Over the years I’ve often wondered how young couples could afford to live. If they typically had a mortgage of say $220,000 and then a car loan of $15,000 – $20,000. This could easily be close to $2000 p/m in repayments.[angry2] Not to mention the day to day living expenses of fresh food and clothes. I can’t see how they could even save some money let alone invest. And if they did invest, then I can’t see how they could invest in property.
Would they get rid of their $15,000-$20,000 car and go for something less expensive while they saved?
Does anyone have any suggestions to how it would be possible?vtxdevo,
Its not mensa. Basically, live within your means and invest the rest. If living within your means results in you not having a $20,000 car then so be it. If it also means renting instead of buying a house then so be it. Once you’ve saved/invested enough to buy the house, then do so. Only when you own the house and have some other IPs might you consider buying a flash car.
I think Steve describes it as delayed gratification. If you’re a young person with a $200,000 mortgage and a $20,000 car loan then you’re likely to be living well beyond your means and you won’t be able to save a penny.
Why don’t young people have any idea of even the most basic of financial fundamentals of budgeting and living within your means…
I’m dumbfounded,
Michael.Car loans are a great way to keep yourself poor. I have never taken one out and never will. If you have to have a new car because of your job or whatever, you should pay it off ASAP.
If you have equity in your house you can leverage off it, you just need to make sure that the cash flow you get is sufficient (whether negatively or positively geared) so that you can make the repayments.
Vtxdevo,
Cheap cars (no hire purchase)
Live or living at home
Savings & being frugal
Parents gifting deposit (this is pretty significant as saving for a deposit is probably the most difficult thing)These are things that first come to mind.
Interesting point vtxdevo…
I’m 19 and in the process of buying my first PPOR. I also have a car loan. I have calculated for myself how much i believe i can afford to pay off of a home loan while saving a deposit for an IP. Any house over that amount i wouldn’t even bother looking at. Living with parents is the best way to save for a deposit in my opinion… no rent to pay apart from doing the dishes and mowing the lawn!
I see Michael’s point about SOME young people having no idea about the financial fundamentals. Most people my age are out Friday and Saturday nights blowing their week’s wage (sometimes more) on booze. I just think to myself that these are the people who are going to be living in MY IP’s and paying for my financial independence because they can’t afford to buy their own homes. [biggrin]hmm, well, to the young people (I’m 30) don’t be too averse to getting out and about on the weekend and having a few frothies, or whatever else you’re into, you’re young, have fun… the key is moderation, moderation, moderation. A lot of people say save save save, I say save, but don’t forget to live a bit too.
cheers
rOriginally posted by Michael Whyte:Why don’t young people have any idea of even the most basic of financial fundamentals of budgeting and living within your means…
I’m dumbfounded,
As Robert Kiyosaki says, it’s a lack of financial education. Schools should be (or are starting to) teach it.
Personally, my wife and I have decided it’s up to us to teach our kids this as I don’t believe the schools will do that great a job of it. It’s our responsibility. Might teach them about life too [grin].
Karl.
The only thing that limits us…is a limiting belief.
Hi vtxdevo,
Like others have been saying, it certainly can be done. I’m 24 and still living at home (my reasons are more traditional than financial as I don’t belive in moving out till I’m married). But this has the added bonus of helping me heaps financially.When I first started working, within 2 months I was able to save for a $10,000 car and pay for it in cash. Within another two months I had purchased my first IP. Thankfully, my parents agreed to go guarantor for me. I couldn’t have done it without them.
I now have 3 IPs and a good share portfolio within 4 years of working. It can be done. (Not drinking, smoking and spending too much also helps).
It depends where your priorities lie.
The latest API magazine has a feature on three young investors and how/why they started… You might find some inspiration….
Originally posted by destined_for_millions:Interesting point vtxdevo…
I’m 19 and in the process of buying my first PPOR. I also have a car loan. I have calculated for myself how much i believe i can afford to pay off of a home loan while saving a deposit for an IP. Any house over that amount i wouldn’t even bother looking at. Living with parents is the best way to save for a deposit in my opinion… no rent to pay apart from doing the dishes and mowing the lawn!
