Australia has one of the highest personal debt levels in the world.
Credit cards, car loans, home loans, HECS etc.
What is yours?
How Much Debt Are You in?
freshofftheplane on 30/05/2021 - 10:16
Last edited 30/05/2021 - 14:47 by 1 other user
Last edited 30/05/2021 - 14:47 by 1 other user
Poll Options
- 498None
- 81$1-10,000
- 322$10,001-100,000
- 537$100,001-500,000
- 329$500,001-1,000,000
- 145$1,000,001-2,000,000
- 90More than $2,000,000
Comments
@alienurbanite: Btw. I'm not against debt. The opposite really.
I in fact, have more debt than you, and at a <50% LVR. Strategy is different though, as all my debt is tax deductible.
@mandelbrot: My issue is that I have already maxed out what I can deduct and frankly, the "losses" on interest in my investment property are not enough to offset enough of my income to make it valuable.
Which is why we have to diversify into other classes where there's an opportunity to have greater capital gains, but at the same time, keeping our foot in the door of real estate with our current two properties.
@alienurbanite: Hey @alienurbanite
This is really interesting. May I ask what you and your partner's combined income is? Would help to put some of the numbers in perspective.
Thanks!@JudasX: Don't really want to give the numbers but we're both medical specialists working full time.
Happily. None. A few lines of credit on my properties but all not in use. Just waiting for opportunities right now.
To the moon!!!
I only have mortgage. 4 years ago, I use to have 20k in credit card debt and 40k in a car loan and no mortgage. Every pay month my money would disappear repaying the credit card and car payment, it was quite depressing knowing my money would repay crap I didn't need. I since got rid of my car and paid off the debt and was able to get a mortgage. I've paid off half my house in 2 years and looking at paying it off in the next 5 years.
Nothing beats the feeling of having full control of my money
Congrats mate, something to be proud of
Just the home loan, 104k
Depends on age. As you get older you should be decreasing your debt, but in your earlier 20's you basically have to load up when buying a home.
Lots of 20's and 30's still living with parents, others live in share homes, some live in vans or a tiny home whilst renting land off a farmer. There are options.
Home loan, $800k
After nearly 500 ebay orders paypal has sent the debt collectors after me. Reason being is that I had purchased a charger and battery combination and only the charger arrived. Seller vanished and so did the java scripted complaint button. Paypal also refuses to open a dispute because the item number has gone away. So I have to buy everything with afterpay. They still want me to buy up to a certain limit despite the dispute. My paypal account is also completely gone and the girls at the debt collector sound like monkeys from a zoo. I still have a paypal card reader that despite hundreds of hours over the phone never got activated and I had to get a square reader on top of it to process cards.
…so… $2m?
Interesting, the same debt collector tried to sue a relative of us. I have no legal degree but around half a dozen lawyers as distant relatives, none of them likes me or the one that got sued to the point they would overcharge us for water. I took on the case as a hobby lawyer and made a good grilling of the collection firm. Would I borrow again? Well afterpay insists that they will tell ebay to keep supplying me. I never applied for credit but they just love throwing money at me!
Are you in the wrong thread?
Mortgage paid off, now just using debt as leverage to build more wealth.
Debt to equity is probably 1:2 which isn’t ideal but what are you going to do in this housing market. Income to debt is probably 1:5
In my 30s
The standalone number is irrelevant, really.
Income to debt ratio, LVR and cashflow / loan serviceability is much more interesting.
I wouldn’t mind owing 50% in 10M well-diversified property portfolio with interest rates below 2%, yet it would seem like a massive debt ($5M) in my response.
Am I in debt if my assets are worth more?
Paid off my house and got another cheap investment house.
Glad to know I'm not the only one seriously over-extended 🤣
Curious as to the slant as nothing meaningful can be derived from this survey with the way it is framed.
Credit card/personal loan debt and a mortgage/investment loan are two very different propositions. High levels of household debt (mortgages and investment loans) are an indication of a thriving society. High levels of bad debt (CC/personal loans) are the opposite.
