Australian (ASX) Stock Market Forum

How much wealth is enough?

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Panaman said:
Greed is good.

Sadly I think in Australia today this rings true.

Recently started my own SMSF and in the process of doing so, meeting and enquiring about varies products and services about wealth creation and investing, nearly all gave the same greed type sales pitch about retiring early, not having to work anymore as if work is something nasty that no one wants to do (maybe iam a freak as I quite enjoy my job), then there was all the glossy brochures of happy smiling people on yachts or at Cafes sipping lattes with the golf clubs and expensive cars.

Think sometimes we lose sight of the important things in life, I think far too many people will spend there entire lives striving for more, and then even more when they have more than enough and don’t realise it.

Oh, and I didn’t buy into any of it, instead went with esuperfund and ETF,s, and defiantly none of the sure thing real estate offerings that involved massive debt, property and massive loans is being flogged to death right now, i hope all those who are buying the dream do ok, but my gut feel is many wont.
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You'll enjoy these then:

http://www.bravenewlife.com/
http://www.mrmoneymustache.com/
 
Saw a couple who are amongst the leaders of their profession in Australia this week with a household income of $700,000 and a lot of spare hours in the fortnight. They couldn't pay their bills last year and remortgaged their home to pay their tax bill.

I saw another client this week who is in his early 20s, income of $75,000 as a recent graduate in an in-demand field, and has just put down a 20% deposit on his own home worth $450k and a 5% deposit down on an investment property worth $500k. He saves 75% of his net income.

I don't think it takes a genius to decide who you think is happier.
 
Really interesting, Vixs. How do the high earning couple explain their situation?
 
Vixs said:
Saw a couple who are amongst the leaders of their profession in Australia this week with a household income of $700,000 and a lot of spare hours in the fortnight. They couldn't pay their bills last year and remortgaged their home to pay their tax bill.

I saw another client this week who is in his early 20s, income of $75,000 as a recent graduate in an in-demand field, and has just put down a 20% deposit on his own home worth $450k and a 5% deposit down on an investment property worth $500k. He saves 75% of his net income.

I don't think it takes a genius to decide who you think is happier.
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So the 20 something has just strapped themselves up with over $800k debt, on $75k income, over 10 times their income. My guess is they wont be smiling for long, so my vote goes for the $700k couple. Spare hours and lots of bills, sounds like they have been enjoying life. Unless their mortgage is over $7m, they are way better off than the 20 something.
 
beachlife said:
So the 20 something has just strapped themselves up with over $800k debt, on $75k income, over 10 times their income. My guess is they wont be smiling for long, so my vote goes for the $700k couple. Spare hours and lots of bills, sounds like they have been enjoying life. Unless their mortgage is over $7m, they are way better off than the 20 something.
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Didn't the 20 something just put down a deposit on a house, where he has 75% of his disposable income as savings and the other couple just took out a loan to pay a tax bill....:confused: pretty obvious to me.
 
CanOz said:
Didn't the 20 something just put down a deposit on a house, where he has 75% of his disposable income as savings and the other couple just took out a loan to pay a tax bill....:confused: pretty obvious to me.
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Yes that was before he committed to two mortgages. He will now have very little spare money and will be chained to his job to make the payments, and of course now has tenants and property managers in his life. Take it from me thats no pleasure trip. He probably was happy with no debt and surplus income, but those days are gone now. He now has to pay the costs of running a bigger home, or perhaps his first home, you know rates, maintenance etc.

The others refinanced, meaning they had some equity to use. Sounds like they are having a good time spending like crazy in their spare time. My guess is that their bills are now up to date and they are still extremely happy.

I'll take $700k pa and a big tax bill over 2 houses and $75k pa every time.
 
beachlife said:
Yes that was before he committed to two mortgages. He will now have very little spare money and will be chained to his job to make the payments, and of course now has tenants and property managers in his life. Take it from me thats no pleasure trip.
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Yeah I can't believe the mortgagee allowed the investment property when the 20 something only has about 60k net to play with per year. That is about 1100/ week in the hand. After loan payments and living expenses the 20 something will be stone broke every week. Take the tenant out of the rental property and the 20 something will default.
 
beachlife said:
I'll take $700k pa and a big tax bill over 2 houses and $75k pa every time.
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:xyxthumbs

Same. Anyone can save a little to then load up on housing debt. Very very few will have the capacity to earn 700k. You can get yourself out of any trouble very quickly with that kind of income. Not so on 75k.
 
Wysiwyg said:
Yeah I can't believe the mortgagee allowed the investment property when the 20 something only has about 60k net to play with per year. That is about 1100/ week in the hand. After loan payments and living expenses the 20 something will be stone broke every week. Take the tenant out of the rental property and the 20 something will default.
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Mortgage repayments are about 1900 a month for his PPR, which is a LOC that he directs all of his income to.

Costs of holding the investment property interest only are about nil after tax assuming 95% occupancy.

