I'm thinking of things like:
Often we don't realise how much we base purchasing decisions on "everyone is doing it", without researching properly or even just stopping and thinking about it for a second. What other examples can you think of?
A new car on finance. The compounding loan interest (and loan insurance) often means you're paying for the car twice or more, plus the car itself takes a massive depreciation hit in just the first few years.
Someone who lives far away from public transport and has to drive to work might have a different opinion…. :P
I am not talking about cars in general. I am talking about brand new cars, especially those bought on finance. Even buying a 1 year old car should save a bundle. I have an old bomb and don't plan to upgrade it any time soon.
As for public transport, in Queensland it's probably cheaper to have a car than to use public transport…
In Melbourne, catching a train to Pakenham (approx. 60km) is a 2 zone fare that costs $3.76.
In Brisbane, catching the train to Helensvale (approx. 60km) is a 12 zone fare that costs $10.75 by go card, or $15.50 for a paper ticket.
https://www.facebook.com/councillor.schrinner/posts/10154016…
for many of us a LEASE on a new car is extremely beneficial from a tax perspective. Most places won't let you do a business lease or novated lease on a car of more than 5 years old and you can't get the fleet benefits for non new vehicles. generally combine the tax benefits of the lease and the fleet discounts you get many of us are actually far better off or at worst only marginally worse off by getting a new car.
Even with the tax benefits I'm not going to buy a brand new car on salary sacrifice.
I know novated leasing is a little different but surely the lease fees are still recouping what is effectively an interest rate for a vehicle finance package.
I would be willing to bet that keeping my old bomb is still cheaper than leasing a brand new vehicle.
@inherentchoice: and riding a bicycle is far cheaper than paying insurance, maintence, registration etc on your bomb. At the end of the day it comes down to choice, if you want a relatively new or almost new car then many of the fleet and salary sacrifice deals can come out thousands of dollars ahead compared to buying an older car. For me I use a business lease, the difference to me at the end of the day is I could have a 2 or 3 year old car and I would be all of $10 a month better off. Fleet gives me free service, free roadside, discounted price, cash back at the time as well as lease gives me easy claim back on tax for all business travel. for $10 a month I would rather my nice new full warranty car than go with a second hand car. I am up for replacing my car later this year, as always though I will redo the maths when I buy but most likely it will still be better to be on a lease or at worst I will be no worse off. your dislike from those that lease a new car I think comes more from ignorance of the many perks you can get through that if you are a smart buyer and push the dealer.
@scottsla: key word: want.
I don't know anyone who is better off on a lease than buying and owning a 2 year old car and selling at 5 Years. In fact if you are buying new on your lease, and then upgrading every 5 years, then at one point in the cycle you actually have a newer car using the buy and sell method (it will be at the 3 year mark when you upgrade). The barefoot investor did a good write up for this on his blog. Since I read this 4-5 years ago I have met a lot of people who thought they were better off with a lease and I am yet to find one who actually was. Let alone the situations where people wanted to break the lease early.
http://barefootinvestor.com/free-cars-buying-plan/
Even if you are paying lots in tax, you should minimise it with an investment, not a liability (which is what a lease car is essentially)
@Jackson: that article describes a very specific case, and I completely agree it was far better the way they were advised to do it. But that was an insane interest rate, doesn't take into account the fact many of us get a car allowance or fleet deals and hence doing it that way has a tax hit as the allowance gets counted as income and pushes taxable income up. I would be lumped with a $6,000 a year additional income tax bill on the method described there, after 5 years I would have given the ATO an additional 30k just so I could have a nice used car.
@scottsla: the rate is high most likely just because rates were higher back then, we are in very rare times now with rates as low as we have.
I don't know how many cars your employer buys, but unless they have a serious number I don't think that any fleet deal would make a lot of difference, at least 10 I would say, I worked at a place with 10 cars and they didn't get special treatment, they were just going down to the dealership (although maybe they were poorly managed, they were hopeless in a bunch of departments).
The car allowance varies also, some places are generous and some aren't. I agree that if they subsidise you enough there can be a benefit, but anecdotally in my experience that's only if you rely on your car for work which means you already had to have one. Your case be one of these, however I would still say that the comment about tax stands, because it may mean that you aren't investing enough of your money elsewhere (ideally you would get a large return and if you were I expect that you are not leveraged enough, it might be worth looking into investing more).
More often than not people are finding ways to get themselves a new car without being able to buy one outright, and are just convincing themselves that they need or deserve it. I have always been of the opinion that if you needed it for work they'd buy you one, and if it's not an appreciable investment I don't feel I deserve it until I can buy it outright.
