18 Year Old Needing Financial Help

thriftysach on 09/02/2020 - 07:46
Last edited 10/02/2020 - 10:18

Hi All.

I am 18 and about to attend university.

Through a university scholarship (6k) + cash prizes upon good performance in the HSC (1.5k) + job whereby I earn $350-$400 a week + Youth Allowance $250/fortnight, I have around $8000.

I live in Sydney and property is very expensive so can't invest there.

Don't really need a car as I still live with parents and will take the train to uni 5 days a week.

Against compound interest bank accounts as it is against my religion (Islam).

Please keep all comments respectful and only comment if you have something useful.

I have a good phone galaxy s10 and have a good laptop too so dont need any of those.

Edit- sorry if i am not replying, was very preoccupied with Dell Customer Service regarding a faulty product of mine.

Will get back to all the comments by 6pm 10february.

Warm Regards.

Education & Work

Comments

  • SharedSugar on 09/02/2020 - 07:48
    +8

    What are your goals?

    • thriftysach on 09/02/2020 - 07:51
      +4

      Have as little debt as possible. Being smart with my money and being able to purchase my own property with cash in Sydney or around Sydney.

      Helping my dad repay our home loan.

      My uni degree will end up costing me 50k once I have finished it so atm my best option is to just put money towards that so I have less to pay later.

      • SBOB on 09/02/2020 - 07:57
        +22

        Helping my dad repay our home loan

        So borrowing money is ok but getting returns on invested money isn't?

        Genuinely curious how that works in the religious sense…

        • thriftysach on 09/02/2020 - 08:00
          +10

          Its not ok. I am not liable for decisions my parents take. For me, it is wrong and something I want to avoid. Hence I stated 'purchase property with cash.

          I still feel like I should help my dad repay the loan. Call it giving back to parents.

          • SBOB on 09/02/2020 - 08:07
            +7

            @thriftysach: Got ya ..
            Good luck with your goals.

            Having to save, with zero returns on those, to purchase a property in Sydney with cash seems like a hell of a goal (whose goal posts will keep moving further down the field)

            Engineers can make some decent salaries, but I don't think many of my peers in engineering could achieve that.

            (Along with I assume things like no returns on super or any other $ throughout your life.)

            • thriftysach on 09/02/2020 - 08:16

              @SBOB: Haha I get what you mean by the house property.

              I might look into Wollongong, the idea of spending the rest of my life on rent does not amuse me too much.

              It sounds extremely hard, but I believe if I am smart with my money, I will get close to it.

              I barely impulse buy stuff, always consult ozbargain before purchases, use cashrewards/shopback. This way I am able to save a lot and do the things I enjoy without tearing a hole in my wallet.

          • p1 ama on 10/02/2020 - 20:04
            +7

            @thriftysach:

            Hence I stated 'purchase property with cash.

            This is almost impossible. Let's suppose you want to buy a property for around $600,000, which is probably regarded as a reasonable entry-level property these days.

            Say you earn $100,000 per year, so $75,000 after tax. Your expenses are $2,000 per month (which is low), you'll save around $50,000 or so per year. Without earning interest or taking out a loan, it will take you 12 years to buy the property.

            If you assume the growth rate for property is around 5% (which again, is low), then in 12 years time, your $600,000 property is $1.1 million. So no chance.

            The point is, you need to find a way to invest. Fair enough if you don't want to put your money in an interest-earning savings account. You could start a business, buy shares…etc.

            • SBOB on 10/02/2020 - 20:26
              +1

              @p1 ama: though in fairness, you've included house price inflation but zero wage growth or inflation in that maths

              not exactly an accurate $/year calculation ;)

              • p1 ama on 10/02/2020 - 21:22
                +1

                @SBOB: Easy to include it in just by modelling your wage as a growth annuity with 0% interest (as OP doesn't like to earn interest). I already assumed inflation away by using a real growth rate of 5% (instead of a nominal rate of 7 - 8%). OP can do his own calculations, but unless your real wage growth rate is well above the average real return on property, you will never be able to make up the initial amount.

                • bthaddad on 11/02/2020 - 13:28

                  @p1 ama: This is nonsense. Firstly 5% is a huge growth expectation for housing prices over the long run, and many people in Australia earn more than $100k. Not to mention OP is going to university with strong high school performance which (I don't have any quantitative evidence for this) probably means they will be an above average earner. Why are you wheeling out these scare tactics?

            • chinawa111 on 10/02/2020 - 22:15

              @p1 ama: 12 years worth of rent will be (if $400/week x 624 weeks = $249,600) bank will take less interest than what someone landlord will be earning from you..

            • arescarti42 on 10/02/2020 - 22:26
              +1

              @p1 ama: 5% real growth rate for is extremely optimistic in my view - unless the RBA can figure out how to keep lowering mortgage rates below zero…

              You also neglect to mention that by not owning property you don't have to pay interest on a bank loan, council rates, insurance, repairs, etc.

              Agree that OP needs to figure out a way to generate a return on his savings though (i recommend investing in shares through simple exchange traded index funds).

            • RefusdClassification on 11/02/2020 - 05:54

              @p1 ama: Yes, saving money gets you nowhere if you are lower income (less than Asutralian median). Housing prices go up as fast as you squirrel away money. You can only become well off through taking on debt (unless you have wealthy parents/grandparents).

