My role is quite interesting, as I am not responsible for any internal processes, but I am responsible for changing behaviors around tools and processes owned by others. This slots me into a difficult position at times, as the people who are responsible, don't always understand what is required for changing behaviors. For instance, there are some who think telling a tool exists is enough for an individual to understand the value and implications, as well as make the shift from default activities to support the change to include it. When written in back and white, it seems so obvious it isn't going to work, doesn't it?
Yet, a lot of what might be obvious seemingly bypasses us, or perhaps it is that we choose to ignore what doesn't fit into our world view or what we desire. For instance, everyone knows that being overextended in debt is a negative, yet how many people have done just this as they FOMO'd into a house in recent years?
In Australia, "mortgage stress" is when a homeowner is spending more than 30% of their income on their mortgage, which is currently sitting at just under 40% of mortgage holders. And around 15% are spending about half of their income on their mortgage, with 4% spending over 60% of their income.
They are quite terrible numbers, and if you remember from the other day, accumulated savings are rapidly decreasing in response to rising cost of living pressures. But once those savings are gone, what happens to those who are unable to cover their mortgages?
But of course, most will manage to make it through this period without losing their home, but "survival" has other implications. For instance, the best time to invest is when the market is depressed, but this requires having available resources to invest with. If they are all going into covering the mortgage. This means that the money isn't able to capitalize, it isn't able to earn, though it is able to reduce a debt burden - if people are actually paying down the principle significantly. A lot aren't though, they are paying the interest only.
This is a "hidden" cost of debt many don't seem to consider, where they look at what they are able to service as the important factor, rather than the opportunity cost of it. A person who has debt that they can manage, but nothing much left over to invest, will continually miss out on the opportunity to have their money working for them, increasing their wealth. They will forever be survivors, not thrivers.
I think that some part of this mentality comes down to the want it now approach and how bad we are at counting the impact of compounding value. Because when we get something now we have it in our hand, we see that immediate value of it and it gives us the dopamine hit that we don't get from the long term investment, which takes time and consistency to develop into a significant impact.
For instance, most of us would like to be able to cover our income needs with passive income, even if we are working, but how long does it take to have enough capital generating value to do so? It is unlikely that we are going to win the lottery or get enough from an inheritance to do so, which means we have to build it. However, it is like building a house buying a few bits of lumber, nail and bricks at a time. Even with good blueprints, it is hard to see the whole house.
And when it comes to investing, it can take years and decades to get to the point we are able to cover our salary, especially since it is also likely that there is lifestyle creep as we age, that soaks up additional income we might get through career advancement.
"Normal" human behaviors aren't actually well-suited to investment strategies, because we are designed to look too far into the future, nor actually live that long. We haven't evolved to be long-term storers of value, even though we have been built to be collectors. It is a strange conflict perhaps, but over the last few thousand years and especially as our lifespan has dramatically increased in the last couple hundred years, we have had to build mechanisms to be able to cover our needs, even though we can no longer hunt or gather.
The more we move away from family units and relying on each other, the more we are going to have to provide for ourselves, and be able to purchase from others. Our culture is changing, even if our behaviors to cater for our lives is not moving fast enough. As a result, a lot of us are going to find ourselves short, because we didn't think long.
We have a lot of tools at our disposal to enable and help us reach our goals, but having the tool doesn't mean we know how to apply them well, when we need to. If we want to improve our chances of getting to where we want to be, we are going to have to change our behaviors and unlike the people at my work, we probably don't have enablement managers to support us. So, we have to take responsibility for our own accommodations, and make it a home.
Taraz
[ Gen1: Hive ]
Posted Using LeoFinance Alpha
You also have to consider the fiscal benefits you may get while paying the mortgage. When we bought our house 25 years ago, with interest rates so low and counting fiscal benefits, it was more profitable to have a longer mortgage than spending amortization. But I also agree the impact of consumism the young generations suffers is way more stronger than back then
Yep. There are many things to consider, but at a general level in the last few years, many people have overpaid and overextended on their debt.
I've always been in the mindset of paying off my debt before I worry about putting money in savings. It just makes the most sense to me. I've always had pretty meager savings, but hardly any debt for the better part of my adult life. When I say savings though, I don't mean investments. Those are totally separate and those either come out before tax or they are paid just like any other bill I would normally pay.
There is interestingly a difference between men and women in this regard, with women saving more, but investing less. Over the space of years, it makes a big difference for passive income.
This is the way to do it. It would be nice to have more basic automated services to set these things up. I know they exist, but I haven't used one.
I have two or three of them going into different areas. It would sometimes be nice if all my investments were in one area, but I like the idea of diversifying. Even though many of them probably hold the same companies. Automated bank services make it really easy to just set the expense and forget it.
Well, we say you can't own something important in life unless you take risk. Otherwise, you might have to wait for years to achieve it.
I often feel that the biggest risk is not planning for the future.
As a single person, I know how hard it is to survive out there. I have found out that life gets even more harder if I remain single till old my life expectancy is better to be reduced mid 50s. Extending beyond that would be hell for me. I guess with married people they need to have kids in same city or around house in some way for things to work.
Perhaps extended families may have to start living together again, though I think this would be hell for some people, and moreso because many houses aren't designed for multigenerational living x_x
I think this is needed. I also think that there should be encouragement for it. For instance, paid childcare money for grandparents.
