# If you were young how would you do it?



## ck13488 (11 January 2010)

Didnt really know where to stick this but i think this was the most suitable section for my situation for you to ponder.

I am a fulltime student, living at home and working casually. I have no debts, own my own car and have no intention of moving out and paying someone elses house off. My goal for 2009 was to begin to save for a house and I have progressed well, now having ~$6k cash with Ubank (5.61% at call) and ~$3k worth of shares (WBC/MTS). My goal for this year is to progress to a trainee-ship (casual≠loan) and continue saving $250/week, although I'm unsure if I should concentrate on saving cash or look to purchase more shares?

what would you do if this was your situation? level of savings cannot be increased (although tax return would be added in). time is on my side and my prediction (hah) is that the housing market will remain stable or slightly decline with rate rises in the next couple of years or so, in line with when i would be able to enter the market  

thoughts appreciated...


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## suhm (11 January 2010)

Not sure if this goes against the rules of providing financial advice but I am young so in a samish sort of situation.

How far are you from graduating/working full time? Are you in the 15% tax bracket yet? Would you need your money for some other thing before you bought your house i.e. backpacking, studying overseas?

If you don't mind not being able to touch your money its hard to beat putting a $1000 into super to get the co-contribution that'll give you 100-150% return and at least $1k and up to 5k a year into a first home owners savers account before june 30 to get the 17% from the government and you'll get your standard interest rates anyway and it'll also start the countdown for when you can use the money to buy your house.

That'll take up to 6k a year of your savings a year which will give you $1850-$2350 of co-contributions from the government. That's a 30-39% return without doing anything.

With luck and skill you could get more than that from investing/trading in shares but it'd be very hard to do that reliably.


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## ck13488 (11 January 2010)

suhm said:


> Not sure if this goes against the rules of providing financial advice but I am young so in a samish sort of situation.




yeah...im only after the opinion of how people would go about things if it was them in these circumstances


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## Aussiest (11 January 2010)

If i were you, i would continue to live at home and save. Keep the shares you have and stick the rest in a high interest earning account. I wouldn't get into too many shares atm, as the market has rallied and we may see a correction in Feb / March of this year (DYOR, but logic says the market can't keep going up forever).

I'm not sure about property, but i can't see it getting any higher for the moment. Already maxed out, and as you say, interest rates will increase significantly this year, so best to sit it out. So, save your money, set stop-losses on your current shares incase there's a market correction (Stop-loss: break even or trailing stop loss. Google for definition).


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## Mr J (11 January 2010)

> although I'm unsure if I should concentrate on saving cash or look to purchase more shares?




Save, while educating yourself in trading/investing. I don't think it's worthwhile getting involved in any market unless you know what you're doing. This goes for property as well as the financial markets. I'd be very hesitant to buy a property, but then I'm ignorant of the benefits and cautious of the risk. Living at home is good, you'll save quite a bit.

If I was you I'd sell the shares, take the savings, sell the car (unless it's cheap) and then use it to trade, but that isn't something I'd recommend to anyone .


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## Dowdy (11 January 2010)

I'm in the same boat. Mid 20's, staying at home.


I'm waiting til the housing market crashes. I am a major bear in the housing market but i also don't believe the hype in the stock market. I bought some stocks in 08 when they were down but didn't buy any in 09 as i reckon this rally won't last. Also bought some silver bullion because i'm a gold bug.

What i'm doing is saving my money, and i also run a home business. Now is the best time to do it (if your parents are supportive and have the extra room in the house) because you pay nearly $0 in overheads, except board. They say 80-90% of business fail within the first 3 years. Well, I would of failed too if i had to pay for things like renting a factory, employees etc (my mum is my book keeper).

So that's what I'm doing. You might get some ideas from that.

If you're not sure what to do, read books about financial investment or economics. A good book on economics is "Economics in one lesson" by Henry Hazlitt. Too lazy to read, then watch youtube clips from the Mises Institute


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## jonojpsg (11 January 2010)

I'd get at least half of my total savings/shares and find some decent underpriced resources stocks that are heading for production in the next two years, or before you are planning on buying a house.  Of course I own these stocks so I have a vested interest but Perseus Mining is a classic example of a company with a massive resource base that is bringing it into production by mid-late 2011 and is currently only valued at $80/oz of it's resource.  Others might argue this but it is 90% probable that PRU will be at least double it's value by the start of production IMO.

Others such as BRM or IFE are worth looking at.  Again, this is my opinion only.  I must say well done for being focussed and goal oriented at a young age, that will definitely get you a long way towards being well off by the time you're my age (37).


