What would you do with this debt/income?

[Esel]

Please bare with me, this is my first post and i am a complete newbie to this forum and PI.

Partner and I have never considered property investment before this weekend (friend planted Idea...)and know nothing about it.

Basically, partner earns about 170 plus bonus of usually 30k (that comes once a year in a lump sum). I earn about 35k but we are planning Maternity leave so don't want to factor In my income. Our mortgage is about 750k. No other debt really but no savings either.

Basically, after tax and mortgage we have about 1200 a week of partners income, which we get through, plus my 550, which we get through. I can't believe we spend so much, no idea where it goes. We have one child.

Our aim is to buy a long term investment that will impact on our disposable income as little as possibe while reducing our income that's taxed at 44%.

1) what would your strategy be or what could we afford?
2) what kind of professional should we go to for advice?

Thanks for reading

 

[ChasingSugar]

Hi there,

Welcome!

What is the home worth? Have you had it evaluated? Bank should be able to do that at no cost to you.

Fairly high mortgage, but perhaps I have a different view on that coming from the suburbs.

If your chewing through all of your disposable income, I'd be concentrating on paying down that PPOR until you have a bit of disposable income on that single income (based on you going on maternity leave). If you can start saving say 500 a month, and have some equity, then you are probably in a stronger position to look at an investment property.

Also - you need to work out your end goal. What do you want and need in the future? Back engineer from there.

Good luck!

 

[Richard Feynman]

I'm curious as to why you have no savings, given a combined annual income of approximately $230k. Any reason?

 

[Esel]

Thanks for replying.

House was valued at 1.1m by the bank when we extended our mortgage last year.

Re no savings - We used to save/pay off our mortgage on our old cheaper place, then we sold it and bought this house and did a huge reno last year. This year we have had to furnish house, finish paying off bits and pieces of reno, bought $18,000 car and had long haul flights to pay for. We eat out a lot and don't particularly watch what we spend so there is probably a lot of fat to trim. Child care and babysitters take a chunk of my income.

I'm trying to convince partner to come to a financial planner but he thinks it will cost 1200 and so not worth the money.

 

[ChasingSugar]

Based on your numbers, 1200 seems very little to pay?

Sounds like you need to sort out your goals, budget etc. Don't necessarily need a financial planner, but some discipline and planning perhaps.

 

[ChasingSugar]

Actually, one thing that might just help you. Get him the book or audio book of 'The Millionaire Nextdoor'. This one was a life changer for me and was used to help set my goals and process.

 

[Esel]

We have tried budgeting before and have downloaded apps etc but we lose interest quickly. I think he is coming round to the idea of paying for financial advice.

Thanks for the tip about the book, will download it now.

 

[TMNT]

also might help but how old are you guys? or how long in the work force?

 

[pieman]

We have tried budgeting before and have downloaded apps etc but we lose interest quickly. I think he is coming round to the idea of paying for financial advice.

Thanks for the tip about the book, will download it now.

Unfortunately you need to analyse your personal spend and start cutting back. It's no good buying an ip without an idea of exactly knowing where all the money goes. I'd be tightening up, forgetting the ip and ripping into that super large non deductible debt of yours. Remember paying that down quicker or better still having an offset account equates to a guaranteed net investment of your interest rate - hard to beat in this market

Here's some cheap advice, find out where every cent goes , cut spending on unnecessary doodads and pay that debt down. Forget the ip for the time being

 

[BayView]

Please bare with me, this is my first post and i am a complete newbie to this forum and PI.

Partner and I have never considered property investment before this weekend (friend planted Idea...)and know nothing about it.

Basically, partner earns about 170 plus bonus of usually 30k (that comes once a year in a lump sum). I earn about 35k but we are planning Maternity leave so don't want to factor In my income. Our mortgage is about 750k. No other debt really but no savings either.

Basically, after tax and mortgage we have about 1200 a week of partners income, which we get through, plus my 550, which we get through. I can't believe we spend so much, no idea where it goes. We have one child.

Our aim is to buy a long term investment that will impact on our disposable income as little as possibe while reducing our income that's taxed at 44%.

1) what would your strategy be or what could we afford?
2) what kind of professional should we go to for advice?

Thanks for reading

As was said; analyse your weekly spending habits and find out where all that money goes.

Being property investors requires far more discipline and often a bit of sacrifice - especially early and without that you won't generate much savings (there were none mentioned).

Banks look at us all a lot differently since GFC.

I would look to save your entire wage until the maternity leave runs out for starters.

I think he is coming round to the idea of paying for financial advice.

That's one expense you don't need to incur right there.

Folks say free advice is bad advice, you get what you pay for etc.

On this forum, you will get the best advice - and for free.

My wife and I have never come close to $170k combined in our lives, but have managed to do ok (loss-making business notwithstanding) - and have 3 kids.

