The trick is to buy something cheap that needs heaps of work. You live in it and do it up as you can afford. My wife and I sqeezed our family into a 3br ex-housing commission house and hit the payments hard in the first few years. The house was only $32500. Buy what you can afford and look for the dumps first and work your way up to what you really want.
You will always miss 100% of the shots you don’t take!
Bruham, cheers for your input, but I believe that people really are oblivious of the consequences. I mean honestly, how many people do you know that reads the fine print on those buy now pay later get up?
If someone has commented they have used it, I’ve asked them if they read it and they almost always have not. I’m not on my high horse mate, I’m just stating what is the bleeding obvious. I understand some people have no option but to use a credit card as it’s happened to me, but my point is, sometimes it is for stupid things they use it for.
I.e. TV breaks down so they go to get an equivalent but come home with one three times the size and budget! Have know of people to do that…
What about preivously before credit cards? If something broke down how did people cope with that? I think probably just fine. Maybe a little strained but most came through…My nan being one of them. They just had to find alternative answers or means…
As a young lad in Sydney, I was fortunate to have parents who were, and still are, very supportive. My first intro into finance came from a “personal” loan from my Dad to purchase a windsurfer which I thought to be the beez neez! I worked part time in a chicken shop and collected a poultry amount (sorry) which I used to pay back my Dad a fixed amount per week for a period of 8 months. The fixed amount was based on my expectation of earnings with money aside for living expenses so basically we negotiated the loan amount and terms and conditions. I was only 14 at the time but has stuck with me till now!
As for the average cost of first homes, I was shocked about 2 years ago when I went to sell a house in Hornsby, Sydney. I was overseas at the time, however later read the ad saying it was for “first home buyers” and advertised at $600k! Dont know that many first home buyers in that league, particularly in Hornsby!!
It’s hard to say ‘no’ to little Johnny when you know you have the money to spend on his brand new electric gituar. However by teaching the value of saving (no matter how hard it is for them, and you) you are proving them with a neverending form of gaining wealth through delayed gratification. We also teach our children to always give 10% of their income (first and foremost)to a charity of some sort.It makes them focus on the bigger picture.
Did anyone see the the programme called Insight on the ABC last night? (in between reading one of Steve’s books and eating dinner I saw bits and pieces of the show) It was a live audience debate about the rising credit card debt in oz.
I personally believe that the majority of people know the consequences of over spending but just can’t control it. They discussed how one not overly wealthy person/couple had a credit limit of $2K and within a few years the limit had been increased to $22K, I don’t think anyone should be allowed that sort of limit unless they are earning over $100K.
Doug
Originally posted by kp:Its a great question Steph,
And the young professional couple who earn $110k and $50k together…are inherently not savers…they’re party going spenders. So the deposit question is another mystery?
They think that high income equals wealth…but all they are doing is trading time for money…so its a trap in itself.
And the job usually burns them out within 10 years….then what ? wake up call time ?…..time to reassess the finances ?Its truly scary from where I sit…..
KP
KP,
Have to kind of disagree, at least from my perspective. My wife and I fit that income demographic with my income at $125K and my wife’s at $45K. And we just bought our first house for $650K in North Narrabeen on Sydney’s Northern Beaches.
But, here’s the difference…
We pay my entire salary off the house each month at around $6,500 net, even though the required repayments are only around $3,500 (10 year P&I term). We still live a fantastic lifestyle on my wife’s income of around $4K net a month. We also managed to save around $300K deposit and have already payed another $150K off since we bought the house around 2 years ago. We still owe $180K, but the house is now worth around $850K so we’re looking alright at the moment.
So not all top quartile earners are spend big consumers, some of us are responsible wealth accumulators (or at least want to be). But my wife and I may be just the exception to the rule.
BTW, this is my first post so I hope it doesn’t come across the wrong way. I’m here on a journey of discovery. I’m still an absolute novice on REI but have been doing my homework (Kiyosaki, Burley etc).
Our current plan is to pay off the house in the next 2 years then look to start investing in real estate. I’m hoping to accelerate this though with some purchases inside that timeframe. I have around $3K in disposable income a month ($6,500 of my salary less $3,500 house repayments). My salary will continue to be our investment income and my wife’s is the enjoy life money.