@Jackson: that rate is very high even for back then. add in the fact the buyers were buying a brand and model of car with one of the highest depreciation rates make a large difference straight away. Personally I work for a large international, so add 2 or 3 zeros to the number of cars staff purchase of each manufacturer to the leverage of fleet price (e.g. not sure how good the deal is in comparison to others but my last fleet was around 5k discount, 5 years free service, 1k cash back and some wankie extras I didn't really need on a 60k car, that is before dealer bargaining. Yes my car has a very high business use percentage but that isn't exactly unusual. It is a gross generalisation to say those buying a new car on lease are making a huge mistake, it is very circumstance, income, tax and usage dependent.
@scottsla: the Holden commodore was the best selling Australian car in 2010 and had been coincidentally every year the previous 15 years.
The cash rate was at 4.75% in Dec 2010, today it's at 2.0, and the current car loan rate on ratecity.com.au is sitting at 6.91 (however goes up to 14% with some lenders). If you added 2.75% to the 6.91 you get 9.66. If the people had bad credit, such as those that might seek help from an adviser, then they could be locked out of the best deals.
You are clearly not in the group of people who think is probably aimed at, however the key point to take away is that quoting your savings off the retail price of the car and not in comparison onto if that money wasn't invested elsewhere is part of the issue. Having said that, if you have plenty of money invested already and want that car then you've warned it (back on to my point that if you could afford to put down the 60k but it was beneficial to finance it, great)
As an ozbargainer, I wouldn't expect many would go for a stock car loan @ 8 or 9%. Have you seen those special finance deals on new cars? especially the 1, 2, or 3% rates. It'd be stupid to pay for the whole car in one go with cash when the bank is offering a higher interest rate to leave the money in your account than the interest rate on the outstanding car loan. Or if you've got a better investment that outperforms interest rate on your car loan, like shares etc.
NOT financing can sometimes mean that you lose out on the "opportunity cost".
@scottslNDa: none if the things you listed as 'free' are actually free the leasing company spins it well but your paying for all of it. Except its wrapped in a pretty rip off bow to make it feel like you arent.
Is your old bomb safe? Do you drive your children around in an old bomb? Will the old bomb save their lives in an accident? These are the questions you must ask.
@Vieira4: safe is how you drive, sounds like guilty parents syndrome to me. Of course often people need to upgrade for size reasons because their family is getting bigger, but they choose an SUV, They aren't safer than a normal car, and are more dangerous to pedestrians that might get hit, and usally cost more than a wagon but does anyone care? Cars above all things seem to be passionate purchases, not sure if it's just the marketing but there is also am aspirational aspect to it.
@Duram: you obviously have no clue how fleet or leasing works. Fleet discounts are completely separate and unrelated to how you finance the vehicle.
@Jackson, just because a commodore is the best selling car doesn't make it less of a dumb choice to choose as a new car, especially in a discussion like this. It is right up there with falcons as the worst possible choice. bad decisions don't become ok just because everyone else is doing it too.
Safe is how "other people" drive. It only takes one moron to ruin your life. You may as well be in something with the latest occupant safety. What good is all your money if you aren't around to use it.
@Vieira4: not according to government sponsored mandatory motorcycle training. The only way to ensure your safety is what you do, not others. If you are relying on others to be safe, you put your life in their hands, not yours. That's why it's called defensive driving
@Jackson:
I ride motorbikes. And I make sure I have the protection, helmet, jacket, gloves, pants, boots. I wear them AND ride defensively. Notice what I did there: I said AND not OR. You should drive defensively AND have a car with the safety tech.
@scottsla: I agree I wouldn't buy a new commodore, but it does make it a fair car to use for the time the story was written, technically it would have made it the most relevant (provided the share of commodore buyers in the communityis maintained in the segment of leasers, which again at the time was popular along with falcon and 360/Magna as a company car at least among the people I knew who had one. Obviously not as relevant in your circumstance.
@Vieira4that's very commendable, and I do the same, but technology is not model dependent, however yes it can be year model dependent. Of course a lot of opinions have been expressed above and I can't speak to all of them but my other point is that a 2 year old car has all the safety features of a new one in most cases. Also extra gear doesn't require you to buy a new bike.
While we are on the topic if your bike doesn't have abs, get one that does, real life saver.
Keep the car ten years or longer and the depreciation is less than the cost of registration/fuel/insurance combined. Most brands of cars these days last 10 years or more with minimal repairs, as long as reputable brands known for reliability are purchased.
Keep the car 100 years and it will appreciate.
Always buy cars on novated lease and pay running costs out of pre-tax money. Just retired my 2004 model car which i owned outright because the running costs were too high and i've leased a new car instead. After tax etc it is only costing me an extra $150 or so a month to drive a brand new car over an 11 year old one! When i sell the 2004 model one I will use the proceeds to pay off some other debts as well.
