Wave Your Wand

Hi Scott,

My wife and I, both 43, are having a difference of opinion. We owe about $8,000 on our mortgage and have $60,000 in cash. I hate debt, so I want to settle the mortgage right now. But she wants to take the cash and redraw another $150,000 off the mortgage to get wealth-creation cracking Barefoot style (we have only $150,000 combined in super at the moment). Yet in 12 months when we stop paying for childcare, we will be able to free up another $1,500 per month. Please, please wave your wand and make my wish come true!

Dom

Hi Dom,

Well this is interesting. In most cases that I see, it’s the husband who’s the risk-taker and the wife who’s wanting to put the brakes on. So let’s play a game of Family Feud. I’ll be Grant Denyer with the cheesy grin.

You said that you ‘hate’ debt. So your wife needs to understand that borrowing money against your home to buy shares is probably going to raise your blood pressure. If you don’t feel comfortable doing this, don’t do it. Besides, the good news is that you don’t need to take on more risk -- with your home paid off at such a young age, you’re going to be fine.

The biggest trap you can fall into at this point is upgrading your house or your lifestyle. If I were in your situation -- and planning on living in your place forever -- I’d do the following:

Pay the mortgage off immediately and get your title back.

Take the family on a holiday and celebrate your biggest financial achievement. You’ve earned it.Keep $15,000 in an online saver account for Mojo, and then put $30,000 into two investment bonds for your kids’ long-term future.

Then what? You could set yourself up for a multi-million-dollar retirement by salary-sacrificing $25,000 each into low-cost super funds and invest anything over that into shares (either through a family trust or in the lower earning spouse’s name).

Scott