Very interesting article in the Tele on Sunday regarding the record debt Aussies are in, $720 Billion Dollars.
Reasons: Financial deregulation,Credit retailing,Housing boom,Store credit.
I don’t know? however, if I was mortgaged up to the eye balls, or owed plenty on my credit card and couldn’t afford to pay if OFF tomorrow, I would be sh….g myself.
How about you … comments … “she”ll be right mate, or, get a second job at McDonalds??
Regards Phil … heed the roar of the distant drums!!!! (that is my saying!!)
Phil,
I think this is a similar question to the “How do people live” thread, in that some people seem very comfortable labouring under a helluva lot of bad debt. I personally couldn’t stomach it. My personal debt for my PPOR sees it paid off in two years time and then I’ll be bad debt free. I also pay my CR card off monthly in full.
Now, if its good debt and you have contingencies built in then you should probably pass the “sleep at night” test. I personally couldn’t live under the burden of a lot of bad debt, it would kill me.
Our foreign debt is staggering now on a per head of population basis. But the PM seems to be able to sleep at night [biggrin]
Cheers,
Michael.Yep. Live the Aussie Dream Now…..and pay it off later.
I see it as a basic misunderstanding of the concept of living within your means.
I think the problem begins with with a basic financial illiteracy on the part of the Australian Public.
Resi, I think you have hit the nail on the head when you point out that the contingency plan for a lot of people is to get a second job.[blink]
The far reaching social problems that I think will result when families find they have to use all their time to pay off “The Credit Funded Dream Lifestyle” will be devastating.[wail]
Personally, I am mortgaged to the eyeballs and have a lot of other debt. HOWEVER, all my debt is tax deductible, so none of it is bad debt (unless you include the rent I pay to my own landlord is sort of like bad debt)…..and I sleep very well.
Live, Learn and GrowLifexperience
and obviously as the population growth continues and inflation marches on and we experience growth it would be more surprising if gross debt actually reduced. They could have that article printed up and ready to run on a regular annual basis! actually is the billion they talk of 100 million or 1000 million? at 1000 million it is still only $38000 per head of population which sounds very low – do these numbers exclude mortgages or something?
Personally I couldn’t pay my debt off tomorrow and can’t really see a problem with that. As long as the asset backing is there I figure I have a good 30 or 40 years to pay it off – what’s the big hurry?
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
Hi Mike how r u … yes similar to other post, but this one is concentrating on (i hope) why Australians are getting further into the debt trap.
I’m not that old mate, i’m still in the top 8 in my golf club. It seems to me, and the warnings are proving it, that Aussies (the younger generation 18 – 35) have changed their SPENDING HABBITS.
We have a 27 billion dollar credit card problem,why??, 5 year interest free store accounts – 86% of people refinance paying over 40% interest,why??
We’re not saving we are spending – Robert Kiyosaki calls this finance FUNDERMENTALS.
How can a person create wealth if they lease an expensive car on a PAYG income, they could own 5 investment properties while driving a second hand Hyundai with the difference.
Am I wrong ????? i’m confused [confused2]
Regards Phil
An expensive car will give that person the illusion of being well off.
I think the reason is simple: It is because that type of person wants the best possible lifestyle NOW. And due to a lack of financial intelligence, they are unable to understand that they have thrown away an even better future.
To you and me and basic logic……IT IS CRAZY. The only reason I can see why is ignorance.
[disguise]
Live, Learn and GrowLifexperience
Hi LifeX
May be they are on the river that used to flow past the pyramids
DeNile !!!
I completely agree with you lifeX!!! A lack of financial literacy. I have held the belief for a while that “Financial Literacy” should be a compulsory subject in all schools from 7th to 10th grade, with the syllubus written by a number of investors specialising in various fields.
Commerce skims the surface, as does Maths, and Business Studies is a pretty average course in my point of view. (I can say that because I got over 90% and still feel that way).
On the flipside – us investors are probably better off while this is not a compulsory subject in schools. For as long as these conditions persist, the rich will get richer and the poor will get poorer…
Age doesn’t negate effort – you can never be too young or too old.
Resiwealth,
DeNile. ha ha.I did pick up that you put this across as a rhetorical question.
Spanky,
I think that it is a very widespread problem. I personally would like to contribute in some way towards solving it. Another reason I need to attain financial freedom, so as to have the time and backing to do so.I really admire People like Steve McK and Robert Kiyosaki (even if he is a yank) for making such a contribution to financial literacy.
Live, Learn and GrowLifexperience
hey, nothing wrong with a hyundai excel!
mag wheels, cow seat covers and a dancing elvis (you think i’m joking!)
but seriously, i own two ip’s 20k worth of shares and a company worth 85k but as yet not producing an income stream.
i do want the z3 bmw (metalic silver, mag wheels, gps road map thingy and the dancing elvis) but i am willing to wait so that the company can lease the car. to do this i live well within my means.
i pay 100 dollars a week rent which includes electricity and cable, and save 480 dollars a fortnight.
i wouldnt say i live tightly but it certainly helps that i am single!
cheers all
shaunLead, Follow or get out of the bloody way
We know someone who works for a major retailer and at this time of year he basically spends his days writing up paperwork for hundreds of interest free deals.
