Wage increase

Discussion in 'Investor Psychology' started by BayView, 19th May, 2015.

  1. BayView

    BayView Member

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    Was thinking about my BIL today; he had a FIFO job in the S.A mines for a couple of years (during the boom).

    Previous to that he was in and out of jobs as a plumber, earning between $60k and $80k per year when things were going well.

    His income from the mine went up to effectively approx $140k when you factored in all food and other perks.

    He never did anything constructive with the extra dollars; despite me having a fatherly chat about how to handle this windfall.

    He and his wife are like most folks - live hand to mouth, have a mortgage and couple of cars, 2 kids...no investments, and not likely to get any... My suggestion was to pretend he never had the extra money, and put all of it on his house loan.

    Hypothetical - and may not even happen - but if you suddenly got given an increase in your income of say: $50k per year; what would you do with it?
     
  2. Rixter

    Rixter $uper Investor (Retired)

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    Reduce debt.
     
  3. skater

    skater Capitalist

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    Well, it would be VERY hypothetically, since we are about to get a wage DECREASE of in excess of that figure, with Hubby retiring, but IF we were to get any kind of windfall, we'd just carry on as usual. Excess funds would go to a reduction of debt. No increase in consumer spending whatsoever. But many of us SS folk aren't the average man on the street when it comes to this stuff.
     
  4. freyja

    freyja Member

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    This happened to us in January as both my husband and myself got promotions plus our youngest started school (no more day care fees!). we ploughed the extra cash into our offset account and recently purchased our first IP :). We didn't want to waste the windfall after 12 years of maternity leave, part-time work and childcare fees. Oh - and we bought a new lounge!
     
  5. datto

    datto Member

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    I'd open up a small mechanical workshop.
     
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  6. Reality Cheque

    Reality Cheque Member

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    Paid my PPOR off, live like I'm still earning $80k and invest the rest.

    If the cost of your lifestyle goes up with your income then you are no better off.

    RC
     
  7. chindonly

    chindonly Member

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    Reduce non-deductable debt.
     
  8. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    Into the offsets for use at a future date.
     
  9. wylie

    wylie Member

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    We settled on a sale today, so this is a lovely problem that I have right now... reduce some debt is what we will likely do, but I need to process a lot of different scenarios and get it right.
     
  10. Xenia IM

    Xenia IM Property Manager

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    If someone came from around the corner and offered me a salary that I did not have to create myself through my own businesses.

    hmmmm :cool::eek::rolleyes::p

    I wouldn't take it, thanks anyway but I would always opt for freedom not security.

    You are either growing through your own creativity or you are seeking security - you cannot grow and hide at the same time.
     
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  11. bob shovel

    bob shovel Muppet

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    Not get addicted to it!! All extra straight into offeset... maybe 1 motorbike:D

    There would have to be a market out there for a financial person to stand at the gates of these "fifo workplaces" and tell people how to budget and use their money wisely! for a fee of course!

    So many get hooked on the cash and the lifestyle that they can never go back to "normal". Being in gladstone for the last 8 months they were happy to spend the bucks with their family in town but now worked has slowed etc they are forced to leave their families for fifo to chase the bucks! crazy some of the stories.
    My wife worked at the hospital and saw it often, old mate who couldn't tie his shoelaces shooting his mouth off - I earn 2500net/week, work is slowing woe is me, theyre all *******s blah blah then says he is doing well he has 12k saved!! ffs that was over a couple of years. The only winners are hoon car salesmen up there!
     
  12. jerrybee

    jerrybee Member

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    Sigh. I always assumed that's how it generally played out but it's always interesting to hear the stories.
     
  13. Brady

    Brady Big 4 Banker

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    Each year I negotiate my pay pretty well, it's not $50k but it's a decent amount. My savings increases each year along with my properties I hold. My weekly 'spending/walking around money' is very similar to my weekly income of my first trainee job before joining the bank (around $350p/w), I spent every last cent back then. Each year majority of the extra goes to my savings/bills accounts with a slight increase in spending money, but don't seem to notice the extra spending money.
     