If he has any cash flow problems he said he'd be happy to have friends move into his PPR after the 12 months period is up for the Great Start Grant and stamp duty concession restrictions. That's 2 bedrooms to rent out @ 100-150 a week, or around half his mortgage repayments.

I'm not saying I'd be comfortable with that level of debt on that income, but I hadn't saved $150,000 cash by the time I was 25 either, so we're not really in the same boat.
 
Vixs said:
Mortgage repayments are about 1900 a month for his PPR, which is a LOC that he directs all of his income to.
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This is not ideal should Mr. 20 something ever move out and make the PPOR an investment property - if he draws anything out that is not investment related (i.e the other 25% of his wages needed for living expenses). Mr. 20s always move out when they meet a Mrs. 20 and move on in life etc etc. Should be using a mortgage offset. Doomed from the get go. Are the properties from the same lender? X-Coll? Many things to consider when starting out as the first investments we make are the cornerstones and foundations of further investments.


As for 'How much wealth is enough'? My take is to be able to create a capital base that >tracks inflation, and provides an income the individual/pair are accustomed to until the end. Once this is reached, then amassing further wealth is relative to how much more time an effort is required to achieve this further wealth. That in turn, is called 'working'.


pinkboy
 
"“Most of us,” said the cosmic humorist, “go through life not knowing what we want, but feeling damned sure this isn’t it.”

Over 99% of the people in the western world live on lower consciousness levels characterized by trying to find enough security, sex, “groovy”sensations, ego rushes, prestige, money, power, and status. This endless struggle yields lives of constant resentment, worry, suspicion, anger, jealousy,shyness, and fear. Everything people tell themselves they must do to be happy ends up yielding more frustration than joy. The more successful a person is in making money, collecting skills and possessions, developing exciting sexual relationships, acquiring knowledge and degrees, and achieving positions of status, power, and prestige, the less loving, peaceful, and contented he may find himself or herself.

And yet it is not these things in and of themselves that create an unhappy life-- it is the internal mental addiction or desire for them that minute-by-minute keeps one from enjoying life. Addictions (or emotion-backed demands) bring fear of non-fulfillment; jealousy that someone may steal our source of fulfillment; anger when someone thwarts us; cynicism if constantly under supplied; paranoia if constantly threatened; boredom if we’re making no progress toward satisfying our addictions; worry if we can’t see a steady supply; anxiety if we’re worried about being worried; and unhappiness when the outside world does not supply us with whatever it is we are addicted to. Since the nature of life is such that we win some and lose some, an addicted person has no chance of living a happy, loving, peaceful, conscious, wise and effective life. And the addictive programming is not necessary to find and enjoy that which we prefer in life.

You are ready for growth into the happiness of higher consciousness when you realize the utter futility of trying to live a beautiful life by your efforts to rearrange or change the world of people and things outside of you to fit your addictions and desires. You will find you have only to rearrange your own personal, automatically programmed responses to life situations -- most of which are childhood hangups.

As you work toward higher levels of consciousness, you will find that you have always had enough to be happy. It is the patterns in your head that make you unhappy, although you usually blame the people and conditions outside you for your unhappiness. Your journey into higher consciousness can enable you to be loving, peaceful, wise, and free of a constant barrage of unpleasant emotional feelings. Living Love offers you four advantages in your adventure into higher consciousness:

1.For many people it can be one of the most powerful and rapid ways for growth into higher consciousness that has ever been available to mankind.

2.It does not require you to detach yourself from your present life. Living Love can be used most effectively if you stay with your present business, personal life, and other conditions until you have grown to a high enough state of consciousness to be fully perceptive of the arbitrary mores,folkways, and social roles you are guarding and living out.

3.Once you thoroughly understand the system, it is not essential to have a teacher for continuing your growth. Your life will be your best teacher, for you will discover that you are always putting yourself into learning situations that are ideal for your growth. The programming that you most need to change has an unerring way of putting you into life situations that can make you aware of the exact inner work you should be doing.

4.When you use the Living Love Way to find the love, inner peace, wisdom, and effectiveness of higher consciousness, your inner work on yourself immediately adds to your enjoyment of life. With the Living Love Way, happiness is not a distant goal -- it is an ever-growing part of your here and now.

Think of the energy you now put into the up-and-down hour-by-hour coping with your feelings while you continually try to rearrange the people and situations in your life so that you can then be loving, serene, effective, and happy. And yet year by year your quest for happiness is as elusive as finding the pot of gold at the end of the rainbow. Since almost everyone around you seems to be having similar trouble in becoming a happy, loving being, you may have lowered your standards and decided that continuous happiness is probably not realistic.

The Living Love Way invites you to set the highest imaginable standards of love, serenity, peace, wisdom, effectiveness, and continuous happiness for your life. and then you are ready to begin your journey into higher consciousness."

-Handbook to Higher Consciousness
Ken Keyes Jr.
(1972)

http://www.scribd.com/doc/17658844/Handbook-to-Higher-Consciousness-Ken-Keyes-Jr
 
ftw129 said:
The Living Love Way invites you to set the highest imaginable standards of love, serenity, peace, wisdom, effectiveness, and continuous happiness for your life. and then you are ready to begin your journey into higher consciousness."