I was watching Today Tonight last night, they did a story about a lady debt collecting for these companies – the real interest rate was 27%!!!People get into debt because they want to keep up with the Joneses! I on the other hand say to hell with the Joneses – because the Joneses will be the ones who will be relying on the government for a handout when they’re old – I would sooner cut back and suffer some financial hardship while I was young and able to handle it then have to deal with it when I’m old and infirm.
P
The author is definately a conspiticy theorist, but raises some interesting points.
.
the only difference with bob is that ‘I criticise what i dont understand’ – the times they are a changin’
love a conspiracy…
Phil,
In answer to your “why now” question, I propose the following… Maybe its a case of the Baby Boomers sitting on their PPORs and realising all this capital gain. They may have been one of the lucky ones and splashed out on a single investment property, you know a unit somewhere as a nice little retirement nest egg.
Now the market comes along and whataya know, they’ve got all this equity. But instead of staying true to the “retirement nest egg” mentality, they see some bloke on tellie with a new boat saying “equity mate” and Eureka! Now we can have our retirement nest egg, but redraw our equity to fund our excessive lifestyle. Off to the boat show for the new trailer sailer and now that I think of it that means I’ll need the new Nissan Patrol to towe the thing… Oh, and if I’m getting a new car I probably should build a double garage to house it. What the heck, if I’m going to council I might as well shove another level on top too…
Well, you get the picture.
I think equity and easy finance is funding a consumer society. Its a real shame that the real estate market has paid big dividends recently for the BBs in the market, but they’re so into consumerism that they’ll draw it out and blow it.
Ah well, there’s always the Gen Xs to fund their retirement and hospital bills with higher PAYG tax rates.
Sorry, I’m a Gen X and might be showing a little bit of a one eyed approach to this post. [biggrin]
Cheers,
Michael.I’m with you on this one Michael – I’m a Gen Xer who believes I shouldn’t have to pay for a baby boomer bail out either. Financial education is nothing new – the last 30 years has been plenty enough to pick some up.
Neither do I feel, as Mr. Costello suggests – that I should have to “breed” in order to support the economy. Another novel approach to the whole baby boomer problem – why should my kids be burdened with higher taxes for past governments lack of foresight?
P
LifeX,
You’re so right. It’s like Aesops fable about the Golden Goose. There’s no logic in cutting off the head to kill the need (perceived?) for more eggs? So many people I know borrow money they don’t have, to buy things they don’t ‘NEED’, to impress people they DON’T LIKE!
Cheers,
Gatsby!I hear a hint that the Genx people are suspecting a babyboomer problem. People born between 1946 & 1965 are starting their retirements now. Over the next 10 years this will grow in intensity. I personally have always been just ahead of the boomers and they made property investing easy for me. I have the feeling that we are going to see the property market change.
What do think the changes will be? With the Oz$ at .75 and climbing, our huge trade deficit and an unstable world economy, who would want to be heavily in debt.
What are your ideas on property investing in this atmosphere?Michael got to agree. Economists call it the wealth effect. When you feel wealthy because you have more RE equity or your share portfolio climbed (US in the 90’s ) you feel more wealthy and spend accordingly. Economy is fine.
Now when the equity shrinks ppl cut their spending and the economy slumps.The US share market peaked at 11,700 back in 2000 and is still bouncing between 10,000 amd 10,700.
Even though yields are up etc. A four year slump has never happened before, but the last boom driven by so much media exposure was also totally new.We slumped before in 1983 ,Gold Coast Unit off the plan at $160K that could not be sold for $80K,
and I remember Carla Zampati buying a Double Bay property for high 3Ms and dropping over a Mil when sold in less than a year.Now this economy is going to struggle with the boomers phasing out, most boomers are underfunded for the lifestyle they wish to enjoy and if property stabilises a lot will have been caught out living beyond their means.How they scramble to make up for it will be interesting.
gmh454,
I can’t help but sense interesting times ahead. There are a lot of contributing factors including the Baby Boomer phenomenon, which I consider to be a significant event, the likes of which we haven’t witnessed before.
I can but hope my intuition is born out as I’m cashed up and awaiting my opportunity. If something “significant” happens in the next 2-3 years I’ll be looking to capitalise on it. But I’ll be buying on the turn and not on the slide. I’m not clever enough to try and pick the bottom. I’ll wait for it to arrive and then wait for it to turn before I start parting with voluminous amounts of cash deposits for multiple IPs.
I don’t plan on being one of the poor mug GenXs who’s PAYG tax is subsidising the consumer culture of the Baby Boomers even into their retirement. I’m executing an exit strategy based on REI. Let the BBs pay for their own medical bills and wanton consumption I say by selling down their assets to fund their retirement. I’ll pick em up on the cheap and rent them back to them, or their kids, if I can. Lets face it, they won’t need those assets forever will they, so IMO they’ll want to turn equity into cashflow by selling the spare ones off…
Cheers,
Michael.
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