Staying motivated on a low income?

[AndrewT]

If you go to work on your goals, your goals will go to work on you.
If you go to work on your plan, your plan will go to work on you.
Whatever good things we build end up building us.

--Jim Rohn

Thanks Rob. I'm still been meaning to get through those e-books you sent me!

Hey, that's quite a bit by the way....




Well, there's a limiting rule right there. Why not? Why make that limiting decision for youself (and you partner while you are at it)?

You can earn whatever you want.

Cheers,

The Y-man

I just assumed people would be saving alot more money then us. I'm happy my partner isn't a big spender on clothes etc.

Your right, I shouldn't be putting a limit on what I think we could eventually earn. It's the wrong mindset.

Hi Andrew T

Don't be discouraged; saving $400 a week is very good! I personally know a doctor who's living in a 1.6 million house in Sydney and he is worried sick as he is going backwards every month!

His problem was he is living in too expensive a PPOR and that was hampering his investing journey...........

Don't underestimate mindset; it can either help you or really hinder you.

Start at the lower end of the market; one at a time, out in Campbelltown way, you can find some neutral or small cash flow positive houses (i know, i bought one!)

All the best.

Thanks for the advice. When the time comes, we will really have to try and find something cf neutral or +ve.

I think we've just got to take all opportunities we have, work hard and work towards a goal.

Thanks for the motivation everyone.

 

[BayView]

So how do people do it? We have big plans in the future for getting into property but with our low incomes at the moment our motivation is so low. We have been budgeting what we can, and we found we could save about $400 a week. Not nearly what we would like to be putting away.


Thanks,
Andrew.

Mate,

people on low incomes don't save $400 per week.

You are way ahead of the trend.

 

[RumpledElf]

people on low incomes don't save $400 per week.

They EARN $400 per week ...

 

[daniellee]

Keep your chin up, man.

Thanks Rob. I'm still been meaning to get through those e-books you sent me!

I just assumed people would be saving alot more money then us. I'm happy my partner isn't a big spender on clothes etc.

Your right, I shouldn't be putting a limit on what I think we could eventually earn. It's the wrong mindset.

Thanks for the advice. When the time comes, we will really have to try and find something cf neutral or +ve.

I think we've just got to take all opportunities we have, work hard and work towards a goal.

Thanks for the motivation everyone.

Hi Andrew,

Our income went from $100K to $70K when my wife had a baby. We have one PPOR and one IP, the latter is negative geared at $400 a month. My wife is working part-time from work, and her income and Family Assistance payments cover our PPOR mortgage.

My own income of $55K pays for the IP, living expenses, etc, and I still pay away around $1.5K a month. Yes... we live on a tight budget. Our intention is to upgrade to a larger PPOR / do a development in 2011.

What keeps me motivated?

1. The idea of being financially free by year 2023;
2. Having the income for wife and I to work part-time (4 days a week is great!);
3. Being able to provide the opportunities to the baby and his future siblings;
4. Having the wealth to look after my parents;
5. Looking back with pleasure knowing I gave it my best.

Know there are others in similar position to yourself, so do not lose heart. Keep reading and immersing yourself in PI mags and books.

Cheers

Daniel Lee

 

[Piston Broke]

$400 wk is great going!
I'd recommend "The Wealthy Barber" by David Chilton.
Maybe I like it because I know quite a few "wealthy barbers" types, some of who were also actual barbers. So I found it inspirational.
As for pay, my taxable income was never >45K though in 2012 I may not be able to keep it <100k as income becomes the strategy rather than CG.
This is a game of patience. Start drawing lessons for your current situation to date and thinking about what constitutes an ideal investment criteria for an IP given your personal situation.
Keep looking at properties, attend auctions etc to learn and familiarise yourself with the local markets.
Again I'm talking "investment", for which i already posted my criteria ie it does'nt cost to hold.
Who knows I may bump into you at one of the local auctions.
If you see a person who you think is more likely to steal your wallet rather than buy the place, it could be me...

 

[AndrewT]

When I start getting more weekends off, I intend to attend local auctions in order to familiarise myself with the local markets and to give me some some experience with what happens aswell.

