Ask Paul: We have debt, no assets, and will soon come into $3 million


Q. My disabled wife and I are both 45 and will receive a lump sum of $3 million from a property sale soon.

We have four kids, total debt of $55,000 at 14%pa, rent at $450 a week, and food and electricity costs of $400 a week.

Our only assets are household items and two vehicles.

ask paul million franking credits

Our gross incomes are $60,000 and $40,000.

We would really like to purchase our own home and have a good but steady income.

What would be the best thing to do: buy the house outright and invest the rest or invest the lot and borrow for a house?

If we invest, what would be the best way to get a good and steady income? - Chris

A. Crikey, that is a large amount, Chris!

$3 million will really set you up for life. Pretty obviously, clear out that $55,000 in debt to start with.

Then if I was in your shoes I would buy a home for cash.

People bang on about "invest and rent" and I get the technical argument that investments may return a higher amount than the cost of your mortgage, but what about the security of owning your own home?

This is your personal decision but I reckon you would be poorly advised to invest and rent.

In fact, I would be suspicious of the motives of anyone who took you down this path.

Three million dollars is a huge amount and I would protect it by buying a home, investing the rest and then building super from your employer's contributions and topping it up if you can.

With four kids, this is a wonderful chance to protect your future. I would be horrified if you took unnecessary risks.


Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. 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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