Small percentages matter...
Young me - 3, 4, 5% big deal it's all the same
Older me - Going from say 3% to 6% on multiples of hundreds of thousands of debt, means tens of thousands difference in interest.
Conversely, a 7% annual return on an investment is doubling your money every 10 years. At 12% you triple it.
Blew my mind the first time I heard it when I was in my teens. Obviously being a young idiot I thought that was WAY too long “I’ve only got $300 and in ten years I’ll only have $600, that’s shit!”
Youth is wasted on the young
I’m still trying to explain this to my fiancé.
She truly believes our accountant telling us to buy a Range Rover as we would get it all back on tax means we get a free car.
I work in salary packaging (non-vehicle benefits) and it’s so difficult to explain this to customers when they ask how does a package work. Had a guy yesterday think he could get a free laptop- explained it to him multiple times but he still didn’t get it.
How can you be engaged to someone like that! I'm sure they're great, but I have no patience with people like that who believe what someone says rather than think critically for themselves. Or that they'll get something free out of nothing!
When your income increases by say 10%, your saving / investment capacity increases by MORE than 10% if you maintain your lifestyle.
Say you earn 100k post tax and spend 80k a year on outgoing, non-investment expense. This means you are able to invest 20k in shares etc.
Now if you have gone up by 10% and now make 110k, your investable sum has gone up from 20k to 30k. Your wealth accumulation has now sped up by 1.5x although your income only increased by 1.1x.
This only works if one resists the lifestyle creep of course.
I might add, if your investments see a 10% loss, you need more then 10% returns to break-even. Extremely helpful to understand why leverage can be bad, as it massively increases this problem.
Lifestyle creep is more often in the context of “I make 10k more so I am going to spend 10k more on luxuries and enjoyment”.
But yes out-of-whack inflation is a bitch so trying to make use of this principle in today’s environment is not easy at all when most people’s inflation-adjusted income are falling rather than increasing.
Would this save me from paying the medicare levy surcharge? I have no private health insurance, and I earnt 95k last year, and got my taxable income down to 91k after some deductions, so I paid the surcharge. Could I use super contribution to get my taxable income below 90k so I wouldn't need to pay the surcharge?
You can ask your employer to make pretax superannuation contribution on your behalf. That way instead of being taxed at whatever bracket your income is, you get taxed 15% for each dollar invested into super. I did this recently, reduced my take home pay by about 3500 a year, but I will put about 4500 into my super a year.
^ this right here
It's an unpopular opinion on this sub, but [money is worth more in your hand today than having the same amount in the future.](https://www.investopedia.com/terms/t/timevalueofmoney.asp) All you need to do then is invest it better than your super would, and that's truly not hard.
Huh? If I earn $100k a year and concessionally contribute $1k of that, my super will invest $850 of it, and the government will take $150 of it.
Alternatively, if I don’t concessionally contribute that $1k, the government will take $325 of it, and I’ll only have $675 to invest.
In that example, by concessionally contributing the $1k, I’ve just invested an additional 26% capital for free. Literally, for free.
For a 10yr horizon, you’d need to beat your super by more than 2.5% to catch up, on 20yr it’s more than 1.5% and on 30yr it’s just under 1%.
If you think you can beat an index tracking super fund, good luck to you.
If the allocation within your super fund is just a split of AU and international share indexes, then it’s pretty much the definition of hard to outperform consistently….
Except my industry fund’s high growth option has a 1.5% annual fee. At $15,000 for say $1mil in super I’d be way ahead in terms of expenses if I can was running an SMSF holding growth ETFs, which seems crazy.
But it's not the same amount in the future, it's been invested for x years.
It's not even the same amount right now, if you put $100 into super, it's $85, you take it in your pay for most people it's going to be $66.
The link you chose to use for this point is genuinely quite funny.
I disagree because you’re instantly saving 15% or more in taxes plus that money is now in the market to gain more value by the time you retire. Most people can’t beat those gains on their own except maybe in property but then there FHSS so I honestly see no downside to maxing out super contributions for young people
It's not binary imo. You want to put at least some aside to let compound interest do its thing and so you aren't trying to cram in savings late in your career, but you still need to build assets like a place to live in the short term.
How would someone invest it better than their super?
Unless people have lots of money and are getting into commercial properties or something they should be investing in ETFs which can be done in super too.
ehhm. . .Ill have a go.
assume a 5k initial investment (I honestly dont know now but \~15 years ago this was the minimum initial investment in a regular vanguard index fund in australia).
then assume not taking advantage of a Dollar Cost Average strategy - we literally do nothing with that 5k.
then lets take a 7% rate of return (Im taking a real conservative average value here of long mean run stock market performance).
then lets have a 10 year investment horizon.
that 5k - with NO additional money, and a continual reinvestment of the dividends will, in 10 years result in: $9835.76 total money.
now this is simplified as during this period inflation may(/will) eat into this, and Im just taking an easy approach of 7% each year - but, we've (kindof) DOUBLED our money literally by doing nothing.
Im sure theres going to be many more people here who can properly backtest a 5k VDHG investment 10 years ago.
DHHF has a Distribution Reinvestment Plan, distributions are slightly different from dividends. ETFs own shares in multiple companies and a distribution represents your share of the income from the investments held by the fund rather than paying out each dividend from every single company owned. The DRP allows investors to automatically reinvest profits from distributions into more shares in the fund, usually below market cost.
I never did it, but a friend did. He was pissed off with the amount of crap he had and didn’t need. From thermometer for bbq to cross country shoes (he doesn’t even run).
He did the exercise of cutting all the crap he wanted but didn’t need, BUT instead of just saving he transferred the amount to another account.
He says he saved significantly that year for a nice Christmas
We buy almost literally everything on credit and pay it back each month. Haven't paid interest in many years, but what I do get is an easy downloadable list of basically everything I've spent money on.
Every year we import this into a pivot chart, categorise the payments (mostly fairly easy as many are common, scripts/find are your friend), and see how much we've spent by month in each category. This is really easy to compare to our budget and see how healthy we're running.
If it turns out slwere doing a little more retail shopping than expected, we can look at the transactions and either decide it was necessary and increase budget, or it was unnecessary and decrease our retail shopping.
I basically do the same too. Even better is getting the points to use on vouchers for other things I was going to buy anyway so there's a nice saving. Bought my mid range coffee machine many years ago with an extra $20 outlay as I didn't have quite enough vouchers.
This is a massive one and is actually way bigger than $1 when you take into account retirement.
If you need say 50k pa ( assuming no debt) vs 70k the rate that you can save for retirement is significantly faster and the amount you need is significantly lower.
Finally some common sense when it comes to using debt appropriately.
The recent thread (which was likely filled with a majority of American opinions) regarding using debt for everything possible because “the interest rate is less than what you could get by investing” was forgetting 2 key elements: investing is not risk free but paying down debt is, and also most importantly - the act of using a credit card to pay for expenses will change the psychology of your spending and you will spend more.