I'll have a look at getting that book, first I have to finish a few that are laying around the place here that I havent touched!

I found a place that seems ideal for an investment but the figures on the rental return seem too much for the area. It is a townhouse @ 180k. Apparently it's currently tenanted for $265pw. Now i've entered that into my IP Calculator and at an IR of 7%, it's Yield is 7.66%.

This sort of Yield should be pretty much cf +ve. The IP Calculator says that it won't be cf+ until it's been held for 9 years (30 post tax a fortnight after 1st year). I'm thinking I must have entering something in wrong but they all seem right.

 

[wobbycarly]

When I start getting more weekends off, I intend to attend local auctions in order to familiarise myself with the local markets and to give me some some experience with what happens aswell.

I'll have a look at getting that book, first I have to finish a few that are laying around the place here that I havent touched!

I found a place that seems ideal for an investment but the figures on the rental return seem too much for the area. It is a townhouse @ 180k. Apparently it's currently tenanted for $265pw. Now i've entered that into my IP Calculator and at an IR of 7%, it's Yield is 7.66%.

Why wouldn't this be correct? Is that a typical rent for the area? Maybe this is one of those 'elusive' CF+ bargains! Or a typo, and the rent should be $165? There could also be really high body corp fees that eat into the rent!

This sort of Yield should be pretty much cf +ve. The IP Calculator says that it won't be cf+ until it's been held for 9 years (30 post tax a fortnight after 1st year). I'm thinking I must have entering something in wrong but they all seem right.

Something's not right there! Are you perhaps mixing CF+ and positive geared? ie, after tax it's CF+, but before tax it's -ve?

 

[AndrewT]

Well I might have to give them a call about the property to see what the situation is with the rent. I had a bit of a look around the area and rents for similar places are about the 200pw mark, but that was only a quick look.

The spreadsheet is telling me:
Rent @ 50 weeks: 13,250
Interest Loan @ 7% = 12,548
Property Expenses = 3,460

This leaves a $2,758 pre-tax shortfall ($106 Fortnightly).
After-tax it is a $771 yearly shortfall ($30 Fortnightly).

 

[wobbycarly]

My mistake - I saw that $30 pf as positive after tax.

Does your "property expenses" include depreciation? That will 'artificially' inflate your costs (artificially because they are non-cash costs), resulting in a larger tax refund, which can make quite a bit of difference depending on your tax rate, and possibly push it into CF+ territory.

 

[AndrewT]

Not sure how much to put down for the depreciation but I put in 15k. It's a relatively new place, probably around the 2000 mark.

This brought the after-tax to $6 (cf+) but then went to cf-ve by $5 per fortnight on the 3rd year and going back to cf+ve by the 9th year again.

 

[wobbycarly]

Not sure how much to put down for the depreciation but I put in 15k. It's a relatively new place, probably around the 2000 mark.

This brought the after-tax to $6 (cf+) but then went to cf-ve by $5 per fortnight on the 3rd year and going back to cf+ve by the 9th year again.

IME, that slight "dip" is normal as you are usually amortising borrowing costs over the first 5 years, so your non-cash costs decrease a little. But after 3?

Anyway, sounds like you've got all the numbers in.

 

[DeeHwa]

http://www.heraldsun.com.au/news/fi...rth-fitzroy-home/story-e6frf7jo-1225836283166

This should give you some motivation! Proves hard work can make things work!

Does anyone know how much this 169 Alfred Crescent, Fitzroy North house went for? I straight away recognised it, haha. The price guide was $770,000-$840,000. Smallish house but houses on Alfred Crescent fetches awesome prices.

She is 26 and a nurse, so her wage is probably not too flash. 80% of her income on her mortgage is inspiration that it can be done!

She reminds me of my parents with the 'help with money' bit and mirrors a lot of what I did.

Single chick buying a close to $1mil house. Me, got my house now worth close to $1mil at the age of 23 (now 24). But I am a guy, haha.

Bought in the best location of Fitzroy North. I bought in the best location of Brunswick (or so I claim, haha).

She is a single person on single wage. Me 2

We both bought Victorian houses.

I wonder how many people she had to outbid. I had to battle 5 other bidders, and the last one was extremely stubborn as.

