Australia has one of the highest personal debt levels in the world.
Credit cards, car loans, home loans, HECS etc.
What is yours?
deaths caused by coalition automated debt collection through centrelink as you well know.
deaths caused by coalition automated debt collection through centrelink as you well know.
I don't know, that's why I asked, I assumed you were being autocorrected from robodebt.
Please let us know how robodebt caused deaths? This is very interesting.
@brendanm: no money no hope bills to pay kids to care for people to bury.
coalition aid consisted of sending in debt collectors…
You can be in $10,000 debt and no income.
Or you can have $1,000,000 in debt but the assets generate enough income to service the repayments plus some.
Which would you rather?
@sashatheman: imaginary math for sad people
@petry: Imaginary? I'm in the second category personally… I'm really hungry for more debt! The more (productive) debt I have, the richer I am!
Serviceability is not fixed, debt value is.
Still trying to win lotto so i can pay off some of my credit card. :-(
Are you using credit to buy the lotto tickets though?
That is the best way to win it.
Spend other people's money to win free money. Win - win
Personal debt is one of the best tools used by the system to keep the cogs under their thumb.
Accumulate wealth from a position of strength and don't get rekt.
No debt - unless you count national debt, my share being about $28k and expected to rise sharply in years to come.
Paid off your house or renting?
Paid off - still figuring out what to do with surplus savings.
Very nice! Buy more property before all the Victorians get it.
Don't forget State and Local Government debt.
yeah, that too.
Everyone is up to their eyeballs because if things go wrong the government will bail us out with everyone else's money. If nothing goes wrong walk with the profits.
I can relate to that. the financial system is broken
The Feds will just print more money
I leave within my means 😷💪🏾
Where are you going?
sorry to hear about the divorce
You in lockdown too?
If you're leaving, can I have your stuff?
Need to spend money to make money in many cases.
So my existing debt is calculated risk in that it will return money in the future.
Live within your means until such time your bad debt is paid off.
Never been in debt, don't plan on being in debt in my personal name anytime soon, business debt yes but that is a separate legal entity
Debt isn't a bad thing if you know how to use it to your advantage.
I've recently been debt recycling to take advantage of tax benefits. My net worth is worth more than my debt, and I expect the debt to allow me to increase my net worth by approx 30% by end of next year.
tell us more! :)
HECS isn't a debt because for me it was a valuable investment.
Net worth positive, so I'm going to say "none".
Debt is a due outstanding to others, it is not a perspective on the cost being worthwhile. That is simply the definition of investing and value.
Yeah that's not how debt works.
Clearly, the "investment" hasn't yielded much.
Nah holding cash reinvesting it in my business and choosing to hold the HECS debt seems a solid choice. Don't be too presumptive.
It's at best a "conditional debt".
Sold the lie… stuck in a boring job, too afraid to re-train, shackled to debt of artificially inflated housing market, and bug ridden hi tech vehicles, owing HECS till the day you die.
Sold 300sqm by a developer? That would be the icing on the cake
With half a house…
Developer baked me a cake, with 250m2 land with 150m2 house icing on my cake :)
Total cost was $580k back in 2017-2018 (land/construction separately)
Total value now sitting above $750k, thanks artificial inflation!
Developer has a big belly after all the cakes they bake
I have no debt. I do volunteer work for centrelink payments ( work for the dole). I have a very nice car….that I look after. I am renting privately….in the same place for 16+yrs. I have all the usual stuff…mobile, computer etc. And am very happy. :)
Genuine question: are you working for the dole out of necessity or is it just your choice? I know a few people who chose to do it and they seem to be happy.
I thought everyone on the 'dole' had to work.
ie: when I turned 55, I could keep working a paid job or do volunteer work (for me 15 hrs/wk) and get centrelink payments….which I assumed was working for the dole!!?
So, I guess the answer to your question is both, really.
I don't get the pension until I'm 67.
good on you!
Thank you. :)
Only debt is mortgage and value of house is >20% than the loan, so pretty happy with where i'm at.
Mortgage debt which is positively geared, with my PPOR being supported by my income.
Well debt is relatively high, but as a % of Total assets its below 50% so I am comfortable.
Owe about 1k on a credit card but other than that zilch
2/3 of 3/5 of bugger all. $0 Debt…I sleep well after many years of smarter money matters after many years of hard slog.
I'm in debt to my parents. Unfortunately the debt is priceless.
300k just on a Mortgage which is split between a fixed 200k and variable rate 100k. Other than that I don't keep a lot of debt around too long.
760K mortgage - jointly owned with spouse new home owner - Sydney metr - home is worth more - atleast at the moment
Metropolitan Area: An area of population usually with a central or core city and surrounding towns or suburbs.
