QUESTION:
I’m 42, my wife’s 40, and we’re a single income family with two primary-school-aged children.
We have a mortgage balance of $128,000, with an offset account usually about $5000 and no other investments. (Our super balances are about $180,000 and $8000 respectively).
My current base salary is $130,000 (but can be up to $145,000 or so with variable overtime and bonuses), however I expect to be made redundant towards the end of this year. I have calculated a redundancy payout (including leave entitlements) of somewhere between $100,000 and $140,000, after taxes, (I think!), although we will need to fund two cars from this total.
Assuming I find new employment, and so don’t need to live off the payout for a significant period of time, what do you suggest is the best use of the potential redundancy payout? (i.e. pay down mortgage, invest, super?)
ANSWER:
I think the key is to stay as flexible as possible while you are looking for new employment, which you are almost certain to find.
You could certainly park a big chunk of it in the offset account, where it will be at call but at the same time be available for redraw if necessary.
The trouble with lump sums is they tend to be dissipated once you get them.
Therefore I’d be looking at good secondhand cars, not new cars. Any surplus money could be parked in your wife’s name as, based on the information supplied, she does not work.