Today is my birthday. Happy birthday to me. And I have many good reasons to celebrate, including the fact that I have just paid off my mortgage.
So I paid off my mortgage. Three months ahead of my ambitious goal to pay it off by Christmas. I cannot begin to express what the feeling was like looking at the ‘balance unavailable’ field on my online mortgage and smiling to myself knowing that the reason is because I have paid it off. Of course the security hasn’t been released yet. This doesn’t happen until I fill out a discharge form. The bank is hardly going to chase me for that. Interestingly the form asks why you are discharging (i.e. are you refinancing?) There wasn’t even a field to say I wanted to discharge because I had repaid in full.
It has been an interesting journey. In the end it happened faster than I anticipated, due in part to some luck with investment properties selling for more than expected. But then the luck was a result of dedication and focus – my ex husband and I had been investing in property for eleven years and lived a frugal life to do so.
My challenge elicited a lot of comment from people. It was in four main categories:\
- OMG, I could NEVER do that. That’s impossible!
- Oh, paid off my mortgage already when I was in my 20s. It was easy. Well it took around three years but with focus and determination it is possible. Best thing I ever did.
- It is easy for rich people like you who earn a lot of money. I am struggling and don’t have a spare room to rent out in my house like you do.
- You have really inspired me to pay off my own mortgage. I have recently refinanced, I have sold the second car I no longer need and my family and I have drawn up a budget together.
Being a busy sort of person balancing full time work, kids, blogging, writing and more recently a food business supplying lactation friendly meals for new mothers, I must admit I have gotten a bit slack about reading up on investment and personal finance. I figured I wouldn’t need to worry about it until my mortgage was paid off, and that would be a loooong time.
But now I achieved it, right before my birthday. What a wonderful birthday present!
Mr Red Sports Car suggested that, since I like property, that I buy an investment property. Well I still have investment properties with my ex, but a property in my own name is appealing. The competitive side of me wants to show that I could do a better job all by myself. I have been crazy about property since I discovered Monopoly as a kid. Word of warning – never play Monopoly with me. Ever. I behave as if possessed, and have even been known to negotiate hard with young children. Even if they cry.
But when I think about it, my financial needs are different to when my ex and I first started investing in property. I have two young children to support now. The might need braces. Or they might fall out of a tree and need urgent surgery with a private doctor where there is a huge gap on my private medical insurance. Having gone through uncertainty about money following separation, I really crave the security of knowing there is a stack of money there that I can draw on in an emergency. Owning my own home was also important, very important, to me in wanting to feel secure. Also, to maximise property investment the best thing to do is minor renovations and that is not where I want to put my energy and focus right now.
And I want to move house next year. I love the community where I live, my overgrown garden and view from my north facing deck. But the commute is taking me around an hour each way, every day. I want to live somewhere closer to my work and closer to my boys school, where we can walk and cycle and spend more time running around rather than listening to the same Lah Lah song in the car. (Love Lah Lah by the way, even after listening to Big Bold and Brassey hundreds of times.)
I asked my lovely financial planner, Michael Miller from MLC Canberra, for advice. He advised me to keep my money where it is for now, that is in a high interest uSaver account with UBank. The reason is because I will likely need to buy a more expensive townhouse/house in order to move closer to work, so I will need access to cash within the next six to twelve months.
This makes sense. Most investments need time to mature and bear fruit. If I put in money for a short time and then withdraw, I will be liable for capital gains tax that might diminish any returns. And there is also a risk of losing the capital if I invested in a more speculative fund. If I was young and single that would not be such a risk, but it is riskier now that I am a parent.
That said, I am uncomfortable about not making my money work for me. I am inspired by the biblical parable about investing. Basically, if you just bury your money in the ground out of fear you miss a valuable opportunity.
So I am going to adopt a hybrid model. I am going to keep my main strategy of building up my cash reserve, but also start investing a small amount in a Vanguard index fund. Actually I will have two accounts with Vanguard – one where I deposit 5-10% of my pay (in line with the Richest Man of Babylon principles), and a second where I invest whenever I make frugal savings. This is a way for me to get some positive visibility of the savings I am making.
And I also plan to splurge a bit. I need to replace my 16 year old reliable Toyota in the next six to twelve months with another reliable mum mobile. And perhaps it is time that I went on that decadent and romantic holiday to Positano that I have dreamed about for so long. In fact, I have just come back form a short trip along the Prosecco Road at King Valley, which has given me a taste for Italian food and wine. Enjoying la dolce vita, in moderation.
So what do you think is the best investment vehicle for me now that I have paid off my mortgage? And what are you investing in at the moment?