Not bragging; just hoping to make you understand how fortunate you are to even have one wage of $170k to play with.

I'll give you a weekly budget for free, but you won't like it. (It's our budget by the way )

Live on what we live on, and you'll smash it.

 

[skater]

Basically, after tax and mortgage we have about 1200 a week of partners income, which we get through, plus my 550, which we get through. I can't believe we spend so much, no idea where it goes. We have one child.

We eat out a lot and don't particularly watch what we spend so there is probably a lot of fat to trim. Child care and babysitters take a chunk of my income.

OMG!! That is a massive amount of money per week, to basically just flush down the toilet. I've highlighted the problem area for you.

Without knowing anything else about your lifestyle/income/goals, I can tell you right now, you don't need a financial planner. All they will do is get you to invest in shares. That's fine if that's what you want to do, but you really need to control your spending BEFORE you go committing more $ elsewhere. Besides, once the spend is controlled, you will have a lot more to invest.

The very first thing I would look at, is to start eating more at home, as a family. You don't need a babysitter for that, and it's a lot cheaper than eating out, not to mention better for you. Eating out should be a treat! Not something you do each day. So, maybe set a goal that you will have dinner out as a couple, once a week, the rest of the time you eat as a family.

Then, you can start looking at the rest of the spend.

Just as a guide, we are an older couple with an adult child still at home. I allow roughly $500pw for discretionary spending. That covers food, day to day expenses, Hubby's train ticket for work ($65pw) and entertainment. Now, some weeks we spend more, other's we spend less.

 

[Richard Feynman]

Thanks for the info about the no savings..

Actually, one thing that might just help you. Get him the book or audio book of 'The Millionaire Nextdoor'. This one was a life changer for me and was used to help set my goals and process.

This is a great suggestion. This book, read and comprehended, in tandem with tracking your spending (track every cent for a month or two minimum) will be a very good first step. Keep reading the forum and asking questions too. Once the spending/mindset are in order and under control, you'll be in a much better position to move on to the next step.

You are hemorrhaging money into a black hole at the moment.

 

[Aaron_C]

First get your budget under control then see a broker to work out your borrowing capacity and go from there.

 

[Esel]

Ok, I get it, we need to save. We can do that. Then what?

As I said earlier after id thought about it a bit, we've had a lot of expenses this year that I wouldn't expect every year, mostly to do with setting up a home (blinds, sofas, heating, cooling, appliances etc...). Plus, we have spent much more on one-off medical and dental expenses than we usually would (more even than the year i was pregnant and had a baby). So it hasn't all been bars, restaurants and babysitters. Next year we will be saving.

In previous years we have just paid extra on the mortgage and made sure we have no other debt. The bank thinks we have about $350k of equity.

So we should just keep saving? Thats what my nana said. i was hoping for more exciting advice than that.

 

[Nemo30]

I would follow Aaron's advice - sit down with a broker and find out how much you have to play with.

You have a mortgage of $750k against a $1.1m property.
Keeping in mind you dont want to go above 80lvr you have about $130k in equity.

Once you know what you can spend, you can think about options.

 

[kathryn d]

Start tracking all your spending for a month. This will quickly show you where all your money goes. You can't fix, what you dont know.

$1200 a week...we don't spend that in a month...even when we are back in Canada, living our 'normal' life.

You don't need a financial planner.
I'd concentrate on paying off all personal debts and PPOR first.
Except paying for childcare, bank your cheque, and live off your partner's income.

A budget needs to be something you and your partner agree on, or it won't work.

 

[skater]

I would follow Aaron's advice - sit down with a broker and find out how much you have to play with.

.

I think that's a bit premature. It's no good jumping in & buying something just to be buying something. Sometimes it's not a good idea to use the equity.

Work out where the money is going should be step 1

Work out how much you can comfortably save, and at the very least, you should be looking at not using your wages at all. This then gives you options if you wish to give up work later on to be with the kids.

While doing this, read, read, & then read some more. Be a part of the forum & learn as much as you can.

THEN, and only then, start talking to brokers etc. When you know how much you can afford, and you've gained a little knowledge to go with it. This is the 'exciting' advice that you want. It's no good for you until you have the knowledge and discipline to put it to good use first.

 

[Esel]

also might help but how old are you guys? or how long in the work force?

We are mid 30s. Started careers about 10 years ago after uni/travel.

 

[Esel]

We should be able to save 30-40k next year if we don't spend my wages or his bonus.

I will also see if we can live on $1000 a week after mortgage in jan/feb. if we can that means we would be able to save about $200 a week of his income. Does that sound doable?

 

[kathryn d]

We should be able to save 30-40k next year if we don't spend my wages or his bonus.

I will also see if we can live on $1000 a week after mortgage in jan/feb. if we can that means we would be able to save about $200 a week of his income. Does that sound doable?

If this is too personal, I understand...
What do you spend $1000 a week on?