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## Ashsaege (11 January 2010)

Im in my early 20s at the moment and this is what im doing.

I dont pay rent (though im not living at home with my folks), I own my own car (Toyota Vienta worth about $4k), I work full time and study part time. I direct a decent portion of my wages each week into a high interest savings account.
I use to trade with real money, but unfortunately i was too green in 2008 and blew up most of my account - that was a big lesson for me. So now im saving my cash, trying to keep expenses low, studying the markets hard, i subscribe to The Chartist, and im paper trading.

I think it is better, when starting out from scratch, to save your money and paper trade. that way when you have saved enough you should have built up some decent experience with the market and have a fair idea if you can be profitable


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## brty (11 January 2010)

Hi,



> its hard to beat putting a $1000 into super to get the co-contribution that'll give you 100-150% return




I can't think of a more stupid place to put your money than in something that you have no access to for 40+ years (probably closer to 50 by the time you retire), when the governments are changing the rules every year. 

Eventually this huge pool of super money will become too tempting for a govt and be taxed harshly. You also have to ask yourself if the current financial system will even exist that far out, or what will be the price of bread in 40-50 years time??

You have to realise that your thoughts, lifestyle, attitudes to many things will change in a lifetime, if you have invested in your own name then you always have access.

brty

PS The best thing/investment we ever did was buy a house and pay it off as quickly as possible, it doesn't have to be the Taj Mahal, just something comfortable to live in. Later we used equity and bought another property, then another etc, etc.


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## skyQuake (11 January 2010)

brty said:


> Hi,
> 
> 
> I can't think of a more stupid place to put your money than in something that you have no access to for 40+ years (probably closer to 50 by the time you retire), when the governments are changing the rules every year.
> ...




Disagree with that; Property values may fluctuate and if you bought at the top of a boom with 90% LVR you're basically screwed for life.
The co-contributions means u double up; Then its your choice to put that money into shares or even cash or property trusts etc. The price of bread is irrelevant as your investsments should keep pace with inflation (esp with a healthy boost at the beginning)
Most people won't be "rich" when they retire so a healthy chunck of super would be in their best interests.

Sure the govt can change rules and unforseen events can happen in 40yrs, but super would remain largely unaffected as there would be many concerned stakeholders.


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## brty (11 January 2010)

skyQuake,



> if you bought at the top of a boom with 90% LVR you're basically screwed for life.




That is exactly what we did in 1981, and it was the top of that boom. By buying  an ordinary place instead of the expensive ones we were able to pay it off quickly, in 6 years. With two incomes that were rising it was easy. A young person today would likely find themselves in a similar situation.


The name of the game here is investments, it is easily possible to invest over 30 years and have enough to live off, before eligible to collect super. Using leverage the returns will be much better than those of super without leverage. By purchasing property and paying it off, you are able to draw equity at low interest rates, while being tax deductible. This then opens many doors for investment.
Just as importantly, you have time to learn about investing correctly while paying off the property.

By the time you are able to draw super, you shouldn't really need it if you had spent a lifetime of paying off debt and investing.

When ck13488 starts work, his employer will be putting in 9% pa, that is plenty in something you can't touch for 40-50 years.

brty


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## white_goodman (11 January 2010)

gotta get me some boats n hoes!

travel for a bit do plenty of rack then think about saving...


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## prawn_86 (11 January 2010)

white_goodman said:


> gotta get me some boats n hoes!
> 
> travel for a bit do plenty of rack then think about saving...




+1. Great advice imo


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## IFocus (11 January 2010)

prawn_86 said:


> +1. Great advice imo




+1 on the +1 you are only young once don't blow it on being to cautious.


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## Julia (11 January 2010)

Re governments changing the rules on Super, I'll be surprised if there is not before long a new rule which dictates that at least some of Super has to be taken in the form of an annuity.  Not a bad idea, in terms of avoiding people blowing the lump sum and then drawing the age pension.

But it's just one example of how governments can take away your choices with your own money.


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## Largesse (12 January 2010)

just ball


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## white_goodman (12 January 2010)

Largesse said:


> just ball




out of control...

BOC


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## SmellyTerror (13 January 2010)

In addition to advice already given: what ever you do, get an account you can paper-trade in, and educate yourself. If you find something you like you've got yourself an enjoyable hobby that you can turn into money some day.

If I was talking to the younger me, I'd tell him to grab Meta Trader, read as much as he could on trading Forex, and muck about - because it's actually kinda fun, in a Tetris kind of way. Whatever you settle on, just find something that's fun that you can trade on paper. If you like it, it's just a game. A passtime.