      • SelfMade on 09/02/2020 - 09:00
        +11

        Being smart with money and having as little debt as possible doesn't go hand in hand. Pretty much any financially successful person has got there with debt…'good debt'.

        I'd strongly suggest you to take up financial litracy courses to learn how it all works, that'll be one of the best investments you'll ever make. It's freightening to see just how many people have no idea how money works and how to leverage and make money work for you.

        Your best asset is time and being 18 you have plenty of it, use it to learn and you'll be better off than 90% of people.

        • thriftysach on 09/02/2020 - 09:03

          My degree involves a finance major from a reputable commerce school (usyd).

          Would that teach me financial literacy or id be required to do other stuff.

          • SelfMade on 09/02/2020 - 09:13
            +3

            @thriftysach: I studied commerce at Monash Uni and majored in finance, it does teach you a little but nothing like the real world. Youtube is a great source and free as well. Uni takes ages to teach basic concepts and costs you at the same time.

            Just start searching Youtube about 'investing' 'how to invest money' 'how to earn more' 'how to save more' 'borrwing money' etc…obviously there will be a lot of people trying to sell you their course and some who don't really know what they are talking about but because you've been intelligent enough to get into a decent uni you'll be able to weave through those who are worth your time and those who are not!

            Also, learn from those around you who are successful. Don't listen to those who think they know what they're talking about but don't have the results…the world is full of these people. Seek advice from those who have the proven results, you'll find many of them have similar ways of thinking.

          • geoffs87 on 10/02/2020 - 12:57
            +3

            @thriftysach: I have a finance degree, and an MBA (the latter from a reputable bus school) - i don't think i learnt anything in either that helped me become financially literate in my personal life, alot of principals and concepts that you can tie together, but still need to do your own research outside to work that one out.

            Honestly the best education i had was moving out of home at 18 (to move to attend university). Trial and error/failing isn't a bad thing either - by the end of uni i had HELP debt and credit card debt… but within 5 years of starting a career i had 2 properties, and i wasnt earning a bucketload…

            Great first step to start thinking at 18. I'd read some books like barefoot investor, plenty of youtube videos, read some magazines (money/afr/economist). Let me say this - no ONE thing will help you to become financially literate more than an interest and research. Oh and find some friends who think similarly to you, or at least on the same level. One of my best friends has complete different views of investing than I, and even though we've both done well, i think its because we keep each other honest.

            Best of luck!

            • thriftysach on 10/02/2020 - 23:16

              @geoffs87: I kinda think that moving out will benefit me, living in shared housing near a train station with a couple of mates isnt that expensive.

              But going USYD, it only takes 40mins-1hour by train so dont see the point of moving out.

              Whilst I was travelling in the past few months, being alone helped me learn about myself. At the end though, I got pretty freaked out because Coronavirus hit the news.

              I think it is wise to leave the HECS debt as is for now, credit cards, I dont really want to get into them but will obviously get one for emergency times.

              • cwongtech on 11/02/2020 - 00:23

                @thriftysach:

                credit cards, I dont really want to get into them but will obviously get one for emergency times.

                Credit cards should only be used to bridge the small timing gap between purchases and paychecks, they're effectively used for paycycle timing buffers, especially for those who get a monthly salary.

                You should never be using it for emergency times, it will penalize you 20% per annum in interest, that's what savings are for.

                If you pay your closing balance before the due date, you don't pay a single cent of interest.

                The only thing you pay is the annual fee (the best no annual fee credit card is Amex Essentials by the way, all the other "no-fee" ones are pretty rubbish)

      • serpserpserp on 09/02/2020 - 14:32
        +7

        Have as little debt as possible.

        Invest in shares and managed funds then. You are young so the risk profile for this type of investment is fine.

        Helping my dad repay our home loan.

        Help him after you have secured yourself.

        My uni degree will end up costing me 50k

        Do not pay any of this off in advance. Your uni degree is FREE money if you pay it off with HECS/FEE-HELP whatever they call it these days. Your debt is only indexed by CPI so it is effectively free debt and should be the last kind of debt that you ever pay (unless of course they start giving a discount for early payment again…)

        • geoffs87 on 10/02/2020 - 12:58
          +1

          +1 to fee help! My debt was over $100k… indexed at 1.5%, that's the cheapest loan you'll ever have!

        • johnnybravo on 10/02/2020 - 23:30

          serpserpserp

          Do not pay any of this off in advance. Your uni degree is FREE money if you pay it off with HECS/FEE-HELP whatever they call it these days. Your debt is only indexed by CPI so it is effectively free debt and should be the last kind of debt that you ever pay (unless of course they start giving a discount for early payment again…)

          Are you referring to compulsory payments or any payments over the compulsory amount?

        • RefusdClassification on 11/02/2020 - 05:57

          And maybe oneday a Bernie Sanders like politician will emerge in Australia that promised to cancel any debt people accumulate as students.

      • Icecold5000 on 11/02/2020 - 00:35

        Do you think you can save up 700k in cash within your 10 years after graduation?

      • Obkay on 11/02/2020 - 12:51

        Don't waste your money on uni fees when you barely have any money. Save that extremely low interest debt until you can afford to pay it off comfortably.

  • MS Paint on 09/02/2020 - 07:51
    +8

    Place money in a no interest bearing account. As a uni student you will need the money at call.

