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While at the same time if you read the investment thread you'll hear Canadians talk about their TFSA and Americans have something similar.. A tax sheltered account that can be used for investment. They usually have contribution limits but once you've got the dosh in there it can grow through capital gains too. We have no such thing in Australia. Why? The whole negative gearing set up seems so convoluted in comparison, get so much debt that it actually eventually saves you money because you don't pay it in tax while the whole time riding our ridiculous property market and hopefully with you second or third property. I think it's why when I try to talk to Aussie mates about index funds and investment outside property they get all 'aw nah, dunno about that.. know people that lost money with shares. Safe as houses, mate!'. It's so single minded and almost groupthink faith that it makes it unattractive to me just because of that, even thought I know it works and everyone is doing it.
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Jan 20, 2014 01:16
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It's easy to see why people wouldn't gently caress around with index funds when their country is going through a massive housing, mining, and oil(?) boom.
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Jan 20, 2014 01:23
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Harry posted:It's easy to see why people wouldn't gently caress around with index funds when their country is going through a massive housing, mining, and oil(?) boom. And gas
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Jan 20, 2014 01:37
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Well.. as CaptianAmerica said its not a housing boom if its sustained. It'd be like buying property in NYC, if you can afford it you shouldn't be at risk of it losing its value. You have to afford it is the problem and as I said its half a mil for 2 bd apartment living in St Kilda, Melb. Mining isn't something you're buying stocks in unless you really know the game and with increasing political pressures about sustainability.. there is plenty of talk if mining not continuing to be what it was. Don't know about the oil, pretty sure that's not us. It all comes back to sell a body part if you have to but buy property now, because the only way is up, baby. Now 'loving around' with index funds can mean the return of the property market but with liquidity level property owners cannot have. Factor in stamp duty in some states and other running expenses and you can even beat property returns, while being insulated to a degree from the US economy and whatever sub-prime shenannagins they get up to. Get sick or really need some money for whatever reason and you can't sell off a room of your mortgaged to the eyeballs home. Unless you're in the position to sell an investment property an wear the transaction costs of that (sales fees, marketing, loving real estate agents) you might not be able to do that in a hurry either. A few clicks online and I can sell what I need in stocks in literally seconds.
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Jan 20, 2014 01:50
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Another part of it is 'rent money is dead money' which was a very memorable marketing campaign on Aussie TV for.. guess what, a builder. Interest money is dead money too, although rates are rock bottom now they'll probably got up too. I was paying 250 a week for an ok place, now I know that's dirt cheap but that was the same over a year if a I had a mortgage of enough to have a house at 4.5% (which you won't get that rate). So again, the popular talk of 'renting is throwing your money away, at least I'm paying somethig off' needs to be critically thought if against what your debt costs you.
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Jan 20, 2014 02:04
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Tony Montana posted:Another part of it is 'rent money is dead money' which was a very memorable marketing campaign on Aussie TV for.. guess what, a builder. I love idea that rent money is dead money. Money is alive and we must keep it that way! It's an escort mission where you must guard your cash! The problem is that I have a few friends reciting this as if it's gospel. I have one friend who's up to the eyeballs in debt on a four-bedroomed house (she's single and has no kids, I'm somewhat puzzled at the reasoning behind buying a 4-br house), but claims it will pay off because she plans on getting housemates. I haven't tried asking her what happens if she can't find anyone to rent a room, it seems just mean spirited in light of the fact she's already signed the paperwork. froglet fucked around with this message at 06:58 on Jan 20, 2014 |
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Jan 20, 2014 05:03
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Tony Montana posted:So again, the popular talk of 'renting is throwing your money away, at least I'm paying somethig off' needs to be critically thought if against what your debt costs you. It is also important to consider opportunity costs. My wife and I may not live in the area in 5 years. Purchase prices for homes are highly inflated in our area (DC). Renting provides insurance against catastrophic property loss (AC breaks and don't have money to fix it?). We can rent in an area that allows us to walk to work (no transportation costs or car required), while my friends who buy have to live further out to find places they can afford. Choosing a place to live is filled with intangibles that everyone values differently.
