Taming the Debt Monster - Attitudes to debt for young players

I get a lot of my business from people that arent into the "look at me" real estate agents.

However alot of my peers say that having the fancy car has helped them. I dare say that you win and lose some which ever way you go.

Thats not to say I drive a crappy car, just not an expensive one.
 
This is the second time I've read this post and join everyone else in saying well done Simon.....I've just pasted this on to my twin sis...Lets hope she takes in in!

Ems :)
 
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
See that's the balance that the old school seem to have had worked out better than, well me

They would say borrow nothing, save save save and ONLY pay cash when you spend blah blah blah.. now, they did not invest, but did not end up in bad debt either ...

Now I see myself as having rebelled against that philosophy cause I felt I never had enough, not REALISING the issue it would cause... So you get people thinking "yeah I'll do that later" only to find out the missing part of the story later - "start xxx years ago"

Habits become hard to break too...
 
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
I read both your posts as I jsut stumbled across this thread. How fantastic Encourage her as needed now, show her what's saved, what the plan is for it and the rewards - speculate as need be.. She has 'seen the light' but of course does not yet understand the whole big picture.. I hope my neice does the same with the copy of rich dad poor dad I gave her, she's 16. she has said she is not interested in a car, not soethign she looks forward to, which is good, she does not need the expensive commodore & hondad civic with all the trimings here cousins borrowed for.. What you've got to undersatnd is, without 'seeing this light' peopl think they ARE doing the right thing.. I finished school, got a job, saved some money and bought what I wanted with it, I borrowed money & I can afford to pay it off - that's what it's all about.
 
Simon,

I'm relatively new to property investing and having read a few books (Yardney, Somers) it's great to have some of their concepts confirmed in your article, which proved to be succinct and straightforward.

I have never really suffered from the 'Bad Debt' as in my teens and twenties I pretty much followed the advice of my parents that all debt was bad. However, I fully realise now that some debt is actually good. The first realisation was when my partner and I moved in together and I decided to rent out my previous house. I look back now and do some quick calculations on the difference in monetary terms this would have made had I sold my previous house and not retained it. Sure you make a quick profit and reduce your overall debt on your place of residence but this pales into significance the profit I could make now should I decide to sell (Which i'm not - buy and keep!)

So, I stumbled into property investing by accident and not by design. In the next 6-12 months we are looking to purchase another property (see separate thread) and love learning the concepts and strategies from books / forums etc.

I often wonder why if property investing is so great why isn't everybody involved? I guess a few points may be:

1. People are simple not aware of the strategies / benefits. I wasn't.
2. People are busy in their life (work long hours, kids, etc)
3. People don't financially plan for the future.
4. People have a reasonable salary and live for today.
5. People are easily able to obtain loans for items they desire now (bad debt). So why plan for delayed gratification when instant gratification is so readily available.

There maybe many other reasons that I haven't listed.

Sorry to ramble for so long. In short, I loved the article and for the record I drive a 10 year old car which I would happily drive for another 10 years. I bought it when it was 4 years old and it's still running well.

Cheers,

Curious Investo!
 
I often wonder why if property investing is so great why isn't everybody involved? I guess a few points may be:

1. People are simple not aware of the strategies / benefits. I wasn't.
2. People are busy in their life (work long hours, kids, etc)
3. People don't financially plan for the future.
4. People have a reasonable salary and live for today.
5. People are easily able to obtain loans for items they desire now (bad debt). So why plan for delayed gratification when instant gratification is so readily available.

There maybe many other reasons that I haven't listed.

Cheers,

Curious Investo!
Fear is also a strong deterrent.

Also, buying properties is simply hard work, and one of the most common human nature traits is; "the path of least resistance" - laziness.

Advertising - no-one advertises the benefits of property investing publically in a big way.

The only advertising done is by developers wanting you to buy their products, and they advertise the "dream" of the PPoR lifestyle.

The only other type of advertising in large volume for investing is to do with the share market and the various "products" associated with that - and guess by whom...the share market players/fund managers.
 
OK . Going to sell the 2 new cars and go back to old bombs like I had in late 70.s.

But hey, the multiple properties I have bought by owning those old bombs have increased through 3 booms :)

So maybe it is time to enjoy some items :D

Gee Cee

REALLLLLY old Fart
 
Thank you Simon for taking the time out to write and post what for me is a bit of a source of continued inspiration. Your post isn't just related to credit card debt and other consumer debt. For me it relates to 'greed' debt. After earning monthly dividends over the past three years from what now has been revealed as a 'ponzi scheme' I'm left with the loss of $70k of my own money and a debt to the bank of $100k (plus interest!).
It's an enormous amount of money for anyone to lose (and an even larger lesson to learn from which is a long story that I'll leave for another time). I currently own two investment properties that are cashflow positive and I have been tempted to sell one to cover the loss yet I've been applying what you have just posted to attack 'greed' debt. So far since the start of this year I have reduced this debt to the bank by $30k using the principles you've basically outlined. I'm on an average salary (less than I was three years ago) of $47k per annum yet it can be done. I'm now associating the 'feel good' sensation everytime I see that $100k debt to the bank go down. When it's exhausted I intend to continue to stay on this 'financial diet' to buy more investment property.
My apologies if I have strayed from the intention of your post but I just wanted to post to others that money management can be applied in any situation and at any age with any financial mistake.
Cheers,
Gats!
 