  14. Bran

    Bran Member

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    I doubled my income in February, and in March siphoned the planned extra cash flow into a house purchase.

    Despite the salary, we are still tight week to week, but with an end goal.I drive the shittiest car in the entire work car park, and secretly take some pride in this :)

    Aiming to double my income again in 1-2 years, so will pay off some accumulated necessary but non-deductible debt, then accumulate cash into PPOR offset and go again.
     
  15. BayView

    BayView Member

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    Sigh.

    No need to psycho-analyse it, or load it with moral aspects...just tell us what you'd do with the cash. ;)

    Me; I'd do what I suggested to my BIL - pretend it never happened, use it to pay down any consumer debt first, then pay down some other loan debts after this and continue to live my life on the same wage before the rise.

    If I was a newbie, and owned no IP's, once there was enough equity build-up in the PPoR, I'd look at my first IP purchase and start talking to a savvy MB (preferably here on SS).

    Then, continue to use the $50k extra towards PPoR debt reduction until deposit no.2 had built up.

    Might also consider looking at one of these after a couple of years:

    http://yachthub.com/list/boats-for-...r-a-riviera-4000-then-this-could-be-it/166473

    :cool:

    For me at my stage of life and fin position, I'd use the $50k to still reduce debt, then look to do some buy/subdiv and build/sell all but one of the builds and keep one as a CFP.
     
    Last edited: 20th May, 2015
  16. VYBerlinaV8

    VYBerlinaV8 Member

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    I bought a bigger PPOR and am paying it down as quickly as I can. When I finish I'll be able to retire.
     
  17. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    I'd stick my 2 youngest kids in private school (eldest is already there), eat out a bit more, save a bit for a non-outrageous holiday every year (or an outrageous one every couple!), and save/invest the rest, which would probably include renovating 2 of our houses.

    Life doesn't have to be completely boring - if you get a raise it's not unwise to enjoy some of it.
     
  18. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    I actually do that, but not for a fee...I was in Hedland last year and saw so many financially dysfunctional people it became a bit of a mission to help the poor 'rich' kids. I still fly up there regularly and do budgeting sessions with them. :)
     
  19. bobby85

    bobby85 Member

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    Save and accumulate more properties sooner.

    With actual wage increases in the past, however, I have played on the sharemarket instead. Lessons learnt.

    Back to property now!
     
  20. 2FAST4U

    2FAST4U Member

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    I'd treat myself a bit more (10% increase) but like all the others have said just put the extra income into an offset and use it to invest. The trouble with FIFO and the mining industry is that there's no guarantee. Deep down the workers all know that but many of them get carried away and think the good times are set to last forever.

    Just another anecdotal story but I have 3 relatives who have worked in the mines all earning well over six figures. 2 of them still work in the industry but 1 quit.

    J- Old bloke in his late 40's he's a typical working class man used to have his own bricklaying company before getting into FIFO. Works hard and parties hard. If he's not drinking alcohol he's on the ice and thinking he's still in his 20s. A night out for him will cost hundreds of bucks (he goes out multiple times a week once he gets back) and he's got nothing to show for it.

    H-She used to be a dump truck driver up in the mines in QLD. She pissed away the money on new cars, motorbikes and partying before quitting to spend more time with her kid. She now works at a bakery earning 18 bucks an hour.

    B- He's an earth moving operator who moves from short term contract to short term contract doing FIFO but he always has work. He does have the occasional beer but he also supports his wife and 4 kids. He's paid of his PPOR already and supports his kids with all their extra-curricular activities. If he didn't have a large family I've got no doubt that he would've already had a couple of IPs + shares.

    *My relatives are all islanders so they also spend thousands flying their families back to NZ and Cook Islands each year so that takes up income as well.

    Comes back to it's not what you earn but what you do with your money that counts.