I see Michael’s point about SOME young people having no idea about the financial fundamentals. Most people my age are out Friday and Saturday nights blowing their week’s wage (sometimes more) on booze. I just think to myself that these are the people who are going to be living in MY IP’s and paying for my financial independence because they can’t afford to buy their own homes. [biggrin]Destined,
Good for you! You’re already in the 20% of the population that are financially literate and understand that they should do something to become financially independent. The trick is to become part of the 20% of that 20% who actually do something about it and get on and start building some investments.
The real trick then is to become part of the 20% of that 20% that do so successfully and become truly financially independent at retirement.
What’s 20% of 20% of 20%, I think that’s 0.8% of the population that ends up truly financially independent. Not good odds, but we’re already part of the minority who understand that its something we want to achieve, so that’s a start.
Cheers,
Michael.I never have dept on anything but property. If you cant pay for a car cash dont but it.You will soon learn to save and you will buy a car if you need one.
My suggestion to anyone that stuggles with money is read a book called the richest man in Babylon. It was writen thousands of years ago in stone, but republished I try to live my live finnacailly by its princiblys , and it is so simple to do , once you create the patern you will never have money problems again.Cheers Rick
P.S. Read the book [drummer]
I know plenty of couples who have bought an expensive house. The way they manage it is to live off ones salary and the others goes into the mortgage. As for a deposit, usually they are met half way by family. eg. they need a $30k deposit, save $15k and the rest usually comes via the parents.
However, future changes haven’t been accounted for in most instances, like a baby or upward interest rates.I personally started out with sitting down and working out what I really needed and what was what “Robert Kiyosaki” terms as DOODADS – Once those were all listed I followed John Burleys Debt Terminator plan and then invested in an AIP (automatic investment plan) Once that was all in place and ticking along I started to work on personal education (well that was where I started actually) then started testing and experimenting with property and shares (to diversify……. The long and short is…. “.:it takes time and there is no magic pill to the millionaire status:.”
Now my AIP is growing and giving good solid returns of 14.5% returns average…. and the best thing is … every week I get closer to the magic first Million. (and my chances increase every week where as a lotto ticket buyer still faces that same odds each week)
Good luck and good on you!
Cheers
KiwiMost of my friends (I’m 30)spent everything they earned on travel and drinking until they were in their late 20s and had done enough of it. However by then they are earning pretty decent money – most between $70 and $100k – so once a decision is made to buckle down it doesn’t more than a year or two to save a house deposit.
I don’t know anyone who have ever bought a brand new car (or a 2nd hand one for more than $8k), except maybe the odd doctor, but they knew they’d be earning the huge bucks by the time they were 30ish.
And although some are married, none have babies.
The first home has usually a 2 bed unit/townhoue around $250k (for the singles), or a house for up to $350-$400k (for the couples) – less if they bought in 2001 rather than 2004! Repayments are not too hard to make on a take home salary of $1k plus per week.
Most earn a lot more than their parents, so I don’t know any that got a gift for a deposit (other than their university education!)
To everyone who’s answered to this topic, I’d like to thank you all. It’s given me an insight into one of today’s struggles.
Rick … yes, I’ve also heard of that book and probably read it many years ago. I should get myself another copy and revise. It could become a valuable gift I can send a few people.
Kiwi …. nice to hear that someone has got a plan and is sticking with it.
CrownOfGold ….. you seem to be really switched on. Good luck with your journey.
Michael … thanks for your thoughts.
Woodsman … good idea.
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……………………………………………………….Hi guys, i’m 16 atm interested in property investing, but the amount of info is confusing me, got any advice?
Hi Guys,
are great way.. of financially getting a head, is asking someone whos been there and done it, ask them, what they would do, if they could start all over again, and how they would do it…
some would say, to do this, others would give mentor advice, others will tell you there life time story on exactly how they did it…
sometimes its easier to copy the wheel than re-invent it…
Cheers,
sisI would say to you there is a time and a season fro everything, i think that investing when your young is a great idea as it set you up for later in life!! You have to make the decision what it is you living for … chosses chooses chooses!!!
What do you want to do … what you belive in is where you will put your money!
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