- April 19, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Planning for Financial Stability and Growth
I have a detailed financial plan in place, but I am seeking validation and advice to ensure its effectiveness.
As a 28-year-old with a fluctuating income ranging from €3k-€12k net per month, I am seeking guidance on how to best manage my finances. Despite taking frequent holidays totaling around four months per year, my annual income averages around €75-80k net. However, with plans to reduce my holiday time next year, my income may see an increase.
## Current Financial Standing and Goals
My monthly expenses amount to approximately €1.7k, with a significant portion allocated towards a mortgage. I currently owe €105k on a €124k loan taken out over 30 years at a 6.29% interest rate. Despite the aggressive repayment strategy I have adopted, I am exploring alternative investment opportunities.
## Exploring Investment Options
While initially considering dedicating all my income towards mortgage repayment due to high interest rates in the Czech Republic, I am now contemplating investing in stocks. With advice suggesting diversifying my portfolio with stocks and other assets, I have decided to take a balanced approach.
## Financial Strategy with AI Legalese Decoder
To assist in making informed financial decisions, the AI Legalese Decoder can analyze the terms of my mortgage and provide insights on the most cost-effective approach. By leveraging this technology, I can gain a deeper understanding of the mathematical reasons behind investing in stocks versus focusing solely on mortgage repayment.
## Seeking Guidance for Optimal Financial Allocation
My current plan involves investing my disposable euros in a XTB portfolio with ETFs and bonds, while directing the remainder of my income in CZK towards accelerating my mortgage repayment. However, I am open to feedback on whether this allocation strategy is sound or if I should consider alternative approaches for maximizing financial growth.
With AI Legalese Decoder’s assistance, I aim to refine my financial strategy to achieve both stability and growth in the long term. Thank you for any insights and guidance provided.
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****** just grabbed a
man I feel poor with most of the posts in these subs.
The interest rate on this mortgage is quite insane, I’d prioritise paying that off first, unless you have fiscal deductions in CZ with your mortgage.
We all love VWCE here. But at 6%+ guaranteed returns, I would keep paying off the mortgage until your next refixation date. It’s too tempting
The math is simple, for long term you want to invest into a well diversified low-fee ETF like IWDA, VT or VOO because they could be expected to provide higher return than you will pay for your mortgage (assuming projected average rate, not the current one).
Then there’s the psychological side of things, which is more complicated and personal. Do you mind caring debt? Would you sleep better owning your home outright? If so, then paying you mortgage off might be the better option.
There’s also the middle ground: pay off as much of your mortgage until you don’t mind the remaining debt. Or refinance using an offset mortgage (e.g. https://www.fio.cz/bankovni-sluzby/uvery/hypoteky#hypokonto) and move all your cash and emergency fund there – it will still be liquid but at the same time will lower your mortgage interest payment.
It depends on your risk profile, but paying off the mortgage at the current rate is equivalent to a 6.29% tax free return.
First of all, refinancing should be your step number 1. Regardless of your fixation, you can refinance anytime and the penalty for that amounts to roughly between 2€ and 50€. You can get a mortgage now for just under 5%. I wouldn’t pay the mortgage off that aggressively. Use the high leverage, inflation and time are playing for you. As you say, equity (stocks) will earn more than the interest rate on your debt. In 3 years, you will refinance for 3% and the difference between rent and your repayment will be free lunch ;)!
It is all about cash flow as the S&P 500 return as been about 10% over the last 20 year. I can explain is how I am doing it, and you can decide how you want to do it yourself. So far, my I have been splitting my investment vs loan as my euro rate has been low, so at that point it does not make sense to pay off the mortgage as the total return from my investment is more that interest I was paying in the loan Come higher interest rate, about 3%, I have a good amount in ETF, some in bonds and a bit in cash, so if I need to, I can take some of the funds in the ETF to pay down the mortgage, but I would take a hit on taxes, as the investment is in a tax sheltered account. For you, 6.29% is high, but I am not sure how the ckz has been doing against the EUR or USD. If it was just a 1:1 and I did not have a tax sheltered account, I want to pay a bit more off the loan, given your age. Maybe until 50k, and then put more in investment? Remember, it is all about the cash flow, as if you almost paid off the loan, you could still default if you stop paying it.. but investing is better earlier as you get the benefit of compound interest.
No super good answer, but I hope you have some considerations based on your situation.
insane salary? what is your job?
I think your strategy is great, you are putting some in ETFs and some into paying off your mortgage. I’m doing the same and hoping to payback everything this year. I don’t like the idea of investing everything into etfs right now because the stock market can go both ways but the interest that I’m paying is going to be paid no matter what. Paying off early does lots of saving. Once you are debt free you can take more chances with other investments.
https://bestinterest.blog/mortgage-vs-invest/
I live in the Czech Republic, what the hell do you have for a job to make so much??