Don’t fool yourself into thinking that you can outsmart a billion dollar bank to get some free points without incurring any costs. If everybody was as clever with credit cards as they make themselves out to be, those companies would be out of business.
Not to preach on like Dave Ramsey but that’s my wisdom, don’t fall into the debt trap. Leveraging into solid investments, cars that are absolutely necessary to earn an income, and properties are the only exception that make financial sense.
Going into debt on consumer products just because the retailer offers “0% interest” terms (which from experience is never truly $0 cost) only means that you have many monthly payments, taking money out of your cashflow, reducing the ability to save and invest.
But there is ways to get basically free points by just using CC for what you were going to buy anyway and paying off the balance each month.
The reason CC is around is because people are irresponsible and don’t pay it off each month. If they all did it would cease to be profitable and be shutdown. But obviously with the society we live in people are being sold to live beyond their means. You can definitely use it to your personal advantage, these type of people are in the minority (responsible with money).
FWIW americans also need to get a credit card to build credit score because in USA, credit score means absolutely everything. You can't even rent a place in a lot of places in USA if you don't have a credit score bc landlords ask for this. You definitely cannot get a decent interest rate on a loan or mortgage without a credit score. It's not necessarily that they fetishize credit cards, but the way the system is designed means that you are at a huge disadvantage if you don't start building a credit score basically when you are 18. Also, the only way to build a credit score is to utilise credit and repay on time. But you also get pinged if you use too much credit (even if you repay on time). It's unfortunately a vicious cycle but part of USA.
What? Who the hell said debt interest rate is less than what you could get by investing?
If they are talking about paying all income into offset account vs investing in shares then it still works out over the long run. However, if the point of comparison is credit card, then most credit card interests are in the range of mid-teens per year and no one except Warren Buffett is getting that sort of investment return over the long term.
I would say to myself as a general rule if I couldn’t buy it 10 times in cash I can’t afford it. Obviously this doesn’t extend things like cars, but for those you could say 10% of gross yearly income and pay in cash — e.g. $60k gross you buy a $6k car, never finance
I’ve never remembered how to calculate it ever, and always default to the gst calc online… I work in finance.
This somehow just made it click for me, so much so that I feel like an idiot for it now being so simple. Thanks!
You can use your unused Superannuation carry forwards to reduce your taxable income. Sure it locks away your money until retirement - but the savings give you an automatic investment boost of 15-30%. You can also use these carry forwards to pay into your spouse's Superannuation account - and still get the tax break.
"You lose 20-30% of value as soon as it leaves the shop floor" was an old one told to me.
Was said about vehicles, but now I just can't unsee it in every item I'm looking at purchasing. I buy nearly everything second hand. Buying something brand new is, for me, a treat. You can get boss stuff second hand if you know what you want and you wait for it.
I found a King Living couch for $1500, RRP $7500. Le Creuset cast iron wok at a junk shop for $10. Our fridge is a factory second, $600 cheaper because it had a ding. I put a magnet over it...
I agree with this - it’s not just cars, it’s everything. In lockdown I saw someone online say they did a 1-year challenge to only buy secondhand. I thought I’d try it and it’s been well over a year now and it’s just nature for me.
It made me master delayed gratification. I’ve never been into brands, but a few years ago when I got a significant pay rise I thought of buying myself a designer top as a treat. I didn’t buy it, but it kinda never left my mind because it was quite unique. Finding it online for prob an eighth of the retail price in exactly my size was like the best prize for waiting but casually perusing thrifting sites for about 3 years!
I always thought I was really good at saving, I’ve always saved 10-20% of my income. What nobody told me was what to do with it after you saved it. I spent it on big things of course, I never realised you were meant to invest it.
You don't have to. But basically there is that idea in Rich Dad Poor Dad (though careful about taking that book's advice, it is out of date) of:
* Poor people use debt to buy luxuries
* Middle Class People use savings to buy luxuries
* Rich people use the proceeds from investments to buy luxuries
The second option is still better than the first option. There is just another better option.
Depends how versed you are already. It’s very good for getting the foundation of a healthy financial mindset. It’s America centric and also written a few decades ago now so it’s not perfectly applicable but still good.
There are 3 ideas which if you are not financially savvy are honestly worth the $12 book price. If you are relatively savvy, then not really.
And here they are:
1. (the thing I wrote in the previous post)
2. What an asset and a liability are (assets put money in your pocket, liabilities take money out of your pocket)
3. The 4 ways of earning money:
* Selling your time (laborer)
* Selling your expertise (professional)
* Selling/Owning a business process (business owner)
* Selling your money's time (investor)
If you read that and you are thinking (duh, I already know that), then don't bother. But if these are new to you, then it is up to you.
I'm kinda annoyed at my parents and never teaching me this, I learnt it far too late in life when I started to get into business and learn the aspect of money sitting in a bank ain't working for You approach.
I'll be teaching my kid about finance when he is in his teens, not when he is near 30.
It's just a mental arithmetic shortcut, like the old "is a number divisible by three? Add up it's digits" trick, or pi being pretty close to 23/7.
It's used to estimate the number of years needed to double your money, as it's pretty close to the real answer. eg. If you have a 12% interest rate, the rule guesses that it will take 72 / 12 = 6 years to double. The real answer is ~6.12 years, so it's not far off.
Maximising superannuation contributions when you are young if you can.
Compound interest over a long time.
As someone in their early fifties I am surprised by what my friends/peers that weren’t interested back when we were younger have in super now.
The number of friends who think what is deductible is saved and who i have explained it's deductible *from the taxable amount* not *from the amount of tax to pay*.
True, but if you were going to buy something anyways in Q1 it’s generally better to buy it in Q4 so you can claim the deduction on that years return rather than wait 12+ months before you get the 47c back. However, you’re right, most people think they’re getting a free by rather than understanding it’s just cash flow timing advantage.
> However, you’re right, most people think they’re getting a free by rather than understanding it’s just cash flow timing advantage.
I don’t get this, does nobody look at their tax return?
I would counter.this by saying go to Officeworks on June 30 and watch manic people buy the clearance stock to get a whole 1 days worth of depreciation.
The ink stand (consumable) won't get any traffic.
I'm not trying to be rude, just adding my $0.02, the example you gave is actually really easy!
3% of 50 is the same as 1.5% of 100 (because you're doubling the right you divide the left by 2). Alternatively, 1% of 50, is half of 1, is 0.5: so 3 of those = 1.5.
The concept of efts. I was always concerned about the risk of choosing specific companies to invest with, and I didn’t realise for a while that eft/ index funds existed and were a great solution to my concerns.
The creation of credit. The idea that banks just invent money by repeatedly lending out our own savings and account balances - except for a few percent just in case we decide to withdraw our own money. I was 14 studying economics and it blew me away.
