Golden opportunity?

Hi all

Here's a short and sweet comment from Martin Hawes, on whether we should take up Matt's opportunity to join the workplace savings scheme.

Steph
This is the breakthrough you have been wanting – a great chance to get ahead. Think about the opportunity: someone is prepared to give you a dollar for every dollar that you invest. That is a good deal!

You have to find a way to do it. Employer-subsidised Super Schemes are one of the exceptions to that rule of paying off your mortgage before you start to invest. Do not turn down an opportunity like this.

Martin

Couldn't be much clearer, could it? I'm feeling quite enthusiastic about this now!

Steph

Week 5, Question 2

So it’s “no” to term deposit saving and “yes” to upping our mortgage payments.

Your votes made the decision clear on this one but thanks also to the helpful feedback from Martin, tiktok and JB.

However, Matt’s employer has just thrown a spanner in the works (potentially a nice spanner, though!). He’s starting up a workplace savings scheme and has offered everyone a place in it. The deal is Matt can contribute up to 3% of his gross pay each month and Matt’s employer will match it dollar for dollar.

So that would take care of our surplus (around $2,000), but could be a better option than putting it into a term deposit or even the mortgage? Or maybe this just isn’t the right time for us to be looking at retirement saving?

Martin Hawes will give us his view later this afternoon.

What do you think?

Steph

Budget update etc.

Hi everyone

In response to tiktok’s comment we’ve put up some screenshots of the revised budget we worked through on Sorted’s Budget Calculator. More income and less spending!

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But is there room for some saving? Here’s Martin Hawes’ view:

Steph

Having money in the bank while you have a mortgage is a really bad arrangement. In effect, you are lending the bank your money (the term deposit), the bank puts a profit margin on and then lends the money back to you.

The result is that while you’re paying 9% interest on your mortgage, the bank only pays you 7% on your term Deposit. Then, of course, the IRD takes its share of the interest you are being paid and so you end up getting around 5.5%. That is not a good deal.

You are much better using any spare money that you have paying off the mortgage. To be better off you would have to get over 9% after tax from an investment – that’s not easy and would certainly mean taking some risk.

There are some exceptions, but most people are better to clear the mortgage before they start to invest.

Martin

Oh well, doesn’t look like such a smart plan at this stage after all. But let’s see where your votes take us.

Steph

Week 5, Question 1

Phew, that was close! Your voting was pretty much 50/50 all the way on whether I should start paying off my student loan or not. But the weight of opinion in your comments has pushed me away from doing this, for the time-being anyway.

We’ve done some more work on our budget. After keeping track of our actual spending in the last month, we realised we'd over-estimated some of our expenses like baby clothes for Caleb (we've managed with the bagloads of hand-me-downs from his cousins so far!), and luxuries like wine and takeaways. We've also decided not to spend any money buying new appliances this year - that new dryer will have to wait.

The result is that our budget calculations on Sorted now show a projected surplus of around $2,000.

So the next question is, what should we do with it? One idea we’ve had is to get into the “saving habit” again and put away $50 each fortnight from my pay.

Then at the end of the year, along with the $700 left from our emergency fund, we’d have $2000 to put into a term deposit and start earning some interest for a change. The other option of course is to put the same amount of money onto our new fortnightly mortgage repayments.

So it all boils down to whether we should start saving a little now or pay more off our debt … what dya reckon?

Steph