I want to have a $10m mortgage as it means i have at least a $12m property. I do not want any 'bad debt'.
Debt should not always be seen as a bad status - depends on assets and stage of life. 5 years ago I had no debt, now I have plenty but have a house, car+ other assets so would consider myself in a far better position financially than before.
It's both a blessing and a curse to have massive mortgage debt, you gotta have done something right to be in a position for banks to lend you that much dosh but at the same time what if the property/properties become untenanted or heaven forbid, the Opal tower crap or some H&L package deal in Marulan where the house sinks into the ground…..
We live in Adelaide
*a 700k house paid off
*2 cars paid off (although both have done 100,000 kms)
*$4k in credit card debt after wife went on 12 months maternity leave.I'm 36 and make 40k a year working part time/looking after our 2 kids (both under 5).
Wife is same age and makes 70k a year working part time. So 110k combined.We're in a good position overall just need to build our savings and use house equity to build security.
Congrats! - on both having the house paid off and the young family :)
Thanks very much
oh dang good on you man! I wish I could pay off my mortgage when I'm 36 haha…only 2.5 years away…600k left lol
Yeah we're lucky as we bought our house in Adelaide 3 years ago for 475k.
700m from beach, 4 beds , 2 bath. Dumped 90k reno into it and in meanwhile house prices in my area have skyrocketed.
Wife's aunt left her 150k USD in her will which was over 200k AUD at time.
Very lucky indeed. Hardest part is knowing what next move is.
Hopefully your area goes through a nice boom! Good luck you'll get there.Probably time to cash it all in, move to Sydney for double the money and you’ll have a nice 30% deposit on an equivalent size house 40km from the beach that will cost $200k to renovate.
Equity mate….
someone is flexing here
i wish my wife had a aunt like your wife's
A very well off mentor once told me, if you don’t have debt and aren’t taking advantage of leverage, all it means is that you are leaving all your money in the bank for someone else to borrow and do more with.
It may make you feel secure, but the reality is that you are falling behind financially.
This has pretty much been the historic trend since money was invented in the Middle Ages.
And truthfully it's never been more true than right now! People sitting on cash are being left behind.
You can invest without going into debt.
You don’t NEED to leverage.It is hard to become bankrupt if you don’t have any debt.
Yes, but then your gains will be muted at best.
I'm not sure why people keep bringing up bankruptcy.
Bankruptcy doesn't happen if you can service your debt regardless of whether or not the assets have gone up and down in value. The key is to not over leverage or not have enough of a liquid position to weather cycles. My personal strategy is that I have enough to cover all debt payments for at least 3-5 years even if I'm not employed. However, each month I am continuing to pay beyond my debt requirements to get to a position in my current asset classes that I can re-leverage without requiring higher debt payment stress.
You’ve obviously never invested through an era where margin calls exist.
If gains are muted while un leveraged then maybe your investment doesn’t match your risk appetite.
Your post gave the impression your options are to have cash in the back, or to have leveraged investments. All I’m pointing out is that there is another option.
@JelIyfish: I would never buy on margin and I know what a margin call is.
That is almost always bad debt because you're buying an individual share and hoping for some miracle crash. Unless you have some sorta of secret special info, chances are, the indicators of the stock crashing are known to everybody and its already priced in. The possibility of unlimited exposure doesn't appeal to me.
I don't consider buying on Margin good debt at all.
@alienurbanite: err… sorry… not to be rude but I don't think you understand the words you are typing.
A margin loan is leveraging, which is what you were advocating.
It sounds like you are talking about short selling..?@JelIyfish: Getting a home loan using borrowed money is also leveraging. I think this is the leverage he was talking about, not margin loans or short selling.
@JelIyfish: Sorry misinterpreted that you were talking about short selling on margin. Regardless the situation you're describing isn't what I'm advocating. I'm not taking on a margin loan to buy shares.
I'm saying the key is you can service your debt and then to take on good debt.
