Q
Iam37andamastay-
at-homemumwithno
current plans to return to
work.Myhusbandworksfull-time
earning $80,000. Our only debt is
a $400,000 mortgage. The house
is worth $1 million. Last year I
inherited shares worth $800,000
that pay $30,000 in annual
dividends. The shares are within
$1-$2oftheoriginalpurchaseprice
buthavebeenashighas$5more
in the market fluctuations. Should
Isellhalfmysharesandclearour
mortgage or keep all the shares and
knuckle down and focus on clearing
thedebt?I’dliketobedebtfreebutI
wonder if it’s a poor choice to sell off
“free” shares.This is an interesting question, Louise.
The“right”answerreallydependson
yourattitudetorisk,whichIliketomeas-
urebythe“sleep-at-night”test.Tech-
nicallyyou’dkeeptheshares.Isuspect
your mortgage interest is about 4%. If
it isn’t, shop around! So you would only
sellthesharesifthereturnwasunderthe
interest cost on your mortgage, which
over time is most unlikely. The dividends
alone are over 4% when we include the
franking credits. Keeping the shares also
meansthat,alongwithyourproperty,
youhavegrowthassetsof$1.8million.
Sell $400,000 of shares and you have
$1.4millionofgrowthassetsbut,of
course, no debt.
So it depends if your mortgage keeps
you awake at night. If so, pay it off. There
isquiteanicehalfwayhousehereas
well. You could sell, say, $200,000 of
shares and reduce your mortgage to
$200,000.Keepyourrepaymentsas
theyarenowandyouwouldclearthe
final $200,000 quite quickly while still
having $600,000 in shares. Over to you!Louise’s $800,000
shares decision must ...Pass the
sleep-at-
night test
Q
Myhusbandis31andIam29.We
haveacombinedincomeofaround
$230,000 and around $100,000
eachinsuper.Whilewehaveababyonthe
way,Idon’tplanontakingtoomuchtime
off work, although we will be reduced to
one income for six months. Our home (in
Brisbane) is valued at around $650,000
withamortgageof$520,000.Wehave
$40,000 in an offset account and $10,000
inshares.SincewefoundoutIwas
pregnant we have been practising living
offoneincome–sowearegoodsavers!I
am also working towards ensuring we are
adequately insured.
In the short term we are stashing cash
inouroffsettoprepareforbaby.Inthe
mediumtolongtermI’dliketoupgradeto
abiggerhomewhilekeepingourcurrent
property as an investment, and continue
contributing to a share portfolio. My
questionis,howcanweexecutethisplan
while minimising tax and continuing to
build wealth into the future?Karissa, congratulations on your pregnancy –
thatisareallyexcitingstageinlife.Youhave
setoutagreatplan,sothereisnothingIcan
add. Living on one income and building cash
reserves are exactly what needs to be done.
Tax minimisation at this stage is pretty much
limited to super via salary sacrifice. It is really
importanttosaveasyouarenow–intoyour
offset account – so that when you move out
youcantakethatcashforanewproperty.
This is your future tax minimisation plan. It will
giveyouthemaximumdeductibleamountof
interest when your current home becomes an
investment property and the minimum non-
deductible mortgage on your future home.
Withababycoming,thedroptooneincome
andawhilebeforeyougobacktowork,this,
along with your growing super, is your best
wealth-buildingplan,sokeeponsavingvia
that offset account and reassess after the
baby is born and you look at returning to work.
Best wishes for your new child from all of
us atMoney. Can we get a photo when he or
she is born?Withababyontheway,Karissaiswiseto...Keep stashing the cash
in an offset account