I first met Anne after she had divorced her husband of 11 years and had spent a great deal of the $80,000 property settlement in the division of marital assets. Anne had splashed on a holiday for herself and her children, furnished a small unit and now was worried about the future for herself and her two girls, specifically how she was going to manage financially with the living and schooling costs on her modest wage.
Anne had approximately $50,000 left and was concerned with what to do next, especially considering she felt she would spend it all if it was sitting in her bank account! At the time, it was agreed her ex-husband would be contributing to the living expenses of their girls, but she didn’t know if she should buy property or do something else with what was left.
We did some rough calculations at the time on purchasing a $450,000 home for her to reside after she had met with some real estate agents and worked out she had enough for a deposit. Anne felt she wouldn’t be able to keep up consistent payments on a $2500 mortgage, believing her limit was about $500 per week in repayments. She considered other options to assist with paying her mortgage such as taking an extra boarder or renter or perhaps buying a cheaper property. She was currently paying $360 per week in her rental home and was quite happy. Her girls were near their school and the three of them now had a good routine and were happy.
Anne didn’t want to disrupt everyone by taking in boarders or moving house so explored other options for investing the $50,000 she had left – her total life savings. Anne ended up investing those moneys into a share market investment returning approximately 10 per cent on average. She decided to put what she felt she would have spent extra on a mortgage (if she brought a house) into her investment each month.
This meant she was contributing an extra $140 per month into her investment. Anne felt comfortable knowing she was able to meet her living expenses, keep the family happy and save nearly $1700 a year towards her future. After a while, she decided to take on investment borrowings and added a margin loan to her investment strategy after she received a pay rise from her employer.
Now, some six years later, her initial $50,000 investment has grown to well over $250,000 and she couldn’t be happier. She is well on her way to building significant wealth, admittedly dipping into her investment on the odd occasion, but she works with her adviser to keep increasing her contributions and margin loan facility. Over the past few years it is interesting to note that not only has Anne gained a solid asset, minimised her taxation liability and created a positive credit rating with her bank, but she has also unwittingly learnt more about the economic situation and financial world around her.
It is a win/win situation for Anne and she has never looked back.
Deciding to become rich is really only about making wise decisions to move forward. It is the power of positively doing something!