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Ask Paul: My paralysed husband just lost his job

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Q. We have been following your articles in Money since we moved to Australia in 2005.

My husband and I are 44 years old with a teenage daughter. I work full time and earn around $64,000 a year (before tax, superannuation and yearly bonus).

I have been working with the same company for more than 12 years.

My husband is paralysed and lost his job last year. He has income protection cover, which pays $6000 a quarter until he turns 65. He does not receive a disability allowance from the government.

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When he became disabled in 2009, he received a TPD lump sum payment, which we used partially to purchase our two-bedroom apartment.

At the moment we have a $420,000 mortgage. Our property is valued at around $1 million. We have $75,000 in an offset account.

We also have a credit card balance of $5000 (the limit is $5500) which we pay only partially each month.

We have a margin loan with a balance of $17,000 and a total portfolio of $41,000.

I have around $75,000 in super and my husband has around $40,000.

I have income protection, TPD and trauma cover insurance with TAL where the premium is mostly taken from my super.

I only have to pay $165 a year (out of pocket). We have been thinking about paying our credit card in full using the money from our offset account.

We have also been thinking of paying off our margin loan but it seems that the timing is not right if we sell our shares.

We would like to start investing in exchange traded funds, hoping that it could help to generate passive income.

Could you please shed a light on what we should do to improve our financial condition? - Jolanda

A. Jolanda, I really feel that your priority is to focus on paying off your home loan.

You are making good progress here with $75,000 in your offset account.

I do agree that you should use $5000 from the offset account to get rid of your credit card debt.

You may be paying up to 18% on the credit card and I hope under 4% on your mortgage.

Then I suggest you concentrate on using any excess income to keep on adding to your offset account.

You both have superannuation and your funds should own shares.

Super is a good place to build your exposure to shares and other growth assets.

This will happen automatically due to employer contributions and I really would like you to clear your mortgage well before retirement.

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Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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