Taming the Debt Monster - Attitudes to debt for young players

[avura]

And I have no problems with him doing so. I wonder, in ten years time, when he has a 10 yr old Audi that costs a fortune in maintenance (someone posted an auto transmission as costing $19K I recall) whether he will be wishing he'd spent that $80K in a blue chip investment that should have at least doubled and be paying him 5% yield fully franked...

I know exactly where you're coming from Simon. He just has different goals and different strategies. I think he plans to make his fortune through business. I throw it out there every now and then about investing, but he is not the slightest bit interested. Same with the other directors.

He even made the argument today that the car will bring in more business and pay for itself (something about it raising morale). You never know, maybe that's true, or maybe it isn't. I think once he realizes you can't work forever, it will all become clear to him.

I mainly added that point in my last post to show another young person taking on a huge debt for a depreciating item. I certainly don't think it is a good idea, unless it really does increase business of course.

 

[Simon]

Does he think it will attract clients in?

I reckon I need to upgrade my sailboat for the same reason - just run it past my wife.....

 

[Monopoly]

He even made the argument today that the car will bring in more business and pay for itself (something about it raising morale). You never know, maybe that's true, or maybe it isn't.

Hi Avura, I understand how your colleague's Audi may help to make an impression from an image point of view, but I don't quite see how it would "raise morale"; any ideas on how this may work???

 

[Simon]

Hi Avura, I understand how your colleague's Audi may help to make an impression from an image point of view, but I don't quite see how it would "raise morale"; any ideas on how this may work???

Might raise his morale?

 

[Monopoly]

Might raise his morale?

Well yeah, that goes without saying, but how does it work for everyone else's morale??

I know, maybe because he is walking around with such a HUGE smile on his face that it lifts up everyone else's spirits!!

 

[handyandy]

I reckon I need to upgrade my sailboat for the same reason - just run it past my wife.....

Hi Simon

Great article enjoyed reading it.

My first car was a hand me down VW broke down 4 weeks later, had to shoot it .

Didn't get another car until about year or two later, in '74 bought a 1970 cortina for $800 (at that time a property in Surrrey Hills cost $29k) drove it until it died in '83.

Let me know when you upgrade that sailboat I'll come up and get a refresher. (used to sail a 420).

Cheers

 

[alexlee]

If you want to buy something badly enough, you'll always be able to find a justification for it. Problem is, buying depreciating items using debt debt is a slippery slope. You start with owing some money on your credit card from shopping and paying it off when it's due. Then you think 'it's only a few dollars interest' and start living beyond your means. Then you start buying things like furniture, car, etc.

No one item will kill you financially. Even buying a car is fine as long as you then concentrate on paying it off and don't take on any more debts. It's the cumulation of all the items and the mindset that it trains you into (i.e. thinking that you're only paying a few dollars in interest and thinking only short term). It's the mindset that drives the actions, so the key is to change the mindset first.
Alex

 

[Simon]

Hi Simon

Great article enjoyed reading it.

My first car was a hand me down VW broke down 4 weeks later, had to shoot it .

Didn't get another car until about year or two later, in '74 bought a 1970 cortina for $800 (at that time a property in Surrrey Hills cost $29k) drove it until it died in '83.

Let me know when you upgrade that sailboat I'll come up and get a refresher. (used to sail a 420).

Cheers

Can you come tomorrow? I want to have a sail but Jen can't make it and I need someone to help me.....

Anyone available Sun afternoon?

 

[aussierogue]

g'day

Dear Buzzlightyear and Avura....

Yeh i was being a bit condescending...sorry about that. i was writing it with a smile on my face if that makes any difference. It makes me feel better to be occassionally controversial. This happens when you get older and the only one who argues with you willingly is your your 2 year old daughter.....

i was being a little truthful though in that i must admit these are my feeling most of the time about sub 25 ers with fast cars. I have a thing about being showy and blatant consumerism......and i know thats being judgemental.....

To Les...thanks for sticking up for me, even though i was being a s..t!!!

Ps i drive 6 year old subaru liberty - paid cash 20k. the previous one was 11 years old and clocked 300k. sold it for a lofty 1,500 bucks.. Im 35 so im middlesaged???

 

[avura]

Hey aussierogue

After re-reading a few posts, I guess it was just one of those things. You stirring the pot, me taking it the wrong way, etc. No harm done I hope.

Anyway, I forwarded on Simon's post to a few people today (parents included). But I think it's like someone who has just quit smoking telling other smokers how bad they think it is. I am/was the worst 'bad debt offender' I know, so it must seem rich coming from me. hehe

Just an update though: sold car on Friday and new owner is picking it up on Wed. That's was quicker than expected.

 

[Simon]

A number of you have said they were going to pass my article onto some people who might benefit from the message.

How was it received?

Sometimes the most needy are the least happy to read this stuff and I am curious as to people's reactions?

Have had a few lovely emails from folks as well which made me feel good.

 

[Chilli]

Hi Simon,
Thank you for the article.
Have passed it onto my 2 nephews (in their late 20s). It has helped; they now understand well good debts vs. bad debts.
Then I lent them 2 books, Jan's (told them to read it first), and Michael Yardney’s.
Then I told them about making plans and WRITING THEM DOWN.
I think they are paying attention which is a great start .

Also sent the article to some young professionals at work , who have been earning decent income in the last 5 years and still live with parents no investments, no plan, only talk about weekend outings, new cds, dvds, games etc. These people think they already know all and are living their chosen lifestyle so no need to be educated any further. It re-affirms my theory that most professionals tend to think they have "made it" and hence see no urge to progress.