Using your 2 percent home loan to leverage onto investment classes that produce significantly more in this current climate is a given. If you don't leverage now, then you probably never should as your risk appetite is next to zero.
Again, I'm not suggesting people go out and leverage like crazy and hope for a home run. You need a reasonable guaranteed pay packet that can service whatever you're borrowing.
What I'm saying is that the current climate has created a ever larger gap in wealth because those that can afford it can leverage.
Reminds me of the saying: "You would've made more money buying comm bank shares than actually putting money into an account in comm bank"
And that should be the case. When you put money in the bank, you're taking virtually no risk (depends on how much you have of course). When you are buying equities, you are taking a risk. If you don't think you can make more, why would you ever buy shares.
The key is the index - its automatically diversified and you're betting on the economy and not a single stock that can have very different business outlooks based on factors that's out of their control.
Look at the chart from the index since 1920. Always up in a long term period.
I have a mortgage. I read the Barefoot Investor. Did a consolidation loan for my credit cards & store card. All paid off. Paid my car loan off too. I have a Swift and would love a bigger car for the baby but it's so cheap to run and I own it now. The bargain hunter in me can't justify it now. I don't want another loan right now.
Never take a loan out to buy a depreciating asset (e.g. car).
I get this agument, but there's a sweet spot;
Buying a 20k second hand 3 year car whicih has peaked at the depreciation curve by extending a mortgage makes sense, rather than throwing parts on an old clapper if you're not mechanically minded.
Unless you bought a secondhand car 12 months ago, the same car is about 15-20% more expensive to buy..
So is toilet paper, face masks and hand sanitiser. Doesn't make them good investments in a post covid world.
i am in crippling debt
Read the barefoot investor and check out the r/ausfinance subreddit. In the sidebar there are really great links including free financial counsellors/related services.
My only debt is a mortgage
PPOR and investments give an asset:liability rate of about 3:1, add in super and some alternative invesments, it's probably more like 4:1
600K debt on an investment property bought last year in June (buy when there is blood on the streets, or in this case it was covid).
I reckon income matters in that if your household earns say 100K most of that goes on living expenses and you might be able to say say 10K. Whereas if your household pulls in 200K you can live the same but save 110K, or 11 times the amount. (Assume figures are after tax.)
So my debt is pretty high but serviceable and tax deductible. Never paid a cent of interest on bad debt like credit cards or cars.
My goal is to have passive income > mortgage payments.
If that occurs then the actual numbers become irrelevant.
So positively geared investments?
I guess by definition. I don’t really consider ppor an investment though.
My goal is to play the lotto forever because I'm too scared to take a punt at cryptocurrency and that's why I'll stay in the bottom half forever.
No loss anyways I was never going to amount to anything.
@AlienC: That was my way of doing it (put $5-10 per week hoping to win somethibg) but if I put the same amount into crypto 6 months ago, it would have made me $20k+….
So what happens if you have student loans aka hecs debt and are over the repayment threshold and don't pay it or do anything about it like what is their protocol and how much of a penalty do you incur by doing nothing?
They take it from you when you do your taxes
Do they take the same amount as if I did and set it up myself?
Thanks for the answers by the way and from everybody.
Much appreciated.
Yes the same amount. Taking it out with your pay progressively is so you don't get stung with a 5k bill at tax time
@polol: Oh ok that is fine then if the bill is the same regardless of how you do it.
Oof well I guess big thanks for the heads up I guess.. I know what is coming now come tax time.
I guess I'm pretty happy now that I am actually paying it back now I never thought in a million years that this would happen.
@AlienC: Unless you're very diligent I would just get it done as part of your pay. You just tell your payroll to pay it and they tax you extra each fortnight and the ATO figures it out regardless and adjusts for any overs and unders.
@polol: Question is what do I tell payroll like how do I phrase it or what documents do I need to send etc.
I think the email contact I have with payroll is one way only do not reply.
I'm 36 with wife & kid.