Cheers,
Michael.It amazes, even frightens, me how much debt first home buyers in particular and young Australians in general are willing to take on.
My wife and I decided to buy our first home 2.5 years ago. We were renting in inner-suburban Melbourne at the time but despite being very fortunate to have salary income comfortably in the top quartile for Australia we decided to move to outer-suburban Melbourne to buy a property. We simply weren’t comfortable with carrying the amount of debt required to purchase a property in the area where we were renting.
By contrast my brother and his girlfiend, with joint income perhaps around the median, bought a house a few months later in inner-suburban Melbourne. It’s about half the size of ours but cost the same. So they are servicing the same debt (an amount I considered to be about the maximum that is comfortable for me) on half the income. Somebody’s reality is out of whack, I don’t know for sure whose but I hope it works out for them!
(Both properties were less than the median price at the time.)
Very few of my friends (I’ve just turned 30) have bought a property yet, maybe 1 in 5 have. I don’t know of any of my peers who’ve bought something in the $350k – $400k range, but perhaps not far short of it. But still, it certainly doesn’t surprise me that people are willing to do that, I think saving the deposit is a bigger barrier than servicing the debt in most people’s mind.
The consumer society we live in is amazing. A friend of ours recently returned from living OS for several years and the first thing she did (in the first week back!) was buy a new car fully financed. She spent more money on a car than I did, she funded it through debt, and based on her occupation I expect her earnings are somewhat less than AWE. I find that astounding but it seems that I’m in the minority, that kind of need for instant gratification and lack of concern about taking on “bad” debt seems to be the majority position. I must be weird? Thoughts?
the news yesterday was full of of interesting things about our ageing population….soon us 30 somethings will be forced to save and live frugally. those who already know that will have less problems 20-30 years down the track.
Aussierogue,
I couldn’t agree more. Part of the reason I make zero voluntary contributions to my super is that i don’t trust the government. The burden the ageing population will place on those of us earning an income will be enormous unless significant steps are taken to mitigate this now. I can’t see that happening, so I invest my money directly so i can be a self funded retiree in my own timeframe and not slave to the government. Who says they won’t increase taxes on super payments or defer the eligible age further. Don’t want my money under the control of a government that is going broke.
Smethem,
You are the minority! As am I and probably most of the people on this forum who are taking control of their financial futures. My brother’s situation scares the heck out of me. He earns less than a quater of what my wife and I do yet has bought a McMansion in Kellyville and is working crazy hours and weekends to barely service his mortgage. And just a few months ago he added a $20K pergola!!! What the??? He spends a fortune on the latest and greatest very expensive toys for his son yet he is stressed to the max as he can barely cover the interest component of his mortgage. I’m scared about what will happen when the rates rise…
I’m going to buy him Rich Dad Poor Dad for christmas as a nice easy read introduction to the concept of getting control of your life. If he “gets it” then I’ll give him some of the more specific action oriented stuff in my library.
I seriously don’t know how he sleeps at night…
Cheers,
Michael.spot on michael.
you know what though – its very very diffiuclt not having things NOW. i too am someone who beilieves in delaying gratification so we dont have flashy things even though we have a high combined income (much the same as you michael).
The big problem is that others (friends and family) become very confused. they know we have money howevever why do we decide to rent and drive a lousy car………things just dont add up…hehe.
the easy answer to that one is that i must be a tight arse!!yet the truth is we are investing for the future and those that know me well know in very generous (even if i do say so myself)
must admit dont mind being the anti – consumer either.(regurlar posters will know im a bit contrarian by nature). good for the soul!!
AussieRogue,
Absolutely! Your post sounds far too close to home. I get the whole perception of tight ass thing too, yet I’m the most generous by far of all my siblings. I set up a managed portfolio for each of my nieces and nephews with a grand in each when they turn 5. My wife berates me sometimes for being too generous, but as most financial wellbeing authors would suggest, its important to “give or donate” a portion of your income if you are to be truly abundant.
I’m also the last of my siblings to actually buy a house. And although its the most expensive of them, my parents don’t understand why I didn’t pay millions for a mansion in Mosman or something. I saved over 50% deposit before I bought it and will now own it in 2.5 years time.
