Ben Nash revealed how a young couple were able to accelerate their savings and nail their investment strategy, to the tune of $750,000. ·Getty/Ben Nash
Hector and Harriet were a young couple in their late 30s and when we met they had a fair few good things happening with their money. They were making solid incomes, had a strong savings rate, and owned a lovely home in Sydney’s Eastern Suburbs.
The couple had two young children and were just getting to the other side of the trough of sorrow (the maternity leave + part-time work + daycare costs = financial disruption). They were getting set for the next stage of their money, and with the foundation they’d built, they had a good platform to work with.
I met them by chance, but from our first conversation, it became clear there was a lot of opportunity Hector and Harriet weren’t aware of.
Over the next year, Hector and Harriet took advantage and cut their tax bill by over $22,000 p.a., and set up investments to grow by over $750,000 extra by the time they reached age 60.
Hector and Harriet had been chipping away at their mortgage with their spare money and building up some savings that they wanted to use to fund a home renovation to create some more space for their growing family.
They were happy with their progress and felt like they were in a pretty good place.
But there was something missing.
No focus on investments
When we started planning with Hector and Harriet, the first thing that became clear was the fact they had been almost solely focused on owning their own home and paying down their mortgage.
This in itself was positive, but Hector and Harriet had pretty much completely ignored investing.
We agreed this was the first thing that needed to change.
Stepping it back, Hector and Harriet were about to use a heap of their savings to add more value to their own home, which would have made them feel really good.
But this move would only push them further away from their investing goals, and ultimately further away from financial independence.
It was only because they went through the planning process that they could see all the moving parts of their money and things they wanted to do moving forward - that we were able to identify the challenges they were about to create for themselves.
Once this became clear, Hector and Harriet quickly decided that getting ahead with their investing in the short term was more important to them than having an extra bathroom, a new kitchen, and some extra living space.
Hector and Harriet were approaching their decision around renovating in isolation, trying to assess whether it was a ‘good’ idea.
This is a common error but so easy to do.
Instead of looking at each money move you’re considering on its own, you have to instead look at how it fits in with the other elements of your money, your financial trajectory, and where you’re currently at with your money.
It’s only then that you’ll be able to see if the decision you’re considering is actually a good move for you.
Buying an investment property
We started chatting about different ways to invest, and the prospect of buying an investment property was raised.
Hector and Harriet mentioned that they’d spoken to their existing mortgage broker who had told them they weren’t able to borrow any more money.
This seemed a bit strange to me because they had good incomes and their surplus savings capacity was strong.
I felt like based on this alone they could comfortably afford to fund an investment property if the bank would lend.
Not being a mortgage broker myself, this is an area where I need to defer to the experts but I figured it was worth a second opinion.
I had a chat with one of our Pivot Wealth mortgage brokers who I knew had a lot of experience and was good at finding solutions to lending challenges.
This broker was able to find a number of banks that would lend more money than Hector and Harriet were looking to spend on an investment property.
They agreed that buying a property was a smart move for them.
This alone would add over seven figures in investment wealth for Hector and Harriet over the long term, so we were all stoked with this result. But it got even better.
Hector and Harriet got a bit lucky with the timing of their investment property purchase and bought just before a solid run in Sydney property values, so they made a good chunk of money in the short term.
This money gave us a lever we could then use for more investing in the future.
Increasing savings rate
Another realisation that came through when we got into the numbers was that even though Hector and Harriet were saving at a solid rate, saving at this level wasn’t quite going to get them to where they wanted to be in the timeframe they wanted.
They had fallen into the trap of thinking that because their savings number was large, this was ‘good enough’.
But given their goals and the future lifestyle they wanted to live, it wasn’t.
We spent some time looking at the impact of saving at a range of different higher rates, and Hector and Harriet decided to wind back slightly on short-term spending so they could hit some of their investing targets.
Without the deep insight they took from the planning process around the real impact of their spending both short and long-term, they wouldn’t have even known that something needed to change.
Getting back to the property purchase, Hector and Harriet decided to use a property buyer's agent to find and negotiate on the property.
Through this, Hector and Harriet were able to take the emotion out of the property purchase, and instead have a laser focus on the goal of finding a quality property that would make good money.
But by far the biggest benefit was that Hector and Harriet were able to purchase their investment property quickly.
They were both time-poor professionals and without the help of a professional, the property purchase would have likely taken months longer.
Given the rise in the property market almost immediately following their property purchase, moving quickly to secure their purchase made a significant contribution to Hector and Harriet’s bottom line returns.
The wrap
Hector and Harriet made a lot of money fairly quickly from focusing on their planning. This came through investment growth, tax optimisation, more savings, and smarter decisions around their lifestyle choices. But it was really the pathway they created for themselves that would make them so much more in the years ahead.
Hector and Harriet’s plan was the thing that solidified their goals and targets, their current financial trajectory, and highlighted the work that needed to be done.
Once they could see it in front of them, they were motivated to make it happen.
And in the years since we did their initial plan, they’ve made some epic progress and increased their trajectory even further.
Money is hard, but success is possible - when you’re clear on the pathways in front of you and you choose the best one for you.
Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. Ben’s new book, Virgin Millionaire; the step-by-step guide to your first million and beyond is out now on Amazon | Audiobook.
If you want to chat about getting some help with your money, you can book a call with Pivot Wealth here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.