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Jan 20, 2014 05:16
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Tony Montana posted:It all comes back to sell a body part if you have to but buy property now, because the only way is up, baby. Now 'loving around' with index funds can mean the return of the property market but with liquidity level property owners cannot have. Factor in stamp duty in some states and other running expenses and you can even beat property returns, while being insulated to a degree from the US economy and whatever sub-prime shenannagins they get up to. Well I guess it depends on the indexes you're buying but the Aussie stock market is way less insulated from what's happening in the US and elsewhwere than the Australian property market. Other than that though, you're right. Here is why every clown in Australia thinks property is a surefire way to get rich: 1. It made them/their parents rich. As an asset class it has outperformed for much of last 40 years. Link. Young people's parents keep telling them to get in to the market and offer them money to do it. 2. They don't understand other investing. They think that a $300K house appreciating to $400K in 5 years is an outstanding result when really it's about a 5.9% return before taking into account everything that the home has cost them over those years. A good result to be sure, but probably under performing the indexes. 3. They suck at saving. They look around and the only people among their friends with any net worth are the ones who bought houses because the enforced savings effect of a mortgage. A mortgage works quite well for people who would otherwise blow through their earnings. 4. They don't do the numbers. People own investment properties and have no idea what their true cost is. So we come back to point 2. They only see the capital gain and think they're killing it. 5. They don't understand inflation and think their appreciation is real returns. An asset class that the general population thinks is going to make them all rich is ripe for bubble territory and at the very least will under-perform other asset classes over the coming decades. When you consider the advantages of holding mutual funds over real property the choice becomes clearer. Personally I own and plan to continue to own the place I live in which gives me appropriate exposure to the Aussie real estate market. I wouldn't own an investment property again though. As kaishek said above, where you live has a whole bunch of intangibles. izorpo fucked around with this message at 09:00 on Jan 20, 2014 |
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Jan 20, 2014 07:38
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izorpo posted:2. They don't understand other investing. They think that a $300K house appreciating to $400K in 5 years is an outstanding result when really it's about a 5.9% return before taking into account everything that the home has cost them over those years. A good result to be sure, but probably under performing the indexes. The gains are also magnified because of leverage. If you have 25k in cash you can probably get a mortgage to cover the remaining 275k and quadruple your net worth, whereas you can't get a loan to put 275k in an index. Of course this is also an incredibly easy way to go from having 25k in cash to having a negative net worth.
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Jan 20, 2014 08:17
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True, leveraging into property is easy to do, considered normal and works great while prices continue to rise. Most people don't leverage into equities and for very good reason of course.
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Jan 20, 2014 08:50
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izorpo posted:1. It made them/their parents rich. As an asset class it has outperformed for much of last 40 years. Link. Young people's parents keep telling them to get in to the market and offer them money to do it. Housing doesn't always go up, it fluctuates just like stocks do. Housing owners just usually aren't as aware what is going on, that's all, pretty much because of what you said. Look at this poo poo though: Melbourne boasts double digit property growth http://www.news.com.au/finance/real-estate/melbourne-boasts-double-digit-property-growth/story-fncq3era-1226804371002 Market History from the Real Estate Institute of Victoria code:I'm not in Australia for the moment and wont be for a while, so buying a rental remotely and dealing with poo poo from the other side of the world is a great way to eat up your returns. But if I was living back in Aus and in Melb.. that really does look like some good action. Hrm.. but if you average those returns, that comes out at about 7%. I'm trying to get a summary of the All Ords or S&P 300 over the last 10 years, but I haven' got the time now. If you or anyone else does, I'd be interested to see. edit: source for the REIV if you wanna have a look http://www.reiv.com.au/Property-Research/Median-Prices/Market-History Tony Montana fucked around with this message at 10:43 on Jan 20, 2014 |
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Jan 20, 2014 10:35
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One of the key themes of The Four Pillars is that an asset class that is out-performing everything else is likely to under-perform in the future. Now there are solid arguments for Australian property to continue to go up due to population growth and the rate of new land releases but nothing looks like a bubble until after it has popped. And it doesn't have to be a bubble to just under-perform for the next two decades. When a large segment of the population thinks that a particular investment is the sure path to wealth, I'm looking elsewhere because doing what everyone else is doing is a good way to lose money. It's like when friends and colleagues completely ignorant of investing start buying trendy stocks. It's a good predictor that things are over valued. There's no guarantees though. For all I know Aussie real estate will produce double digit annual returns over the next decade, but I doubt it.