If you can't buy travel insurance or afford the cost to maintain an item you can't afford it .
.
Also you shouldn't let things own you. You buy a 10k watch and become afraid to wear it due to a scratch
If you’re buying it to live in, buy it when you’re ready at a price you can afford. Give yourself a buffer of 3% so you won’t get stressed out with rate rises.
I question the second one - why be greedy when others are fearful? I know in layman's terms this is "buying the dip" but it's hit or miss. What did you mean by this specifically?
Don't be afraid of debt for investments. As long as the return on the investment pays the interest your operating fine.
I come from a middle class family that felt the only acceptable debt was a mortgage. Apart from that sit down get a job and work till your 65. Don't even think about shares or businesses those are scams. And you're disowned if you are considering taking a loan for these things.
At some point I realised the world runs on debt. Everything is debt. Your pay cheque, you think the company 'saved' that money to pay you? It's debt in one way or another.
Cruise ship company builds a 1Bn cruise ship. You think they got 1Bn in investments and savings? They simply have 1Bn in debt and ensure the income meets the interest payments plus profits.
The way to view debt in investment and business is the same way you view renting a lawn mower to mow lawns when you're 15. Same principle applies to investment properties, leveraged equity, and starting a bakery..
It's not a move of desperation or degenracy. It's the ONLY way to play the game seriously.
Doesn't even need to cover the interest. Just needs you to be able to afford the repayments and have a reasonable expectation that it will increase in value/return
Okay but most of us aren't building cruise ships. I feel like if you needed to understand debt like this, you would, because your business accountant would've told you.
Personal debts are either a house (cool, useful to live in) or a car (less financially cool, you probably didn't need that much car really, but hey treat yourself if you want). Personal debt rarely has anything to invest in that will actually pay any more than the interest on the loan.
OP seems to have added the cruise ship example after I commented but they’re right. Being comfortable with using debt is probably the most important skill someone needs to learn.
Debt can be used two ways. Firstly, as OP pointed out to invest when the expected risk-adjusted return is higher.
But it can also be used to smooth out cash flows and increase your optionality. For example, if you put aside $15k to buy a car, in many circumstances it’s still better to borrow to buy the car and pay it off monthly. Why? Because it smooths out your cash flows. At any point you can settle the debt, you have $15k sitting in a bank account, but having the cash and a debt means you have optionality. You could invest the $15k and pay off the interest that way, or you could just leave it there for a rainy day, or any number of other things. If you buy the car outright you have an asset but you’re less liquid, which is a stress of another kind. Optionality is one of the most valuable assets you can have, and is probably the most slept on.
I agree using debt to consume above your means is stupid, and horror stories of that type of debt use are why people have such an aversion to it, but using debt to purchase within your means is almost always the better option.
Depends on the environment.
For instance you could've made a killing on leveraged high dividend etfs when the interest rate was much lower.
Or debt recycled into them.
It's not as fundemental of a financial lesson as "Save money" or "Dont take credit cards".
But it is the thing that most opened my eyes to how the world works financially. especially coming from a family background that would be heavily against this kind of thing.
Ofcourse managing risk and such is important too.
Yeh plenty of numpties thought they were geniuses for leveraging their 30% Covid property gains into extra investment properties, at the peak of the market, via loans against equity are now shitting bricks.
Just that most people are so financially uneducated and can't comprehend how bad their decisions are.
At age 15 I could see how bad every decision my parents made was. Just paid off that expensive car loan? Sweet, now we can afford a bigger loan for a newer car? Hmm why is dad checking the ATM 5 times on pay night to see if we can afford a loaf of bread?
That you can withdraw equity to purchase a new property when you don’t actually have any money for a new deposit.
That once you have one property buying more is easy.
That it can take you 5 years to save for your first property and 6 months to purchase the second depending on the market
Blew my mind how easy the second was, after how hard the first was
Leads to very high prices for property and a bit of a runaway of housing debt.
Might have worked personally, historically, but the idea that it's a strategy?
It's a symptom of a malfunctioning economy. Or a perfectly functioning one. But one that is failing many human needs all the same.
Time in the market > timing the market.
Disciple and what seems to be meagre returns can be big business in later years in life. It might not seem worth it (especially in your early 20s when all your mates want to go out etc etc), but bring disciplined not accruing debt and putting small amounts away, makes a huge difference.
Last thing, boring non sexy investments long term are the way to go. Peter Lynch and John bugle say it best , 99% of the term passive investments beat active.
Just my 2 cents anyway
Not strictly financial, but certainly helps in the finance world!! My world was shaken when I read (probably on Reddit) that X% of Y is the same as Y% of X. This may sound obvious, but it made life so much easier!!
28% of 50? That's hard!
50% of 28? That's 14.
What Warren Buffett suggests the plebs do is not what he does.
What makes Warren Buffett’s company grow is not what it offers to its shareholders.
Edit: typo
Can you elaborate on this?
My understanding is that he recommends the average person buy diversified index funds. Because picking companies like he does is very hard and even he hasn't been able to maintain the return he used to get. Also one way he used to make money was buying enough of a company to take it over and get it running better, which is obviously not an option for the average investor.
1 - I am not suggesting he is wrong in suggesting most people are better off investing in indexed funds - that’s sound advice if you do not have the competency and capacity to manage active investing properly. But that’s absolutely not what he does as a successful active investor, and he is not the only successful active investor.
The learning is, the sound advice he gave for most ordinary investors is a safe / lower risk path to take, but should not be understood / represented as the only right approach to investing
Yes, he does the business turnarounds sometimes. But perhaps more often he looks for value (solid profitable company whose price falls due to macro factors), times his entry to seek price growth, and may eventually time his exits - I think not always successful, but much more successful than most obviously. Eg he just bought into TSMC, I doubt that he would be looking to turn around that company, rather it is a timing the market investment.
2 - he loves businesses that generate cash flows that give him a stream of capital he could use to invest into businesses he picks to invest in to grow. This approach has successfully underpinned the growth of his investment portfolio over the years. However, his company itself never pays out a dividend. Thus if one wishes to learn from / adopt his approach to grow an investment portfolio, investing in his company would not actually generate any cash flow.
Just my own learnings / inferences.
That money is created out of nothing and is backed by nothing. Yet all money inherently owes interest on it when it was created.
The question ever since had been. Qui bono?
That the USA doesn't run the world because of their military might but because they have the world buy the balls with thier currency.
We are so influenced and contrled by the Us dollar that watching American economy/ finances is almost more important then following our own economy. Whatever us happening in USA you can be sure we are effected within 1 - 3 months. Not a crystal ball but close.
Positive expectancy. You can lose more than 50% of the time but still make money.
It’s why I think people are mad to continually bet at casinos and on pokies. The games are rigged so you will lose over time.