    For my benefit how do you get youth allowance while living at home and making $400 per week?

    • thriftysach on 09/02/2020 - 07:52
      +1

      I get some of it deducted. So for every dollar I earn over $437 a fortnight, I get 50 cents taken off. Since im a casual my pay varies.

      I already have a no interest bearing account.

      • thriftysach on 09/02/2020 - 08:08

        I have been thinking of this or saving up for an apartment (small one that'll cost 300k) and putting it on rent. However, at my current situation max I will make in a year is 20-30k. However, my expenses are very low and savings are very high.

        So give this money 5 years and I can have around 100k.

        With my degree, I should be able to score a starting salary of 60k+ so will have more savings there and assuming the prices dont skyrocket, I should have enough money to purchase property by the time I am 28 or so.

        • MrHyde on 09/02/2020 - 10:26
          +13

          Prices don't need to skyrocket to show this plan won't work. You also need to take inflation into account. What is 300k today will not be 300k in 10 years - more likely around 400k-450k even an a conservative estimate not taking massive price rises into account.

          If you don't invest your money into something, the real value of your money will decrease over that time.

          I suggest you look into some of the Islamic Banks and what products they offer in terms of interest (or comparable terms) accounts or home loans. Those products should align with your faith.

          • daleyboy79 on 10/02/2020 - 13:43
            +1

            @MrHyde: +1 to that, if your money isnt making money, its losing it.
            Just curious, how does the whole borrow/invest religious thing work with HECS …. isnt that essentially a loan?

            Are you able to invest in shares or anything else?

          • thriftysach on 10/02/2020 - 23:17

            @MrHyde: Yeah my concept seems kinda flawed.

            Im basically putting cash in a locker and expec5ing it to be worth the same after 10 years.

      • serpserpserp on 09/02/2020 - 14:34
        +20

        At uni, pay your HECS bills if you have excess $.

        NEVER advance pay your HECS!

        • SBOB on 09/02/2020 - 14:45

          Borrowing money with interest or requiring more back than borrowed,is against his religion.
          I'd assume HECS debt falls into this category, as it increases with indexation..

          • serpserpserp on 09/02/2020 - 14:51
            +8

            @SBOB:

            Borrowing money with interest

            You are not charged interest on HECS. It is indexed to CPI. They are completely different concepts. The latter is simply keeping the value of money constant.

            Would be interesting to see what OPs religion's take on this concept is. Might go have a read!

            EDIT: This is interesting:

            Therefore, Islamic banks are not allowed to link any debt or receivable for the purpose of indexation. However, they are allowed to stipulate a floating or variable rate in certain financial products. In fact, in order to settle pecuniary liabilities in the context of an inflationary situation. In fact, banks can enter into Musharakah, Mudarabah and diminishing Musharakah transactions wherein their return can automatically be adjusted with an inflationary situation. The rental rate for a short duration can be fixed or variable. Accordingly Islamic banks can charge rental in Ijarah at a higher rate, if already provided in the agreement, for any remaining period of the lease. However the rentals for a particular period, once accrued, cannot be indexed.

            http://www.financialislam.com/indexation-of-financial-obliga…

            So basically they don't like the term "indexation" but aren't against the concept of additional capital being paid on a debt for an inflationary situation. So basically Islamic indexation :D

            • spackbace on 09/02/2020 - 14:59

              @serpserpserp: Yeah I was looking it up on wiki as well.

              We regularly have customers chasing the old 0% finance cars. We used to be able to jack the purchase price to offset the interest, but since the banking reform we have to charge a minimum % now

              • serpserpserp on 09/02/2020 - 15:08

                @spackbace: This kind of answers it:

                https://islamqa.org/hanafi/askimam/102345

                In HECS-HELP loan, the debt is indexed each year to reflect changes in the Consumer Price Index (CPI). Indexing the debt to reflect changes in the CPI is not permissible according to Shari’ah, as it falls in the definition of interest. Hence, it impermissible to apply for such a loan.[3]

                That makes life a little harder. I wonder how they pay for uni then? I guess kids get help from family then pay them back.

              • serpserpserp on 09/02/2020 - 15:10
                +2

                @spackbace:

                but since the banking reform we have to charge a minimum % now

                You guys might need to find an Islamic broker for auto finance that is underwritten by an Islamic bank!

            • thriftysach on 10/02/2020 - 22:55

              @serpserpserp: That is one of the extreme interpretations, my local community has a lot of muslim kids going uni and the experts say the model in HECS is Shariah compliant.

              • Ghosteye on 11/02/2020 - 01:08
                +3

                @thriftysach: who are the experts in your community? I find it a little odd that you can use HECS but at the same time you are not able to open a bank account that gives you interest.

                Do these experts also hold the same opinion as you do on the a fore bank accounts? or is it just your interpretation?

                • thriftysach on 11/02/2020 - 05:10

                  @Ghosteye: They have given the ruling that you can open bank accounts to keep your money safe.
                  Whatever interest is accrued on your money, you must calculate it, (for e.g. quarterly) and give it to a charitable cause.

                  • aboogee on 11/02/2020 - 13:00
                    +1

                    @thriftysach: Hi there,
                    Sorry I mean no offence but is there a difference between saving money in bank and earn interest vs buying a property and earn rent in Shariah's context?

