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Strategy for high income earners with little deposit/savings

Discussion in 'General Property Chat' started by B-Mac, 1st Apr, 2016.

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  1. B-Mac

    B-Mac Well-Known Member

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    I see lots & lots of information on how to achieve financial freedom on an ‘average income.’

    However, what would you presume the best & quickest strategy would be for someone on a high income but with limited current deposits/savings to begin with?

    Thanks
     
  2. Befuddled

    Befuddled Well-Known Member

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    • Stop spending money on crap that's not needed. Learn to live on less
    • Save for 6months (if on truly high income 6months is plenty of time to save up a deposit)
    • Sell that expensive car
    • Take out LMI to invest, or see if you're in one of those professions that qualify for no LMI whilst borrowing at 90%
    There is no silver bullet. That first deposit will have to come from somewhere. First thing that springs to my mind is "why don't they have savings?"

    Those on high incomes can go so much harder and faster than someone with an average income. I hazard to say that it's a lifestyle/attitude problem that prevents them from starting
     
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  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Such simple but powerful advice.

    I see it quite a bit - people on good incomes who don't have a lot to show for it.

    It's simple - don't let your spending habits creep up with your income level.

    Cheers

    Jamie
     
  4. Big Will

    Big Will Well-Known Member

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    Reduce cost and/or increase income, these are the only way to save more.

    If looking at saving for a deposit and you think it will be a while away depending on timeframe you might consider term deposits or shares (just understand the risks).
     
  5. AndrewTDP

    AndrewTDP Urban Planning Consultant Business Member

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    Save loads.

    I was in a similar boat (not frivolous spending, but a series of large bills and the loss of income for a period of time which needed to be covered) a few years back. Wiped out my savings.

    Put in a concerted effort, rebuilt it quickly by not going out to eat at fancy restaurants often, got rid of my expensive car for a cheap run around.

    If you have a dual income household, try saving 100% of one of the incomes.

    It's doable, and the lessons learned are invaluable. You don't need to eat out every week. You don't need to have a fancy car. And you can get away with buying clothes from Target ;)
     
  6. Biz

    Biz Well-Known Member

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    You guys are no fun. :(
     
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  7. Barny

    Barny Well-Known Member

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    Ummm, no. Only socks or jocks allowed.
     
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  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If large income you have to ask why are there no savings.

    A related party loan may work for the deposit.
    High income means high tax, so debt recycling strategies and spousal transfer strategies can work as well.
     
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  9. chylld

    chylld Well-Known Member

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    High income and low savings to me sounds like a cashflow problem borne out of an expensive lifestyle. Lower the expenses by paying off credit cards, high-interest loans etc and cutting back on Michelin star dinners and designer fashion.

    My uber-simple 2-part method has worked very well for me:
    Income -> Living expenses and investments
    Investments -> Toys, holidays, experiences and more investments

    Don't become that person who skips the investments and pays for toys with salary. Or worse, one who forgets the second part entirely.
     
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  10. Scott No Mates

    Scott No Mates Well-Known Member

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    Take it to the extreme ((sorry to paraphrase @AndrewTDP)

     
  11. B-Mac

    B-Mac Well-Known Member

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    Basically, the reason why i have minimal savings is because is because i'm 24 years old, rent an apartment in Coogee & have done some serious partying/travelling over the last 5-6 years.

    Over the next 2-5 years i am planning on doing some serious saving (approx $50k. p.a.), however does anyone have any further advice on the type of investing would be best suited to high income earners?

    e.g. buy well located houses in Major Cities (within 15km from CBD) or buy properties in order to add value via reno/development?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Whatever you think will make you the most money.
     
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  13. bobbyj

    bobbyj Well-Known Member

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    whatever you want to buy.
    Each has its own merits. This is where you need to figure that out yourself with reading.

    In your position I'd consider a newer property so you can maximise the capital depreciation to offset your income tax.
     
  14. Wukong

    Wukong Well-Known Member

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    too figurative, what is the intended goal of that 'high' income?

    i.e that 50K/ annum is to generate X cashflow or Y equity in Z number of years

    there's no best and quickest, everything requires in depth planning, execution and an ability to adapt
     
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  15. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    1/4/20116
     
  16. hammer

    hammer Well-Known Member

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    The best advice I ever received was "pay yourself first".

    Get a separate account and put your pay in there. Then send the rest to your daily account minus the savings.

    Eg pay = $100 send to account 1.
    From account1 send $80 to account 2.
    Live off account 2 and forget about account 1...

    You don't miss what you don't see. It's amazing how fast it grows....
     
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  17. radson

    radson Well-Known Member

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    I have 5.5k/month go directly into managed funds. That way I cant spend it and I DCA into an investment portfolio. Its like a mortgage payment except I receive the interest (dividends) instead of paying it.
     
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  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Great - but do you have any non deductible debt?
     
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  19. radson

    radson Well-Known Member

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    Non deductible...zilch
     
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  20. See Change

    See Change Timing Lord Premium Member

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    Only way to by pass the saving bit is if M&D Bank chip in for the deposit , BUT you still need to get your spending under control and more you save, the quicker you will build up an investment portfolio.

    Having said that , I'm a lousy Saver ...:(

    Cliff