Consequences of "free money"

[Welcome]

I am glad the banks keep increasing my credit card limit. I put as much stuff as I could on one card (fixing up an IP, not consumer debt) and then I found a new credit card with 6 months interest free on Balance transfers so I then put all that debt onto the one new card and have left the money that I would have used to pay it off in my offset account. Will save me $100's in interest over the 6 months!

 

[WinstonWolfe]

Personally, I think Australians are becoming the white trash of Asia.

And I don't blame Gen YZ for it. I blame baby boomer parents.

Why? because they have a highly distorted perception of what it is to parent with discipline. They also go on sheltering adult children from the REALITY of life when their kids take off on flights of unaccountability and fantasy.

I recently have been castigated by several boomer friends for criticizing one of their children for dropping out of 3rd year law to pursue a career in acting, eventually in Sydney. He is working in a nightclub to save money to live in Sydney.....and has started to get sick all the time from working late nights.

Having been closely involved in the industry, I told them in all seriousness, they will be supporting him for as long as he pursues the career in acting.

 

[Norwester]

Hi Winston,

Do you have any children?

Just curious.

ciao

Nor

 

[WinstonWolfe]

Hi Winston,

Do you have any children?

Just curious.

ciao

Nor

That's the question one of them asked me, because the generic follow up is
"You don't know what it is like if you don't have children of your own"
To which I reply
"Have you got step children? If you don't then you don't know how to keep your ego out of your child rearing"

 

[alexlee]

Had a chat about this to a friend the other day. Say someone told you their children are all investment bankers, lawyers, etc. Is that a good thing? I suppose. But I know what it's like to be an investment banker, and a lot of them end up practically living on the road or at the office, with the usual costs to famiy life.

Is that something we want for our kids? I don't know. I'd prefer they chose what they wanted to do and make them happy, but I'd like them to be aware of the cost of all their choices as well.
Alex

 

[WinstonWolfe]

I'd prefer they chose what they wanted to do and make them happy, but I'd like them to be aware of the cost of all their choices as well.
Alex

Which is my point. Parents should have a more mature approach to evaluating the choices their children want to make in relation to a career. It is ridiculous for parents to leave it all up to their kids, to discover what career they want to do, when many of them have not the slightest what the real world is all about.

Just saying I want my 17yo to do what makes him happy, is a cop out. I know a lot of teenagers who want to be pro golfers and tennis and footy players, or just to go fishing with a rod....cos that makes them happy.

The whole happy thing is dependent on how well it serves your Maslow hierarchy of needs....and sadly, a lot of boomers just don't get that.....

And the eventual failure of a so many ill considered pursuits of happiness, are what is fueling the electorate's demand for a nanny state. When youngsters fail at being a tennis player, many want welfare to be there to back them up.

 

[warrioress]

Winston - I do understand what you're saying - however on average, Gen X & Yers will have/have an average of 8-15 career changes in their life. So it's no longer relevant if they don't know what to do at 18...they'll have their whole lives ahead of them to try different roads.

 

[feihong]

credit card is a 2 edged sword, use it appropriately and you get the benefit of reward points and debt recycling (and hence less interest payment on your properties). Use it recklessly and you end up with what Shonnie and everyone else is portraying.. personal lending crisis. Personally, I wish my credit card limit is 100k+!

 

[lizzie]

weeeelll i have used mine for the occasional ip deposit ... but only when i knew the cash is on it's way and there is a lapover.

 

[Shonnie]

"Which is my point. Parents should have a more mature approach to evaluating the choices their children want to make in relation to a career. It is ridiculous for parents to leave it all up to their kids, to discover what career they want to do, when many of them have not the slightest what the real world is all about."

I don't know if that is really fair - personally I don't think it's up to the parents to evaulate the kids choice. Whatever direction a child wants to take with their own personal career is their choice only. If they screw up then thats their problem as well.. I can understand why many parents would want to be there for their children in case they do make the wrong decision.

I guess the best thing parents can do is educate their children the best know they way how, and support (not neccessarily financially) them in whatever happens!

 

[WinstonWolfe]

So it's no longer relevant if they don't know what to do at 18...they'll have their whole lives ahead of them to try different roads.

Unfortunately SheWarrior, that's the misconception many young people and their boomer parents share.

Opportunity cost is not understood by such people. When I sat down with my friend the other night, to explain to her my attitude towards her son's decision to do acting, she still couldn't grasp the importance of lost time.

