Slow and steady does it

Long-time Money reader Terrance Fong* has taken a long-term, considered approach to wealth building, with some calculated risks along the way

Iam a 36-year-old, working professional, married (my wife is aged 42) with two little monsters who are now five and two years old. Our goal is to save and invest though property, shares and super, and hope that compounding will result in the dream of retiring at the age of 55 and 61 respectively.

Because I grew up as a second-generation migrant single child, with both my parents on low wages due to their low English language ability, I saw saving money as very important. Anything I wanted needed careful consideration and planning, using pocket money earned by doing house chores.

Like any young adult, during my teenage and university years, any money I made from part-time work was splurged instantly. It wasn’t until I started my first full-time job that my money transformation began: spending less than I earned, paying down a car loan, taking up a second part-time job waitering tables after hours to save for a house deposit. We bought a house in 2014.

From little things …

In late 2019, my wife was back at work after our first child, so we started planning for an equity release from our principal place of residence to fund a deposit for an investment property. The deposit was such a big barrier for entry as we had leveraged heavily on our first property that we live in – at 97% loan-to-value ratio it took a while for our equity to build up. We finally managed to secure an investment property in western Melbourne for under $600,000, which has grown quite well these past few years.

At the start of 2022, we did another equity release, out of our investment property, to invest in, shares – 50% ETFs and 50% stock picks – only to experience the horror of losing 30% since the start of 2022. As I’m holding for the long term, I haven’t rushed to sell and know to hold out in the current bear cycle.

Next generation

Every time one of our kids is gifted money for their birthday or Christmas, we have been doubling it and then investing it in broad-based ETFs (70% in S&P 500, 30% in S&P/ASX 200) in my wife’s name. Our strategy is to gift it back to them at around age 25. By that stage my wife would be 60, and if our overall investment strategy has worked we would be retired. Keeping in mind CGT and our level of taxable income, rather than sell down the shares we could gift the equivalent money to them from our super.

Money philosophy

I try to bring a frugal mentality to our house expenditure but be more flexible when it comes to experiences. I compare mortgage rates and negotiate with the banks, review internet plans, utilities and insurances regularly. Ultimately, I believe that money is a gateway to freedom.

Smart moves with super

Paying attention to my superannuation, checking the fees, insurances and investment plans (changing it to high growth from balanced based on my long runway due to my age) was critical. I started to salary sacrifice to super – even when my wage was around the national median back in 2012 or so, I started doing it with $500 a month. As my wage grew, I continued to sacrifice and after about a decade of doing so I can see how much the return has compounded. Today, even though my salary is close to the highest tax bracket, I am sacrificing the maximum limit.

Caught in a crypto crash

I was one of the unfortunate souls who had a position in Luna crypto when it crashed in May 2022. Overnight I basically lost all of the money I had invested, which really highlighted the risk and volatility of investing in cryptocurrency. Fortunately, my position was only $500. The lesson: overall diversification, and when doing a speculative play, only put in money you are willing to lose.

Goals for the new year

After buying a vehicle in late November 2022 (a purchase that is in line with Paul Clitheroe’s mantra of only buying the cheapest car my ego can handle), the purchase drained a portion of our emergency cash buffer – not enough to put us at risk if we were to be unemployed for a period, but my money goal for 2023 is rebuilding the balance.

We are also facing the famous fixed-mortgage cliff in May (goodbye 2.29%) and again next January (farewell 2.64%), so we are focused on keeping track of our money, ensuring we are only spending where needed and living modestly.

Best money advice

There is so much that I have learnt over the years, most of which I can confidently attribute to reading Money magazine since 2008 (a dedicated subscriber since around July 2015). Living within your means and spending less than you earn is foundational. Without that, it is not possible to progress to the next phase of investing for the future. *name changed

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