We do have differences though. I understand interest rates and I got my house at the 1st auction.

Glad to see parents helping their kids!!!

 

[RedCat]

Also a good example of FHB not willing to settle for less which is what creates the mortgage stress the media keep writing about.

 

[Alex P Keaton]

http://www.heraldsun.com.au/news/fi...rth-fitzroy-home/story-e6frf7jo-1225836283166

She is 26 and a nurse, so her wage is probably not too flash. 80% of her income on her mortgage is inspiration that it can be done!

Silly silly girl ... forking out 80% of her income on her mortgage!! Wonder what will happen when interest rates go up another 1% dur!!

Oh well she could always move out and rent it out after 6 months if she's finding it tough to make the repayments and move back with her parents.

 

[Alex P Keaton]

Also a good example of FHB not willing to settle for less which is what creates the mortgage stress the media keep writing about.

Its crazy isnt it!! I thought someone spending 50% of their income on their mortgage are crazy but 80% that is just insane!!! lol at Deehwa saying good onya young lady. Are you nuts Deehwa?? what planet do you live on? lmao

She said she will be renting out her 2nd bedroom but she has put herself right behind the 8 ball from the start. If IR go up 1 % she's in deep s***. If they go up 2% omg. She can rent it out i guess.

 

[RedCat]

10 years ago I was renting in Fitzroy but realised I couldn't afford to buy my first home in my preferred area so I bought a shack in North Melbourne with a 20% deposit, did it up, sold and made a net profit of $60K - then I had enough to move to Fitzroy.

It really is like the media state: Y Generation are not willing to wait for anything.

 

[RedCat]

http://www.heraldsun.com.au/news/fi...rth-fitzroy-home/story-e6frf7jo-1225836283166

I wonder how many people she had to outbid. I had to battle 5 other bidders, and the last one was extremely stubborn as.

We do have differences though. I understand interest rates and I got my house at the 1st auction.

Glad to see parents helping their kids!!!

And you're certain you didn't pay way above what you should have in the first place? Just because you bought at your first auction doesn't mean you did better than her. Maybe you did worse. Maybe you paid too much because you had to have it. I don't know your circumstances so I'm not trying to shoot you down in flames, that's just what your reply suggests to me.

 

[skater]

How the heck does a nurse have the serviceability to get a loan for a property that expensive?

 

[AndrewT]

Thanks DeeHwa for that link.

Makes me feel alot better with my 300k mortgage! I couldn't even imagine thinking about getting a property for over 700k, not for a while anyway!

Your probably right RedCat, alot of Gen Y don't want to wait. They want the best they can have straight up. My mate wants to buy his first place for around the 500k+ mark, he can hardly save a dollar at the moment let alone manage a mortgage of that size.

For the record, the mortgage repayments at the moment are about 26% of my wage.

 

[Luv2Travel]

10 years ago I was renting in Fitzroy but realised I couldn't afford to buy my first home in my preferred area so I bought a shack in North Melbourne with a 20% deposit, did it up, sold and made a net profit of $60K - then I had enough to move to Fitzroy.

It really is like the media state: Y Generation are not willing to wait for anything.

I did the same. Bought the cheapest thing I could find in the area I grew up in, in the outer suburbs, Lilydale (can you believe $95K only 8 years ago!!). Had a huge mortgage of $85K which I managed easily as a graduate. Did it up, sold it recently and moved to inner Bayside area of Melbourne and my mortgage payments are 25% of my wage, again I can manage this nicely and continue to invest. Then one day I may upgrade from 1 bedroom to 2 bedroom, but only when I can afford it! One step at a time. Is insane this whole "I want it all now" attitude from Gen Y. Although depending on when Gen Y actually starts (some say 1976, some say 1980), I might even be one.

Having said that, it's not just Gen Y, I know a girl 36 who is in so much debt she can barely afford her rent and has banks chasing her for credit card payments. She continues to buy her breakfast and lunch every day, and even though she recognises she is in a financial mess, continues to buy things she wants (not needs) right away. I find it bizarre! She talks about buying a house one day as she sees a few of us doing well, but I have no idea how she plans to.