A lot of assets but no cash

Discussion in 'Investment Strategy' started by Darlinghurst Boy, 14th Jul, 2015.

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  1. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    i wonder how much cash reserve you should have in the Bank for emergencies eg you lose your job, you get sick very quickly, etc etc

    I have a work colleague who tild me this, he has 2 properties one in Newcastle NSW and one in Sydneys West which is worth 400k he lives in
    and the other $370,000 earning $360 weekly rent

    They are bith fully paid off.so give or take they are worth combined 770

    The thing is he has only 20k in his bank account.
    He told me this wasnt a problem as he has a redraw on both

    I dont feel comfortable with only 20k in my account , isnt that a problem?
    Redraw works i guess but you have to pay interest.

    Would 20k be enough for you? Ok he has a job bringing in income plus the rent BUT what if something happens?
     
    Darlinghurst Boy, 14th Jul, 2015
    #1
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  2. Eric Wu

    Eric Wu Well-Known Member

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    how much does he have in the redraw?

    his situation sounds alright
     
    Eric Wu, 14th Jul, 2015
    #2
  3. Natedog

    Natedog Well-Known Member

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    It's a mental game, what one person is comfortable with another isn't.

    Most people's reaction to us having millions of dollars in debt is probably "aren't you worried with all that debt"

    Whereas in my own mind "i would be more worried if I didn't have the debt"

    Buffers are good, but don't stress about them getting in the way of having a go I guess
     
    Natedog, 14th Jul, 2015
    #3
  4. HUGH72

    HUGH72 Well-Known Member

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    So no debt and over 360 pw passive income so whats the problem? But seriously this is a personal decision in which you have to consider many possibilities, it depends on stability of employment, insurance, whether your partner works, if you have other comittments etc etc.
    As Natedog indicated I would be more worried if I didn't have or couldn't afford a little leverage.
     
    Last edited: 14th Jul, 2015
    HUGH72, 14th Jul, 2015
    #4
  5. Bayview

    Bayview Well-Known Member

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    "ONLY $20k".

    The majority of humans on the planet don't even have 1/1000% of this.

    Should this be in the First World probs thread?

    FYI I have over $1m of debt, and less than zero cash in bank...my interest bill is someone's wage (mine).

    Have a few hundred in an ING account set aside to pay for some items we needed and bought on the never-never for the holiday letting attempts.

    LOL! This place is such a fishbowl...almost worse than SS.
     
    Bayview, 14th Jul, 2015
    #5
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  6. LibGS

    LibGS Well-Known Member

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    A friend of mine always had 3 months worth of wages spare. He called this F*** U* cash in case he needed to quit his job.
     
    LibGS, 14th Jul, 2015
    #6
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I can't see a problem with this.

    I assume with two unencumbered properties he's disciplined with money and has little debt/expenses. If he has money available in the PPOR redraw then that can cover big emergencies.

    Sounds like a decent situation to be in.

    Cheers

    Jamie
     
    Jamie Moore, 14th Jul, 2015
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  8. The Y-man

    The Y-man Moderator Staff Member

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    So with the redraw, he actually has about $630,000 in cash. That's a fair wack!

    The Y-man
     
    The Y-man, 14th Jul, 2015
    #8
  9. The Y-man

    The Y-man Moderator Staff Member

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    So you take mitigating actions:

    Lose your job: keep your skills up to date, have a plan B, be aware of your workplaces finances, customers, and the economic conditions overall. Be involved in the "business" of the workplace.

    Sick: make sure you have income protection insurance. Workcover doesn't help if you break a leg playing footy and can't work

    The Y-man
     
    The Y-man, 14th Jul, 2015
    #9
  10. Rixter

    Rixter Well-Known Member

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    If you dont feel comfortable then there is a problem. There is no 'one shoe line of thinking' that fits everyone. We are all different and as such all have different personal risk profiles and tolerances to risk.
    You do what's right for 'you' based around your financial situation at the time.
     
    Rixter, 14th Jul, 2015
    #10
  11. WattleIdo

    WattleIdo midas touch

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    Why is this guy still working?
     
    WattleIdo, 14th Jul, 2015
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  12. sanj

    sanj Well-Known Member Premium Member

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    I'm guessing 360/wk isn't enough to live off...
     
    sanj, 14th Jul, 2015
    #12
  13. WattleIdo

    WattleIdo midas touch

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    Maybe, maybe not. In any case, the friend is laughing.:p
     
    WattleIdo, 14th Jul, 2015
    #13
  14. Rixter

    Rixter Well-Known Member

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    The friend would be if wanting to live in Asia on it. :)
     
    Rixter, 14th Jul, 2015
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  15. skyfall

    skyfall Well-Known Member

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    He probably likes working otherwise he could rent out the one he's living in and move to SEA or LatAm and easily live on AU$750-800 a week.
     
    skyfall, 14th Jul, 2015
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  16. Fargo

    Fargo Well-Known Member

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    He could live/party overseas on $200 a week and invest 600k each week to get more income. I would be worried if I had 20k doing nothing with its buying power wasting away and the lost opportunity costs.
     
    Fargo, 14th Jul, 2015
    #16
  17. sanj

    sanj Well-Known Member Premium Member

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    im the opposite, ive learnt the hard way to have cash lying around so i can pounce when opportunities arise.

    perfect example - a few years ago we invested in a private biotech company. about 18 months ago i had the chance to buy more shares but i was short on cash and had to say no.

    it is listing in singapore next week and i would have made 4-5 times my investment if i had the spare cash.

    currently the world is absolutely awash with opportunity but the key is to be cashed up and ready to pounce imo.
     
    Last edited: 14th Jul, 2015
    sanj, 14th Jul, 2015
    #17
  18. sanj

    sanj Well-Known Member Premium Member

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    i had considered selling 80k of shares to pay for this, decided not to.

    those shares are now worth 40k and so effectively 1 bad decision i made has "cost" me 400k in 18 months...
     
    sanj, 14th Jul, 2015
    #18
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  19. willair

    willair Well-Known Member Premium Member

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    Would be interesting to see the chart of this company?,100 years ago one in 2000 were refined enough to talk business,now with the media internet over night millionaires it's one in 5000..
     
    willair, 14th Jul, 2015
    #19
  20. sanj

    sanj Well-Known Member Premium Member

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    there's no chart, it's only going to be listed in singapore next week.
     
    sanj, 14th Jul, 2015
    #20
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