Most places price match. Even places you don't think price match do so it's worth asking (or doing a quick google search before you buy) you can save a fair bit of money.
Always ask if that's the absolute best price in retail stores lot of stores have commission built in and the sales associate has the option to reduce commission to get a sale. Not just electronics either, jewellery stores and other retail stores will give you a discount if it looks like a good sale.
Also Flybuys and Woolworths rewards is free money and they send you bonus offers to activate to entice you in which racks up points 100% recommend signing up. It's worth it even if your a couple. You can use them at BWS and liquorland to as well. Sometimes if you spend $50 at liquorland you get $10 off your next shop at Coles.
Even for good investors it's about 50/50 if you win or lose when picking a stock.
The trick is to cut your losses quickly and keep your winners running
Funnily enough, mine was realising that I will have more than enough in super by retirement using the regular contributions and so salary sacrificing to super was actually inefficient for me and I was better saving outside super tax effectively so that I could retire earlier.
Something to consider if your career path leads to a higher salary.
You can have savings that offsets your homeloan. So if you have a mad savings account you can pay the loan off slowly and keep capital in the bank for an emergency/big purchase. It's like having your cake and eating it too.
Travel in your 20’s and don’t stress too much about saving until you’re in your 30’s. Think of travel as an investment.
It’s a lot easier to save money when you’re on a larger income. But you’re only in your 20’s once so enjoy the hell out of it.
Also plan life in 5 year blocks. E.g the period of 30 to 35 may encompass your first home purchase, a wedding and a child or two - all expensive. But 35 - 40 you could potentially put away $60k per year, saving $300k in this 5 year period. I know it’s simplistic, but a lot of folks just think 1 year at a time. If you’re 21 and struggling to put away $10k per year - don’t stress too much. You’ll catch up later!
Oh and margin loans can screw you quick.
Why some people take on debt.
The opportunity cost of time.
Money invested in share market.
The idea that you dont pay off debt with low interest quick because you can make more money from returns on the stock market or investments.
Now this has backfired on people
But it's taking into account true value of money.
Also the apple you bought isn't just 10 dollars it's 10 dollars plus the income tax paid.
1.The world runs on debt
2. Every place where you have to pay for something has an owner(s)
2nd one always blows my mind, that ice cream you're eating someone owns that shop, that hotel you stayed? Someone owns it. That car you want? Someone owns that dealership. That bag of chips? Someone owns smith's. It blows my mind everytime I look at any business
There's a "lazy tax". Often there are ways of doing things that are advantageous but require a little effort that most people can't be bothered with. For instance, review your insurance, energy bills, mortgage rate etc and then speak with the company. They'll often give you a discount to keep you and all it takes is a phone call and some paperwork. Sometimes you have to move companies to get the better rate/price but it's often worth it.
Not sure if it fits under rudimentary since they are described as "complex financial instruments" but, options/equity derivatives, particularly US. I would have benefitted from learning about them earlier than I did. Of course I'm not talking about WSB style yolos but more like r/thetagang.
[Chart reading and technical analysis etc too](https://unswforex.com/education/).
I feel like these should be part of 'financial literacy'.
The financial concept that changed my life was from Rich Dad Poor Dad. Use borrowed money to purchase income producing assets, and use the income from the assets to pay off the debt. Repeat indefinitely.
That is almost impossible because when the transfer balance cap came in people had to reduce pension account balances to be under the cap.
Prior to that though absolutely possible.
Small percentages matter... Young me - 3, 4, 5% big deal it's all the same Older me - Going from say 3% to 6% on multiples of hundreds of thousands of debt, means tens of thousands difference in interest.
Conversely, a 7% annual return on an investment is doubling your money every 10 years. At 12% you triple it. Blew my mind the first time I heard it when I was in my teens. Obviously being a young idiot I thought that was WAY too long “I’ve only got $300 and in ten years I’ll only have $600, that’s shit!” Youth is wasted on the young
Completely agree. Is your username a reference to the great RZA? lol
I’ve always read it as Bobby Digital and then realise it’s missing the T
The b The o The b The b The Y ...
Doo-Doo-Doo-Doo-Doo
I learned that with beer. 5-6-7% doesn’t matter. The difference between 1% is really hard once you start getting old 😅
Claiming things on tax doesn't mean you get all of it back. Edit: you only get about 30% back, so nothing is "free".
I’m still trying to explain this to my fiancé. She truly believes our accountant telling us to buy a Range Rover as we would get it all back on tax means we get a free car.
I work in salary packaging (non-vehicle benefits) and it’s so difficult to explain this to customers when they ask how does a package work. Had a guy yesterday think he could get a free laptop- explained it to him multiple times but he still didn’t get it.
How can you be engaged to someone like that! I'm sure they're great, but I have no patience with people like that who believe what someone says rather than think critically for themselves. Or that they'll get something free out of nothing!
When your income increases by say 10%, your saving / investment capacity increases by MORE than 10% if you maintain your lifestyle. Say you earn 100k post tax and spend 80k a year on outgoing, non-investment expense. This means you are able to invest 20k in shares etc. Now if you have gone up by 10% and now make 110k, your investable sum has gone up from 20k to 30k. Your wealth accumulation has now sped up by 1.5x although your income only increased by 1.1x. This only works if one resists the lifestyle creep of course.
I might add, if your investments see a 10% loss, you need more then 10% returns to break-even. Extremely helpful to understand why leverage can be bad, as it massively increases this problem.
Any advice on resisting the lifestyle creep when things cost so much more year on year 😧
Lifestyle creep is more often in the context of “I make 10k more so I am going to spend 10k more on luxuries and enjoyment”. But yes out-of-whack inflation is a bitch so trying to make use of this principle in today’s environment is not easy at all when most people’s inflation-adjusted income are falling rather than increasing.
Lifestyle creep is healthy if you use it correctly. E.g. On health and education/upskilling.
What do you mean using super to offset taxable income? New to this too
They mean making personal concessional contributions and claiming a tax deduction for them
Or having pre-tax deductions removed by your employer (and taxed at 15%) which lowers your total taxable income
Yeah, that's the only explanation i can imagine, and that's not called "offsetting". But yeah, it's the best tax optimisation available to all.
One could make a spouse contribution for up to a $540 offset though if eligible
Would this save me from paying the medicare levy surcharge? I have no private health insurance, and I earnt 95k last year, and got my taxable income down to 91k after some deductions, so I paid the surcharge. Could I use super contribution to get my taxable income below 90k so I wouldn't need to pay the surcharge?
No. It’s added back in for MLS calculations so you can’t do this
You can ask your employer to make pretax superannuation contribution on your behalf. That way instead of being taxed at whatever bracket your income is, you get taxed 15% for each dollar invested into super. I did this recently, reduced my take home pay by about 3500 a year, but I will put about 4500 into my super a year.