I think there was something or other for grandparents here at one stage though that may have changed now along with everything else (I looked up Centrelink nonsense to see if the big two were eligibile for any financial assistance and I could be wrong again but as far as I could tell from the convoluted website and some other person's experience, apparently the "dependent" age is now 25?).
I think more multigenerational houses (either purpose built to begin with or "granny flats" or I think some places have got like complexes of houses on a decent sized property that a few generations of one family will live) are a good idea anyway but they take up more space than flats or single dwellings crammed into a "huge" 400sqm "family-sized" block and would probably make less money and also would create stronger family ties maybe which according to conspiracy theories governments don't want because fractured selfish stupid population is much easier to control XD
It is more expensive for singles in many regards, but it gets untenable perhaps in older age, unless making a significant amount whilst young.
It's tough and it's why I don't like having debt. Anyone can make that change but it takes effort and I find that a lot of people are lazy now. They just charge everything they can on their card and it's not a surprise to see their finances in trouble. At the same time, the economy doesn't look that great either. So we can't rely on our current sources of income that much.
I was reading an article today of a person who declared bankruptcy after taking a holiday. She is 24! The article made it sound like this is a viable option for people who get into a lot of debt....
That sounds like they are being irresponsible and I guess they are just trying to get out of paying that debt.
Interestingly, my job involves the constant evolution of processes and the formulation of strategies to enhance efficiency, primarily through the utilization of automation tools as well.
Nevertheless, as is the case with any technology, there are occasional breakdowns, leaving end users suddenly uncertain about how to carry out their tasks due to their reliance on automated workflows.
This quote immediately sprung to mind: "Give a man a fish, and you feed him for a day; teach a man to fish, and you feed him for a lifetime." This sentiment resonates deeply with me; individuals should take pride in their work, as ultimately, it falls within their realm of responsibility 😤
A lot of people can't drive very well now, because everything is so assisted. When it comes down to a job description, after automation, if there is less than 50% of the job left, most are going to lose their position.
Completely agree!
Just funny how it always become my problem when things do breakdown and people suddenly do not know how to revert back to their old ways of doing things manually. Makes me wonder if they even know their job in the first place 🤔
The inflation is really starting to hurt people and once the savings are gone, that is going to change things dramatically. Already there have been many reports (mostly from USA and UK) of people having to bundle back into their original family houses because they defaulted. I don't think it's going to get any better any time soon, but they keep dangling the carrot of "next year the rate will come down" but what if it doesn't? It's going to mean doom to a lot of first time home buyers especially, not to mention many elderly that are not going to be able to cover their bases. It's a dog eat dog world when things start going this way. Very sad.
And just think how in Australia, the bank of mum and dad put a lot of the money in for the deposits. This means that they lose it in the default and, the kids won't inherit it later either. Big impact.
That's true and they've lost the asset in an asset class that only seems to be appreciating in value over the space of a mortgage bond. It's a lose lose all around, even the banks don't really do well out of this scenario.
I am barely keeping my head above water these past 6 months while looking for work. If I don't manage something soon before the end of the year, it will mean finding some more 0% APR credit cards to use for the next 15 months while I figure out ways to close my debt for 40c on the dollar. If banks can do it, so can I! Write my debt off!
I envy you in some way, because you have a lot of confidence in your abilities! I wish I was more confident and risk taking at times.
Is it really risk taking if one pins themselves into a corner to start with?! Well anyways, here I am risking it all and now I need to drum up some new capital for Rebellion release?! Aye Caramba!
Rightly stated, just because we have a lot of tools at our disposal doesn't mean we know how to use them.
We need to change our mindset and know that having tools for a job doesn't mean that we have gotten the job done, we all need to cultivate the attitude of learning to use things at our disposal to work for us.
Thank you sir
A full toolbox is useless in unskilled hands.
This is why I always give kudos to investors. Normally l, as you have said, a human is not really suited to investment strategies so we mostly force or inconvenience ourselves to do it so that we can later be convenient
No one likes risk, because no one likes loss. We have to learn how to survive them both.
One, the other, combination thereof?
I'm going to be wondering this for a while now XD
Probably a combination? :D
I totally understand the phrase "mortgage stress" I feel like I am in this bracket too. It just seems normal to pay 30 or more on mortgage and bills. In hindsight, I would rather own a smaller home and have increase disposable income to invest in.
"living the dream" in a house that doesn't really bring much more value. And then, there is all the stuff that we need to fill our houses up with these days.
I don't like borrowing money because I don't like owing people money, and it usually entails high interest rates. Unfortunately, I know that a lot of people still do it, and just kept on paying the interest which hurts them in the long run. What's interesting though is that even the rich borrow money, but instead of buying things they need, they reinvest it or start a business. They make their money grow, and earn more than the interest. I think borrowing money just for a FOMO or a whim is insane, and I hope they just invest their money so they use it for the future.
Precisely! Their debt is a calculated risk to generate wealth. The average person's debt is to get something they desire, even if it has no real value.
Sometimes it is more difficult than it seems to try to change a behavior that has been going on for years. We also often choose to go for debts that may allow us to have something tangible but in reality are often twice as expensive and we do not pay attention to it because it is something that is paid in installments.
Even if there were solutions, it would still be difficult for people to give up something they have been holding on to for years. However, as you say. There are people who do want it.
I guess the trick is to evaluate what we are buying and whether it is really worth paying twice the amount for it - or even the amount alone, compared to the cost of investing it into a generative source of income.
Wao!!! Increíble el contraste de esa foto entre blanco y negro con el rojo