  • Hardlyworkin on 09/02/2020 - 08:05
    +8

    There is more to life than owning property! University is more than just getting a degree.

    Does your plan allow for you to live, see the world and enjoy yourself?

    I guess we all have different goals. If I were i were in your shoes I would be taking a gap year.

    • thriftysach on 09/02/2020 - 08:09

      I already travelled to 5 countries since last yr november.

      I don't want to travel anymore for some time.

      • Hardlyworkin on 09/02/2020 - 08:30

        Fair enough, that's a good start for someone of your age to do something independently.

  • Ocker on 09/02/2020 - 08:31
    +3

    If you are earning $350-$400 a week AND honestly declaring your income to Centrelink then your YA would be only $95-$155 p a fortnight.

    • thriftysach on 09/02/2020 - 08:34

      Ive only just started working and didnt declare anything until i got my payments. (got payments stacked up for 6 weeks since my claim) hence I couldnt declare anything as when I did my claim 6 weeks ago, i wasnt working.

      That amount showed 250, from now on i am declaring so it'll probably be less later on.

    • Strahany on 09/02/2020 - 09:06
      +1

      They have the “income vault” (or, at least, they did) which allows for this. It basically “stores” the difference between the threshold earnings limit and what your actual limit, and allows you to consume that on future pay checks.

      e.g if the threshold is $500 per fortnight and you earn $300 per fortnight for a month, then you’ve “stored” $400. If, on the next fortnight, you earn $800, then instead of losing most of your YA, it’ll consume $300 of that stored $400, and you’ve been considered not to have earned over the threshold.

      You can store a decent amount that can last months. I believe it’s designed to help those that have fluctuating incomes, so they don’t get stripped of their YA if they happen to have some weeks with large pay and others with minimal/nil

      • thriftysach on 11/02/2020 - 05:11

        Thank you! I will be sure to look into this.

  • spal on 09/02/2020 - 08:37
    +3

    Maybe consider shares. You will not earn interest, but dividends and capital growth. The way I look at it is if one don’t have cash stashed in banks, there is less temptation for impulses. On the contrary shares are pretty much like cash, if you really needed access you could have the money in your account in three days (I think). Considering that you are very young and your income would only keep growing from here, your capacity to take risks is higher. Again contrary to popular perception even in the share market you can reduce your risks by spreading your investment strategy to multiple companies, sectors and markets.

    • thriftysach on 09/02/2020 - 08:43
      +2

      The share market is so big. I have no clue nor anyone to guide me as to where I should invest.

      My dad has a 20k aud emergency fund for me - kinda like super but accessible for a kid when they turn 18, the parent basically puts a small amount in it each year and in turn gets bank company loyalty shares which can also be cahsed out.

      I like the idea of money from shares being accessible within 3 days or so, can you please elaborate a bit on that. Also, would you be able to recommend any resources that'll help me understand the stock market.

      • ms_caz on 09/02/2020 - 09:12
        +3

        The Australian Stock Exchange has an education section - its purpose is to help people learn about how to use the Stock exchange. Get a grasp on the fundamentals, then you can look for resources to help you develop a more sophisticated understanding of how to use it for greatest gain.
        ASX Education

      • Bidet Mate on 10/02/2020 - 10:37
        +2

        Best bet for the market would be to get a simple ETF. You just buy and forget and let it do its thing, it is basically just like buying a piece of the whole market as an average, and works on the idea that the market will always, on average, go up. The only possible downside is it involves compounding (like any dividend paying share will) which may also conflict with the religious limits you have, not really sure how it works personally.

        • thriftysach on 10/02/2020 - 10:39

          I'll look up the compounding stuff and see if it is acceptable.

        • daleyboy79 on 10/02/2020 - 13:47
          +3

          Where does the compounding occur? That could only be applicable to the re-investment of dividends, which is not an automated process and doesnt need to be done

      • [Deactivated] on 10/02/2020 - 13:49

        Have a look at an App called Raiz. Easy way to tuck away small amounts of cash into various types of funds. Anyone can refer you for a free $5 as well.

        • cwongtech on 10/02/2020 - 14:24

          Raiz is for the lazy..

          • [Deactivated] on 11/02/2020 - 01:25
            +4

            @cwongtech: It's an 18 year old kid asking for extremely vague islamic friendly advice about investing in something. Lazy sounds ideal.

        • Dingus on 10/02/2020 - 15:41

          Closed my Raiz account, commonwealth kept sending me emails saying my account was not secure and not to give 3rd party applications or sites my password. Now just manage my money better.

      • arescarti42 on 10/02/2020 - 22:09
        +1

        Have a read through this blog - very good:

        https://passiveinvestingaustralia.com/

        Share investing doesn't have to be hard, and i suspect it doesn't conflict with your religion.

  • Meho2026 on 09/02/2020 - 09:14
    +1

    I thought that compound interest is prohibited in Islam in the context of making a loan and charging unfair interest. Depositing money in a bank account doesnt constitute a loan contract, how can it be interpreted as wrongful?

    • thriftysach on 09/02/2020 - 19:22
      -5

      Giving interest on a loan you get from the bank for e.g. and interest on money you give to someone is prohibited.

