Client Case Study

Purpose

Both of our clients had realised that they had a terrible case of Financial Cancer and would never pay off their mortgage at the rate they were going. They knew they both earned good incomes, but with a combined tax bill of over $84,000 p.a. they knew they needed to do something to fix this problem too.

Situation

Our Discovery Session brought out a lot of pain in our Greg and Sarah. They really were uncomfortable with where they were at in their financial lives and this was affecting their personal lives too. As Sarah was the stronger income earner, she felt that there was a lot of pressure on her to work and earn the money as well as be there for her family, she had always wanted kids and now felt she was neglecting them just to kept the money flowing in. They had bought their home originally 3 years ago for $950,000 and had seen excellent growth in the value of their home with it now being worth $1.4 Million, but hadn’t seen much of a reduction their mortgage over that 3 years.

Strategy

Greg and Sarah understood that they were starting their journey for a cure a lot later in life than we would normally want to see, but at least they are starting the journey. Our goal was to show them how it was possible to pay off their home loan in the next 10 years and it would cost them nothing out of their pocket to do it.

Solution

During the Solution Session we showed Greg and Sarah how they could purchase their first investment property and hold it for 5 years. Our goal was to make $300,000 over the next 5 years, after which, they could sell they property and pay the $300,000 off their home loan. The property we chose was positively geared at $300p.w. so over that 5 years, we can direct that positive cash flow back into their mortgage to also help pay it off. Although this is not the main focus of reducing their debt, the extra cash flow has taken the pressure off their mortgage repayments especially now as interest rates have increased along with their repayments. After 5 years and once we have sold their first investment property, we will look to purchase another 2 positively geared investment properties, this time allowing for $600,000 in growth over the next 5 years at which time we can then sell them and pay of the balance of their home loan.

Outcome

So in 10 years our Greg and Sarah should see their home loan, or “Financial Caner” cured. Now let me remind you, this is not a true science, it may take a few more years than we have projected, but it may also take a few less if the markets kick and property prices rise in each area quicker than we had projected. But one thing is for sure, they are now working smarter, not harder to pay off their mortgage and with the positive cash flow, it has certainly taken the pressure off their day to day lives.