Hairpins—-They go missing in a day anyways..
NEW iPhones.. any model!
And OLD iPhones.. any model!
I do think iPhones are expensive for what they offer, but for people such as my parents, who like taking photos, watching video, using social media and playing simple games like Zynga Texas Hold Em, as well as not being very techy savvy, an iPhone is honestly a good buy for them.
put a opportunity cost on your time based on what you could be doing now to make income,
sure other than work most people can't earn anything, but there are other ways to generate small amounts of cash, surveys, competitions, creating a personal brand, tasker,
Blondes…… j/k
makeup
Worth it if you can land a rich husband, then divorce for 1/2 assets while cucking him with a young stud. Always good if you quickly pop out a minimum of one kid for a recurring child support income stream on top and it solidifies your judicial case.
It is sad isn't it.
then divorce for 1/2 assets
Why stop at 1/2 when you could get 3/4?
Massive Wedding. Just to get divorce later on.
Divorced?
not yet :P still happy haha. But have seen many cases.
Haha, yep still married here too haha
"yet"
I call this "putting more work into the wedding than into the relationship".
Not just the wedding; wives and children yield a pretty poor return when you consider the lifestyle one could have as a bachelor.
But to be fair you don't know at the start how it's going to work out down the track…. thankfully we are still happily married.
Getting the biggest mortgage you can, buying a McMansion, and spending an extra $500,000 in interest over the next $35 years
And what if the house prices kept going up at a crazy rate? Especially as the primary residence is one of the few assets (only?) you can get a tax free gain on. And/or if inflation takes hold so your loan becomes much lower in real terms, while the house value remains constant in real terms/grows. Or even if you're just in a field where you expect your salary to rise.
Depending on circumstances, for some people it could be a wise, if somewhat risky, financial decision.
There's a lot of ifs there, but I hardly see this as comparable to buying a $100 designer white t-shirt.
Most people who buy massive properties have a family. 40% get divorced and have to give up a significant amount of assets? Is that a good investment? Check out the redpill on Reddit.
I did says some there are some ifs, and here's some more.
If you the person who is in the (minority) 40% that got divorced, then if over the course of the marriage house prices go up faster than the cost of interest, yes - it was a good choice.
Its a good choice if your on the receiving end of the stick ;), most of the time, women.
Why do most people fall for the McMansion stereotype. Many of the people taking out the massive crazy loans and overstretching are using them to buy smaller places but in the 'RIGHT' suburbs. People buying tiny 1 or 2 Bedroom terrace houses with no garden in prestigious suburbs for $mil+ prices. Out in the fringes of the city where land is cheaper you can buy a lot more house at a much cheaper price.
The criticism of Mcmansions comes from the urban planners that would prefer we abandon the city sprawl to reduce the spiralling costs of providing new infrastructure to support it. From a planning perspective it would be more efficient if we all lived in Apartment buildings in the middle suburbs!
The problem with McMansions is not that they appreciate, but that you could buy something half the size, then buy something else as an investment with the money saved and rent it out. Regarding the dodging of tax, yes that's a benefit, but realistically so is renting out an investment and depreciating it each year (in the case of new ones). Also consider that if you do sell, you don't get to 'keep' that money as such because you end up buying something else.
The real issue though is people buying houses out west and going to the wall and selling during hard times when the market is low as when the gfc hit. Those guys really probably shouldn't have bought if they could not ride out the bad times. Most of these people had they split their investment would have been in a better position to ride it out, and have had the option of just selling one place.
The benefit of McMansions is that you can kick a footy or play cricket in your backyard with your kids or you can have a swimming pool for them to enjoy on a hot day. You can have a pet that can live in your garden and you could even grow your own vegetables/fruit etc. The kids can have their own bedroom and you dont have to lie awake at night listening to your neighbours fighting or partying on the other side of the adjoining wall between properties. Horses for courses I guess but there are non-financial benefits to having a bigger block of land further out.
You can go to the park to kick a footy or play cricket, and you might meet some other local kids. There are plenty of pools in unit blocks (along with gyms, saunas and even tennis courts sometimes), you can have a pet pretty much anywhere if you buy, and there are plenty of 3 bedroom units where 2 kids (the average) can have their own room, as long as the parents are flexible about their study/office whatever, but either way sharing a room with a sibling was one of the best things I remember about growing up. Sure there some people who can afford it but I disagree with people spending their entire income just to have a big house. I came from one and it's overrated, all the fun to be had was outside.
Cars. Especially numpties who take out loans to buy them.