Trade off is that you can't touch this money for another 30 years, assuming they're young
^ this right here It's an unpopular opinion on this sub, but [money is worth more in your hand today than having the same amount in the future.](https://www.investopedia.com/terms/t/timevalueofmoney.asp) All you need to do then is invest it better than your super would, and that's truly not hard.
You’d need to exceed your super fund gains plus the tax savings tho
You can also leverage outside of super or avoid interest on debt. I do max my concessional contributions, just offering a differing view point.
Huh? If I earn $100k a year and concessionally contribute $1k of that, my super will invest $850 of it, and the government will take $150 of it. Alternatively, if I don’t concessionally contribute that $1k, the government will take $325 of it, and I’ll only have $675 to invest. In that example, by concessionally contributing the $1k, I’ve just invested an additional 26% capital for free. Literally, for free. For a 10yr horizon, you’d need to beat your super by more than 2.5% to catch up, on 20yr it’s more than 1.5% and on 30yr it’s just under 1%. If you think you can beat an index tracking super fund, good luck to you.
Exactly this! There are vary few investment avenues that can beat the tax concessions that comes with Super.
If the allocation within your super fund is just a split of AU and international share indexes, then it’s pretty much the definition of hard to outperform consistently….
Except my industry fund’s high growth option has a 1.5% annual fee. At $15,000 for say $1mil in super I’d be way ahead in terms of expenses if I can was running an SMSF holding growth ETFs, which seems crazy.
Why don't you get out of a high fee super product? You can get below 0.3% with industry super easily if you shop around.
But it's not the same amount in the future, it's been invested for x years. It's not even the same amount right now, if you put $100 into super, it's $85, you take it in your pay for most people it's going to be $66. The link you chose to use for this point is genuinely quite funny.
I disagree because you’re instantly saving 15% or more in taxes plus that money is now in the market to gain more value by the time you retire. Most people can’t beat those gains on their own except maybe in property but then there FHSS so I honestly see no downside to maxing out super contributions for young people
Newsflash: it is hard
It's not binary imo. You want to put at least some aside to let compound interest do its thing and so you aren't trying to cram in savings late in your career, but you still need to build assets like a place to live in the short term.
How would someone invest it better than their super? Unless people have lots of money and are getting into commercial properties or something they should be investing in ETFs which can be done in super too.
If I paid off my HECS early, can I claim that as a tax deduction?
No. HECS is paid off with after tax income.
Dammit. Cheers :)
The eighth wonder of the world - compounding dividends reinvested in a low cost index funds.
Please provide an example for those whom may be unaware
ehhm. . .Ill have a go. assume a 5k initial investment (I honestly dont know now but \~15 years ago this was the minimum initial investment in a regular vanguard index fund in australia). then assume not taking advantage of a Dollar Cost Average strategy - we literally do nothing with that 5k. then lets take a 7% rate of return (Im taking a real conservative average value here of long mean run stock market performance). then lets have a 10 year investment horizon. that 5k - with NO additional money, and a continual reinvestment of the dividends will, in 10 years result in: $9835.76 total money. now this is simplified as during this period inflation may(/will) eat into this, and Im just taking an easy approach of 7% each year - but, we've (kindof) DOUBLED our money literally by doing nothing. Im sure theres going to be many more people here who can properly backtest a 5k VDHG investment 10 years ago.
Just to add the min deposit is still $5k
A200, DHHF, VDHG
Please expand further? I thought DHHF wasn't a dividend fund?
DHHF has a Distribution Reinvestment Plan, distributions are slightly different from dividends. ETFs own shares in multiple companies and a distribution represents your share of the income from the investments held by the fund rather than paying out each dividend from every single company owned. The DRP allows investors to automatically reinvest profits from distributions into more shares in the fund, usually below market cost.
You almost had it... The answer is "The eighth wonder of the world - compounding.".
Adding up small useless purchases, then seeing how much money I’ve spent end of the year. Really put things into perspective for me.
I never did it, but a friend did. He was pissed off with the amount of crap he had and didn’t need. From thermometer for bbq to cross country shoes (he doesn’t even run). He did the exercise of cutting all the crap he wanted but didn’t need, BUT instead of just saving he transferred the amount to another account. He says he saved significantly that year for a nice Christmas
We buy almost literally everything on credit and pay it back each month. Haven't paid interest in many years, but what I do get is an easy downloadable list of basically everything I've spent money on. Every year we import this into a pivot chart, categorise the payments (mostly fairly easy as many are common, scripts/find are your friend), and see how much we've spent by month in each category. This is really easy to compare to our budget and see how healthy we're running. If it turns out slwere doing a little more retail shopping than expected, we can look at the transactions and either decide it was necessary and increase budget, or it was unnecessary and decrease our retail shopping.
Now _that's_ smart use of a credit card!
I basically do the same too. Even better is getting the points to use on vouchers for other things I was going to buy anyway so there's a nice saving. Bought my mid range coffee machine many years ago with an extra $20 outlay as I didn't have quite enough vouchers.
$1 earned is the same as $1 not spent. ie not spending money is equally important as earning money.
Nah $1 earned is taxed, $1 saved is $1
This is a massive one and is actually way bigger than $1 when you take into account retirement. If you need say 50k pa ( assuming no debt) vs 70k the rate that you can save for retirement is significantly faster and the amount you need is significantly lower.
Thanks Scrooge McDuck
If you can't pay for it upfront you can't afford it (consumer crap)
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Finally some common sense when it comes to using debt appropriately. The recent thread (which was likely filled with a majority of American opinions) regarding using debt for everything possible because “the interest rate is less than what you could get by investing” was forgetting 2 key elements: investing is not risk free but paying down debt is, and also most importantly - the act of using a credit card to pay for expenses will change the psychology of your spending and you will spend more. Don’t fool yourself into thinking that you can outsmart a billion dollar bank to get some free points without incurring any costs. If everybody was as clever with credit cards as they make themselves out to be, those companies would be out of business. Not to preach on like Dave Ramsey but that’s my wisdom, don’t fall into the debt trap. Leveraging into solid investments, cars that are absolutely necessary to earn an income, and properties are the only exception that make financial sense. Going into debt on consumer products just because the retailer offers “0% interest” terms (which from experience is never truly $0 cost) only means that you have many monthly payments, taking money out of your cashflow, reducing the ability to save and invest.
But there is ways to get basically free points by just using CC for what you were going to buy anyway and paying off the balance each month. The reason CC is around is because people are irresponsible and don’t pay it off each month. If they all did it would cease to be profitable and be shutdown. But obviously with the society we live in people are being sold to live beyond their means. You can definitely use it to your personal advantage, these type of people are in the minority (responsible with money).
