Ask Paul: I quit law for pastry - can I still support my mum?

A former lawyer swapped a high-paying career for pastry making. Can she still build wealth and support her mum?

Reader question

My name is Qi and I'm a long-time reader of Money. My life - and my financial situation - is unconventional and I would value your advice.

I'm 37 and a few years ago I transitioned from a career as a lawyer to fine pastry making. My goal is to be a master craftsperson, like my grandfather.

Financially, things look stable on paper.

No debt aside from HECS.

A paid-off apartment valued at about $800,000.

Super of $198,000, with a $300 contribution per fortnight.

Cash savings of $64,440 in Australia and £56,000 ($105,000) in a UK account.

ETF investments of $8000, with $500 invested per fortnight.

However, my lifestyle means I often spend two to three months at a time with little to no income.

My biggest concern isn't for myself, but for my mum who is in her mid-60s. She liquidated her savings and super to give to my dad, who 'invested' it all in a pyramid scheme. They are separated now and I want to ensure I can support her, if needed.

I'm unsure how best to plan for that, given my lifestyle.

So how should someone like me, who values learning and mobility over stable income, structure their finances? What would you suggest I do with my savings? How do I balance long-term security with a non-linear career?

I do hope to start my own business, but for now my focus remains on developing mastery in my craft. I want to have lived a rich life, but also be able to later on financially support my mum. - Qi

Paul's response

Goodness, Qi.

I think that at the age of 37 you have already lived a very rich life.

What a good call on your part to build investments and pay off your apartment, rather than focusing on paying off an interest-free student loan (HECS).

Who knows, as a master craftsperson, you may well end up with a chain of profitable stores, in which case your student debt would soon disappear anyway.

As I am sure you have calculated, with money you control what you can.

Where you have saved me many words is that you have used your logical lawyer's mind to build a financial plan as good as I could produce, and probably better.

Buying and paying off an apartment was so important. Living your dreams is one thing, but if things go wrong later in life through health or misfortune, living in a car is not fun.

I am sure you knew this before you made your call to become an apprentice fine pastry maker.

Your apartment gives you security for your lifetime accommodation. It will grow in value over time and, of course, can be rented if you are overseas for longer periods, generating valuable cashflow.

Then you have your super of $198,000 and, very sensibly, you are adding $300 a month. If you follow this strategy, based on very long-term investment returns, you'll have about $1.5 million at age 65.

You also have cash of $64,440. With the recent rate rise that should be earning about 4.8% and, with your long periods of low or no income, it's a sensible cash reserve.

There is also your £56,000 ($105,000).

Looking at your ETF investments with your extra $500 a fortnight, if you keep doing that, without indexing the $500 a fortnight, history indicates that your ETF investment would grow to about $1 million in today's money.

Frankly, all you need to do is keep doing what you are doing and you not only have a creative career, but a clear path to financial security.

All this assumes your career as a craftsperson. Continuing with lifetime learning does not generate much additional income.

I appreciate that you have gone down a somewhat unconventional path, but it sounds like a lot of fun.

I often hear from people who are living their passion, but few are as well organised as you are.

I could suggest investing some of the cash you have here and in the UK, but in those times when you earn very little, I'd prefer you kept up your regular contributions to super and ETFs.

Let's talk about your mum.

I am devastated that she gave her savings and super to your father.

I am assuming she owns a home and, with no savings, at her likely qualification age of 67 she will draw a full Age Pension, with pensioner health benefits. This would come to about $31,000 a year.

An option for her when she receives her pension is to apply for the Home Equity Access Scheme.

This is a terrific product, providing a pensioner clearly understands how it works.

The government currently charges a modest 3.95% p.a. on the amount borrowed, secured against her home, which can be up to a maximum of 150% of her pension.

Obviously, the amount a pensioner draws, plus the 3.95% interest, must be repaid. This is usually done on the sale of the home or from the estate.

Here your training will be very valuable to your mum.

I would doubt a pensioner would need to borrow another 150% of the pension. But let's say she borrowed about 50% of her pension, an additional $15,000 a year. This would make a huge difference to her lifestyle.

I don't see you needing to inherit her home. Your financial path looks solid.

But you may have siblings who need this money in years to come. Those personal matters I will leave to you, but the Home Equity Access Scheme is worth a look.

Another path is that based on your projected assets at age 65, you could provide her with an extra $13,000 a year, which I appreciate is a number I just made up, by pausing your $500 a fortnight into ETFs.

This $500 a fortnight will be important to you in decades to come.

You're a lawyer, you could document this and treat it as a reverse mortgage supplied by you and repayable from the estate.

But I think the first port of call is the Home Equity Access Scheme.

Qi, I have much enjoyed pondering your question.

But most of all, I admire you quitting a powerful job with high financial rewards to follow a life as a master craftsperson, particularly in pastry.

I do love pastry, and my very best wishes to you and your mum.

What to read next

• How much super do you need for a comfortable retirement?
• Ask Paul: Should I pay off HECS or save for a home?
• How does a reverse mortgage work in Australia?
• Why family finances work differently for migrants
• Four questions you need to ask yourself before changing jobs

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