-Handbook to Higher Consciousness
Ken Keyes Jr.
(1972)
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Ah yes, exchanging one set of beliefs for another (for a fee). The mastery of self is when the neighbour poisons your dog, the wife is diagnosed with cancer, a bad car driver tail ends you, the mother-in-law nags incessantly, the bush fire burns down your house and throughout it all you remain this remarkably calm individual who has developed the higher consciousness of "I don't give a #&*@".
 
Wysiwyg said:
Ah yes, exchanging one set of beliefs for another (for a fee). The mastery of self is when the neighbour poisons your dog, the wife is diagnosed with cancer, a bad car driver tail ends you, the mother-in-law nags incessantly, the bush fire burns down your house and throughout it all you remain this remarkably calm individual who has developed the higher consciousness of "I don't give a #&*@".
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Ah yes, nice sentiments and heavy duty crises and dramas. If one had all the lovey dovey 'the world is a beautiful place' stuff, they wouldn't be part of this forum. And I'm still trying to work it out after all these years.:)
 
pinkboy said:
This is not ideal should Mr. 20 something ever move out and make the PPOR an investment property - if he draws anything out that is not investment related (i.e the other 25% of his wages needed for living expenses). Mr. 20s always move out when they meet a Mrs. 20 and move on in life etc etc. Should be using a mortgage offset. Doomed from the get go. Are the properties from the same lender? X-Coll? Many things to consider when starting out as the first investments we make are the cornerstones and foundations of further investments.
Click to expand...

The LOC fits his goal of starting a regular investment facility to build a managed fund portfolio over time with a view to having a direct share portfolio once he has the funds.

Pay down principal, redraw into a sub-account on a monthly basis for regular investment, increase the portion of his debt that is deductible over time. Sure he won't have the ability to just move out and have the original loan amount be deductible, but that's not his plan for now anyway. That's why his investment property is structured that way.

Interest only with an offset works just fine for most people with the view to upgrading and retaining as an investment, though. It's not a great idea recommending a giant credit card secured against their home to people with bad cash habits haha.

As far as how much is enough, I think that one was nailed earlier in the thread - "Just a little bit more."
 
Vixs said:
The LOC fits his goal of starting a regular investment facility to build a managed fund portfolio over time with a view to having a direct share portfolio once he has the funds.

Pay down principal, redraw into a sub-account on a monthly basis for regular investment, increase the portion of his debt that is deductible over time. Sure he won't have the ability to just move out and have the original loan amount be deductible, but that's not his plan for now anyway. That's why his investment property is structured that way.

Interest only with an offset works just fine for most people with the view to upgrading and retaining as an investment, though. It's not a great idea recommending a giant credit card secured against their home to people with bad cash habits haha.

As far as how much is enough, I think that one was nailed earlier in the thread - "Just a little bit more."
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The way it appears to be structured robs Mr. 20 Something of options and precious deductible interest from the start of his investment journey, when it can be easily preserved. Your suggestion that an IO mortgage with offset is a 'giant credit card' is thin, as an LOC is just that moreso. Mortgage offset accounts preserve the deductible portion of the loan, and has ready access - so you can have your cake and eat it too. An LOC doesnt allow this, as if you mix any personal funds, or take out funds for personal use, you have to apportion the deductible and non deductible portions, creating more cost for an accountant to do so. Continuing this has potential to create a real mess.

You said yourself Mr. 20 Something saved 75% of his net income. That is not a person with 'bad cash habit'. He has proven discipline, and would probably adjust quite easily to a well structured loan structure that allows all the principle of his HL paid down to be deductible using debt recycling.

Plans should start with the end goal and work backwards to work out how to achieve that goal. Plans don't work any other way, otherwise it's not a plan, but a motion to nowhere.

pinkboy
 
burglar said:
high end retail stores
big end of town
the mall

today's people have so much to contend with

we just had the corner deli
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If she wasn't so successful professionally she would have had to face the hard facts like everyone else. She is not going to be able to retire with the kind of lifestyle she has lived with, though.
 
Vixs said:
If she wasn't so successful professionally she would have had to face the hard facts like everyone else. She is not going to be able to retire with the kind of lifestyle she has lived with, though.
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This is the problem, everyone thinks that $50k a year is enough, it probably is if you have been on the bread line most of your life.
Generally I think $50k is o.k if your wants are modest, if you want to travel overseas probably $80k.
To earn $80k in todays market, without risking your capital, will require lots and that's a rough estimate.lol

So if we extrapalate that out, how much is enough, as much as you can save.:xyxthumbs

Then you have to contend with those, who save sod all, saying you are a fat cat.lol

What's the saying " never shall a saver go unpunished".

Spend your money have a great time, there will be taxpayers and savers to support you, because you have it so tough.

Just do it.:xyxthumbs enjoy.
 

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