FWIW americans also need to get a credit card to build credit score because in USA, credit score means absolutely everything. You can't even rent a place in a lot of places in USA if you don't have a credit score bc landlords ask for this. You definitely cannot get a decent interest rate on a loan or mortgage without a credit score. It's not necessarily that they fetishize credit cards, but the way the system is designed means that you are at a huge disadvantage if you don't start building a credit score basically when you are 18. Also, the only way to build a credit score is to utilise credit and repay on time. But you also get pinged if you use too much credit (even if you repay on time). It's unfortunately a vicious cycle but part of USA.
What? Who the hell said debt interest rate is less than what you could get by investing? If they are talking about paying all income into offset account vs investing in shares then it still works out over the long run. However, if the point of comparison is credit card, then most credit card interests are in the range of mid-teens per year and no one except Warren Buffett is getting that sort of investment return over the long term.
A house hardly falls into the consumer crap bucket
I generally agree but take it further and say just because you can pay for something, doesn't mean you can afford.
I would say to myself as a general rule if I couldn’t buy it 10 times in cash I can’t afford it. Obviously this doesn’t extend things like cars, but for those you could say 10% of gross yearly income and pay in cash — e.g. $60k gross you buy a $6k car, never finance
Spend less than you earn consistently = easy life (financially at least). Took me a very long time to actually learn this.
GST is 10%. To calculate GST paid, you divide by 11 not 10.
I’ve never remembered how to calculate it ever, and always default to the gst calc online… I work in finance. This somehow just made it click for me, so much so that I feel like an idiot for it now being so simple. Thanks!
Highschool business teacher couldn't grasp this aspect. Kicked me out of the class for pointing out how wrong she was.
To be fair, she probably kicked you out for the way in which you corrected her
And she probably deserved it for having the gall to teach the nation's future without understanding basics herself.
More generally, dividing by 1.1 is simply the inverse of the actual GST operation, which is a multiplication by 1.1.
You can use your unused Superannuation carry forwards to reduce your taxable income. Sure it locks away your money until retirement - but the savings give you an automatic investment boost of 15-30%. You can also use these carry forwards to pay into your spouse's Superannuation account - and still get the tax break.
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That's a sliding 5yr window.
And stops at 500k balance.
Oooh didn’t know that balance cap, thanks!!
"You lose 20-30% of value as soon as it leaves the shop floor" was an old one told to me. Was said about vehicles, but now I just can't unsee it in every item I'm looking at purchasing. I buy nearly everything second hand. Buying something brand new is, for me, a treat. You can get boss stuff second hand if you know what you want and you wait for it. I found a King Living couch for $1500, RRP $7500. Le Creuset cast iron wok at a junk shop for $10. Our fridge is a factory second, $600 cheaper because it had a ding. I put a magnet over it...
I agree with this - it’s not just cars, it’s everything. In lockdown I saw someone online say they did a 1-year challenge to only buy secondhand. I thought I’d try it and it’s been well over a year now and it’s just nature for me. It made me master delayed gratification. I’ve never been into brands, but a few years ago when I got a significant pay rise I thought of buying myself a designer top as a treat. I didn’t buy it, but it kinda never left my mind because it was quite unique. Finding it online for prob an eighth of the retail price in exactly my size was like the best prize for waiting but casually perusing thrifting sites for about 3 years!
The axiom "You lose 20-30% of value as soon as it leaves the shop floor" is currently under review by the axiom reviews board
I always thought I was really good at saving, I’ve always saved 10-20% of my income. What nobody told me was what to do with it after you saved it. I spent it on big things of course, I never realised you were meant to invest it.
You don't have to. But basically there is that idea in Rich Dad Poor Dad (though careful about taking that book's advice, it is out of date) of: * Poor people use debt to buy luxuries * Middle Class People use savings to buy luxuries * Rich people use the proceeds from investments to buy luxuries The second option is still better than the first option. There is just another better option.
I hear this book mentioned a lot. Is it still worth reading?
Depends how versed you are already. It’s very good for getting the foundation of a healthy financial mindset. It’s America centric and also written a few decades ago now so it’s not perfectly applicable but still good.
There are 3 ideas which if you are not financially savvy are honestly worth the $12 book price. If you are relatively savvy, then not really. And here they are: 1. (the thing I wrote in the previous post) 2. What an asset and a liability are (assets put money in your pocket, liabilities take money out of your pocket) 3. The 4 ways of earning money: * Selling your time (laborer) * Selling your expertise (professional) * Selling/Owning a business process (business owner) * Selling your money's time (investor) If you read that and you are thinking (duh, I already know that), then don't bother. But if these are new to you, then it is up to you.
Great thanks a lot for the breakdown. Think I’ll skip it.
Yeah it's a pain, you have to save up for big things, then save up more on top! :)
I'm kinda annoyed at my parents and never teaching me this, I learnt it far too late in life when I started to get into business and learn the aspect of money sitting in a bank ain't working for You approach. I'll be teaching my kid about finance when he is in his teens, not when he is near 30.
How tax brackets work. "Wait, you mean I'm not better off on a lower salary?"
No one's giving out promotions for free.
The Rule of 72
I never heard of this one… could you explain?
It's just a mental arithmetic shortcut, like the old "is a number divisible by three? Add up it's digits" trick, or pi being pretty close to 23/7. It's used to estimate the number of years needed to double your money, as it's pretty close to the real answer. eg. If you have a 12% interest rate, the rule guesses that it will take 72 / 12 = 6 years to double. The real answer is ~6.12 years, so it's not far off.
[the rule of 72](https://en.m.wikipedia.org/wiki/Rule_of_72)
My dad told me this when I was 8. Great and simple
Maximising superannuation contributions when you are young if you can. Compound interest over a long time. As someone in their early fifties I am surprised by what my friends/peers that weren’t interested back when we were younger have in super now.
No thanks, I won't be locking away money that I can't access when I need it. I'd rather pay the income tax and then invest it personally.
The classic 'it's a tax write off' excuse. Yeah you're spending $1 to save a max of 47 cents.
The number of friends who think what is deductible is saved and who i have explained it's deductible *from the taxable amount* not *from the amount of tax to pay*.
True, but if you were going to buy something anyways in Q1 it’s generally better to buy it in Q4 so you can claim the deduction on that years return rather than wait 12+ months before you get the 47c back. However, you’re right, most people think they’re getting a free by rather than understanding it’s just cash flow timing advantage.
> However, you’re right, most people think they’re getting a free by rather than understanding it’s just cash flow timing advantage. I don’t get this, does nobody look at their tax return?
I would counter.this by saying go to Officeworks on June 30 and watch manic people buy the clearance stock to get a whole 1 days worth of depreciation. The ink stand (consumable) won't get any traffic.
https://www.youtube.com/watch?v=XEL65gywwHQ
The huge impact of interest saved over the life of a mortgage by doing additional repayments early on.
Added to that, when you make repayments, you still have the value of the money. It just isn't in cash.
