'We have €400k saved, two rental properties and a pension. What is missing?'

Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca, 

My wife and I, both in our early 40s, are seeking your professional advice on how best to manage and invest our €400k in savings.

We own our main home (still on a very low-interest loan) and own two fully paid-off apartments we rent out, contribute monthly to a third-pillar pension scheme, and have recently started investing in the S&P 500 after bad experiences with mutual funds.

Property prices have risen sharply, so using the full amount for another apartment would only get us a decent 1-bedroom outright. But then we'd have no emergency fund left.

We learned from past mistakes not to dump it all in at once. What diversified strategy do you suggest to grow this safely while keeping liquidity? We feel paralysed but want to be savvy with our money.

Investor in Paralysis

Luca responds: 

Let me start by congratulating you on where you stand financially.

Having two fully paid apartments and €400,000 in liquid savings (not to mention your home, albeit still under loan), your net worth is for sure already above €1 million, something which many at your age, and even older more than aspire to.

Now to be clear, I cannot give direct financial advice. For that I urge you to speak to a licenced investment advisor who can direct you accordingly.

Having said that, I invite you to sit back for a while and think clearly.

My first question to you would be: What is your ultimate financial goal? You can even have more than one.

Remember, life is not just about growing your current cash base. It is about making the most of the assets you have so that you live a wealthier life.

Because you can go and double or even triple your current assets right now… but if you don’t know what your financial goal is, you’ll continue to be left paralysed by whatever amount you have.

My second question to you would be: What is enough for you?

To answer that, you have to think hard about what you want out of life.

Do you see yourself travelling 5-8 times a year to exotic places? Or would you be happier living in a nice villa near the seaside? Both have their own monetary value…

For me, for example, ‘enough’ is to provide for my children and wife, see them grow comfortably and ensure that I have enough to create great memories with them. This carries its own monetary value, and it is far less than most people think.

But not every person is the same, and that is why it is you and your partner who have to decide as soon as possible: How would a life without regrets look like? And in this kind of life, just growing money for the sake of growth itself is rarely the correct answer.

Now, back to the €400,000.

A significant sum, no doubt. But before anything else, I want to point out what you already got right, because I don't think you realise it.

Those two apartments? Paid off and bringing in rent every single month, most couples your age are still years away from that. Your pension is ticking along. And even after the mutual funds episode, which I imagine stung, you went back into the market instead of parking everything in a savings account at 0.3%. I meet people every week who got burnt once, ten, fifteen years ago... and to this day they refuse to invest a single euro again.

So where to next? There are a few directions I could mention here, like widening your ETF exposure beyond just the S&P 500, or looking into asset classes that don't all move in the same direction when markets get shaky.

But I am going to stop myself, and on purpose. Because how exactly one should split €400,000 depends on things I have no way of knowing from a letter... your tax situation, how long the money can stay invested, how big a drop you can stomach before you start losing sleep.

On a sum this size, these details matter a lot, and this is exactly the kind of decision where a licenced investment advisor is useful.

What I can tell you though, after having met hundreds of people in your exact position: your paralysis has nothing to do with knowledge. You clearly know enough, probably more than most. What you are missing is clarity... and no amount of extra research will give you that. Only sitting down with your wife and answering the two questions that matter: what do you actually want out of life, and how much is enough?

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.