Is it time to get out of debt?

[Aaron Sice]

let me get this straight - i haven't closed the shutters. i'm not NOT investing.

i'm just sticking to my criteria and it seems to be working well. i'm just looking for other options to increase cashflow.

 

[urbanprospector]

wonder if this trend will continue

http://www.abc.net.au/news/stories/2010/05/24/2907417.htm?section=justin

 

[Bigtone]

wonder if this trend will continue

http://www.abc.net.au/news/stories/2010/05/24/2907417.htm?section=justin

yep likely to continue.

people who use their home as a credit card and are consumption junkies are bound for trouble as soon as properties stop rising, they lose a job, commsission drops, they miss a bonus etc.

so many people have no idea have to manage money

 

[markpatric]

You run the risk of looking a little silly if you keep a closed mind.

Here are a few Gentlemen who, if they had any decency, would be shamefaced:

http://www.youtube.com/watch?v=4AgTt8iFi2Y

Peter Schiff was always ridiculed on US money channels but he was pretty darn right. Anyone who didn't see the GFC coming cannot say that nobody else did or that the wiser heads kept it a secret.

Check out what Schiff is saying today.

Yep.
It`s understandable too why people don`t want to hear it, or at least acknowledge it openly but I 100% agree with Schiff.

 

[Value Emperor]

One of the worst things about losing money is the feeling of having failed as opposed to the goods or services foregone from to the loss of purchasing power.
So there is a huge amount of comfort in following the crowd. Even if one ends up being wrong, they can feel a sense of relief that everyone else was wrong with them. Who blames themselves for losing money on an investment? It was bad tenants, bad stockbroker, bad govt policy, those lousy shorters, the banks, subprime, the weather). Rarely does someone admit simply, "hey I followed the crowd and paid too much".

Schiff is unique in that he ignores what the crowd is doing and calls what he sees.

He copped a log of flak for debunking the new paradigm of "spend, borrow, consume as this will lead to growth and the more you do it the higher the growth". People didn't listen because it went against what they wanted.

 

[Aaron Sice]

remember though, everyone gets into debt for things they WANT.

you WANT more wealth, you're going to get into debt.

you WANT a new car, you're going to get into debt.

fat chance saving cash for that $300,000 unit, but you COULD save for a $30,000 car.

 

[markpatric]

remember though, everyone gets into debt for things they WANT.

you WANT more wealth, you're going to get into debt.

you WANT a new car, you're going to get into debt.

fat chance saving cash for that $300,000 unit, but you COULD save for a $30,000 car.

Sure they do, everyone seemed to buy into the OPM dream, stop work and watch the dollars roll in, I had a few years off so I am not complaining, but it is right back to work these days, you bet.
That 300k unit is actually worth probably less than half that amount in reality, same with the car, it has been driven up by strong inflation, a rapidly descending value of fiat currency, easy credit and mass speculation, we all bought in at some point but when to recognise the signs to get out is what makes all the difference.

 

[Sunfish]

"...a kite only soars high when it's flown against the wind, not with it..." Winston Churchill.

But only while it is tethered. Set it free and it falls to the ground.

I mention this because I'm not confident everyone's SMSF will thrive unrestrained.

 

[Sunfish]

Value Emperor:

So there is a huge amount of comfort in following the crowd.

There is some easy money following the crowd. Being contrarian pays off best if if get in before the crowd, swim with them during the run up and then heeding the alarms and heading for the beach early.

When you are on a good thing you close your mind to warnings.

 

[Value Emperor]

remember though, everyone gets into debt for things they WANT.

you WANT more wealth, you're going to get into debt.

And when everybody thinks that debt is the easy way to create wealth, it probably isn't!

ATM, the banks doing the lending still think it is, but slowly the penny is starting to drop.

When it does finally drop, and banks realise they may not get the money back, thats when you'll see the reverse happen.

Not only do you NOT want to be overleveraged at this point, you actually want to have as little debt as possible so you can take advantage of opportunities.

 

[Aaron Sice]

guys - i hear your argument and i agree.

but as long as they're trying to repair and maintain the "old" system, then them's the rules we gots ta play by.

 

[devo76]

Or in 20 years time when average wages have doubled or more and average house values have doubled and more. We will look back at this time as just another opertunity used by some and missed by most. Cashflow for survival is a big priority atm but I bet my left ### and half my right one that the game will not change long term. If I'm wrong I'll be broke like 99% of the population. But if I'm right I'll be wealthy like the 1%.

Cheers.

 

[BayView]

We have been pretty much on the trail of "consolidation" - reducing our own LVR significantly

Cheers,

The Y-man

It is my view that everyone of us should be doing this anyway - regardless of good times and bad..

Of course; start with personal debt which is not deductible and then work towards the deductible debt.

The combination of debt reduction (interest saved) and inflation, and cap growth will accelerate your equity position much faster.

 

[VYBerlinaV8]

I'm going to do what I've been doing for the last several years:
1) Spend less than I earn
2) Buy good quality long term assets
3) Use the spare cash from (1) and asset yield to continuously reduce debt.

Periodically I'll get more debt to buy another asset.