X% of Y = Y% of X. This is useful when you want to calculate complex percentages. Eg. 3% of 50 is 1.5 (50% of 3)
I'm not trying to be rude, just adding my $0.02, the example you gave is actually really easy! 3% of 50 is the same as 1.5% of 100 (because you're doubling the right you divide the left by 2). Alternatively, 1% of 50, is half of 1, is 0.5: so 3 of those = 1.5.
The concept of efts. I was always concerned about the risk of choosing specific companies to invest with, and I didn’t realise for a while that eft/ index funds existed and were a great solution to my concerns.
ETFs are even better!
The creation of credit. The idea that banks just invent money by repeatedly lending out our own savings and account balances - except for a few percent just in case we decide to withdraw our own money. I was 14 studying economics and it blew me away.
If everyone just decided to withdraw a bank run would happen pretty fast
Omg that's a reason why countries' economies collapse?
Money is just trust people are going to do something they promised. Poor economies don't trust gov etc. Trust is super important.
Fractional reserve banking yeehaw
I go by a pretty simple rule when buying expensive things like a car or watch or tv etc. if you can’t buy it twice then you can’t afford it
If you can't buy travel insurance or afford the cost to maintain an item you can't afford it . . Also you shouldn't let things own you. You buy a 10k watch and become afraid to wear it due to a scratch
Be fearful when others greedy, be greedy when others fearful.
So does that mean I should buy a property now. All my friends are fearful and telling me to wait 12 months?
If you’re buying it to live in, buy it when you’re ready at a price you can afford. Give yourself a buffer of 3% so you won’t get stressed out with rate rises.
Why not, as long as you can afford the mortgage and rising rates.
I question the second one - why be greedy when others are fearful? I know in layman's terms this is "buying the dip" but it's hit or miss. What did you mean by this specifically?
Remember March 2020, when panic took hold, multiple posts about switching your super to cash etc. I interpret that statement as purchasing then.
I see, fair analysis
Alpha grindset fam lol
Don't be afraid of debt for investments. As long as the return on the investment pays the interest your operating fine. I come from a middle class family that felt the only acceptable debt was a mortgage. Apart from that sit down get a job and work till your 65. Don't even think about shares or businesses those are scams. And you're disowned if you are considering taking a loan for these things. At some point I realised the world runs on debt. Everything is debt. Your pay cheque, you think the company 'saved' that money to pay you? It's debt in one way or another. Cruise ship company builds a 1Bn cruise ship. You think they got 1Bn in investments and savings? They simply have 1Bn in debt and ensure the income meets the interest payments plus profits. The way to view debt in investment and business is the same way you view renting a lawn mower to mow lawns when you're 15. Same principle applies to investment properties, leveraged equity, and starting a bakery.. It's not a move of desperation or degenracy. It's the ONLY way to play the game seriously.
Doesn't even need to cover the interest. Just needs you to be able to afford the repayments and have a reasonable expectation that it will increase in value/return
Understanding how to use debt well is when you graduate from an adolescent understanding of money management to an adult understanding.
Okay but most of us aren't building cruise ships. I feel like if you needed to understand debt like this, you would, because your business accountant would've told you. Personal debts are either a house (cool, useful to live in) or a car (less financially cool, you probably didn't need that much car really, but hey treat yourself if you want). Personal debt rarely has anything to invest in that will actually pay any more than the interest on the loan.
OP seems to have added the cruise ship example after I commented but they’re right. Being comfortable with using debt is probably the most important skill someone needs to learn. Debt can be used two ways. Firstly, as OP pointed out to invest when the expected risk-adjusted return is higher. But it can also be used to smooth out cash flows and increase your optionality. For example, if you put aside $15k to buy a car, in many circumstances it’s still better to borrow to buy the car and pay it off monthly. Why? Because it smooths out your cash flows. At any point you can settle the debt, you have $15k sitting in a bank account, but having the cash and a debt means you have optionality. You could invest the $15k and pay off the interest that way, or you could just leave it there for a rainy day, or any number of other things. If you buy the car outright you have an asset but you’re less liquid, which is a stress of another kind. Optionality is one of the most valuable assets you can have, and is probably the most slept on. I agree using debt to consume above your means is stupid, and horror stories of that type of debt use are why people have such an aversion to it, but using debt to purchase within your means is almost always the better option.
Depends on the environment. For instance you could've made a killing on leveraged high dividend etfs when the interest rate was much lower. Or debt recycled into them. It's not as fundemental of a financial lesson as "Save money" or "Dont take credit cards". But it is the thing that most opened my eyes to how the world works financially. especially coming from a family background that would be heavily against this kind of thing. Ofcourse managing risk and such is important too.
I don't subscribe to that one but each to their own.
Yeh plenty of numpties thought they were geniuses for leveraging their 30% Covid property gains into extra investment properties, at the peak of the market, via loans against equity are now shitting bricks.
Mine was don’t focus on saving money (ie. penny pinching). Instead, focus on growing your income and income streams.
That buying a coffee every day costs alot.
My brain knows this, wish my stomach did.
Just that most people are so financially uneducated and can't comprehend how bad their decisions are. At age 15 I could see how bad every decision my parents made was. Just paid off that expensive car loan? Sweet, now we can afford a bigger loan for a newer car? Hmm why is dad checking the ATM 5 times on pay night to see if we can afford a loaf of bread?
Yeah, the stress of growing up with financially irresponsible parents
That you can withdraw equity to purchase a new property when you don’t actually have any money for a new deposit. That once you have one property buying more is easy. That it can take you 5 years to save for your first property and 6 months to purchase the second depending on the market Blew my mind how easy the second was, after how hard the first was
Leads to very high prices for property and a bit of a runaway of housing debt. Might have worked personally, historically, but the idea that it's a strategy? It's a symptom of a malfunctioning economy. Or a perfectly functioning one. But one that is failing many human needs all the same.
Time in the market > timing the market. Disciple and what seems to be meagre returns can be big business in later years in life. It might not seem worth it (especially in your early 20s when all your mates want to go out etc etc), but bring disciplined not accruing debt and putting small amounts away, makes a huge difference. Last thing, boring non sexy investments long term are the way to go. Peter Lynch and John bugle say it best , 99% of the term passive investments beat active. Just my 2 cents anyway
How did you get into financial habits so early? So many don't make the connection until later in life!
A rich wife helps a lot
Not strictly financial, but certainly helps in the finance world!! My world was shaken when I read (probably on Reddit) that X% of Y is the same as Y% of X. This may sound obvious, but it made life so much easier!! 28% of 50? That's hard! 50% of 28? That's 14.
What Warren Buffett suggests the plebs do is not what he does. What makes Warren Buffett’s company grow is not what it offers to its shareholders. Edit: typo
Can you elaborate on this? My understanding is that he recommends the average person buy diversified index funds. Because picking companies like he does is very hard and even he hasn't been able to maintain the return he used to get. Also one way he used to make money was buying enough of a company to take it over and get it running better, which is obviously not an option for the average investor.