$1 mill house ppor paid off. Soon to be in a joint property investment, so will be total $1.5 total property assets with 200k debt. It is the worst feeling going back to debt, so we'll clear it asap to free ourselves from the damn banks.Nice how did you accomplish that? Do you work multiple jobs or operate multiple businesses.
No, I currently work a very cruisy job for a big company.
I worked my ass off during & when I got out of uni. I also didnt buy stupid crap when I was younger. Bought a unit when I was 24 & then just kept upgrading. Once I turned about 30, I took my foot off the pedal & focused on enjoying life.
These days, I don't think it's that hard. Just don't be dumb with money & with the money you do have, learn how to get it working for you.
Sold up in the city and moved back to a regional area. This allowed my family to buy a house outright and be debt free.
I can't believe more people don't do this. Life is a breeze once you no longer have a mortgage or rent to worry about.
I could get a job at a supermarket and still be fine. That's a good feeling.Good decision, albeit the regional cities that have decent job access aren't super cheap e.g Geelong, Newcastle.
For instance the median house price in Geelong is typically higher than on the fringe of Melbourne.
I suppose with working from home it is now far more practical to live in far flung yet affordable places like Horsham.
I personally don't classify Geelong as regional.
The thing many people don't realise yes jobs are far fewer but the ones that come up for places at councils, water, hospitals and other gov agencies pay the same as in the city but have far fewer applicants so your chances of getting the jobs are very high.
Anyway going off topic sorry.
True they can be similar paying (can be a bit lower for Councils) however if it is a small town e.g Sale, Horsham, Merimbula, then you can get stuck with one employer (depending on the specific job). And that one employer may not be the best. I think that's why a lot of people live in the cities - for unemployment insurance of a sort that if you lose your job or want a different employer, you usually have a lot of options.
So it is an odd sort of trade off, have a small (or no) mortgage vs greater job diversity.
And yes you might be able to get by working in a supermarket (and there is nothing wrong with that) but if you have a $40+ hour job you might be better off overall having a mortgage to live in a city, but it depends on the specific type of job.
@acersaurus: I'm not sure if you checked my post history but oddly enough I live in Horsham lol.
And yes agree regarding its possible you could find yourself stuck in a job as no viable alternatives exist in the area but it's pretty unlikely. I find it fairly surprising how many 100k + jobs are advertised in the region that I could apply for.
@velcrochicken: Lol I had no idea you lived in Horsham or even Vic. It is just a really distant place I think of, but it's a nice place.
I just looked at my HELP debt it is not as bad as I thought.
38.5k but was 35.1k in 2015 about 6 years ago.. Pretty fair interest rate I say.
Two failed courses at two failed universities.
Never again.
I hate to say it but don't stay in school kids if you can't handle it or don't like it or you are just fooling yourself.. It's like self imposed prison just wasted life and wasted time all for nothing.
If it makes you feel better I had a friend who studied communications, got to the last year then had some problems, failed repeatedly and never finished it. He since started 4 other degrees and never finished one. He was a bit crazy. Think he had nearly 100k in debt from his efforts, and ended up as a bartender. The gov will never see $1 back.
Damn it always sucks to see this but as the saying goes there is always a bigger fish and I guess your friend was it.
Somewhere out there there is some poor bugger probably trying to get through medicine or some other expensive degree and might not make it due to xyz reasons.
I really wanted to try a few more degrees but I cut my losses before I went even further into a deeper darker hole.
My cousin was smart he dropped out grade 10 and started working immeadiately.
A lot of older generation I know that are still going strong started working young and never looked back.
I think there is a good lesson to be learnt there.. just do it and do something you know will follow through.
$950 in debt.
Pretty sweet life atm.
Nice.
Sydney - Mid 30s - dual income earners (wife only started working about 4-5 years ago) with a 9 month old:
~$550K in liabilities with ~$2M of assets
I just refinanced the ~$550K, the minimum repayment is roughly 20% of our post-tax income -> the payments are direct debited from an offset account where I just throw everything in.
