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covered by life insurance. Jason, you will
have something in place with the Defence
Force, which you should review.
In terms of disability there are three
layers – at the centre sits income
protection, which provides an income if
you are unable to work. Then you have
trauma insurance, which will pay on
diagnosis of a major illness such as cancer
or a heart attack.
Finally, you have total and permanent
disability insurance, which covers
Again, Jason, due to your specialist role
research what you have with the ADF in
regards to this.
Now you have a child, you should also
consider your estate planning. Ensure
you have a will and a power of attorney,
particularly if Jason is likely to be
Now, let’s look at adding to the property
portfolio. The biggest hurdle, as I think
you have identified, is being able to
borrow again due to Danee being on
As you begin to pay down debt on
the Darwin property it should obviously
become easier. It would be good to get an
idea from a mortgage professional.
Once that door opens, I think your
strategy of buying an inner city unit
is a good one. It will enable you to
diversify your portfolio with both the
acquisition of a unit and accessing a
My only words of caution would be to
aim for as lower strata fees as possible
(for cash flow), new as possible (for the
depreciation) and access to transport. I
would also suggest aiming at residential
usage and avoid things like holiday and
Finally, let’s look at how we clear the
Darwin mortgage. It is great to see you
rate yourself as excellent budgeters which
will be the key to paying the home loan
down as fast as possible.
What I suggest would be to follow a
mortgage reduction strategy, if you aren’t
already. What this means is you need to
organise all your incoming such as Jason’s
holdings are at the mercy of future
interest rate rises and you do not have
The first action you need to take is to
understand whether or not a lender would
still lend you what you already owe.
From my calculations your average
borrowing capacity is only around
$850,000, not the $1,135,500 that you
Being in this situation puts you at risk
of not being able to restructure your
mortgage to a fixed rate as you no longer
meet credit policy and therefore would not
be able to protect your family’s cash flow
from future interest rate rises.
The second action is that you’ll need
to have a clear budget and cash flow
understanding while you remain on a
If you’re planning on relying on only one
income, for example for three years, then
you need to understand what you can
afford to pay off your debts and build in
savings during this time.
Once you have this dollar figure, you
should try to restructure your loans to
match this, by fixing all of the mortgages
in an interest-only structure for the same
period, except the amount you expect to
be able to pay off.
Step three, you’ll then have a variable
portion to your loan – ensure you have
a 100 per cent offset account linked to
this and continue to build up the savings
in that account rather than physically
reducing the loan balance.
This will provide you greater flexibility
when it comes to tax, and provide the
ability to build another deposit, should
pay to be paid into the offset account.
The idea is to hold as much cash in the
offset for as long as possible.
The aim then will be to pay the majority
of your expenses on a credit card. These
expenses will be interest free for around
50 to 60 days.
Once payment is due simply transfer
the money from the offset account to pay
If you’re bold enough you can also turbo
charge this strategy. This can be achieved
by opening another offset account, which
all your rental payments go into. Then,
as necessary, you can pay your mortgage
amounts and ongoing expenses from
Hopefully this gives you a platform to
First of all, congratulations on the new
addition to the family and thank you for
the service and sacrifices you’ve made
You’re undoubtedly a driven couple and
a great example to many.
With a great head start of three quarters
of a million dollars worth of net assets, as
well as a focus on your long-term goals,
you no doubt will be successful financially.
There are some key areas, however, in the
short term that could put this at risk.
When you last applied to borrow from
the bank, your household income was
significantly higher than it is today. At
the moment your investment property
The couple’s Mackay property
æNow you have a
child, you should
also consider your
JASON AND DANEE SMITH \\ ROADMAP TO WEALTH
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