Taming the Debt Monster - Attitudes to debt for young players

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
Blacky,

Had a similar problem to you.

I found that it wasn't until I wrote all my spendings down for a month or so and I saw the ***** I was spending it on that it snapped me out of it.

Pretty simple but it really worked for me.
 
Whilst very much agree with general principles of buying doodads and expensive cars on the other hand we only buy new cars.

Number of reasons:
1. we negotiate very hard to get best deal. Last car, we drove ALL over Brisbane for two whole days to get best deal - saved about $7k and got driveaway pricing on a $40 people mover.
2. we have a child and consider generally increased safety of newer cars
3. we tend to keep cars for 10+ years therefore minimising total depreciation compared to buying 2-3 yr old car and keeping for 3 years
4. we have full history so take care of it to get full warrenty (5 years). Rather than buying 2nd hand history and perhaps 1 yr warrenty if lucky.
5. Tend to buy run-outs and at end of month to maximise discounts.
5. we have minimal price difference between new and good 1-2 yr old from dealerships.

We know about massive depreciation in first year but above outweighs in our opinion. Also we tend to buy just what we need, no SUV, no sports, no bigger or fancier than necessary.

Ian
Im with you. Not everyone is mechanically minded and can fix other people's bombs. We had a couple of older cards in the first few years of our marriage but when the ford falcon was constantly having problems and needed fairly major repairs when we least expected it and the up-coming birth of our child we decided to buy a new car. We still have that new car (nissan xtrail) over 6 years later and economically it has been good, no break downs or problems.

The price for piece of mind.
 
wow i really liked that!
especially since its based for the people who cant control there spending as anyone that can shouldnt be in this situation
it might not be the best financial advice as you say to pay the smallest loan first instead of the higher interest
but if they stick to paying it off it wont really matter what they pay off first it wont be that much of a difference overall (unless they have some terrible debt)
i
i actually done overtime at work until i had enough to purchase the luxuries like big screen tv and fridge etv
 
Thanks for that article. It was well written and very interesting. We're generally pretty good with saving money and save a lot of what we earn. We placed a 5% deposit on an OTP property in June but then got carried away and applied for a personal loan to fund 50% of an overseas holiday. It was a bit silly but we can pay it off quickly so thought it was OK. It should be paid off by mid-January (we came back in October). It was worth it to me as we had a very hectic few years and needed a nice break.

Once that is paid off, we will finish putting together a deposit for our first IP. We hope to be moved in by May. We will rent it out once our OTP purchase is completed and the rent should cover the repayments :)
 
I can hardly believe it's nearly been 6 years since you posted that up Simon.

The time has certainly flown by.
 
Blacky,

Had a similar problem to you.

I found that it wasn't until I wrote all my spendings down for a month or so and I saw the ***** I was spending it on that it snapped me out of it.

Pretty simple but it really worked for me.
I just picked this thread back up again after about 18months. Just as an update I did what you you said, and yes it really is quite amazing what I was throwing money at.
I still have bad months (mostly when on holidays) and I chew through money like there is no tomorrow. But hey, you only live once.

After 18months of change I have managed to survive quite comfortably (though have cut back on the number and 'quality' of my holidays) and have a nice cash balance of a bit over US$60k.

Things are slowly on the improve. Now just to shake off a couple of monkeys.

Thanks for the advice.

Blacky
 
Thanks Simon! Made me think about debt from a completely different angle. I am 21 and got myself into 42k of debt on a car at the start of last year and 3k on a credit card for a holiday. The car lasted 6 months as a truck driver had a lapse in judgment and slammed into the back of me, writing my car off. Insurance paid me out within a few days and all of a sudden I had 42k sitting in my bank account. Well today as it stand I owe the bank 35k for the car I don't have and 3k on my credit card. I haven't crunched the numbers yet but I know that if I stick to a plan I'm currently pretty much 2 years away from being debt free. I am in no position to invest in property but am keeping my finger on the pulse and can't wait to get into it!
 
Are kitchen renovation, re-painting the house, and re-flooring the house good or bad debts?

I have never done reno before, I don't know how much value actually those reno s can add to the property value, 100% of the reno cost or more?
 
Are kitchen renovation, re-painting the house, and re-flooring the house good or bad debts?

I have never done reno before, I don't know how much value actually those reno s can add to the property value, 100% of the reno cost or more?
It all comes down to comparable sales.
 
IMHO if you are doing this to your PPOR, then its bad debt. If youa re doing it to your investment property, and it increases the rent, or value, then its good debt.
 
