TheFrugalDoctor loves a bargain it is early March 2025 TheStockMarket is in the red it’s been “tumbling” down. The goal for the financial year ending June 2025 is to invest $52 500 into my taxable investments. In January 2025 I had put in a lump sum of $30 000 into the market. This brought total contributions to $50 000. Usually I would dollar cost average each month. However, because of our mini-retirement plans, I felt I would enjoy the travel more knowing that I had paid myself first already. I like automation. For the remainder of the financial year, $125 is to be debited into my investment account each week.
When I made the lump sum investment I did it as a trial of trying debt recycling. That is making part of my non-deductible home loan into a tax deductible one. Tax is after all my biggest expense. TheFrugalDoctor would not be truly frugal if they were not optimising tax. Why pay more tax than I need to? I was going to invest the money in the market anyway. So why not pay this into the principal of my non-deductible home loan? Before doing this I had requested 3 splits of the home loan (120K, 30K, 30K). The first 2 have offset accounts the last has redraw. Thanks to TheHandsomeSurfer, I channeled one of my cash buffers straight into the market. Now I am dollar cost averaging this back into the cash reserve with each pay cycle. So when I paid the 30K, a redraw of 30K was then sent to TheStockMarket. So the home loan is still the same, however the interest from the 30K portion is now tax deductible. I have not taken on anymore debt.
TheStockMarket is in the red. Is there some spare cash I can throw into the market? I remember plowing more into the market in 2020 and 2022. Yes, the value of the investments is down. It keeps going down. However, this is an opportunity to get more units of the index at a bargain. Our mini-retirement starts end of July we each will contribute $30 000 to the travel pot. Can I find some spare cash somewhere? I hate missing out on a bargain this market plunge is an opportunity. I had received an incentive grant payment in February and had thought to leave it be as another cash buffer. I decide this market opportunity is too good to miss. I will take a third of it, $5,000, and invest it into the market. I pay this into one of the loan splits. The bank then reconfigures my loans so that one part decreases by 5K the other increases by 5K. So now the loans would be 120K, 25K, 35K. The deductible component is now 35K.
Should I pay off the mortgage or invest is a question I have asked myself many times. I had been opposed to debt recycling but as I grow on this financial independence journey I keep learning. I am doing both and testing the waters with debt recycling. I am not taking on any extra risk. I am still debt adverse. The mortgage principal is still getting paid down each month as all loans are set to principal and interest payments. I am learning in the process. Will I regret not getting started on debt recycling earlier in my financial independence journey probably not. Do I regret dumping a lump sum into the market in January when the markets were high? No I am not a market timer. The mini-retirement is getting closer four months to go! I can enjoy planning our travels knowing the travels are not taking away from the financial independence journey. I can invest in our travel experience guilt free it’s after all what we value building memory dividends.
Photos Vanuatu September 2024. Please note the above is NOT financial advice.