Mortgage free by 40

Susie’s admirable aim is to be ...

Q My husband and I are 33 years old with one child (and planning another in the next 12 months). I have my own business so will be paid throughout my months of “maternity leave”.

We currently earn a combined income of $144,000 (net). We owe $438,000 on our family home (worth $900,000). We pay $2000 off our mortgage fortnightly (36% of our income) and put $1000 to savings fortnightly (19% of our income). The rest of our income is spent on: 36% expenses (needs and wants), 7% spending and 2% towards our annual family holiday. We have $2500 in shares (Vanguard, Australian Foundation Investment Company and Super Retail Group). I have $90,000 in super and my husband has $120,000, with an employer contribution of 12.75%. My husband also salary sacrifices $211 a fortnight. All our bank accounts offset our mortgage.

Our goal is to own our family home by the age of 40 and be mortgage free, therefore having less pressure to enjoy our family and lifestyle.

Should we keep the $1000 a fortnight being saved into the offset account, pay down the mortgage, invest some (for example, 50%) in shares or buy an investment property? Or stretch ourselves to do all of the above if we can?

Another well-organised Money magazine reader! I am really impressed with the breakdowns you provide, Susie, showing what percentage of your budget goes where.

But I do think you answer your own question. You have set out a clear objective: “Our goal is to own our family home by the age of 40 and be mortgage free.” This is a cracking plan and you should go for it. For me, this means you should direct a decent chunk of your $1000 a fortnight into the offset account.

Age 40 is seven years away for you and I do appreciate that this is probably enough time to invest in shares and seek to earn higher returns and pay your mortgage off by 40. So a 50/50 plan, with half going into the offset and half into your share investments, is a perfectly sensible idea. It is a question of risk. The offset is risk free but with low returns. Shares offer higher returns but with more risk.

I am not keen on you gearing into another property, in particular with plans for another child. I think you would want to hold a property for longer than seven years and I do like to see people manage risk intelligently by using diversification.