 

[alexlee]

Also sent the article to some young professionals at work , who have been earning decent income in the last 5 years and still lives with parents no investments, no plan, only talk about weekends outing, new cds, dvds, games etc. These people think they already know all and are living their chosen lifestyle so no need to be educated any further. It re-affirms my theory that most professionals tend to think they have "made it" and hence see no urge to progress.

The 'old' professions (medicine, accounting, law, etc) are in a weird position these days. A generation ago you could become rich simply by becoming a professional. All the professional associations and bosses (most of whom came from those salad days) harp on about how stringent the professions' criteria are and so on. They assume that if they keep working in their professions somehow everything will be ok.

What the partners in the firms, etc don't understand is that those days are over. Unfortunately, the older professionals are either already rich or don't want to admit that the world has changed. So they keep preaching from the same book. It's not unlike telling kids that doing well at school is the only thing you need to be successful in life. It's advice that's about 30 years out of date.

Professionals think that they should know everything, so they don't listen to people who they perceive as less qualified as themselves.
Alex

 

[avura]

Hi Simon

I sent it to a few people and even posted it in our public folders at work. To be honest, most people took it as if I was trying to prove something. The section about the lady who bought a performance car and thought it would appreciate, was criticised the most. I told them to forget that part because it was about debt, not about anyone thinking new cars appreciate.

Anyway, the guy I mentioned buying the Audi, is picking it up this week. It's almost as if they (Audi) saw the post on this site. For anyone who has flash, go check the site out (http://www.audi.com.au), the first words you see are: "INVESTMENT PROPERTIES ARE OVERRATED ANYWAY". hehehe. I got a bit of hard time over that; very funny though.

I think the fact is that some people consciously would rather do things other then spend 10, 15 or 20 years managing properties just to have money later in life. It seems that many people don't understand that. Sure some people are in trouble and need guidance, but at least with the people I know, they're having fun and they're healthy. That's more than I can say for most of the investors I know (especially the health part).


Anyway, just trying to paint the picture from the other side.

 

[keithj]

Citibank Retirement Index Report

I came across this overview of a report from citibank regarding savings/retirement. It uses the word saving a lot and rarely the word investing or debt.

The full report is also worth a browse.

 

[Bantam Roosta]

I sent it to a few people and even posted it in our public folders at work. To be honest, most people took it as if I was trying to prove something. The section about the lady who bought a performance car and thought it would appreciate, was criticised the most. I told them to forget that part because it was about debt, not about anyone thinking new cars appreciate.

That's an excellent idea avura, posting it on your public folders. If you don't mind Simon, I'll do the same thing. I can almost guarantee I will get a similar response as avura received, detractors and know it alls trying to prove me wrong, but hey, I love it. . If only one person reads it and learns something from it then I would say it's been a success.

BR

 

[grossreal]

hi simon
great post and a very interesting read am looking at a new car for me, second hand car in the car world.
I say there is no problem with debt as long as the repayments are covered by your investments and that you are not paying for it and someone else is.
yes unfortunately most of the people that need to read it, won't
and a few people that are interested in investing would do well to have a read.
well done

 

[quickerblade]

very good

 

[Bantam Roosta]

What a disaster

Well, bear with me if you wish. This all happened over a 3 week period.

I posted this article on the public forums at work, a Defence Network. All going fine, a few comments, then I receive an e-mail from the folder moderator saying that the attachment has been removed as the article is copyrighted and I have no authorisation as an employee of the Commonwealth to reproduce it.

So off I go and get specific, written authorisation from Simon to reproduce the article on a public Defence forum. The folder moderator then asks that I do not re-post the article until he has had a chance to read it for possible solicitation or financial advice. Wonderful.

2 weeks later. Article has been read and I receive this e-mail that goes on forever about how it could be classed as general financial planning advice in which case Simon/Mortgage Hunter must be a licenced financial planner or advisor. One way around this would be to remove the article and point them towards a site from Mortgage Hunter that had this article so that Mortgage Hunter would then take on the 'risk' of any challenges from financial regulators. A draw back to this I'm then told is that some people may misconstrue my post as a form of solicitation which then opens up for other nasty consequences.

Now I understand that there need to be stops in place to protect uneducated people from being taking advantage of, but how can they ever learn if we aren't given a chance to help them with some very good information.

Rant over.

BR

 

[Simon]

Well, bear with me if you wish. This all happened over a 3 week period.

I posted this article on the public forums at work, a Defence Network. All going fine, a few comments, then I receive an e-mail from the folder moderator saying that the attachment has been removed as the article is copyrighted and I have no authorisation as an employee of the Commonwealth to reproduce it.

So off I go and get specific, written authorisation from Simon to reproduce the article on a public Defence forum. The folder moderator then asks that I do not re-post the article until he has had a chance to read it for possible solicitation or financial advice. Wonderful.

2 weeks later. Article has been read and I receive this e-mail that goes on forever about how it could be classed as general financial planning advice in which case Simon/Mortgage Hunter must be a licenced financial planner or advisor. One way around this would be to remove the article and point them towards a site from Mortgage Hunter that had this article so that Mortgage Hunter would then take on the 'risk' of any challenges from financial regulators. A draw back to this I'm then told is that some people may misconstrue my post as a form of solicitation which then opens up for other nasty consequences.

Now I understand that there need to be stops in place to protect uneducated people from being taking advantage of, but how can they ever learn if we aren't given a chance to help them with some very good information.

Rant over.

BR

Sometimes when I wonder why I left the Army life gives me little reminders....