IMHO if you are doing this to your PPOR, then its bad debt. If youa re doing it to your investment property, and it increases the rent, or value, then its good debt.
So very true.

But people get persuaded and confused that increasing the value of anything by going into debt is a good thing. Not so true.
 
But then again....if your strategy is to onsell PPOR short term then cap gains are tax free.

Works both ways depending on strategy.

We are currently spending and improving PPOR in order to build the cap val with plans to move somewhere we can hear waves crashing. Even the smell of salt air will do.;)
 
Hello,

Thought I'd post here instead of starting a new thread. Just wondering if others here can give some advice on tips/strategies to quickly pay down non-deductable debts?

We have just purchased our first PPOR. We will be moving in in 6-7 weeks hopefully. As we are currently renting a furnished apartment, it will cost us about 10k to set up. This includes furniture, appliances as well as the non-related expense of paying for my professional registration (need to pay this within 3-4 months or my qualification will expire) and basic home office setup for the associated business I am starting. I don't have this saved at present so it will all be paid in stages as soon as funds are available.

In addition, I have 11k of personal loans that I would like to pay off asap. I have just been paying min repayments so that we could save our house deposit quicker but really want to get it out of the way as it is getting annoying to keep paying.

Lastly, I am hoping we can go on a big 3 month trip to Europe at the end of next year which will cost ~10k.

What is the best way to accomplish all of this?

Thanks :)
 
Hello,

Thought I'd post here instead of starting a new thread. Just wondering if others here can give some advice on tips/strategies to quickly pay down non-deductable debts?

We have just purchased our first PPOR. We will be moving in in 6-7 weeks hopefully. As we are currently renting a furnished apartment, it will cost us about 10k to set up. This includes furniture, appliances as well as the non-related expense of paying for my professional registration (need to pay this within 3-4 months or my qualification will expire) and basic home office setup for the associated business I am starting. I don't have this saved at present so it will all be paid in stages as soon as funds are available.

In addition, I have 11k of personal loans that I would like to pay off asap. I have just been paying min repayments so that we could save our house deposit quicker but really want to get it out of the way as it is getting annoying to keep paying.

Lastly, I am hoping we can go on a big 3 month trip to Europe at the end of next year which will cost ~10k.

What is the best way to accomplish all of this?

Thanks :)
Can i be brutally honest?

-From memory (pls correct me if im wrong) you/your husband dont earn much because one is studying.
-you have now, after a lot of searching found a place to buy but it has left you so stretched that you do not even have 10k to spend on setting your house up (let alone a buffer).
- you still have a 11k personal loan

the last thing you should be thinking about right now is a 3 month holiday next year imo, not unless something fairly drastic changes in terms of some investment gains or big wage increases.

you need to build up a buffer and look at paying off that personal loan before you start saving for that trip, unless youre planning on borrowing for the trip.



i dont mean to be a spoilsport btw, ive just seen people get into a fair bit of trouble by not curtailing their spending ways after buying a property, all it takes is some unforseen circumstance either with the house or with one of you losing your job or getting sick and you could be in a whole lot of trouble with no real safety nets in terms of savings/equity/buffer/other investments to fall back on
 
Hello,

Thought I'd post here instead of starting a new thread. Just wondering if others here can give some advice on tips/strategies to quickly pay down non-deductable debts?

We have just purchased our first PPOR. We will be moving in in 6-7 weeks hopefully. As we are currently renting a furnished apartment, it will cost us about 10k to set up. This includes furniture, appliances as well as the non-related expense of paying for my professional registration (need to pay this within 3-4 months or my qualification will expire) and basic home office setup for the associated business I am starting. I don't have this saved at present so it will all be paid in stages as soon as funds are available.

In addition, I have 11k of personal loans that I would like to pay off asap. I have just been paying min repayments so that we could save our house deposit quicker but really want to get it out of the way as it is getting annoying to keep paying.

Lastly, I am hoping we can go on a big 3 month trip to Europe at the end of next year which will cost ~10k.

What is the best way to accomplish all of this?

Thanks :)
Read mrmoneymustache.com and you'll guilt yourself into frugality.

(what an awesome typo, "guilt" almost said "quilt")
 
Thanks for the quick replies. Just as background (not that it really matters) but the personal loan was for important expenses like paying for my husband's uni (he has just become eligible for citizenship and HECS deferral) and our savings have also been quite curtailed by expensive surgery I needed to have in Jan this year. Not an excuse - just mentionibg it so someone doesn't read this and think I got in debt to swan around the world or anything :p
 
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