I used to pay $2600 a year for public transport in Brisbane. Now I can drive to work it costs me less than that in fuel + depreciation + maintenance. Bought an old car outright though, not on a finance scam.
No need to spend $30,000+ on a vehicle that'll do the same thing as a $5,000 one, though.
Surprised that public transport is so expensive in Brisbane though! even at full-fare prices, the most anyone will pay for a year's public transport (assuming a full time worker) is $1,440…
even at full-fare prices, the most anyone will pay for a year's public transport (assuming a full time worker) is $1,440
Not sure where you're getting this figure.
4 zone fare on a go card is $5.24 x 10 trips each week x 52 weeks = $2,725 per year.
If you want to pay full fare for a paper ticket it will cost $3,900 per year.
A 23 zone go card fare would work out to $11,102 per year or $16,068 for the full fare!
@inherentchoice:
not a public transport person, but is there such a thing as an "All-day pass"? (like a ticket that allows you unlimited km/zones for train, bus, ferry, for the day?)
There is seriously something wrong with someone in a $5000 car that isn't on P plates.
@thorton82: Can I suggest that if you consider the value of your car to be so incredibly important and status-defining, that it's probably you that need to re-evaluate your life.
@johnno07: No, you are setting your standards too low. There is a big difference between driving a bomb ($5k car) and spending too much money on a car. Sometimes you just need to be sensible and pragmatic. You can't get 5 stars for $5k
@wako: I second that. Reminds me of Homer Simpson hitting himself in the head with a hammer and doing it a few more times just to be sure it hurt.
You are a little out of touch.
I recently bought a car, 2008 model 75000kms $4500 with rwc. Small 4 cylinder Mitsubishi. Has 2 small dints quoted at $400 to have repaired might not bother though, still under 5k and presents well to get around for work. M
Regardless of the fact that this is a second car for me (V8 as a daily was a stupid idea), I'd rather put whatever savings I made onto my mortgage.
@inherentchoice: Like all your comments re public transport in Brisbane (as it's a joke). In saying so, your calculations are incorrect in that you only pay a max of 9 trips per weeks…. so -272.68 less than what you said (almost 10%)
Drinks at pubs. Looking at myself here.
That is why I get as drunk as possible before I go out
As drunk as possible?!
*imagines strikerzebra doing 10 shots in a minute
Pretty much but maybe in 60 minutes?
Coz that is a real smart thing to do.
Buy gym membership, get obsessed, won't want to drink. Problem solved for $50 a month!
But I enjoy drinking more than gyming.
De Beers donations
I really hate how De Beers has associated Diamonds with Engagement/Wedding rings. Moissanite is just as good and a LOT cheaper but try convincing a woman of that!
I donate to de beers and de wines and de spirits
good comment 30 years ago, but these days, but they have a much much smaller % of marketshare
Coffee and baguettes/sandwiches/buns at cafes especially for those working in corporate/business areas
Super expensive and most don't even have prices…
I'm OK with higher phone plans because it's tax deductible but I don't understand how people will buy the newest iPhone each year…
Even if your marginal tax rate is 50% you're still saving $0.50 for every dollar you can save on your phone plan. Not everyone needs a phone for work anyway.
I'm OK with higher phone plans because it's tax deductible
Whenever I hear a statement like this, I wonder if the person thinks they are getting the full amount deducted from their tax bill, rather than just having it deducted from their taxable income.
Well it's effectively a discounted percentage of whatever tax rate you're on. So if you're in the 30% tax bracket the $90 plan becomes a $60 one.
That said there will always be some people, people who think entering a higher bracket would cause their entire income to be taxed at a higher rate rather than just what's earned above. People who think a tax deduction is a full deduction from your taxed amount. People who enjoy getting tax return even though it means the government has been holding your money interest free from you for the better part of the year.
Weed and Booze. However, I do enjoy them.
Grow and ferment your own?
One day. Room mate does homebrew, The time involved is ludicrous and I don't see the upside except for the self gratification.
Serious question, isn't weed illegal?
Yeah but so is anything cool these days, except for Meth.
Ah got ya.
I find it amusing how we admit to doing illegal things so casually, and the police doesn't do shit.
@inose: Small fish theory re the police. Weeds is decimalised in South Australia so if you get caught (under a certain amount) it is an on the spot fine as if you just littered.
Something that might seem to one person like a dumb buy might be highly valued by another…
I say that if you've got disposable cash and you wanna buy something, go for it! :D
Eneloops.
Bus fares. Every time I ride to work (~15kms round trip) I save ~$4.50 in fares. That's one flat white from my local cafe!
I wish I could ride/jog to work.
I sweat like anything and would need a change of clothes and a shower.
" hobby & personal satisfaction related "
Yeah, I see what you did there