It is between 40 - 45 KMs from Sydney CBD
Before moving into our current 3 bedroom home we were paying $21,060 in rent ($405 per week) for a 2 bedroom apartment.
In the last 12 months we have paid ~ $25,250 in expenses ($485 per week) that include annual interest, council, water, repairs, maintenance and a roof restoration. This excludes capital repayments.
Of that $25k how much of that is principle off your home loan?
Theory is your new place is 1/3 bigger with the extra room.
There is hidden costs in property ownership that people are unaware of. Or just don't want to mention because then it just doesn't seem so enticing. It is like European car drivers will rarely show you the $500 - $1k service bills.
@netjock: 25K - none of it is principal. It already includes other costs that have come up with property ownership like Annual Council, Quarterly Water Bill x 4, Maintenance and upkeep incurred in the last 12 months. It doesn't include the time value I need to spend to keep it maintained, for e.g gardening, cleaning, DYI repairs.
Also a 3-bedroom house compared to a 2 bedroom apartment (atleast in my case) is double the size. It has front and back yards, separate wooden deck, dedicated fully gated/enclosed garage, etc which didn't exist in my apartment.
@bigbadboogieman: Are you interest only, or just ignoring the rest?
@brendanm: Principal is ignored.
It would be interesting to see what age bracket some of the above comments are in…
Nothing other than mortgage.
This would be interesting if it excluded property.
good debt (investment) - lots.
bad debt (credit cards, personal loans etc none.)
indifferent debt $200k on mortgage.
Net debt is Nil though.
With debt, for example a home loan, you own the home, so technically your position is not negative because it's value of home - debt = your position.
Tell that to the Wall Streeters who shorted Gamestop?
Although I bet lots of people are thinking that way cos with the reputation of people just buying up properties I find it hard to believe not more people have loans totalling more than a million over all their properties.
The amount of debt does not matter. What matters if it is a good or bad debt.
Even if it's on good debt and is tax deductible if the asset is falling in price its not great
It doesn’t matter if you’re living in it long term and you can service your loan.
The ability to service the loan and whether it’s good or bad debt is the key. The short term cycles of the market shouldn’t matter.
If they matter, the problem is not that you have debt, but it’s because of poor investment decisions.
The reality is that interest rates are at a ridiculous lows. Almost every asset class their intrinsic value is increasing against the dollar. That means if you’re not invested in diversified assets, your equity is depreciating. Often diversifying assets will mean borrowing.
Historically, those who take on serviceable debt and have found investment opportunities have always come out ahead. Unfortunately, this is also why there is a growing wealth gap around the world.
Those who are better off can take these opportunities because despite their debt, their income and asset revenue/cash flow can continue to service the debt whilst still putting food on the table and living a good quality of life. You can risk more without putting your family or your PPOR in jeopardy.
If the asset is falling in value then maybe it is a bad investment. good or bad debt relates to how and why you are using the debt. Debt to go shopping or holiday etc is bad debt, Debt to leverage your investment position is good debt (depending on risk and exposure).
yes…. and the reality is, particularly with shares, 99.9 percent of the population who think they know what they are doing don't. You will never have the access the the executives, the real time data, and the algorithms to compete with the big boys who have teams getting info to bet against you.
That's why I like the index. You may never be at the lowest point of a cycle when you buy (particularly if you regularly invest extra money into the index funds), but you are betting on a very established trend that in the long run, equities are always the best bang for the buck.
I would only ever buy a stock that I believe is "undervalued" because I have some expertise in that company. Reality is I almost never would have that expertise.
A better question is what's your net worth.
A million dollars of debt is nothing if you have $5m in assets.
$100k of debt can be crippling if you don't own any assets.
Good point about people's cash flow.
There is a lot of people sitting on $1m homes but probably not making much more than the $65k they were on 20 years ago.
$1.1M in Assets, two of us (mid 30's) + a toddler.
900k in debt, 340k of that is in an investment property, the rest is our family home.
Good job! #thumbs up.
Thank you :)
We've been fortunate but made the most of it I think.
We are in our 30s x2. $600k home loan only
A better survey is debt to income ratio. Who cares if you're at 3-4 million in debt if you make 1M.
We are 3M in debt. One PPOR and one investment property. Income that can service both with 50 percent of post tax salary. In our late 30s.
That is an uncomfortable amount of debt for someone in their late 30s (well it would be for me, as someone in my late 30s), so would 50% of my income on payments.
I'm also in my late 30s, I have net equity in the 7 figures, and a small mortgage in the low 6 figures. No other debt. I will probably taking on some more debt to renovate my house (again), but I'm aiming for about $500k max debt (and hopefully my net equity would increase considerably).
Well, that's why the numbers on their own don't really demonstrate whether debt is good or bad.