      I really am not sure as to what the full teachings are behind interest, as I am fully aware that countries with 95%+ muslims still have some kind of loans involving interest. I am still learning about religion and aim to contact the relevant experts on this.

      Basically as far as I know, no harm in opening a bank account and depositing money even if you earn interest on it. In the event you earn interest on it, you need to essentially calculate the amount that is interest out of your bank balance and give it in a charitable cause without the expectation of any reward.

      The experts state on this matter that the person should try to do this to the best of their ability, obviously it becomes very difficult to keep track once interest compunds over a lot of years.

      • unelectric on 10/02/2020 - 23:25

        Message me in 45 years, I'll happily be the beneficiary of any superannuation interest you accrue.

        • thriftysach on 10/02/2020 - 23:29

          What if I am using an Islamic Super? 😇

  • Rilo 117 on 09/02/2020 - 10:06
    +1

    I think you've got too many goals in the above comments, focus on getting through Uni with as little debt as possible.

    I know you mentioned Compound Loans is against your religion, i dont know how HECS debt fit into this but that is possibly an option.

    You've started right with a scholarship, getting those will greatly assist you. Treat a afternoon each week looking for them, if you can get 2k-6k from doing this, I think you could justify the extra time allocated to looking (probably like the equivalent of more then $100 per/hr job.

    Sometimes you can reach out to some Social Groups, like Lions Club or some Church groups to help finicially.

    Another option might be to defer Uni for a year and go the following year with a bigger nest egg, a lot of people do this these days. I worked with a a 18 yr who had 3 jobs and pretty much worked 60hrs a week. He's now in he's 2nd year of uni with no debt and savings.

    There are a ton of good books, podcasts and other resources a quick google search will turn up. I personally like Dave Ramsey, as he's got a no nonsense approach to finances. Considers some debts to be called "dumb tax" not everyone likes him and thats okay, each to there own, he's american though so their system is a bit different.

    I think once you finish Uni, you can focus on your other goals, helping your dad (possible pay rent to help with this now?) and saving for your own house.

    Your 18, you've got years and years before you need to worry about buying a house so take your time and be frugal and smart with your money and everything will come with time.

  • ilikeradiohead on 09/02/2020 - 13:00

    Have you looked at Islamic banks/finance to deposit your funds? I assume there is something in Australia.

    • thriftysach on 09/02/2020 - 19:24
      -3

      Honestly I've heard theyre all kinda dodgy. If they were a good option, Islam is the second most common religion in Australia, I'm sure it'd generate a good customer base and thrive a lot.

  • cwongtech on 09/02/2020 - 13:11
    +11

    You should look into different schools of thoughts, as many as posisible, and make your own decisions.
    Is Renting Always A Waste Of Money?
    One thing I agree with Dan Lok, is your primary residence is NOT an investment.

    Also purchasing property with full cash payment upfront may not be the best decision you can make.

    Consider the following theoretical scenario:
    You have the option to buy a phone:
    - over a payment plan, at $30/mth for 24 months, which is $720, assuming no catches, administrative fees or interest charged, there is no phone service attached.
    - Outright, for $720
    - Assume you have money right now to buy the phone straight up.

    Personally if I was presented with the above, I'd be choosing the payment plan, assuming the payments stop immediately at month 24. It frees up $690 of cash flow for month 2, then $660 month 3, and so on.
    I could potentially divert the free cash flow towards something else

    Being smart with my money and being able to purchase my own property with cash in Sydney or around Sydney.

    Understanding how finance works theoretically is different to how it works in the real world.

    Helping my dad repay our home loan.

    That's great, but also consider if your return makes more than the cost of servicing the home loan
    Businesses are not built on savings alone, they're built on loans as well

    You will learn this in your first core subject of accounting:
    Assets = Debt + Equity (a.k.a. Owner's Equity or Shareholder's Equity)

    In a nutshell, in a business perspective
    Assets are defined as anything that can be used to generate income
    Debt = Money owed to others, can be loans, can be wages owed to employees
    Shareholders Equity = Represents the portion of the assets that are fully paid by investors

    Another option might be to defer Uni for a year and go the following year with a bigger nest egg, a lot of people do this these days. I worked with a a 18 yr who had 3 jobs and pretty much worked 60hrs a week. He's now in he's 2nd year of uni with no debt and savings.
    - Rilo 117

    I hold dual bachelors degrees and the biggest regret for me is not speaking to people in the real world, asking them what they do on a day to day basis, before committing money and time to a degree.
    If I could turn back time, I would have deferred my uni for at least 6 months and spent time trying to talk to people instead.
    Time is money, but money is not time.

    My advice to you is to take the time to talk to working professionals and ask what they do on a daily basis, and see if that interests you

    A degree is 3 years of time, and $50K for a piece of paper.
    If you compare this to standard office admin role getting paid $30/hr, 40 hour work week, 48 work weeks in a year (paid for 52, -4 weeks for annual leave), this equates to 62.4k a year pre-tax income, or 50k post-tax, assuming you don't spend a single cent.

    In the same time as getting a degree, if you compare yourself to someone who isn't attending uni, goes straight into admin work, they will be 150K ahead of you, and you're in 50K debt (HECS, it's fine). If you consider that, you're really 200K down.
    Can you make back that 200K with that degree that you have now (in three years time)?
    Only a handful of the best finance students will go into investment banking, if you want to do that, work experience and ethics are highly valued.
    Food for thought

    I respect you in thinking ahead in such an early age, but don't fall into the traps of believing what an uneducated commoner will say "don't go into debt". Simply put, cashflow positive, cashflow negative.

