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Out of the closet.................I hate owing money

Discussion in 'Investor Psychology' started by Bunlee, 31st Oct, 2015.

  1. Bunlee

    Bunlee Active Member

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    Sydney
    Hey all

    Usually on a Saturday morning I sit in the backyard with a coffee and reflect on the past week. This sometimes entails a bit of an update on my financial spreadsheets if I am so inclined.

    Over the last few weeks I have had a consistent theme in my head like ' it will be great when I reduce my debt to zero, it will create more choices for me....... '

    This is where the dilemma comes in. I understand the importance of gearing in building up assets over time, and, if used wisely to purchase quality, well located and appropriately funded investments, it can enhance lives greatly. Notwithstanding my dilemma , throughout my life I have focused on building up assets and have used gearing fairly prudently. My maximum exposure was about $823,000 in my life (I know, I am a minnow in this respect).

    My exposure now is only about $350,000 (all investment / deductible debt) or so but I am now going to follow my instincts more closely and reduce the debt and only acquire assets for cash out of savings. Having 4 years to go on a fixed loan I will redirect savings to buying additional shares only for cash with a view to selling these at the end of the fixed loan term and reducing the debt further.

    Part of me is inclined to buy another investment property in Sydney after a few more years or so but this will not occur unless I borrow funds at the time. I think I can accept this.

    I think I have hit that point in my life where I have enough assets (but am not rich by any measure) and am looking forward to a period of being debt free for a while. Hopefully this will be the case in the next 5 years or so. I won't be selling any property to get there but am happy to have this goal to work towards. I think that I will enjoy redirecting excess funds to investment by choice rather than by necessity in repaying borrowed funds.

    I think my innate desire not to owe money being satisfied will more than compensate for my life long habit of acquiring assets....time will tell

    Maybe then I will work extra hours by choice rather than feeling compelled to :)

    Maybe I have been visiting to many 'live debt free ' websites recently!!!!!!!!!!!

    I accept that my view is out of step with the majority on this forum and is personal to my individual view of life.

    Apologies for my musings......

    regards
     
    WattleIdo likes this.
  2. Travelbug

    Travelbug Well-Known Member

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    You have to do what lets you sleep at night.

    I used to worry about the debt but I got over it, especially as my LVR dropped. I'm not a risk taker and was never one to have a high LVR.
    While doing the "will I retire now or later debate with myself" I looked at selling down to get rid of debt.
    I could have done that and had increased cashflow but then I asked myself the question- In ten years time will I regret the decision? the answer for me was yes. I decided having a larger portfolio meant more CG in the long term. I only sold a few to get my debt to a level I could live with (and not lose sleep).

    Be happy!
     
    Investpro likes this.
  3. Mumbai

    Mumbai Well-Known Member

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    As @Travelbug said!
    Good night's sleep is all you need.
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

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    Adelaide, SA
    Breadth of gross asset base is what makes the magic happen.

    Holding onto it til it booms is the trick.

    The method is personal; depends on your risk profile, financial circumstances, etc either:
    - paying down debt
    - increasing your income
    - getting better yields

    So what's right for you
     
    MsAli, Bran and HUGH72 like this.
  5. dabbler

    dabbler Well-Known Member

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    There are so many posts on how to increase your debt burden, at some point, some where, the aim has to be as your positioned, I wish I could be in your position & no matter what anyone things, debt is a risk.
     
    Barny likes this.
  6. Travelbug

    Travelbug Well-Known Member

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    Stepping out your front door is a risk. As with everything, you have to way the risk with the benefits.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    I dont mind debt at all - all several million of it ! specifically because the NRAS assets I have within my portfolio mean the debt across the entire portfolio is fully self servicing and actually delivers me 100K CF+ tax free after all commitments are met. It has allowed me to expand my footprint very very significantly without any additional financial burden being placed on me directly.
     
  8. Investing101

    Investing101 Well-Known Member

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    Accrue as much debt as possible and hope that Brad Pitt and Edward Norton blow up everyone's credit history.

    Sound strategy?
     
    Barny likes this.
  9. Azazel

    Azazel Well-Known Member

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    Push yourself to where you want to be.
    If you find it's too much for your risk profile at that point, scale back.
    I would prefer to do too much and have the option of scaling back, than try to play catch up and get caught out.
     
  10. Vassago

    Vassago Active Member

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    I was planning to go down the same path of debt reduction but have since change my mind a bit.

    New plan is to fully offset the balance of the PPOR mortgage (leave as a nice cash buffer) and all additional funds can go into high dividend paying LICs and ETF (Argo, AFI, VHY etc). In the long term the compounding effect of the ~4% fully franked dividends and capital growth will outweigh the savings made by paying down the debt on the IPs. In 20yrs time the IP debt will be a lot less in real $$ terms but the LICs & ETFs will increase beyond inflation.
     
    keithj and Terry_w like this.
  11. Fargo

    Fargo Well-Known Member

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    I think you risk more or forgo more profits, by not having debt. Banks are conservative with how much they will lend. If debts a problem may be it is asset allocation and yield that needs looking at to mitigate risk. I don't think having an LVR of about 30% or 40% risky.
     
  12. Xenia

    Xenia Adelaide Property Manager Business Member

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    I'm with you on this I don't like to hold too much debt in this economic environment either.
     
  13. Perthguy

    Perthguy Well-Known Member

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    Don't feel alone, you are not the only person who is averse to debt. My investment partner is very much opposed to taking on new debt but will do so to achieve a goal. I'm the opposite of you, as long as I can service it, I take on as much as I can. The deal I make with myself is that I will never calculate how much debt I have. I have no clue and I never have. That's how I handle it.

    Sounds like a pragmatic approach to me. Nothing wrong with that.
     
  14. Omnidragon

    Omnidragon Well-Known Member

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    At the peak of my debt cycle, I think I had so much debt I wasn't going to pay it off even if I worked 20 years.
     
  15. Wall Street

    Wall Street Well-Known Member

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    I'm all for maximising debt to acquire performing assets.

    However as others have said - it's depends on your risk profile and what makes you comfortable. If lowering debt is going to make you more comfortable, lower it and enjoy the fruits of your investment!