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Jan 20, 2014 11:24
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Wasn't the same argument used in Japan 20 years ago? The investment books I read all touched on the same message: When everybody is buying the same thing and talking about it, get out fast.
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Jan 20, 2014 14:50
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Folly posted:Wasn't the same argument used in Japan 20 years ago? Yes, "avoid sexy like the plague".
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Jan 20, 2014 15:13
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I have a story for this thread. A friend of my mine recently got married. He and his wife have been living together for a while now. I am guessing they each make about $150k, $300k a year combined. They live in a condo that cost only a little more than and that was bought a long time ago. They have one car, an Accord they bought used. They recently got married, and it was pretty pricey, but not a 6 figure sort of deal. They got money for the wedding from both parents. I found out that all their credit cards are maxed, and that they had to get, like, western union from one of their parents during their honeymoon to cover minimum payments on their credit card bills without overdrawing their bank account. I am flabbergasted. I can't even comprehend where their money is going. e: They probably started with a lot (maybe 250-300k?) of student loan debt. But still. gvibes fucked around with this message at 17:16 on Jan 20, 2014 |
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Jan 20, 2014 17:08
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Folly posted:Wasn't the same argument used in Japan 20 years ago?
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Jan 20, 2014 17:50
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No Wave posted:This honestly worries me about index funds. But it's sort of the anti-same thing - it's more the same approach than the same actual assets - so I'm still in it. Well you won't really see an index boom because those funds are, by definition and design, broadly diversified. You might see a finance boom and if your exposure is heavy in finance you'd be hit by that, but not nearly as much as someone who's all about buying a single bank.
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Jan 20, 2014 18:29
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http://www.reddit.com/r/personalfinance/comments/1vo8mg/us_possibly_buying_a_house_are_we_ready Ahahahaha holy poo poo.
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Jan 20, 2014 20:33
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/r/personalfinance is a never-ending treasure trove of financial disasters trying their hardest to become even bigger disasters. It's the only reason I occasionally read it.
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Jan 20, 2014 20:40
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Saros posted:http://www.reddit.com/r/personalfinance/comments/1vo8mg/us_possibly_buying_a_house_are_we_ready quote:Currently neither of us contribute to 401(k). Our son is on my health insurance, and she pays for single coverage (for both the employment flexibility, and to reduce my taxable income). When we get married, we will switch to a family plan. I plan on taking my portion of the life insurance and paying our credit cards and revolving accounts down to $0 again. We plan on banking the rest to put toward a honeymoon possibly (since we don't know when/where we would even go yet). Ahahahahahahahahaha indeed. Also they're spending $40 a month on credit monitoring  Edit: Oh Christ the responses: quote:[–]Ccswagg 5 points 2 hours ago
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Jan 20, 2014 20:41
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gvibes posted:I have a story for this thread. They each earn 150k? This is economically top tier couple, a single earner such as that can enable a family to be affluent if you manage the money well.. two.. holy poo poo. Both successful professionals obviously, hence the student debt. I noticed this myself when I finished college and threw myself into my career. My sister is doing it now and I'm finding quite an educational experience how she will not listen or engage about anything to do with money management. My father tried just the same with me nearly 10 years ago when I started pulling down a serious wage and I clearly remember not being interested in the slightest. Unless finance was actually your major, the whole reason you devote yourself so hard to study is its something you really believe in and love and the point of all those loving exams and super-high stress environments is you always thought after that money doesn't matter. You'll earn plenty and can concentrate on the medicine or computing or whatever it was that kicked it all off when you were 18 and spurred you on for a decade of the hardest mental slog you can sign up for in our societies. Something that has become apparent to me a decade in now, is that whatever it