Why has your household cut back on spending?

Well happy to say outside dining out and essentials, I now spend 0.001% of my income on discretionary purchases. I invest the rest. Why? I refuse to waste the amount of money required to buy a house in Sydney or Melbourne, and probably won't want to live here due the continuing increase in congestion which really ruins the livability (and I live in one of the nicest areas on the harbour...which to be honest apart from looking nice is a pain in the butt to do anything after 8am). So I am planning an exit strategy...with the backup of leaving the country. Australia's 'growth' strategy is destroying it...

 

Oh....what a shame....see ya!

Where will you go that doesn’t have a growth strategy?

 

Venezuela.

 

It had one though. Look what happened with socialism there!

 

increasing spender here everything is roses.

 

I think you missed the sarcasm in 'Strategy' we have growth.. the highest in the OECD...and no strategy...just keep pumping. This destroys living standards. Basically if you live west of Newtown in the South and Crows nest in the north, Sydney offers you nothing that you can't get for half the price elsewhere. I'm fortunate I have a quick walk to the beach and the harbour national Parks...which are great, up there with the best in the world. Just not worth spending 3-4 Million for a house!
Is this the standard shout down of anyone who says anything negative?
Frog in boiling water...

 

You missed another reason being a foreseeable change to your finances.
My wife and I just had our first baby so leading up I tightened the belt in a few areas.....
Lot of good it did me though!
After a very long and emotional 7 years of trying to get to this point, it’s safe to say this little girl is going to be spoilt rotten for the rest of her life.

So I’ve come to the new realization that I’ll just be broke for the rest of my life.
When you make peace with that it’s actually quite peaceful

P.S - I haven’t actually succumbed to that fact. But I have succumbed to the fact my finances will be going backwards for the next few years.

 

What do you mean by this bit? What shout down?

 

Every thing depends on what stage of life you are in.

20s study prgess carrier
30s progress carrier family/house/investments
40s Start enjoying life more travel a bit more
50s Enjoy your life more kids may be coming out / more travel more leisure.
60s Party like your are 18 proving the previous 40 years your self up.

 

Laundry powder. Soon to head out to eat (yum) wearing the same jeans I've had on for a few days which haven't been washed from the previous period I wore them.

Razor blades. When it starts to annoy me I'll shave.

Clothes. T-shirt looks like it should be ditched but meh it'll do. Also refer to comment on washing powder.

Deodorant. What's that?

These minor things add up.

 

That's the way to do it. Pay down PPOR. Harvest the equity to fund deposits and stamp duty for INV properties. Then pay down the debt against the PPOR again.... harvest again......

It's much more difficult now obviously, with borrowing capacity changes and cash out restrictions meaning that harvesting equity isnt as simple as it used to be.... For all but the highest earners , it can really only work for a while before hitting a servicing ceiling..... then, without a deliberate debt reduction strategy - meaning P&I and accelerated repayments - it stalls....

Whichever way you cut it - if you have ambitions to accumulate a portfolio bigger than the average bear, you need to pay attention to paying down debt faster than you needed to in the past.

 

To a person that would clear any room they walked into

 

So you have cottoned on to my cunning plan. As long as it's the patrons and not the staff I'm fine with it.

 

That’s what one of our banks wanted us to do early this year when our I/O period expired. That is, go P&I.

They wouldn’t entertain re-newing our I/O loan (a split loan with part fixed and part variable with an Offset) at all, even though the variable component was fully chocked (a serious percentage of the loan).

They were concerned that we could empty the Offset (and put it all on red at the casino , my comment) even though the funds have been in the Offset for 11 years.

I threatened to go elsewhere but to no avail. So I did.

Now have a new split loan, both components are I/O, both have of 25 years terms (I/O for five) and both have lower rates then the original I/O loans and lower than their P&I suggested replacements.

How to lose $1M of business with a good customer !!!!

 

When you have sufficient borrowing capacity to keep refinancing, the need for debt reduction doesn't really exist .... and it's also worth noting you have a very mature portfolio that's well established, not an immature portfolio still under construction. It is also worth noting that many banks now have maximum age limits on when they prefer loans to be paid out - and its often 75 or 80 years old - so you may find that in future, as you reach the end of your IO terms , you will likely be required to refinance into shorter loan terms each time ie 20 years next time. 15 years the next time. etc.... Although, some will ignore that if it's INV stock and a clear exit strategy exists. For example, if there are sufficient funds in super to retire all the debt, they may not care about age limits whatsoever... But again, these things really only help the 3%....not the investor starting out who has average income and not a lot else, asset wise.

For those at the beginning of their portfolio accumulation, and with immature yields, the need to pay down debt in order to grow the portfolio absolutely going to be more important than for someone in your position, or someone in my position....

 

Earlier than expected retirement. Cancelled all the income protection and life insurances plus some belt tightening

 

Yeah, we were advised by our FP and our accountant (independently) to cancel our Life, TPD and Trauma insurance when we retired (we knew to cancel our Income Protection insurance).

It took us about 6 months to action their advice because it felt we were tossing away our security blanket.

Yep, lots of it.

 

Same, lots of it. But 30 year loans at 3% hard to justify paying down. That’s a work in progress