    By that token:
    - Mortgages should never exist, and we should all be able to fork out the 500k out for a cardboard box in Sydney to live in.
    - Accounting equation should not exist
    - Businesses should not be using loans

    If the cost of debt is lower than the returns (assuming they're guaranteed) it gains, then overall it brings in positive cashflow right?

    • serpserpserp on 09/02/2020 - 14:41
      +2

      In the same time as getting a degree, if you compare yourself to someone who isn't attending uni, goes straight into admin work, they will be 150K ahead of you

      This is nonsense.

      Office admin work isn't easy to come by and definitely not in a full time/non-contract basis. Getting 62k + super in a non skilled job is not a sure thing.

      Plus you are completely discounting the money OP earns through part time work, and gets from the government and their scholarships while they are at Uni.

      HECS is FREE debt and give you the ability to INVEST in yourself.

      Investment banking is not the be all of getting a finance degree. You can go into boutique firms, commercial banks, large corporates, accounting or advisory firms, fintechs if you combine it with an IT degree. It is pretty flexible and if you work hard, within 5 to 7 years you'll be looking pretty good.

      • cwongtech on 09/02/2020 - 15:17
        +1

        Plus you are completely discounting the money OP earns through part time work, and gets from the government and their scholarships while they are at Uni.

        Income from part time work is insignificant if we're talking about money.
        Scholarships isn't stable income unless it's a PhD grant.
        Saving money does not count as stable income either.

        Making money (in the form of "adding value" or measured as GDP for economists) is different to saving money.
        "You gota spend money to save money"
        They may look like they have the same effect to your bank balance but they both come from different sources.

        Investment banking is not the be all of getting a finance degree. You can go into boutique firms, commercial banks, large corporates, accounting or advisory firms, fintechs if you combine it with an IT degree. It is pretty flexible and if you work hard, within 5 to 7 years you'll be looking pretty good.

        Pure accounting as a grad gets you 45k a year (while being withered away for a few years) before it jumps up after you study to become a CA.

        if you work hard, within 5 to 7 years you'll be looking pretty good.

        If you were OP, you're 18 now, 21 when you graduate, 65-70 projected retirement age.
        44-49 years of "working", 5-7 years off those usable years is a lot to ask for someone to wither away.

        This is nonsense.

        Is it?
        All I'm asking is for OP to tread carefully and to not believe stereotypes, do their own research and don't just follow the flow
        Talk to as many people as possible from all walks of life, be open to different perspectives
        Life is like a game of chess, each move affects the rest of the game.
        There's no restarts though, you only have one shot at it.

        HECS is FREE debt and give you the ability to INVEST in yourself.

        It's debt that doesn't have the same implications as other types of debt, and arguably the highest return on investment.
        If we're talking about networth though, debt is debt, regardless of short-term or long-term.
        I'm just asking the O.P. to consider whether the degree they chose is what they want, and also to consider whether paying off a 3-4% p.a. home loan should be at the top of their list as the biggest priority right now.

        • serpserpserp on 09/02/2020 - 16:07

          Income from part time work is insignificant if we're talking about money.

          OP says he earns 350 to $400 a week right now. So even at his lowest amount is 16.8k if we take your 48 week example. The amount he quoted could even be an after tax amount which makes that vastly more. Plus they get youth allowance. it isn't insignificant. The gap is much smaller. Then OP comes out of uni and can potentially earn more than the 62k job you made up. Then5 years after that potentially double that amount. All because of a degree.

          I don't know anyone who didn't earn a degree that worked in the corporate land who didn't hit a ceiling of 80-100k without having to go get a degree of some sort.

          • cwongtech on 09/02/2020 - 16:41
            +1

            @serpserpserp:

            OP says he earns 350 to $400 a week right now. So even at his lowest amount is 16.8k if we take your 48 week example. The amount he quoted could even be an after tax amount which makes that vastly more.

            Let's say he earns $350-$400 a week
            By that alone we know it'll be a casual job since there's a variability on the income.

            There's no annual leave with that.

            Scale that up to 52 weeks, 18200 - 20800.

            Youth allowance is the below:
            Single, no children, 18 or older and live at parent’s home - $304.60 - Your maximum fortnightly payment
            $150 a week, but I'd assume that's with 0 income.

            https://www.servicesaustralia.gov.au/individuals/services/ce…
            We look at this:
            Single, over 18, living at home, $43.50 plus 60 cents for each dollar you earn over $524

            At $350 per week, this is $700 per fortnight, YA payment = $304.60 - $43.50 - ($700-524) x 60c = $304.60 - $43.50 - $105.6 = $155.5, $77.75 per week.
            Equates to $4043 p.a.
            At $400 per week, this is $800 per fortnight, YA payment = $304.60 - $43.50 - ($800-524) x 60c = $304.60 - $43.50 - $165.6 = $95.5, $47.75 per week.
            $2483 p.a.

            It's not very significant if you compare that to a full income in the long run.
            I've heard people use "I receive Youth Allowance" to justify getting a credit card…

            "I don't know anyone who didn't earn a degree that worked in the corporate land who didn't hit a ceiling of 80-100k without having to go get a degree of some sort."

