Taming the Debt Monster - Attitudes to debt for young players
- Thread starter Simon
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Good article Simon, many thanks, and to those who posted about cars. Mmmm....got me thinking about my history with cars....Alfa Romeos (x 3, including a Spider), and Merc 380SL. I've always had a penchant for sports cars. My friends used to call my yellow Alfa Romeo Spider "Mussolini's Revenge", as it cost me $thousands over the years in repairs. And the Merc guzzled fuel like it was water. But...oh how I loved driving my Spider! Wish I had known then what I know now about "bad" debt, depreciation. I could have put a deposit on 3 properties with the repair bills from the Spider. Still, hindsight is not foresight and never will be. Some of us are late starters in the wealth creation game...tis important that we finally "get it" at some stage.
My current car is a red Honda CRX....my joy. It was 4-years old when I bought it, and now is 13-years old. Runs on the smell of an oily rag, and I've honestly spent about $1500 on repairs over the years. So twas a good buy and still going strong. I have no intention of selling it, until it dies. Looks just like this one.
My current car is a red Honda CRX....my joy. It was 4-years old when I bought it, and now is 13-years old. Runs on the smell of an oily rag, and I've honestly spent about $1500 on repairs over the years. So twas a good buy and still going strong. I have no intention of selling it, until it dies. Looks just like this one.
Gee took me a while to pick up on this article Simon, well done, wish i'd read it 20 years ago.
I'll send it to most of my friends and family, though it probably won't be well received, oh well
Seem's a lot of us with a few properties have a thing for the older car's, some older than others.
1980 Chrysler Valiant Wagon on LPG, increadibly reliable, economical, and solid.
Had her for 4 years now and never regret the $1500 spend.
One day i'll lash out and get a Flash Car like the yellow Charger, but I reckon Redbook has the prices wrong, more like $14k for a good one.
http://www.redbookasiapacific.com/au/vehicle/prices.php?key=CHRY76BE
BB
I'll send it to most of my friends and family, though it probably won't be well received, oh well
Seem's a lot of us with a few properties have a thing for the older car's, some older than others.
1980 Chrysler Valiant Wagon on LPG, increadibly reliable, economical, and solid.
Had her for 4 years now and never regret the $1500 spend.
One day i'll lash out and get a Flash Car like the yellow Charger, but I reckon Redbook has the prices wrong, more like $14k for a good one.
http://www.redbookasiapacific.com/au/vehicle/prices.php?key=CHRY76BE
BB
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Well done Simon a great post!
I do believe however, that this is less about cars (new, old, decrepit or otherwise) and less about attitude to debt, maintaining the focus and thinking long term - sorry I dislike the term 'delayed gratification'.
Knowing the right time to make the purchases in life is just as important, for example, last year was the right time for my family to take two short overseas breaks, due to work pressures etc. Kudos to you Simon for your thoughtful and well considered ideas on how to encourage focus in people, not only young people but everyone who could use some financial focus (and that is all of us!)
Regards
I do believe however, that this is less about cars (new, old, decrepit or otherwise) and less about attitude to debt, maintaining the focus and thinking long term - sorry I dislike the term 'delayed gratification'.
Knowing the right time to make the purchases in life is just as important, for example, last year was the right time for my family to take two short overseas breaks, due to work pressures etc. Kudos to you Simon for your thoughtful and well considered ideas on how to encourage focus in people, not only young people but everyone who could use some financial focus (and that is all of us!)
Regards
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Wish I had been able to have written it 20 years ago
Hope it helps someone down the track.
HI there Simon
thanks for the post and well done
my concern now is how we pass this information onto our children - if I put a copy of the article in the hands of my 17 year old daughter - she would read it - say it was good - then go out and blow all her earnings on new clothes or some other doodad.
We have tried talking about good and bad debt - that she may be better off using her earnings to buy some shares - which will give her an income stream which she can then use to buy some doodads.
She has actually said - why are you spending all this money on property - particularly when I want to be able to buy a nice formal dress... our response is of course - one day she will be glad we did.
We have talked about delayed gratification - but it just does not seem to sink in. We have talked about saving at least 10% of her earnings so she can show a track record to a bank or other institution when she wants to take a loan for something like a house. Nothing gets saved.
It is very encouraging to see many younger people on this forum asking questions - because you know they are heading in the right direction. Just wondering how others get through to their kids the message Simon is trying to relay.
thanks
thanks for the post and well done
my concern now is how we pass this information onto our children - if I put a copy of the article in the hands of my 17 year old daughter - she would read it - say it was good - then go out and blow all her earnings on new clothes or some other doodad.