Then if you make it work, and want to put money in some day, you'll be well ahead of the game. You'll have screen hours logged. You'll have a profession waiting for you if you need it.

Worth doing, IMO.


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## DocK (13 January 2010)

I'm in mid-forties and reluctant to commit too much to super as I'm concerned about possible future restrictions on lump sums etc.  As the OP is very young and can have no idea yet what direction his/her life may take, I would be reluctant to tie much up in super at such a young age.  I've always taken the view that paying off a house mortgage takes priority over putting funds away in super for the young, then concentrate on increasing the super contributions once you have no non-deductible debt - my uninformed opinion only.  Most people my age did not have the benefit of employer 9% SGC for their entire working lives, and although this won't be enough to allow a comfortable retirement in itself, it's a good start until it can be supplemented in later years.

Looking back, one of the best financial decisions I made was to buy our first home when still quite young, and pay it off as quickly as possible.  If I had my time over, I'd probably make that first home an investment property and let tenants help pay it off for me whilst I stayed at home.  The equity in the investment home could then be used as additional security if needed when purchasing a home to live in, or another investment property etc. 

As to whether the $250/week you're saving in the meantime should be tucked away in a high interest bank account or invested into shares - imo that depends entirely on your tolerance for risk and time horizons.  If it were me and I was looking at buying a property in the next year or so I would be reluctant to commit all my capital to shares in case the market corrects or moves sideways in the short-term, but would want to benefit from an uptrend if it should occur as you'll possibly do much better than bank interest.  Perhaps an each-way bet is the prudent option - directing half your savings to shares and half to high-interest account.  Don't forget to factor in the cost of brokerage when comparing potential returns from each option.

The other advantage in not having all your capital tied up in shares is that if the travel bug should bite - you'll have some funds you can use to scratch the itch   You're being very sensible, responsible and forward-thinking which is to be applauded.  Just don't forget that life is for living, and make sure you make the best of your youth while you have it:


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## Tink (13 January 2010)

DocK said:


> I'm in mid-forties and reluctant to commit too much to super as I'm concerned about possible future restrictions on lump sums etc.  As the OP is very young and can have no idea yet what direction his/her life may take, I would be reluctant to tie much up in super at such a young age.  I've always taken the view that paying off a house mortgage takes priority over putting funds away in super for the young, then concentrate on increasing the super contributions once you have no non-deductible debt - my uninformed opinion only.  Most people my age did not have the benefit of employer 9% SGC for their entire working lives, and although this won't be enough to allow a comfortable retirement in itself, it's a good start until it can be supplemented in later years.
> 
> Looking back, one of the best financial decisions I made was to buy our first home when still quite young, and pay it off as quickly as possible.
> 
> ...




Good post Dock - I agree


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## matt_50 (13 January 2010)

That investment property while living at home idea sounds tempting! I'm in much the same situation with savings fast approching a %20 deposit for the biggest property I would be able to afford given the max I can borrow (total price of arnd $300k).  the only thing I worry about is paying close to $15k extra now, due to lack of FHG and Stamp duty that comes with buying as an investment rather than the first home.  also being on a lower tax bracket, 30%, and some in my situation may be lower, tax deductions on interest become a smaller consolation.


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## Mr J (13 January 2010)

> a %20 deposit for the biggest property I would be able to afford given the max I can borrow




Is that the max you can borrow, or the max you can comfortably afford?


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## matt_50 (13 January 2010)

Mr J said:


> Is that the max you can borrow, or the max you can comfortably afford?




max I could borrow.  It would be a stretch to say I could comfortably afford it.  depends whether I remained living at home


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## Gerkin (13 January 2010)

matt_50 said:


> That investment property while living at home idea sounds tempting! I'm in much the same situation with savings fast approching a %20 deposit for the biggest property I would be able to afford given the max I can borrow (total price of arnd $300k).  the only thing I worry about is paying close to $15k extra now, due to lack of FHG and Stamp duty that comes with buying as an investment rather than the first home.  also being on a lower tax bracket, 30%, and some in my situation may be lower, tax deductions on interest become a smaller consolation.




The fhog, you only have to live in the property for 6 months starting within the first 12 months of you owning it.

Nothing stopping you buying it, living in it for 6 months, moving out and it being an IP.