is.. you tire of it. It doesn't matter what you do. 40 hours a week, 5 days a week, year in year out for decades and it becomes work. Mark Webber (Aussie Formula One driver) recently left Red Bull when there was no pressure to (he didn't like Seb, but he could have stayed as the No. 2 driving the best car in the best team being a loving Formula One driver.. seeing the world from one of the most privileged perspectives there is). He was just sick of it, sick of the situation, sick of of the bullshit.. whatever.. the point is if a race car driver can get fed up with F1, I think I can certainly get fed up with my career. So then.. how do you not work for ever? This is where you scurry off and read the investment threads and start becoming probably a total bore to your younger friends because you start thinking about money differently. How can I structure things, use the education I have, so I can retire early? I don't want to work forever because whatever I do, working forever is not good. That is the place I believe your friends aren't at yet. The perhaps unfortunate reality is money really is the currency of life and your command of it is your command of your life. I'm just learning myself.. but at least I'm now listening. My sister is still at the 'I don't want to be a millionare, Tony, why is all this money crap so important?'. edit: whoa is that a ton of preachy words. Tony Montana fucked around with this message at 21:14 on Jan 20, 2014 |
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Jan 20, 2014 21:09
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FrozenVent posted:Ahahahahahahahahaha indeed. Also they're spending $40 a month on credit monitoring I don't get why they are squirelling away $1000 into savings each month when they have 26k in debt and are only making minimum payments on their cards. Wouldn't the smart thing to do is make more than minimum payments on them? Also: haha, people with 26k + in debt "only" paying $4k for a wedding. I realize weddings are expensive. But they don't need to loving be.
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Jan 20, 2014 23:12
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If they don't save, they'll never have enough for a down payment, duh.
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Jan 20, 2014 23:43
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FrozenVent posted:If they don't save, they'll never have enough for a down payment, duh. They also probably plan to roll the debt into the mortgage somehow.
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Jan 20, 2014 23:44
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I've basically given up on owning a house in the next ten years because of this thread and/or forum. I just won't be in a place to do so smartly for at least that long, and now I'm starting to see friends who bought houses before they were established in their careers suffer from the lack of mobility. Especially working in county-based government positions where if you take a new job in a new county your compute doubles AT MINIMUM. Instead, I am renting a house for an incredibly reasonable rate with a garden and a driveway and freeway/public transit access. I would never be able to afford to own this house, but man, living in it sure is sweet. Too bad I'm just burning money on rent 
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Jan 20, 2014 23:50
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CapitanAmerica posted:I don't get why they are squirelling away $1000 into savings each month when they have 26k in debt and are only making minimum payments on their cards. They're so good at squirreling away $1000+ every month, they've got a whole $1700 in their savings account!
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Jan 21, 2014 00:26
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How do you approach someone who's selling MLM parties and poo poo on Facebook?
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Jan 21, 2014 01:16
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Zhentar posted:They're so good at squirreling away $1000+ every month, they've got a whole $1700 in their savings account! Yeah, I think that's their "if we stuck precisely to our budget, this is how much in savings we would have" amount. I bet at the end of every month, they pretty much break even. I don't understand how if you really could save $1000 a month, you wouldn't just pay off little piddly ant debts of $114 at 26.99% interest?
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Jan 21, 2014 01:16
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tuyop posted:How do you approach someone who's selling MLM parties and poo poo on Facebook? Post the FTC complaints in the thread.
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Jan 21, 2014 01:17
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tuyop posted:How do you approach someone who's selling MLM parties and poo poo on Facebook? Is it a person who you don't want to explicitly declare war with? The answer varies based on that. Definitely PM anyone who replies that they are interested.
