last point and I will def seek some professional advice as well. I was just keen to get some general advice from the forum so i can arm myself with some more knowledge and info prior to meeting financial advisors etc. I'm also, rightly or wrongly, very apprehensive about financial planners giving advice that serves their own interests etc, so the more information and knowledge I have the better off i'll be with regards to deciding which road i'd like to go down etc.

cheers
 
Paying it off isn't a bad idea, you could then borrow against the home and use it for investments, turning non deductible debt into deductible.

Agree with seeking out the best advice, when you're playing with big dollars it is well worth doing so. My net worth has grown significantly since doing exactly that, you have the ability to not play by the same rules as most people so you should do exactly that.
 
Paying it off isn't a bad idea, you could then borrow against the home and use it for investments, turning non deductible debt into deductible.

Agree with seeking out the best advice, when you're playing with big dollars it is well worth doing so. My net worth has grown significantly since doing exactly that, you have the ability to not play by the same rules as most people so you should do exactly that.


Thanks mate.

Where do people suggest going to seek "the best possible advice" ?

I take it people usually see someone based on word of mouth?
 
Thanks mate.

Where do people suggest going to seek "the best possible advice" ?

I take it people usually see someone based on word of mouth?

Yeah word of mouth is how I found them, basically seek out people significantly more successful than you and find out who they use and trust, it might take a whole to find someone you gel with though.

I like to get advice, both paid for and free, from people who have a lot more experience and money than I do

Just a tip though, you will need to handle yourself well as people generally are pretty careful with who they recommend their advisors too, they want to know you'll do the right thing by them.
 
Clearing your personal debt on the mortgage can be a very prudent first step. It will free up your current cash flow and equity position to rapidly implement an investment strategy, without the noose of constant non-deductible repayments.

While doing this however, it would be practical for you to sit down and map out your investment plan. Establish your goal, where you currently are and work out which investment strategy will help connect these two points as effectively as possible. Without a clear strategy, you can be at risk of using the scatter-gun approach. That may be OK for average investors, but it provides average results.
 
Clearing your personal debt on the mortgage can be a very prudent first step. It will free up your current cash flow and equity position to rapidly implement an investment strategy, without the noose of constant non-deductible repayments.

Thank you for the advice.
 
Hi JP.

If you old the shares what would you lose in CGT?
Without selling you ocould probably pay out that home loan in 1 to 2 years anyway. Do you think this is possible?
 
what do you mean by this?

Basically I will only ever recommend someone who I know will not mess around the person I'm recommending them to. Eg, if I feel someone will not treat say my accountant or designer well I simply will not recommend them.

In return the people I work with know that if I vouch for and recommend someone that it is highly likely to be worth their time and it works for everyone.
 
Not enough information to give give advice on the shares. The stock you own has either skyrocketed in value from $120k to $1.4m in a few months or you have been gifted the majority of the shares. To sell or hold the stock depends on the quality of the company and how you think it will perform in the future - we have no idea unless you name the company. I'd speak to a professional if I where you.

Your family income will shortly be $1,000,000 p.a, this income will put you amongst a very very very very very small percentage of the population. Why worry about selling the shares to pay your PPOR debt - they will both be chicken feed to you soon. Just wait a couple of years and pay out your home loan with the cash from your income, borrow some more money and buy your dream home and more investments. Repeat and repeat and repeat and so on.

With all due respect to you and the forum members - someone about to earn $1m a year should be seeking out the best financial advisers in the country and get a loan term financial plan in order.

Must be two doctors
 
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