Annual income: $48,700 plus superannuation.
Assets: Rental property $185,000; shares $220,000; international managed fund $4000; superannuation $35,000.
Debts: Mortgage $133,000; margin loan on shares $79,000.
Monthly expenses: Rent $200; mortgage $1300; margin loan $1000; other expenses, including managed fund contribution, $600.
Savings: $6500.
Goals: To retire at 55 with an income of $35,000 to $40,000 a year; to travel, following the sun in retirement, with a 4WD and caravan.
* Not his real name.
Ray is single and shares a house with a friend, paying only $50 a week rent. He has direct shares worth $220,000 - 16 stocks in the top 100 - with a margin loan of $79,000.
He wants to know what this portfolio and his super will be worth in 15 years.
Ray owns an investment property worth $185,000, on which he owes $133,000. The mortgage is at an interest rate of 6.06 per cent and Ray has rented the house out since he bought it in July last year.
"I pay $300 a week off the mortgage on a house that gives me a rental return, after fees, of $160 per week," he says. "Based on my current mortgage repayments, how long will it take to pay off the mortgage?"
Ray also wants to know how long it will take him to repay his margin loan, at an interest rate of 7.20 per cent. "I have the capacity to purchase more shares through my margin loan - is this a good idea?" he asks.
"Will I have enough to earn an income of $35,000 per year if I retired at 57?"
If not, he wonders what else he should do.
"I do most things that I choose to do, I pay double the amounts needed to cover both my mortgage and margin loan, which doesn't give me a huge amount over," he says. "I'm not extravagant - nor do I miss out."
While he would like a new car, he says it's not essential. His car is worth about $17,000. He is fit and enjoys the footy: "I exercise every day, socialise by going to the movies, out to pubs and dinner, am an AFL member and enjoy a beach holiday each summer."
Rob Goddard, certified financial planner and financial adviser with Collins House and member of the Financial Planning Association, replies:
You have an admirable savings capacity and investment attitude and a modest cost of living. This, with a good investment and contingency plan, should allow you to continue building up assets.
The expected value of your share portfolio and super in 15 years depends on your investment strategy and market performance.
If we assume a conservative and realistic rate of return of 7 per cent a year, and assuming that you make ongoing contributions and reinvest all your returns, the net value of your super after 15 years should be about $350,000.
Your share portfolio - allowing for no further contributions and not allowing for the loan - should be worth about $620,000.
These calculations do not take into account the impact of capital gains tax or eligible termination payment tax consequences.
You should regularly review your investments and ensure you maintain adequate diversity. Your portfolio is funded with 35 per cent debt. I recommend you reduce this debt rather than extend it.
It will take about 12 years to repay your mortgage at your current rate.
The tax effectiveness of your debts depends on your taxable income (including salary plus grossed up dividends plus interest received plus rent minus investment costs including interest). Tax benefits are heightened when this is in excess of $50,000 a year.
The rent on your investment property is meeting the interest component of your loan but when other expenses are included the income does not cover the outgoings. This means your investment is negatively geared.
For any geared investment to be effective in the long run, you need a capital gain that covers the shortfall in your income and the opportunity cost of having your $50,000 equity tied up in the property.
I suggest you rearrange your loan to make it interest only, at least until you have accumulated enough savings for a new car and your margin loan is repaid. Your margin loan and your investment property loan should be tax deductible. Pay out the loan with the higher interest rate first.
It is a good idea to sacrifice salary into super but you need to maintain reserves that you can get access to outside super to allow for emergencies.
You should also ensure you maintain adequate insurance cover.
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