A plan worth trying?

[Terarus]

Hi everyone,

Being new to personal finance and having just entered the working world, I've set myself a 5 year plan in my slow but nevertheless upward climb in personal wealth. I'm currently working in a bank that pays a measly 45k before tax, a salary I definitely look to change as I move up the ladder or into specialised fields, but until then I will work with what I have. To start, I want to share a little bit about my situation,

Age: 24
Location: Melbourne
Living alone, renting
Weekly savings (after tax): 200
Current investment strategy: Minimum cash balance is kept in my transaction account while the rest gets placed in a high interest earning account; unforeseen expenses are covered by a credit card (no annual fees due to my employment in a bank and I am extremely strict with how much I charge on credit and paying it before the interest free period ends). Once my savings reach approximately 3000, I will move it into shares with the idea of creating a portfolio of different shares over time and will use a time horizon of roughly 3yrs+ while adjusting the portfolio every now and then if unexpected large capital gains were to occur and to weed out weak performing stocks. My shares will also act as my emergency fund due to the relative liquidity of shares (again my credit card will be put to use to handle anything more urgent) and I am willing to take on the risk of a fire sale that may result in 20-30% losses. I will continue this strategy until I save enough for a 20% deposit on an investment property, which I hope to be within 5 yrs given property prices in Melbourne**. In the meantime, I am also looking into the first home buyer's account offered by the government as a possible investment vehicle to reduce the volatility of my investment plan.
** We assume pay is indexed with inflation and I don't get promoted in the next 5 years

What do you guys think? Is it a valid plan? Do you have anything you want to suggest and make changes to?

PS: On a side note, I hold dual citizenship in both Hong Kong and Australia. Having said that, I have a devious plan (although incomplete) of perhaps setting up a trading account in HK, send money overseas; transfer profits to person A, who then passes the profit to person B in cash and person B will transfer that amount back to my account. Personally I don't think its a valid plan given the legal issues associated with it but I'll love to hear if someone here is knowledgeable with tax and possible ways to take advantage of dual citizenship.

All thoughts are welcome!

[BMEPhDinCO]

I think the first part of the plan is good - although I'd keep at least 1k in cash just in case - some emergencies don't take credit cards! As for the dual citizenship, it depends on each country - you can look up the laws for both and then decide if you can use them to your advantage.

Also consider other plans - in 5 years, do you see yourself married or getting ready for that? What about a car? Further education? Travel? If you have other, non-housing, goals, you should set stuff aside for them too.

[Terarus]

Thanks BMEPhDinCO
Your comment is much welcomed. While I do appreciate there will be other things I will eventually want in life (as mentioned marriage, car, further study etc etc); my sole goal for now is to maximise earnings. After all, marriage will require me to buy a property anyway and to me a car is a luxury rather than a necessity. Things will change and I will continue to adjust my plans as my goal and earning power changes as well. Although to me, investing as much of my savings as possible is no different to setting aside money for future goals.

[bjl584]

I'd keep my EF in cash. I wouldn't put it in stocks or depend on a credit card for it.

I'd also forget about the money laundering idea.

But, you are on the right track with the rest.

[mrpaseo]

I think the first part of the plan is good - although I'd keep at least 1k in cash just in case - some emergencies don't take credit cards! As for the dual citizenship, it depends on each country - you can look up the laws for both and then decide if you can use them to your advantage.

Also consider other plans - in 5 years, do you see yourself married or getting ready for that? What about a car? Further education? Travel? If you have other, non-housing, goals, you should set stuff aside for them too.

Really? The first part of the plan is good?

The idea of 1k in cash is good but using a CC as an emergency fund is not good advice, nor is starting a base portfolio in stocks. Maybe I'm missing something.

[Terarus]

Really? The first part of the plan is good?

The idea of 1k in cash is good but using a CC as an emergency fund is not good advice, nor is starting a base portfolio in stocks. Maybe I'm missing something.

Well my thoughts were along the lines that shares are relatively easy to cash out and takes roughly 3 business days for the money to go through to your bank account. Obviously one has to consider a potential fire sale and the losses associated with it but as long as you're saving and investing, saving and investing, saving and investing - you'll eventually reach to a point where your portfolio has more than what you need as an emergency fund anyway even if you consider a firesale loss of up to 30-40%. Depending on the type of emergency, credit cards can act as a temporary fund while you wait for the shares to sell through. Correct me if I'm wrong but I don't think there are emergencies that really requires you to cough up cash on the spot and nearly all bills will give you enough time to sell out your equities to cover any gaps

But I do appreciate your comment and perhaps you can shine light on any flaws in my thought process.