Per month - we only spend about 30% - 40% of out post-tax income, leaving a buffer of 40%. Thus I am currently attempting to buy another investment property at around $500-600K purchase price - trying out the 50% LVR thing & obviously I'm going to buy outside of Sydney.
(Feel better with a $600K house than a $600K apartment)Had a starting HECS debt of $35K - think it was all paid off when I was in my late 20s.
But I knew what I wanted to be & was pretty determined to succeed at uni though.
No debt here at the moment. No HECS because education was paid upfront and just finished paying off mortgage. Looking forward to have my income not being spent towards paying loan.
how old are you? Just curious since I m interested in knowing when would be idle age to have everything paid off.
I miss the high interest rate days. People were more humble.
A few $k from luxury goods.
The wife and owe 200k combined on our house, and that's the only debt we have. Buy everything, build everything, renovate everything with cash. We may go into some small level of debt to buy a new car but that's it.
Always funny to read these threads people have so much investment properties yet they do not understand why they are into investment properties. Is it the returns? Do you like the asset? Why do you care about where the returns are coming from?
You hear people go into hundreds of thousands in debt for X% return. But to talk to a financial advisor or educator to explain how yield works and portfolios work "oh no too expensive" hahah
If you have no taxable debt you are doing it wrong.
Spend less then you earn, invest the rest responsibly.
Inflation is destroying your purchasing power, debt is the only way out, regardless if you earn $30k or $300k p.a.
Nothing wrong with a large PPOR debt given 0% CGT…
Nothing wrong with that.
But why wouldn't you have investment debt at under 4% interest rates for the next decade minimum, with asset inflation at over 7%+ compounded annually?
PPOR debt is the worst kind to have, investment debt is the best kind of debt.
Approx 450k owing on $1.2M home. Don't have any other debts.
But I'm about to purchase a $1.5M property so my debt will be around $2MTechnically don't have any debt as I have yet to buy a house. Use credit cards and pay them off in full for the points.
Kicking myself for being scared of a <$300k mortgage in 2015 - these days it will easily be at least double.
Paid most of it off last year, down to 1700, life that much sweeter knowing you don't own anyone anything, Australia's record amount of private and public debt will have to bite hard one day. Got most the material items i want, having freedom to do things on a whim is a great way to live
I have no debt but that's only cause I'm a moron that went bankrupt. Its not the end of the world but it isn't a picnic either. If I hadn't gone bankrupt I would have wrapped my lips around a shotgun though.
Been discharged for about a year. Don't intend to have any debt in the near future besides a mortgage in the $300k range.
Before all the holier than thou mongs get going I've heard it all. I don't need to hear what a dog I am and how I should JuSt PaY wHaT yOu OwE! I do enjoy hearing the misinformed ramblings though. Stuff like you'll never get a loan again, your credit file is ruined for ten years, good luck getting a job etc.
Don't gamble Kids, especially if you suck at it lol.
It looks like they have reintroduced a HECS-HELP discount although only for up-front payments, not for paynents towards already accrued debt as it used to be:
Re-introduction of the HECS- HELP up-front payment discount
The up-front discount applies to up-front payments of $500 or more.
The discount means that if you pay 90 per cent of your student contribution amount as an up-front payment your entire student contribution amount will be paid, as the Government will pay the other 10 per cent directly to your provider.Most debts are either mortgage or student debts.
@mandelbrot: Yes, value is irrelevant to a cycle. For example, when Goldman was tanking during the 2008 GFC, Buffet was there with cash. And to be honest, his entire business is based on debt and leverage to take advantage of these opportunities. He didn't get to where he is without using investors money to leverage.
If he only every invested what he had in his bank account, he would never been able to compound his investments to what they are today.
I don't think the discussion is about cycles. The point is borrowing to buy a good asset is good debt. Any asset that is undervalued is good debt.
So borrowing for good debt isn't a problem and in fact, you should leverage to do it as it will maximise your returns and give you tax advantages where you structure the investments appropriately.