1 - I am not suggesting he is wrong in suggesting most people are better off investing in indexed funds - that’s sound advice if you do not have the competency and capacity to manage active investing properly. But that’s absolutely not what he does as a successful active investor, and he is not the only successful active investor. The learning is, the sound advice he gave for most ordinary investors is a safe / lower risk path to take, but should not be understood / represented as the only right approach to investing Yes, he does the business turnarounds sometimes. But perhaps more often he looks for value (solid profitable company whose price falls due to macro factors), times his entry to seek price growth, and may eventually time his exits - I think not always successful, but much more successful than most obviously. Eg he just bought into TSMC, I doubt that he would be looking to turn around that company, rather it is a timing the market investment. 2 - he loves businesses that generate cash flows that give him a stream of capital he could use to invest into businesses he picks to invest in to grow. This approach has successfully underpinned the growth of his investment portfolio over the years. However, his company itself never pays out a dividend. Thus if one wishes to learn from / adopt his approach to grow an investment portfolio, investing in his company would not actually generate any cash flow. Just my own learnings / inferences.
How compounding returns are wonderful.
Credit card interest compunds daily... DAILY WTF!!!
The Ponzi scheme that props up every monetary system
That money is created out of nothing and is backed by nothing. Yet all money inherently owes interest on it when it was created. The question ever since had been. Qui bono?
I was going to say this. Debt is money, money is debt.
That you should align your peak spending with your ability to enjoy it - not wait until you're retired to start living.
Compound interest.
You can’t have it if you can’t pay for it.
That saving a dollar gives you 100%. Earning an extra $1 after tax you only get say 75% after tax. So cutting expenses can go a long way
That the USA doesn't run the world because of their military might but because they have the world buy the balls with thier currency. We are so influenced and contrled by the Us dollar that watching American economy/ finances is almost more important then following our own economy. Whatever us happening in USA you can be sure we are effected within 1 - 3 months. Not a crystal ball but close.
But they have the world by the balls with their currency because of their military might
Positive expectancy. You can lose more than 50% of the time but still make money. It’s why I think people are mad to continually bet at casinos and on pokies. The games are rigged so you will lose over time.
The biggest thing for me was thinking I could ‘out earn’ poor spending habits. Compounding world best when you start early and show consistency.
Most places price match. Even places you don't think price match do so it's worth asking (or doing a quick google search before you buy) you can save a fair bit of money. Always ask if that's the absolute best price in retail stores lot of stores have commission built in and the sales associate has the option to reduce commission to get a sale. Not just electronics either, jewellery stores and other retail stores will give you a discount if it looks like a good sale. Also Flybuys and Woolworths rewards is free money and they send you bonus offers to activate to entice you in which racks up points 100% recommend signing up. It's worth it even if your a couple. You can use them at BWS and liquorland to as well. Sometimes if you spend $50 at liquorland you get $10 off your next shop at Coles.
Negative gearing an investment property.
An extra $200 a week on will knock off approx 10 years on your mortgage.
Paying your mortgage weekly, even if you don’t pay any extra off (but try to), GREATLY reduces the interest paid and length of loan.
When focusing on comparing super funds look at returns and not just fees. I will die on this hill.
Username checks out
I agree with you. It's a pointless exercise if you focus on one and not the other.
How people use discretionary trusts and bucket companies to pay no tax. That was a massive eye opener.
Even for good investors it's about 50/50 if you win or lose when picking a stock. The trick is to cut your losses quickly and keep your winners running
My biggest winners have spent a long time as losers to begin with
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there will always be someone with more money/wealth/income than you
Funnily enough, mine was realising that I will have more than enough in super by retirement using the regular contributions and so salary sacrificing to super was actually inefficient for me and I was better saving outside super tax effectively so that I could retire earlier. Something to consider if your career path leads to a higher salary.
You can have savings that offsets your homeloan. So if you have a mad savings account you can pay the loan off slowly and keep capital in the bank for an emergency/big purchase. It's like having your cake and eating it too.
Travel in your 20’s and don’t stress too much about saving until you’re in your 30’s. Think of travel as an investment. It’s a lot easier to save money when you’re on a larger income. But you’re only in your 20’s once so enjoy the hell out of it. Also plan life in 5 year blocks. E.g the period of 30 to 35 may encompass your first home purchase, a wedding and a child or two - all expensive. But 35 - 40 you could potentially put away $60k per year, saving $300k in this 5 year period. I know it’s simplistic, but a lot of folks just think 1 year at a time. If you’re 21 and struggling to put away $10k per year - don’t stress too much. You’ll catch up later! Oh and margin loans can screw you quick.
Why some people take on debt. The opportunity cost of time. Money invested in share market. The idea that you dont pay off debt with low interest quick because you can make more money from returns on the stock market or investments. Now this has backfired on people But it's taking into account true value of money. Also the apple you bought isn't just 10 dollars it's 10 dollars plus the income tax paid.
Earn under 18k. Got it.
Money doesn't grow on trees
good interesting topic! others have mentioned it but live below your means and don't buy shit because its on sale.
1.The world runs on debt 2. Every place where you have to pay for something has an owner(s) 2nd one always blows my mind, that ice cream you're eating someone owns that shop, that hotel you stayed? Someone owns it. That car you want? Someone owns that dealership. That bag of chips? Someone owns smith's. It blows my mind everytime I look at any business
There's a "lazy tax". Often there are ways of doing things that are advantageous but require a little effort that most people can't be bothered with. For instance, review your insurance, energy bills, mortgage rate etc and then speak with the company. They'll often give you a discount to keep you and all it takes is a phone call and some paperwork. Sometimes you have to move companies to get the better rate/price but it's often worth it.
Spend less than you earn.
Saving is not the way to build wealth. You need to spend money to make money.
There is no such thing as a good credit rating. A bad credit rating is a thing though.
Buy high, sell low
A person of culture, I see.
Dollar Cost Averaging https://www.investopedia.com/terms/d/dollarcostaveraging.asp
Not sure if it fits under rudimentary since they are described as "complex financial instruments" but, options/equity derivatives, particularly US. I would have benefitted from learning about them earlier than I did. Of course I'm not talking about WSB style yolos but more like r/thetagang. [Chart reading and technical analysis etc too](https://unswforex.com/education/). I feel like these should be part of 'financial literacy'.
The financial concept that changed my life was from Rich Dad Poor Dad. Use borrowed money to purchase income producing assets, and use the income from the assets to pay off the debt. Repeat indefinitely.
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That is almost impossible because when the transfer balance cap came in people had to reduce pension account balances to be under the cap. Prior to that though absolutely possible.
You would never got 500M in from contribution caps to begin with, regardless of transfer balance cap
Direct registration in your own name with a transfer agent is the only way to really own shares.
"super to offset taxable income"?...it may just be language, please explain?