This single mum hasa big mortgage and her large wage is suddenly in jeopardy, writes Nicole Pedersen-McKinnon.

Financial snapshot
Name: Sheryn Nettheim.
Occupation: Chief operations officer.
Salary: $85,000.
Assets
Property: $545,000.
Shares: $6000.
Super: Unknown
Liabilities
Mortgage: $455,000.
The average week
After-tax income: $1115.
Expenses
Home loan: $600.
Living expenses: $300.
Child care: $300.
Total: $1200.

Sheryn Nettheim, 39, is a single mother whose employer has just gone into receivership.

Although there is a buyer on the scene, there is a possibility that she will lose her job as chief operations officer and her $85,000 salary.

She has no income protection insurance and has just borrowed $455,000 (over 30 years) to purchase a $545,000 townhouse for herself and five-year-old daughter Lily-Anne to live in.

Her weekly repayments are currently $600 but will rise by more than $40 when the six-month introductory rate ends.
Sheryn has just one burning question: how can she possibly make ends meet if she is left jobless?

Of course, she would dearly love to hold on to her house. And she doesn't like the idea of switching to interest-only mortgage repayments.

"I am weighing up if I was to find myself without a job whether I should rent out my house and negative gear," she says.

Or would it be a better strategy to use the equity in the house to purchase a second, positively geared property and hope it generates excess income?

What other options would she have should things get desperate? And what about the 7000 shares she holds in her employer? She knows regular shareholders are creditors at the bottom of the pecking order. What about employee shareholders?

In terms of super, Sheryn has no idea how much she has and it's scattered all over the place. "Being a single working mother and being in a fairly senior role I don't have time to scratch myself let alone investigate better ways of doing things," she says.

Even now, mortgage payments and the $300 weekly cost of child care for Lily-Anne mean Sheryn's finances are stretched to breaking point. "I'd be better off being a single mum on the pension," she says.

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Negative gearing: it is a good option, but talk to a professional first Scott Brouwer from Melbourne's Aspire Financial Services

IT is never easy when your job is at risk, but Sheryn you sound like a smart lady who would find work before long.

Meanwhile, moving to a smaller home and renting is not a silly idea. You can then rent your home for more money than you pay in rent. And turning your home into an investment property will mean rates, maintenance and many of your other running costs, along with the interest on your loan, will be tax deductible.

Provided you do not rent out your house for more than six years (and do not elect another main residence in the interim), any profits on sale will still be free of capital gains tax. (But have the property valued before you begin renting it to establish the cost base for capital gains tax, just in case.)

In the event that the company you work for does go into liquidation, shareholders are among the last to be paid. This is because the shareholders are the owners of the company they make the money if the company is successful and lose it if it isn't.

Employee shareholders are not treated any differently to other shareholders, which is a classic demonstration of why diversification is essential to protect wealth. While it may be appealing to own shares in the company you work for, it also presents a danger if this represents the bulk of your sharemarket exposure. If the company goes into liquidation, you lose both your income and your investment.

Sheryn, the collapse of a company that you both work for and hold shares in is stressful. You are forced to make decisions while in a negative frame of mind. Consider your options carefully and please seek professional assistance.

Mortgage: you may have to rent out to save your property
Steve Blaker from Logical Financial Management in Sydney

Sheryn, being in a potentially precarious position, you are unfortunately caught between a rock and a hard place.

An "interest-only" option is usually available for investors, not owner occupiers. Worst-case scenario, based on the possibility of losing your employment in the near future, I suggest you change the loan purpose to investment and rent out the property. You can then switch to interest only to reduce your monthly repayments.

The rent you receive will help you meet your repayments without resorting to personal savings. It should also allow you to hold on to your current property for when your financial affairs improve.

As you are already halfway into an introductory rate on the Bankwest gold variable introductory rate loan, there would be exit fees of $220, plus an early repayment fee of $1000 if you repaid the loan within three years.

The better alternative is to go to Bankwest to see if you can change the loan purpose at a small variation fee, currently $350. This is economically more viable for you. You then have an option to rent something more affordable.

To positively gear another property, you would need to have equity in your existing property with little or no debt owing on it. As your loan-to-value ratio stands at 84 per cent LVR, this would not be possible. Even if it was, this would be a very dangerous strategy to adopt without a reliable source of employment income.

Steve Blaker is an authorised representative of Associated Planners Financial Services.

Super: you can find it, but you might not be able to get access to it
Paul Moran from Melbourne's Cameron Walshe

LET'S get that negative idea of living on a single mother's pension right out of your head, Sheryn.

For starters, there is no such thing. Second, living on the Newstart allowance of about $14,000-$15,000 a year, including an amount for your daughter, is no bed of roses. Your longer-term aspirations, and the reason you bought the property in the first place, will be severely compromised.

At 39 (sorry to rub it in!), you should have more idea where your super is.

You could try using the Tax Office web page (www.ato.gov.au/superprofessionals/content.asp?doc=/content/16442.htm), which has a lot of detail on how to track it down.

There is no rule of thumb as to how much super you should have, but I often like to see twice your retirement income goal by the time you reach 40. Without any additional contributions, I would estimate that you might have $60,000-plus.

It is difficult to access your super, even in emergencies. The rules for accessing based on financial hardship are onerous, and include being in receipt of unemployment benefits for six months.

You should head down to Centrelink soon to check on your potential entitlements. It is best to be fully informed ahead of time. You also need to be talking to employment agencies about employment opportunities. Is child maintenance a possibility if your income is lower?

Not withstanding this, there appears to be little room to move from a budget perspective.