(03) 9020 2905WHOA! Bring out the big scales for Generation X on this one.
This is a tough balancing act, because Xers financial commitments are monstrous – huge home loans, income-ravenous tin lids to raise, and pathetic superannuation balances.
But my answer is both. Emphatically. Like Meg Ryan’s “yeessss!” in the deli in When Harry Met Sally. You have to both pay down your mortgage faster and commit money towards retirement, inside and outside super.
The first few years of mortgages are pretty tough. But if you’ve had your mortgage for a while, my rule, from Debt Man Walking, is: “Manage your mortgage, then manage your wealth”.
That is, if you’ve had a few pay rises, or your partner has returned to work, that’s when you should start your investment program. Don’t wait until the home loan is paid off.
Divvy up spare cash. Some should go to paying down the mortgage faster, commit a little extra (even $50 a week) to super, but also start investing.
It’s the compounding of investment actions over years that creates real wealth.
There is no restriction to paying off the home loan, or contributing to investments.
But there is a cap on super contributions of $25,000 for Xers ($30,000 from July 1), which includes your employer contributions.
Many should up super contributions now, because there will come a point – when the home loan is paid down and the kids are gone – where you will want to tip more in, but will face a cap. Xers should start extra contributions in their late 30s.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.