We paid off our investment house which was our original PPOR. Upgraded to a larger PPOR in the suburbs during lockdown. With the rent we are collecting and using the investment property for deductions, we now get to live in a bigger place, can service our loan without any issue.
In fact, we've been putting 5-10k away each month with the other 50 percent of our post tax income into the offset so have a reasonable buffer.
Granted, we've been fortunate to have been not affected income wise by the pandemic and have two secure jobs. But my main point is that debt on its own is not a bad thing as long as you can service it and are building assets/equity.
Does that mean the $3m debt is all against your new PPOR?
@icantremember: Yes but we had cash to pay about 35 percent down on the new PPOR and also have money in an offset for about 36 months of buffer.
The key was that we took out debt right from our mid 20s… initially an apartment, then a smaller house, then now our long term PPOR.
Each time, the debt accelerated growth. Keep in mind we were also always diversified balancing repayments on PPOR with investing in equities indexes.
Strategy the whole way has been safety if we can hold long term. The key is ability to service the loan. If you can do that, almost every diversified portfolio goes up given a long enough time period unless you significantly overpaid for a specific asset for that time period. When you buy in the cycle doesn’t actually matter that much if you buy the right property.
@alienurbanite: Rather than paying off your previous PPOR (which is now your investment property), you could have put the funds in an offset. When you purchased your new PPOR, move those funds across, leaving you with a loan against your investment property with interest that is fully tax deductable.
@icantremember: That is exactly what we did. The original PPOR became an investment property and we drew from that equity to offset our new PPOR and invest in other asset classes for tax reasons as you have described.
That last sentence is the core of financial wisdom I am trying to teach my children. Debt is massive accelerator of one’s financial fortune if used wisely. Leverage can quickly help you reach your goals earlier and using other people’s money can be extremely efficient way how to get there.
@duchy: Warren Buffett would beg to differ regarding the last sentence about when to buy in the cycle:
""For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.""
@icantremember: Not doubting what Warren is saying. I don’t think you are interpreting in correctly when applying it to using debt to buy an asset. Also, warren buffet is the guy who invented buying a good asset and holding through cycles. Overpaying for an asset especially an individual equity as that quote refers to is a recipe for loss making.
That’s why I don’t invest in individual shares. The reality is you are betting in an arena where you have a fraction of the information the professionals have.
However, there are asset classes that almost invariably go up in any 15-20 year period where you buy into a diversified investment. Index funds is one example.
If your strategy is to buy and hold for the long term… you reap additional benefits of the asset or just happen to be in a situation where putting money into the asset is the right time for you.
An example your PPOR. If you intend to live there for long time. It will almost invariably go up unless you bought something that is a dud over overpaid within that period. Because even if there are corrections, the long term trend will be up. Similar with the index. Regardless if you buy right after the crash in March 2020 or when the market was at an all time high earlier this year, the historic trend since 1920 is that if you sell those investments in the year 2040, they will definitely be up.
If you keep your no debt equity in cash or whatever no debt asset you have, you won’t be able to outstrip inflation.
Remember, any asset including the one that you have no debt on can also go down. The difference is that while you reap all the losses on the way down, those who are leveraged are writing it against tax. On the way up because of leverage, those who invested wisely would be up a lot more than those without debt.
That’s why I also say it’s a very challenging time for those who can’t take on debt. Unfortunately the conditions are basically set up for those on high incomes to do better and better.
@alienurbanite: Buffet's premise is to buy good quality assets that are undervalued; not good quality assets that are overvalued. So timing makes a big difference.
The financing structure is irrelevant.
@icantremember: Yes, value is irrelevant to a cycle. For example, when Goldman was tanking during the 2008 GFC, Buffet was there with cash. And to be honest, his entire business is based on debt and leverage to take advantage of these opportunities. He didn't get to where he is without using investors money to leverage.
If he only every invested what he had in his bank account, he would never been able to compound his investments to what they are today.
I don't think the discussion is about cycles. The point is borrowing to buy a good asset is good debt. Any asset that is undervalued is good debt.
So borrowing for good debt isn't a problem and in fact, you should leverage to do it as it will maximise your returns and give you tax advantages where you structure the investments appropriately.
@alienurbanite: Btw. I'm not against debt. The opposite really.
I in fact, have more debt than you, and at a <50% LVR. Strategy is different though, as all my debt is tax deductible.
@icantremember: My issue is that I have already maxed out what I can deduct and frankly, the "losses" on interest in my investment property are not enough to offset enough of my income to make it valuable.
Which is why we have to diversify into other classes where there's an opportunity to have greater capital gains, but at the same time, keeping our foot in the door of real estate with our current two properties.
@alienurbanite: Hey @alienurbanite
This is really interesting. May I ask what you and your partner's combined income is? Would help to put some of the numbers in perspective.