I did, however, buy a new MX5 convertible. BUT, I only did it because I could finance it under corporate hire purchase and keep a log book showing 90% business usage. I ran the numbers and realised it was a good deal. I own it outright now. My colleagues drive Z3s and Boxters…
Bottom line is, I have a plan which is heavily geared to future wealth and not immediate excessive gratification. I want to buy a yacht for around $100K, but am waiting until my investments are in place first. I could afford it now but I’d be servicing bad debt and I’d much rather be building financial independence.
I know I’m extremely fortunate to be as abundant as I am already and try to avoid flouting my success. IMO, I am still a little fish on a big learning curve who is taking his first small steps on a life long journey.
Cheers,
Michael.Geez Michael, I wish I could have a little yacht… One day…
Well here I am back but with a dilemma this time. Kiddies are on the horizon within the next year or so and we have to make our financial plan with what to do.
I desperately want to stay home with child and don’t want to go to work as my mum stayed home with my bros and co. We’ve been looking into Family Daycare and it looks fairly viable as I can stay home with child and look after a few others as weel as get paid for it. Plus I get right off pretty much all my groceries, 1/2 of phone, water, electricity, gas bills.
The dilemma we have is that the current house we are in has teh room for a shed down the back which we could change into a mini room type thing for daycare with bathroom etc but the cost of the shed etc will be $20K +. We don’t feel that it would increase the value of the house and are looking to other alternatives.
The next idea was to get a house that 4×2 with a decent yard and run it from the house. The only thing is, that the suburbs I prefer to live in, the houses are around the $200K mark (but fairly new so nothing really ahs to be done to it). Something we were not contemplating for some time.
The only idea we can think of at the moment is use some of the equity in this house (We have around $40K available to us) as a deposit for the second house. Rent that out for a year so we can finish our current house plus it is cheaper to live in and we would get heaps more rent in the more expensive house. Then we would try and get ahead of payments and pay all excess cash into the bigger house to bring the amount down before junior hits the scene in a year and bits time.
The bigger house would be negatively geared but to a point we can handle at the moment. When it comes to moving into the bigger house, our smaller house should be neutrally or slightly negatively geared. SIGH… Not the outcome we were wanting but it’s looking a reality.
Another option is borrow money off parents to help keep number down. I’m open to idea, hubby is pretty closed to matter. Proud young man he is…
Any help? What would you do in my situation? I really like the idea of the day care as it will work with staying home with kiddies. How can we get around the money situation without winning lotto?
Steph.Success is 1% inspiration and 99% perspiration.
When will people stop living like the “jones’s”?
The sad fact of this debate is a creation of our society, make more money… persecute the weak for our own gain. Capitalism will be just another step of the evolutionary ladder, unfortunately I will not be around to see its down fall.
12,24,36 and maybe tens years free intrest and no repayments until 2034…………
dont get caught up in how your garden,home and what car you should drive cload ones mind, it is really a pointless exsercise when you are pushing up daisies………..
99.9% are sheep, will always be sheep and the corporations know it and we know it.
gg
We are all made from Stars
Salubrious,
I think I agree with you, but I’m not sure I got your exact message down pat. There is far too much wanton consumerism in western societies. But this is what props up their economies. I personally avoid this consumerism and still reap the benefits of a boyount economy that someone else is funding. [biggrin]
But at the end of the day, I am investing to make money. A dollar now for 10 in the future, but I don’t intend to take it with me. I want to enjoy life and give something back to society. I can’t do this if I’m locked in a 9-to-5 job working for the man. If I can build financial independence then I can buy my freedom. Freedom to do the things I want to do and have enough left over to donate to the worthwhile charities that I select. It may mean that today I’m working hard and don’t have the latest Gucci bag or watch my DVDs on my plasma TV, but in 10 years time hopefully I’ll be free.
Regards,
Michael.If only everyone shared the same philosophy as you my fellow human, if we all gave as much as we got the good times would role.
We take from the meek, and give to ourselves, I suppose its caveman 2000 style, survival plus credit!
I am not trying to re-invent the financial wheel, I am just saying I would like to be the same guy in a different time.
I just signed up today for Amnesty international, gee it makes you feel good.