            I have two degrees, they're not arts degrees either.. Doesn't mean anything unless you can translate that into experience.
            A degree is a line on the resume, but for now, this is all O.P. has to look towards.
            The only people I will impress are those who don't have two degrees.

            • thriftysach on 10/02/2020 - 18:05

              @cwongtech: I'm also applying for cadetship programs/paid internships. People doing my degree combinations often get part-time jobs through these at Commonwealth Bank and the like.

              • cwongtech on 11/02/2020 - 00:29

                @thriftysach:

                People doing my degree combinations often get part-time jobs through these at Commonwealth Bank and the like.

                I hope you get them, you seem like a very determined guy, though don't be surprised if no one pays attention to a university freshmen with zero results to show for (you haven't even started uni), and zero experience.

                My advice to you, should you fail to secure a cadetship or paid internship is to get an admin job at a financial institution and make connections within the company there to build your network.
                With a scholarship, you do stand out to employers, but whether that's enough is another story.

                I would also look into negotiation and sales skills. Both of them will help you tell a story of how far you've come and how you and the potential employer can work together in a mutually beneficial manner.

                Your friends at uni will become your network (assuming you go ahead with Uni) but most of them won't have the ability to get you a job that you need when you're young, not at least until a few years later.

                Don't rely on anyone else but your own strength and determination.
                Good luck!

                P.s. I didn't say don't go to Uni, I'm just saying consider your choices and whether the degree you choose is right for you.

      • SelfMade on 09/02/2020 - 18:03
        +3

        Going to uni in most cases is investing in the uni, not in yourself! Uni is big business these days trying to rip off students left, right and centre. This coming from a uni graduate who was able to use my degree to get into a banking graduate program so I don't have a chip on my shoulder.

        There are many better ways of investing in yourself rather than going to uni. There is so much time that attending uni takes from you that you can't get back.

        • virhlpool on 10/02/2020 - 16:08
          +1

          That's why in many countries, top unis are super cheap (heavily government funded) but it's hard to get into them. Once you get into them, education is the best and the cheapest. While some shit unis in those countries can be cheap too, but they don't count for good education.

        • thriftysach on 10/02/2020 - 18:03

          Uni takes a lot of time, but as long as you pick a course that gets jobs, you will end up with a job.

          Can say the same for other options like TAFE, but most of the big jobs do require Bachelor or higher Degrees and some employers prefer graduates from prestigious universities.

          So, yes you spend more time attending uni, you often do get a good job from it.

          • SelfMade on 10/02/2020 - 18:47

            @thriftysach: The most successful don't have jobs. They have created businesses that provide value either through selling products or providing services. Generally, the more value you provide the world, the more wealth you generate.

            If I had my time again and if it was purely up to me I'd have left school after year 10, work odd jobs to build up my capital and learn as much as possible about starting a business and wealth generation/preservation. Self learning is the best type of learning if you are motivated enough. I'd be so far ahead of where I am today if I did that.

    • thriftysach on 10/02/2020 - 18:18

      The difference between me and the individual in admin work is that I'd be doing a job that relates to my interests somewhat, meanwhile that individual will either still be in that admin role or theyd now be pursuing education to have the flexibility of picking another job.
      Sooner or later, their sub-60k salary will not support them and they will need more cash.

      What you are saying is that itd be better for me to not go Uni for around 6 months - so semester 1 and join in Semester 2.
      In this time, my degree wouldve only cost me around 5k (you dont pay all the money at once for the year).

      When I enter into Sem2, I would have talked to a lot of people and would also be behind when compared to peers my age.
      Why can't I just talk to individuals whilst at uni, where I believe I can easily find qualified professionals?

      Ideally, the Sydney housing market should be such that a person can buy a property if they save for it. The property market isnt really booming due to the buying/selling of the common Australian, rather a lot of external factors come into play in raising the value of property and hence making it extremely difficult for the oncoming generations to be able to purchase property.

      • cwongtech on 11/02/2020 - 00:44

        Why can't I just talk to individuals whilst at uni, where I believe I can easily find qualified professionals?

        I can easily find qualified professionals
        - If they were qualified they wouldn't be at uni now would they :)

        Join student societies but don't rely on people that are there to just add a line to their resume.
        Find the ones that are truly passionate about helping others, and you'll find they know others that will be able to help you :)
        Societies usually have sponsorships from partnering companies, and thus, connections.

        Ideally, the Sydney housing market should be such that a person can buy a property if they save for it. The property market isnt really booming due to the buying/selling of the common Australian, rather a lot of external factors come into play in raising the value of property and hence making it extremely difficult for the oncoming generations to be able to purchase property.

        In marketing, the price of a product embodies the value it can bring to the consumer's life when they purchase it.
        In finance, a share represents a piece of ownership in a company, and you become a part business owner with just one share, that entitles you to the profits (and losses) of a company.

        Property. A pile of bricks don't change. The only value they can bring is shelter to people underneath. If you want to monetize that value, this comes in the form of rental income.

        Property isn't dynamic. The concrete that lays the foundation, bricks, cement, wood to form window frames, the physical materials are not dynamic. The cost of labour to build a house has already been carried out in the past to build the property.

        The value rises and falls. Why? Who determines it? Can you actively increase the value?