We have tried talking about good and bad debt - that she may be better off using her earnings to buy some shares - which will give her an income stream which she can then use to buy some doodads.
She has actually said - why are you spending all this money on property - particularly when I want to be able to buy a nice formal dress... our response is of course - one day she will be glad we did.
We have talked about delayed gratification - but it just does not seem to sink in. We have talked about saving at least 10% of her earnings so she can show a track record to a bank or other institution when she wants to take a loan for something like a house. Nothing gets saved.
It is very encouraging to see many younger people on this forum asking questions - because you know they are heading in the right direction. Just wondering how others get through to their kids the message Simon is trying to relay.
thanks
My eldest is 13 and we talk about all sorts of things over dinner and in the car etc. The other night during the news she was asking all about the sharemarket - it was a great time to tell her about what shares are and why they are great to own.
We have IPs and are selling our home to build a new PPOR - she has shown a lot of interest in that process and asks questions which is quite rewarding.
She gets pocket money and has to pay for certain things herself with that which involves budgeting - just minor. She also impresses me when we go shopping and I want to buy her something pretty by telling me that certain things are too expensive.
I guess it is the later teen years which will see whether our principles have rubbed off on her.
The younger one doesn't get pocket money yet but whenever she gets a windfall it gets spent on sweets ASAP. If she didn't train 14 hours pw at Gymnastics she would be one of our obese kids we see on telly Just joking. She is a very ftness minded kid.
We have IPs and are selling our home to build a new PPOR - she has shown a lot of interest in that process and asks questions which is quite rewarding.
She gets pocket money and has to pay for certain things herself with that which involves budgeting - just minor. She also impresses me when we go shopping and I want to buy her something pretty by telling me that certain things are too expensive.
I guess it is the later teen years which will see whether our principles have rubbed off on her.
The younger one doesn't get pocket money yet but whenever she gets a windfall it gets spent on sweets ASAP. If she didn't train 14 hours pw at Gymnastics she would be one of our obese kids we see on telly
Just joking. She is a very ftness minded kid.HI there Simon
you may recall this recent thread and my frustration with the eldest daughter when talking about debt.
My husband recently was at a garage sale in Canberra and picked up for $1 a copy of the Richest Man in Babylon.
I managed to get my eldest daughter to sit through the second chapter of that book which discusses how Arkad - the richest man in Babylon - started his wealth creation. The important point being made was to pay yourself first - preferably 10% of your earnings - and use that 10% to invest to raise an income stream.
The penny finally dropped for my daughter and she came out and gave me just over 10% of her last pay packet to put into her bank account to start saving with a view to buying a parcel of shares.
It may be that trip to the garage sale will be the best investment my husband ever made if it means my daughter ends up avoiding the debt trap.
thanks
you may recall this recent thread and my frustration with the eldest daughter when talking about debt.
My husband recently was at a garage sale in Canberra and picked up for $1 a copy of the Richest Man in Babylon.
I managed to get my eldest daughter to sit through the second chapter of that book which discusses how Arkad - the richest man in Babylon - started his wealth creation. The important point being made was to pay yourself first - preferably 10% of your earnings - and use that 10% to invest to raise an income stream.
The penny finally dropped for my daughter and she came out and gave me just over 10% of her last pay packet to put into her bank account to start saving with a view to buying a parcel of shares.
It may be that trip to the garage sale will be the best investment my husband ever made if it means my daughter ends up avoiding the debt trap.
thanks
What an excellent article..!!! I guess people are caught up about the whole car thing, when really what we are discussing is the psychology/mindset of wealth creation. Anyway, I can beat you all for dodgy cars!!!!
And here we go:
1st car (purchased 1997): 1980 Nissan Skyline - $700 with 6 months rego. sold for $300 (blown head)
2nd car (1998): 1988 Mitsubishi TN Magna - $2600, sold for $2600.2nd car:
3rd car: (1999): 1988 Ford EA Falcon (ex-taxi): $1900, sold $1500
4th (2000): 1989 Holden VN Commodore - $3000, sold $3200.
5th car (2000): 1996 Ford EF Falcon (ex taxi) - $2800 sold $1500 (blown head)
6th car (2002): 1998 Holden SB Barina Van (Combo) - $6800 still own it...
I have not got a loan for a car, until....my wife needed a car...so I have my Combo and she has...
7th car (2006): 2003 Ford BA Falcon - $12000 - still own it...
Now, this Falcon required my first loan, which now sits on an IO home loan we are about to sell..so it will virtually "disappear" when we sell it later in the year. Still, we could probably just go with a VT and not got a load...my bad.