Hi Gatsy and welcome to the forum.
Just wanted to say I really admire you for having such a positive attitude (and plan of action) after such a difficult time.
I wish you all the best going forward.
:)
Caroline
 
Thanks Caroline :)! It has been a bit of a roller coaster ride this year and ended when my financial lawyer and I realised there is no point suing if there's no money. More importantly on a personal level is the realisation that it's gone, it aint coming back and it was my own 'greed' that let it happen. Taking responsibility for this has been the best thing and feeling sorry for myself has been the worst and most limiting. Now I feel I can move on.
Cheers,
Gats! :)
 
OK . Going to sell the 2 new cars and go back to old bombs like I had in late 70.s.

But hey, the multiple properties I have bought by owning those old bombs have increased through 3 booms :)

So maybe it is time to enjoy some items :D

Gee Cee

REALLLLLY old Fart
i'm buying an old bomb this week!!!

yay for cars past their fashion use by date. so much cheaper to own.

and someone mentioned garage sales? my BIL went to one and found a BRAND NEW pair of levi 501s for $5. that's right FIVE dollars.

that's the bargain of the week for me.
 
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:rolleyes:

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
jeez charger certainly didnt depricate to much got offered one for $1000 bought a hj manoro for $1500 instead first car got stolen :-(
second vc commodore $800
3rd vb commdore sle car $1500
4th vc commdodore wagon finance on this one as we blew up the engine in the vb trying to put it back to standard
got taken advantage of being young and no way home except buy the car with a ge loan dealer rorted us cost 6k but was a rip wagon hunk of junk.
5th car ea still stupid finance 20%plus but not a bad buy at the time for the car 3.5k

sick of being in debt worked hard online try 3days straight no sleep lol
2 yrs after purchasing the ford

walked into Ge and it cost 6k to payout they offered another loan on the spot I smiled and said no thanks and walked out nothing like paying almost double after paying repayments for two yrs to see how much bad finance does get you

bought 98 hyundai with low klms like brand new still paid 7200 no debt

went and bought a block of land 15k and used that to buy our first house

sold the block 12months later for approx double paid down the house
(now worth approx 150k damn lol)
sold the house for a profit

bought the block next door built and sold another house

started accumalating rental properties sold a few ppors to upgrade to our dream home

oh we did buy another car a 96 vs statesman yeah v8 on lpg would still have it but was in an accident dearest car we have owned 9k but no finance
so now have a 2000 kio sportage
we now live in our favorite beachside town with a ppor with not much debt on it and have 4 rental properties cf+ currently shopping for more....

turned 30 in oct my wifes 28

might not sound like much for some of the people on here but I am pretty damn proud of what we have achived so far

I also own two businesses that are managed all I do is check the books once a week we started in 2004, with nothing and 30k income goal for 2010 is 2mill of cashflow+ propeties.

forgot to ad I still work online writing articles,flipping websites.running membership sites etc
mostly for play money thought these days not becuase it's do or die like back in 2004 lol
 
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OK . Going to sell the 2 new cars and go back to old bombs like I had in late 70.s.

But hey, the multiple properties I have bought by owning those old bombs have increased through 3 booms :)

So maybe it is time to enjoy some items :D

Gee Cee

REALLLLLY old Fart
From bombs to booms! :) Fantastic!

Regards JO
 
BR
Thats Defence for you.. anything that even raises a wind near the DRN is instantly suspicious in the minds of CIOG.

Simon, I'm looking for someone to guide me/Provide some advice for me to get out of a situation in Brisbane. can you recommend anyone?
 
Why don't you post it here? There are a great many financially literate people on here - many that are much smarterer than myself!

Keep it anonymous and stick to generalisations and you should be fine.

Without knowing the nature of your issue it is difficult to sugest someone to help.

Cheers,
 
Need help taming the spending monster

Simon (and all others)

Like many on this forum I started out investing when I young and poor.
I remember earning $2,000 a month, paying rent, car, food and partying and still managing to put away $400/month.

I am now older (still not old, but older) and I earn considerably more than that. I have amassed a nice property portfolio, and am in the process of doing a triplex development. However, I seem to be spending rediculous amounts of money.
I am fortunate all of my debt is (currently) "good debt". With my job it means I dont own a car, phone or PPOR. I dont rent (company house) and most of the time work also pays for my meals. In reallity I should be able to survive on under $100/week.
However, I have definatly fallen into the trap of Earn more=Spend more, and I need to reverse that trend. I used to be able to do it, however, time burns memories, and I dont seem to be able to do it now.

Can anyone on this forum help with ideas.

Thanks & Regards
 
^ I wish I was in your position :p

To build up your savings, you could set up a direct debit that places money into a savings account each pay day.

I found out you can get accounts that can't be touched unless you physically go into the bank (it's not a term deposit, just an ordinary savings account). To make it even less tempting, you can set it up as a joint account with a partner or family member. This means that both of you have to go into the bank together to access the money. My partner and I opened one of these accounts so we can save for a holiday.

Another tip I learned in regards to getting on top of bills. I used to be drowning in bills and could never seem to scrounge up enough money at the end of the month to pay them all. I ended up going through all of my bills and looking at the monthly payment amount. As I get paid weekly, I divided these amounts by 4 and set up Netbank so that a portion of the bills get paid each week. These days I earn less than ever but I am on top of my bills. :D
 
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