        Compare that to a business. A business is not the buildings it operates in, it's the relationships the staff build, that translates into transactions and cashflow, then it becomes a balance sheet, income statement, profit and loss, which in turn becomes projected cashflow.

        Who determines the share prices? When the shares go up or down, does it truly reflect massive changes in the staff on that day?

        Food for thought :)

  • spackbace on 09/02/2020 - 14:38
    -4

    18yo and yet to go into uni… Too young to even think about home ownership. If you just started work, sure, but you're not.

    Come back here when/if you finish the degree and join the workforce

    • serpserpserp on 09/02/2020 - 14:45
      +1

      Too young to even think about home ownership

      I think it is good to have an understanding of what is required. OP is working part time, it might be small cash flow but it is something. If OP can channel that into something financially positive at the end of their degree they could have a little chunk of funds that could be useful for their financial goals.

      Sure I believe a little in "party while your young" and have a good time with your cash in uni. But if they aren't inclined to do that from a personality perspective, why not encourage them to pursue their goal?

      • spackbace on 09/02/2020 - 14:56
        +2

        It's more a case of saving that for a rainy day. All sorts of surprises can happen during uni, and all sorts of expenses can come along. I think it's different if someone gets a full-time job and sets up a savings plan with the free cash, but in this instance neither the OP or us know how much of their earnings can turn into savings.

        I'd say uni is the bigger thing to focus on currently, and focusing on that, than grand thoughts of buying $300k apartments with cash and then paying off the parents mortgage

        Focus on the education, then the job. Don't look forward to the income before you're even happy with the degree

    • johnno07 on 10/02/2020 - 11:44

      I wish I had started thinking about home ownership when I was 18. There is certianly no harm in being aware of what is important to you financially, and making a start at it from a young age.

      • spackbace on 10/02/2020 - 13:42
        +1

        There's a difference between thinking about it, and setting goals too far in the future, hence why I said it would be a different story if OP just started a job and wanted to make those goals.

        OP could easily turn around after a year of uni and go "fk this, I'd rather work full-time" and go chase the money. The flipside is they could look at doing Honours, and the degree turns into a 4yr one, meaning they join the work-force later.

        There's nothing wrong with goals, don't get me wrong, but it's why you should have short-term and long-term goals.

        Don't aim for conquering Everest. Aim first for something achievable, and work your way up to it.

  • mbck on 09/02/2020 - 16:47
    +5

    Well done on thinking about your future at 18.

  • Brendoo on 10/02/2020 - 08:41
    +1

    Sounds like you need to get some professional financial advice. The comment "purchase a house with cash" is not a smart financial decision. You will miss out on deductions (of course you need to be earning an income and paying taxes to realise the deductions, but most adults have a job/income - as you should after university). Read up on "negative gearing" to understand what I am talking about here. And my comments assume you are talking about an investment properly as you mention you are living with your parents.

    At age 18, with a job only earning $400 a week, I would suggest investing in a share portfolio. But you must know what you are doing. You could invest in an ETF (Exchange Traded Fund) which will give you diversity and the strength of experts deciding upon the basket of stocks in the ETF). But do your research and only invest what you can afford to lose.

    You could also pump extra money into Super and gain the financial benefits from that, although at 18 earning only $400 a week i think you'd do better elsewhere.

    And what kind of debt are you expecting from University? I'd suggest to take that into account as well.

    • thriftysach on 10/02/2020 - 10:36

      Property will initially be for investment purposes (giving it on rent), however, I will need to move out at some point so likely that investment property will turn into my primary place of residence. Moving out for me is something I can see coming, for this example lets say I move out at 25, at this stage I have some kind of base salary giving me 60k after tax per annum. Also, we can consider I have around 50k to 150k in savings, so looking at the rent situation for lets say an apartment, I cannot get anything good unless I pay 350-400/week. Now take that amount and rent will be 18k to 20k or even more from my salary. Household expenses/bills will cost me around 15-20k. That doesnt leave much behind.

      Situations like this seem kinda unavoidable. It is Sydney's problem with an unsustainable market.

      Now I really want to try my best to avoid this and save myself the headache of rent/mortgage as an expense.

    • thriftysach on 10/02/2020 - 10:36

      I am also going to look into what a share portfolio is and will obviously do the needed research to make a safe decision.

    • johnno07 on 10/02/2020 - 11:46
      +1

      I would recommended getting advice from someone who subscribes to/is sympathetic of your religion - most Australians in finance are going to look at you like you have two heads when you effectively say "I don't want free money", unfortunately.

  • saltypete on 10/02/2020 - 09:31

    You are happy to work hard and defer reward to reach your (initially unstated) goal of financial independence . You will do fine. Helping family is also really important and at 18 you actually have plenty of time. Enjoy your life and your family, make good friends and enjoy your time at uni.

  • Numlock on 10/02/2020 - 11:10

    You seem to be confused as to what is permitted in Islam. Paying interest and receiving interest are both prohibited in Islam. Anyone who participates in interest has committed a major sin and the only sin that means a declaration of war against God.

    Your father already has a home loan which is prohibited because it involves riba (interest). Now you're not willing to take interest which is right from an Islamic point of view, but willing to get a home loan (is that right?). You need to get your values straight before making any future financial decisions.

Login or Join to leave a comment
Login Join