Originally posted by MichaelWhyte:Salubrious,
I think I agree with you, but I’m not sure I got your exact message down pat. There is far too much wanton consumerism in western societies. But this is what props up their economies. I personally avoid this consumerism and still reap the benefits of a boyount economy that someone else is funding. [biggrin]
But at the end of the day, I am investing to make money. A dollar now for 10 in the future, but I don’t intend to take it with me. I want to enjoy life and give something back to society. I can’t do this if I’m locked in a 9-to-5 job working for the man. If I can build financial independence then I can buy my freedom. Freedom to do the things I want to do and have enough left over to donate to the worthwhile charities that I select. It may mean that today I’m working hard and don’t have the latest Gucci bag or watch my DVDs on my plasma TV, but in 10 years time hopefully I’ll be free.
Regards,
Michael.We are all made from Stars
‘Onya Salubrious,
I think life is far more satifying for Bohemians than the Bourgoise…
Cheers
Here here, onya Salubrious!
I too donate regularly to charities. I give to Save the Children and the Wilderness society monthly. The Wilderness Society is a funny one as I work for an MDF company which makes its product from Woodchip, but as I said to the lady who signed me up, I see it as an opportunity to engender change from the inside.
I truly believe that what goes around comes around, and that generosity of spirit is a key enabler to true abundance in all aspects of life.
Sounding a little Zen now so time to sign off… [biggrin]
But remember, its all about balance, and any imbalance in your life does create disharmony. Mind, body and spirit. I’m flogging my mind constantly learning as much as I can but you got to remember the others too.
Cheers,
Michael.poverty doesn’t equal happiness. why do some people find it so hard to work with and find the positives of western society? There are many 3rd world countries that would gladly accept your immigration application – just so long as you take more than 5 bucks in your wallet. I for one love this ‘consumer’ society and the freedoms my forefathers established for me. Perhaps we need poverty and desperation in our own lives to truly appreciate it?
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
G’day Michael Whyte,
I don’t want to be a pain in the ARSE,but can you
please explain to me how you live FANTASTIC, on $45k gross a year?
My bum is hanging out of my pants,living on $80k a year.
I also own a property in North Narrabeen.Belongs to my superannuation fund.Yours cost $650k, mine cost $36k. Damn and blast!!!!!!!
And you’re into managed funds as well! Do you realize that being in a managed fund makes you the last one in the chain to be paid.Everyone has their hands in your pockets,right up to their elbows,and you cop what’s left,if there is anything left.
Big mistake touching managed funds. Only losers
get involved with them.
Just a thought.bruham. [withstupid]
Bruham,
I guess we live pretty well on $45K because we are debt free other than the mortgage on our PPOR which is serviced entirely by my salary. Oh, and we don’t have any kids either…
Things have got a little tighter lately though. My wife recently took a pay cut from $65K to $45K in order to follow her heart in to Environmental Law. She had been working as Justice Finnane’s associated in the District Court. She topped both Environmental Law and Local Government Law at Uni and wants to practice in these areas. BTW, in 2-3 years she should be earning heaps more than me!! (And how good is her skill set going to be to our REI plans [biggrin])
Managed funds, I hear you! I was in to managed funds and only advocated it to the guy who came in to an inheritance because the equity markets are on the up and even a mug can make a poultry return there now. I was concerned he’d do his dough on some get-rich-quick dodgy. I personally am out of managed funds now and am putting all of my disposable income in to paying off my PPOR. That is, until I can find some informed alternative to invest in, hence my extensive reading and active participation on this forum.
As to living it up on $45K, well I guess that’s a little exageration. Lets just say we have a great quality of life living in a large house with ocean views, driving nice cars and eating out quite regularly. Here’s a tip though, when we eat out we use the “Entertainment Club” books for a buy-one-get-one-free main course. We invariably only buy two main courses and a bottle of wine and thereby have a magnificent meal for only around $60-$70 for the two of us. I also work only 18km from home so my petrol is $40 a fortnight, and Kay busses in to town for $40 a week. She’s interviewing for new jobs in Environmental Law right now for around the $100K mark so if one of these comes off we’ll be back in mega happy ville.
Best Regards,
Michael.
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