A.Congratulations, on two counts.
You did well to pay your mortgage and make yourself debt-free.
It gives you good security. And it's amazing how little you can live on, at least for a few months, if you're not paying for accommodation - as long as the car doesn't get temperamental or something.
And congrats on entering - or at least considering entering - the world of entrepreneurs!
Many successful businesspeople have said, in retrospect, that being made redundant was the best thing that ever happened to them. It set them off in a new direction.
I can understand your hesitation about starting a business. But, particularly if you have a good idea and skills that could turn into something lucrative, it seems a pity not to try.
How about taking a part-time job, or a not-too-demanding full-time one, even if it's not your dream role, and starting the business in your spare time?
Agreed, you're not in a position to put lots of money into it yet. But perhaps you can start with modest expenses and see how things go. Many businesses can run on a shoestring, at least for a while.
The $40,000? I suggest you put, say, $10,000 into bank term deposits as rainy day money.
What you do with the rest depends on your age and tolerance for risk.
If you're within 10 or 15 years of retirement, and fairly risk-averse, you might be best to put it into a share fund and fixed interest investments, as the start of a retirement nest egg. If you're closer to retirement than that, stick with mainly fixed interest. A good financial adviser could help you work out how much should go where.
But if you're younger or more inclined to take a few risks, you could invest at least some of it in your business, as needed. With any luck, the business will take off, and you'll be better off in retirement than if you had invested the money.
You could even raise more cash for the business with a new mortgage. But I would avoid that unless you're pretty confident the business will do well.
A lot of this seems to hang on prospects for your business. How can you tell if it's likely to succeed?
Exploring the following websites might help: www.homebizbuzz.co.nz and www.bizinfo.co.nz. Look specifically for info on business start-ups.
Also, there's all sorts of advice in the Small Business section of the Business Herald each Friday.
About your dependant's university costs, it would be lovely to help out. But many parents don't.
Your situation is a bit like an emergency on a plane - you're supposed to put on your oxygen mask first, before helping your kids. Look after yourself first. If things go well, later on you can help your child pay off a student loan.
No adult child - or certainly one worth worrying about - would want to see a parent struggling because of sacrificing too much for a child.
Your son or daughter has a whole life ahead. And I bet you've done plenty for him or her already.
You have a chance, now, to do something exciting with the rest of your life. It's your turn.
Q.My first comment is to thank you for expressing your opinion about Robert Kiyosaki last week.
I also found myself thinking the same. If this is how I have to think to be rich, then let me be rich in something other than money!
My question is about using personal lending to finance my own business. I've had a business for nine years and through the past 12 months of difficulty I have found my personal taste for borrowing changing a lot.
It isn't just because of difficulty, since I've experienced this before and come through. I now have a real aversion to any credit card debt and am even questioning the value of having money tied up in my business that I could use to pay off my property mortgage.
I debate this with a friend who says, correctly, that a residential loan rate is the cheapest source of finance my business could get, so I should borrow more.
Should I continue to help finance my business this way? I could realistically extract from the business about $50,000, which would halve my mortgage at most.
I can expect 10-15 years of work before retirement and am planning now to put some assets such as my one property into trust for family security, and wonder if this will limit the flexibility I have with the property loan.
My business, as the largest asset, is effectively my retirement plan.
A. I, too, hate credit card debt. The interest rate is simply too high. So if you've got any of it, I would take money out of your business to get rid of it.
Beyond that, your major concern seems to be losing your family home if your business goes belly up.
It turns out, though, that it's not so easy to avoid that.
If you have a mortgaged home, it would be relatively straightforward for the mortgage lender to hold a mortgagee sale if you don't meet payments, says KPMG legal partner Tim MacAvoy.
But if you borrow against your business assets, "a creditor can still bankrupt you and force a sale of your home in bankruptcy proceedings," he says. "Your home and all your assets are at risk, simply because you have debt."
You could, as you suggest, put your mortgaged home into a family trust. "The banks are used to this," says MacAvoy. But the trust would have to remortgage the home.
"You still could lose the home if the business got into trouble. The trust may not be able to protect you from that, or at least not in the short term."
Over the longer term, he says, you might get rid of the debt the trust owes you from buying your home, as part of your gifting programme to the trust. And you might have separate business debt, without using the home as security.
"But even then, if you were unable to pay a business debt, you might want the trust to pay off the creditor to avoid bankruptcy. Trusts are not a silver bullet."
Another possibility is to set up a limited liability company. This might protect your personal property if, for instance, your company was sued for negligence. But sometimes a court will "lift the corporate veil" and put personal assets into the pool, says MacAvoy.
And, if you want to borrow for your limited liability business, lenders are still going to want security, and that will probably mean a personal guarantee from you.
All is not entirely lost. "Over time, with planning, it may be possible to structure your affairs to protect your lifestyle assets," MacAvoy says.
Basically, though, if you want to borrow for your business, it's not easy to protect your home from creditors.
In light of that, you might as well borrow using your mortgage, and take advantage of the lower interest rate, as your friend says.
Given your feelings, though, keep the borrowing as low as possible. And discuss with your accountant or lawyer how you might aim at longer-term protection.
One issue you should both look at is the tax deductibility of your mortgage interest.
If you borrow the money to buy the house, the interest won't be deductible. But if you borrow to finance your business, it should be deductible.
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