I explained that every day, on average, he was falling $110 behind in wealth purely because he was putting off the opportunity to get into real estate. I explained to her that every day he delayed buying property, that property would cost him $110 more to purchase.

Do the math- 350k house, CG an av 7%pa, paid for in after tax income....

So when kids are planning their 12mth trip OS before they settle down, remind them to add $35,000 to the cost of the trip. (the price an entry level metro house went up)

 

[pieman]

those banks a f.ing mad. I had a 12k limit that i paid off every month and thought i wonder what happens if I apply for a 60k limit. Anyway no probs, said the bank here you are after I filled out a 1 page form in the branch. I have an ok income.
Dont know what im going to do with it... i did think i should get one for a 100k and use it to pay for a dep. for an ip
pieman

 

[alexlee]

Guys, you are aware that banks take your credit card limits into account when assessing serviceability?
Alex

 

[ianvestor]

Guys, you are aware that banks take your credit card limits into account when assessing serviceability?
Alex

That's the only reason I've never had mine lifted above $1000.

It's just enough to be convenient without really affecting my serviceability.

 

[feihong]

Guys, you are aware that banks take your credit card limits into account when assessing serviceability?
Alex

yep, that's why I don't dare to ring up bank and increase my credit card limit.. my finance was actually rejected before my lending manager barely got me over the line because I had about 50+ credit enquiries on my veda report..

 

[pieman]

your CC limit will not affect how much you can borrow if you can show that you always pay off the full amount every month, well at least thats what happened last time i went to borrow for an ip. I owe a fair bit over a mil. but have never had any probs with the CC. If there was all you do is change the limit to 1k, simple
pieman

 

[Simon]

your CC limit will not affect how much you can borrow if you can show that you always pay off the full amount every month, well at least thats what happened last time i went to borrow for an ip. I owe a fair bit over a mil. but have never had any probs with the CC. If there was all you do is change the limit to 1k, simple
pieman

Usually it does affect your serviceability. It is the minority of lenders who do as you suggest.

I have clients wh think it is a positive that they have a high limit - often $30K or more. They think they are some sort of preferred client. I nearly always have to ask them to reduce to a practical limit - $5000 or less.

 

[warrioress]

Unfortunately SheWarrior, that's the misconception many young people and their boomer parents share.

Opportunity cost is not understood by such people. When I sat down with my friend the other night, to explain to her my attitude towards her son's decision to do acting, she still couldn't grasp the importance of lost time.

I explained that every day, on average, he was falling $110 behind in wealth purely because he was putting off the opportunity to get into real estate. I explained to her that every day he delayed buying property, that property would cost him $110 more to purchase.

Do the math- 350k house, CG an av 7%pa, paid for in after tax income....

So when kids are planning their 12mth trip OS before they settle down, remind them to add $35,000 to the cost of the trip. (the price an entry level metro house went up)

Sorry to derail the topic...

Look I can't disagree completely with what you're saying regarding missing out on investment opportunities by deciding to travel, study, pursue alternative careers etc. But I don't think it's as cut and dry as suggested.

There is more to life than investing. I may have had the ability to purchase property early - and I probably could have purchased more if I didn't travel overseas or get married etc. It's an opportunity cost that I'm happy to forego.

The budding Actor may start investing when he's 30, 40, 50, 60, 70, if ever! But is that necessarily a bad thing? As Alex says - we need someone to rent from us!

Back on the topic - everytime I see an article or topic like this I do chuckle to myself. I see it as a potential opportunity.

 

[Aimjoy]

weeeelll i have used mine for the occasional ip deposit ... but only when i knew the cash is on it's way and there is a lapover.

Ahhh thank goodness lizzie,

I was beginning to think that I was the only one

Aimy

 

[Aimjoy]

Guys, you are aware that banks take your credit card limits into account when assessing serviceability?
Alex

Weeeeeeel,

Yes, but only the CC limits you tell them about.
And only if you are getting full doc loans.
And only if you are apply for a mortgage from a lender with whom you also have a CC with.
Remembering that CC apps drop off your Veda file after 5 or 7 years anyway.
And I have the attitude that, so what if I have a $50K platinum visa from whoever - its none of the lender's business - especially if I have no balance on it.
If I'm stupid enough to run up a CC debt after a mortgage app then its all my fault and I'll wear the consequences but I don't need some bank employee in a cardigan telling me how to run my investing business.

I'll get off my soap box now.

Aimy