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Jan 21, 2014 01:19
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I suppose this is the polar opposite of being bad with money, in the sense that when you have too much wealth, you become addicted to constantly making more: http://www.nytimes.com/2014/01/19/opinion/sunday/for-the-love-of-money.html quote:From that moment on, I started to see Wall Street with new eyes. I noticed the vitriol that traders directed at the government for limiting bonuses after the crash. I heard the fury in their voices at the mention of higher taxes. These traders despised anything or anyone that threatened their bonuses. Ever see what a drug addict is like when he’s used up his junk? He’ll do anything — walk 20 miles in the snow, rob a grandma — to get a fix. Wall Street was like that. In the months before bonuses were handed out, the trading floor started to feel like a neighborhood in “The Wire” when the heroin runs out. Also, this sounds like someone who Slomo wants to emulate: quote:IT was a miracle I’d made it to Wall Street at all. While I was competitive and ambitious — a wrestler at Columbia University — I was also a daily drinker and pot smoker and a regular user of cocaine, Ritalin and ecstasy.... Shadowhand00 fucked around with this message at 01:45 on Jan 21, 2014 |
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Jan 21, 2014 01:43
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gvibes posted:A friend of my mine recently got married. He and his wife have been living together for a while now. I am guessing they each make about $150k, $300k a year combined. They wouldn't be the first couple to act like they make that kind of money while actually pulling in substantially less.
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Jan 21, 2014 04:12
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Not really a story, but this guy is full of bullshit analogies that read like hacky sales pitches in #5: 5 money myths that are financial nonsense quote:Myth No. 5: You need to diversify Just try really hard and you can be a pro athlete! (...Until you get injured and lose everything.)
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Jan 21, 2014 17:28
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 Your move, "Turnaround King's" Cardone 
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Jan 21, 2014 17:38
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Cranbe posted:Not really a story, but this guy is full of bullshit analogies that read like hacky sales pitches in #5: Well the TV analogy isn't too bad, it's just missing the crucial step of "that TV you meticulously researched and know everything about explodes in a massive fireball three months later."
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Jan 21, 2014 17:38
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Financial journalism is awful because they literally have to make up bullshit to get hits/viewers/readers.
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Jan 21, 2014 17:43
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quote:Myth No. 2: A penny saved is a penny earned Nail Rat posted:Financial journalism is awful because they literally have to make up bullshit to get hits/viewers/readers. The problem is that the bullshit they make up also has to make their readers feel good about themselves. You can be wealthy without reducing spending and all the bankers are lying to you? Sounds good!
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Jan 21, 2014 17:45
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quote:Myth No. 2: A penny saved is a penny earned I want to strangle everyone involved in this article. Yeah, finding a way to save 1k a month(don't tell me you can't do that at 50k a year) for retirement won't make any difference. No sir!
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Jan 21, 2014 18:06
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The problem isn't expenses, it's earnings! If you just earned more then your expenses wouldn't be a problem! See tons of professional athletes and most fighters that after earning millions a year in a short window die broke. Or the couple a few posts up apparently pulling down over a quarter a million a year but have maxed credit cards. But this is the worst of Internet journalism, spawned by the death of actual journalism due to the death of actual publications. Any shithead can write a blog and with the sea of poo poo out there you need to say something sparky to turn heads.
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Jan 21, 2014 18:16
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About 2.5 years ago we had a "500 year flood" in our area. Some friend's parents live by a creek and had their 10' basement completely full of water despite being 20' higher in elevation and 400' back from the creek. Anyway, a neighbor of theirs was not so lucky, and his whole house had about 6' of water in the entire thing. So the insurance money comes in and he spends the bulk of it on doing a $70k restoration on his 60s corvette as an investment (the car was moved prior to the flood, it was just in need of restoration before). Now, I am a car guy enough to know that it's not a split-window 427 vette, so I can't imagine it's worth all that much money, certainly not over $70k worth. Assuming it's a matching-numbers car, which it may be, I think he negated that fact by re-painting it another color and bore/stroke/cam the original engine for more power. Again, I think typically the most valueable/collectible cars are matching numbers / right from the factory OEM spec.
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