Chartered Accountants Auckland

The problem with being mortgage free at 40

October 1st, 2015 | Posted by Wendy Simpson-Fox in Accountant in Auckland

Rhello over 40’s
This article should really come with an R rating but I’m not entirely sure the R40 has been invented yet. Even the over forties may struggle with this topic because in this torturous Auckland housing market the very idea of being mortgage free at 40 seems more of a myth than a problem. Nonetheless, being mortgage free at 40 comes with its own set of problems:

  1. Time fritter
    warningTraditionally, the vast majority of everyday New Zealander’s became mortgage free much closer to retirement and immediately switched from making mortgage payments to frantically saving for retirement. In contrast, those becoming mortgage free at 40 have more than 20 years until retirement kicks in.  Without the financial commitment to a mortgage, it can be tempting to waste that extra time (and, as we all know, time is indeed money).
  2. doolallyDoo lally
    What is it about being mortgage free, at a relatively young age, which makes people go a bit doo-lally? If they’re not frittering away every last cent, of that super-sized disposable income, they’re on a journey of self enlightenment (which they’re compelled to lecture you about) or starting a glamorous and probably loss-making, ego driven, business.
  3. Baby investor
    nobullsheds co nzThose with a few smarts soon realise that investing is a smarter way to go but they tend to be complete novices not knowing a bull market from a bear. There’s usually a sense of isolation from others in the mortgage free club (with their blinged-up pushbikes,  bulging Lycra and quirkily named motor homes). However, the biggest danger is thinking others possess superior knowledge and that investment is all about incomprehensible formulas. It’s not.

Where to from here?
Commit to a financial goal, use common sense, get educated and stay involved. Be aware there are more options out there than just handing everything over to an investment advisor (who’s generally paid based on the size of your portfolio, not profit). Research all your options including:

  • Peer to Peer lending
  • Term deposits (NZ rates among the highest globally)
  • Angel investing
  • Government Stock
  • Commercial building
  • Residential property (rental properties, holiday homes, overseas etc)
  • Land banking
  • Share portfolio & IPOs
  • Managed funds (check how they’re remunerated)
  • Controlling stake in business

Interestingly, our experience has seen long-term investors with term deposits beating those with managed funds.

blind fold no pic

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