Anyway, I think we have learned...
Great post!!!
And here we go:
1st car (purchased 1997): 1980 Nissan Skyline - $700 with 6 months rego. sold for $300 (blown head)
2nd car (1998): 1988 Mitsubishi TN Magna - $2600, sold for $2600.2nd car:
3rd car: (1999): 1988 Ford EA Falcon (ex-taxi): $1900, sold $1500
4th (2000): 1989 Holden VN Commodore - $3000, sold $3200.
5th car (2000): 1996 Ford EF Falcon (ex taxi) - $2800 sold $1500 (blown head)
6th car (2002): 1998 Holden SB Barina Van (Combo) - $6800 still own it...
I have not got a loan for a car, until....my wife needed a car...so I have my Combo and she has...
7th car (2006): 2003 Ford BA Falcon - $12000 - still own it...
Now, this Falcon required my first loan, which now sits on an IO home loan we are about to sell..so it will virtually "disappear" when we sell it later in the year. Still, we could probably just go with a VT and not got a load...my bad.
Anyway, I think we have learned...
Great post!!!
Hi Simon, I applied your pay the small debts off first but with the twist of paying off the loans with the highest payment to value ratio. So the $3000 consumer debt with repayments of $200 a month got paid off before the credit card on $2500 with $60 a month repayments. I think this works to free up cashflow the fastest. I should have all my consumer debt totally paid by February now. Currently paying down the motorbike loan for a 2001 Moto Guzzi V11 Le Mans bought in July 2002 which cost $21800. The bike is now worth $10000 but I now owe approx 5000, the repayments are a minimum of 439.06 a month. I've been paying anywhere from 700 to 1000 a month depending on shift allowances (which vary each month). Next month I'll be putting approx 2500 on the loan...
once all that consumer debt is done, that money will be going monthly into manged funds.
once all that consumer debt is done, that money will be going monthly into manged funds.
The bike should be paid for by feb 15, a mastercard paid for and cancelled by March 15, and the 2k overdraft will be paid april 15. Instead of managed funds I'm now thinking we'll save the next house deposit with ING direct at 6.4% interest. We'll have 30k equity in our current place, but we might use that for IP that we purchase after we move into our next ppor. We still want to have some managed funds to mitigate negative gearing costs, but I think we pay that out of cash instead of using the loc.
Do you mean that there's been other Simons after the original one?
I thought Our Simon was completely original!
Glad I found this article, very well timed.
Over the last 3 yrs I saved enough for my first House deposit. I was a very late starter who partied away everything untill I woke up at around the age of 27yrs old.
I put $20k savings and $10k FHBG towards a House I owe just under $200k on. It cost me $218k but I recon it's probably worth about $230-$250k as I did my homework and i've also done alot of work to the place. I purchased it 4months ago. Anyway........
At the moment i'm driving around in an old 80's car and it's been eating me up. Since I started driving 10yrs ago I have been driving *****boxes. I've been wanting to purchase something new so badly just to give myself a bit of a status lift lol. Since buying the house i've put aside another $14k.....
Problem is now I can't bring myself to spend my hard earned as it's taken so long to save it. I have been thinking maybe I should borrow the money to buy the new car but not now.
After reading this article I think I will keep saving hard towards my next I.P and when the car dies i'll spend $5k-$10k of my savings which should be about $25k by the end of the year. Sound like a better idea?
btw, i've never owned a credit card in my life. Before the house i'd only ever had a small personal loan of 1.5k that I payed off over 3yrs lol
Over the last 3 yrs I saved enough for my first House deposit. I was a very late starter who partied away everything untill I woke up at around the age of 27yrs old.
I put $20k savings and $10k FHBG towards a House I owe just under $200k on. It cost me $218k but I recon it's probably worth about $230-$250k as I did my homework and i've also done alot of work to the place. I purchased it 4months ago. Anyway........
At the moment i'm driving around in an old 80's car and it's been eating me up. Since I started driving 10yrs ago I have been driving *****boxes. I've been wanting to purchase something new so badly just to give myself a bit of a status lift lol. Since buying the house i've put aside another $14k.....
Problem is now I can't bring myself to spend my hard earned as it's taken so long to save it. I have been thinking maybe I should borrow the money to buy the new car but not now.
After reading this article I think I will keep saving hard towards my next I.P and when the car dies i'll spend $5k-$10k of my savings which should be about $25k by the end of the year. Sound like a better idea?
btw, i've never owned a credit card in my life. Before the house i'd only ever had a small personal loan of 1.5k that I payed off over 3yrs lol