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## kingcarmleo (15 January 2010)

Im in a similiar situation (common theme). I recently resigned my job as I wanted a job that relates to my degree. Anyway when I was working I'd make $250 a week and save $100 a week for 5 weeks till I could buy a parcel of shares. Anyway I have saved 5k and invested around 8k in smaller stocks such as ESG,MEL,ISF. I plan to go to europe in july which will cost 5k so that means I'd only have my cash in shares(yikess) Anyway if I'm going to make a mistake I will do it while I'm young. Your only young once so  I think it's important I wine and dine some european women  

I might sell some of my stocks before I go to europe just to be safe, well hopefully by July ESG is taken over!!


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## Mr J (15 January 2010)

matt_50 said:


> max I could borrow.  It would be a stretch to say I could comfortably afford it.  depends whether I remained living at home




Decisions, decisions. If you move out, are you willing (or allowed  to move back? I guess you probably want to move out within the next few years, so that needs to be considered.


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## Gunlom (15 January 2010)

I made a one smart decision when I was 19 and bought a cheap apartment to rent out. And after a few years and twist and turns in life ( including a stint in the army) I had the mortgage down to below 10k, in the by about 2002.

Then after learning about investing, my options exploded, what I was capable of doing with that equity and rental income...

I took a trip to Europe, about $20k it cost, all paid for by my lucky tenant(didn't take a cent of my own hard earned)  and starting buying more property and shares.

Basically the idea is the sooner you get some assets under your belt, the more options and choices you have later in life. And you don't need a exceptionally high wage to start, merely determination!!

Best decision I ever made... and has paid many times over, and I'm only 33 now.


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## ck13488 (24 January 2010)

brty said:


> skyQuake,
> By the time you are able to draw super, you shouldn't really need it if you had spent a lifetime of paying off debt and investing.
> 
> When ck13488 starts work, his employer will be putting in 9% pa, that is plenty in something you can't touch for 40-50 years.



Totally agree...too much can change in the >40-50 years till I can touch super..too greater risk IMO



DocK said:


> The other advantage in not having all your capital tied up in shares is that if the travel bug should bite - you'll have some funds you can use to scratch the itch   You're being very sensible, responsible and forward-thinking which is to be applauded.  Just don't forget that life is for living, and make sure you make the best of your youth while you have it:



Still managing to travel around whilst saving...went to south island of NZ and Melbourne last year. We also really enjoygetting out and exploring the area where I live (hunter valley/newcastle) and camping is cheap and I love it! [cost a tank of petrol and $60 in food for 4 days camping]
In 2 weeks ill be in townsville and still deciding on the next trip. No extended overseas travel till uni is over with!



DocK said:


> Looking back, one of the best financial decisions I made was to buy our first home when still quite young, and pay it off as quickly as possible.  If I had my time over, I'd probably make that first home an investment property and let tenants help pay it off for me whilst I stayed at home.  The equity in the investment home could then be used as additional security if needed when purchasing a home to live in, or another investment property etc.



I really don't think I could live at home any longer if I purchased a property. Parents would want me out and i need my own space...ideally I would have a friend occupy a room to help with repayments [another questionable matter:]

Thanks for all your opinions on how you would approach the situation, I really enjoy hearing how other people would go about something and taking it all in before making a decision


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## Investor82 (2 February 2010)

Ahh a spruke after my own heart. 

I was in a similar possition at about your age. At 20 I secured a great job earning more money than what I ever imagined (all $500/week of it). But as I had just come out of Uni I thought I was loaded - and had no idea what to do with all my money. The only difference was that I didnt live with my folks. But had no debt and owned my car (a ford laser which was 1 year older than me). 

I left school, went to uni, got a job - no travel, no break etc - which I wanted to do at some point. But that was to come later - So without really knowing what I was doing I purchased an investment property. It turned out to be the best decision I ever made. 
My situation was a bit different in that a)I was paying tax b)there was no FHOG. 

So anyway turn the clock foward 7.5 years I still own the house (more than doubled in value), it returns me about $600-$700/month (after costs) plus I have travelled (Indonesia, NZ, Bali, Singapore, Istanbul, Russia, Switzerland, UAE, Milan, Austria - I think thats all?) paid off a lot of debt, got more properties (and more debt) bought my new car (New nissan navara (debt free) and all going to plan I should be able to retire in about 7 years. 

Dont get me wrong, in the early days I had to do it pretty tough. I lived in a small unit, shared with 3 other people, at one point had to take on a 2nd job working nites in a bar, drove a shi* box car for 2 years etc, etc, etc. But give me the chance and I wouldnt change anything I did (except buying a vacant block of land (3rd property I purchased)) but that lesson comes later...
Good luck to you.


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## ck13488 (3 February 2010)

got a job interview next week...holiday tomorrow.
things are looking good   life is sweet


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