Ask Paul: I want to pay off my home loan in my early 40s


Dear Paul,

I am 32 and chasing a debt-free future ASAP. My goal is to be debt free by my early 40s.

I own a house worth $675,000 with $330,000 owing (this is my only debt), $116,000 in cash (mortgage offset), a $85,000 share portfolio ($1000 monthly deposits) and $225,000 in super.

ask paul clitheroe can i pay off my home before my early 40s

What do you think the best approach to achieving this goal would be, while also creating accessible income to facilitate early retirement before being able to access superannuation? - Nick

You have set yourself a realistic challenge here, Nick. We'll allow for the offset account, so your mortgage is effectively $114,000.

The good news is that gives you equity in your home of some $560,000. Then you have your share portfolio 
of $85,000, savings of $1000 a month and a good super balance for a 32-year-old.

I am impressed. This is a terrific financial position at a young age. I love the fact that you are building super, adding to your offset account and adding $1000 a month to your share portfolio.

To be debt free will be easy. If you take your $1000 a month and add it to your offset account, you will be debt free in 114 months or a bit under 10 years - job done.

But my suspicion is you would prefer to keep building super and your portfolio while becoming debt free, so that you have shares to generate income for you.

This gets straight back to your budget; do you have the capacity to save another $1000 a month?

Looking at your super balance, I would think you are making voluntary contributions.

Super is indeed super, but you can't access it until your preservation age, which is many decades away.

I'd hate you to miss the fantastic tax breaks in voluntary contributions to super, but have a think about whether you should pause these, use the after-tax money to remove debt and build your share portfolio to give you access to the income stream.

I see zero issue in becoming debt free in a decade. But you won't get income from your house unless you rent it or rent rooms. You won't get income from super.

So, it is just your shares. In about 10 years, history indicates that with your $1000 a month being added, you will have, with today's buying power, about $270,000 in shares.

That would give you about $10,000 of passive income from dividends.

There are no miracles here, just numbers.

What I'd like you to do is to set up an income target that would allow you to be financially independent. As an example, let's go for $50,000 a year.

To keep pace with inflation and pay you that amount each year, you'd need about $800,000 invested. Best you have an income target and then turn that into a capital target.

Age is a funny thing. In my case, at 69, I'd only need about half that, $400,000, because my life expectancy is 15.7 years.

Sure, I hope to live longer, but it is quite okay for me to sensibly spend my capital. I'll die before we run out of money.

At 32, your life expectancy is more than 50 years. You need to have wealth that will keep pace with inflation and 
you certainly can't spend your capital.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Jon Weekes
July 3, 2024 7.43pm

With $330k owing and $116k in offset, doesn't that make the mortgage effectively $214k? Would this change your suggestions?

Anthony McInnes
July 9, 2024 12.33pm

Absolutely it would. You're right with your maths. This somewhat simplistic model of 114 months ignores the normal mortgage repayments that would also be going on during this decade.

Mandy Higgins
July 4, 2024 11.20am

While I don't understand how those calculations were made, I feel like Nick should be accessing forums like Mr Money Mustache if he wants to be FIRE. There he would get ideas on how to get where he needs to get to with the ideas and how to of like minded people - which is what I believe he searching for...

Nick D
July 14, 2024 1.05pm

Hi Guys,

This was my post, thanks for the info. While I don't (and never have) contribute any extra to my super I feel like I would have better options and benefits with any additional money being outside of superannuation.

Currently working on reducing monthly expenses to maximize $ saved into offset account which in the long run will allow me to contribute more monthly to investments.