but unless you have the money to pay cash for it then YOU CAN’T
AFFORD IT!
By secondhand (for now) or make do, but don’t get into any debt
now.
If you need to buy a car really consider whether you are purchasing
for your needs or your wants. Flashy doesn’t mean easy and it can cost
you money you could be putting towards your home.
If you have bought a car and are paying it off on a personal loan then
get rid of the debt as quickly as possible. You might think that there isn’t
any point because you’re still hit with the same interest, but the idea is to
get you in a home sooner rather than later and the less debt you have to
start with the better.
If you’re fortunate enough to be able to pay off a debt and save, then
consider consolidating your debt into your first home loan. This means
transferring the personal loan you have into your new mortgage. This
frees up a large chunk of outgoings each month (that you’re paying with
your personal loan) and that gives you breathing space when paying off
the ‘good debt’, i.e., your mortgage.
Ask yourself:
What expenditure do I have that I can cut back on or do
without?
Do I really need to have both a phone at home and a mobile
as well?
Can I cut expenditure by monitoring my electrical usage,
walking instead of driving, catching public transport, using a
car pool or buying secondhand?
Can I stop drinking, smoking or gambling?
These might seem like obvious unnecessary costs to many, but it is
surprising the number of people who do not realise their non-essentials
are a considerable contributor to their poor financial situation.
And before you dismiss the idea that cutting back on these items will
indeed help towards owning your own home, I need to remind you that
83
this is exactly how I got started to begin with and the effort and going
without was such a short time in comparison to my now long-term
financial security.
This is the beginning of your road to money management which will
take you further into getting, maintaining and most importantly, keeping
your first home.
84
Why it is so important to get
into your own home then
build from your investment
Here are some facts you need to be aware of which will illustrate why
it is so important to do something about your long-term stability and
financial situation right now! If you’re someone who believes our
government will always provide financial support in the form of an aged
pension or welfare payment, you need to think again!
The reason government introduced compulsory superannuation in
1992 was because they desperately needed to reduce the number of
retirees eligible for a full pension. In essence, the ageing population
would far out-weight the number of future working people to support
them. Governments of the day must now work frantically to implement
changes to our current support system. Our politicians realised, albeit too
late, there was very little time left to prepare for the overwhelming
society of retirees and the lack of financial resources needed to
adequately carry them. This is why where’ having an unrelenting
execution of changes to welfare.
I use the term execution for good reason. Welfare is being put to
death by way of slashing and burying the system as we’ve known it.
Those changes have come in the form of cutbacks to all welfare sectors
and will continue to be unlike anything seen by the past two generations.
What’s more, while the changes are going to be radical, and the
ramifications for having left the run too late will have a profound impact
on millions of people (not just welfare recipients), now and in the future.
Unfortunately, the extremity of this situation doesn’t seem to have
85
filtered out to the public, including the people who will be most affected
by the changes in the very near future.
Many continue to live under the illusion that, no matter what, there
will always be financial support from the government when things get
tough.
Wrong!
What people are failing to recognise is that the support systems we
take for granted are quickly grinding to a halt. The financial handout is
no longer a foregone conclusion and very little has been done to prepare
those people who are generational welfare dependent, marginalised, or
simply lack the skills to support themselves for the coming change. The
impact and preparation needed for sustainability hasn’t registered on the
average working person, either. When times are prosperous, it is often
assumed that it will remain so for a very long time. But… just because
times are pretty good right now doesn’t mean that it won’t change.
Times do change, economies falter and prosperity is always uncertain.
That’s why it is so important to prepare for your short-term, long-term
and immediate future.
Most importantly, the sweeping changes are crucial. The economy
can no longer sustain the level of welfare support being distributed and
our governments have no choice but to impose strict adjustments. The
outcome is grim for people without financial survival techniques in
place.
Furthermore, the initiation of compulsory superannuation is telling
you that the government won’t be looking after you when you retire. The
superannuation instalments by companies on behalf of employees are
usually between 7-9%. It is money that is to be invested and reinvested
until your retirement and also not to be touched until that time arrives. In
theory it is supposed to ensure you are self-funded and wealthy in your
older years. But… then why is there an urgency now for people to add
more and more towards their superannuation? And why can you only
access the funds when you retire? Why can’t you have some of your
hard earned savings during your working life when you might need it
and why are you penalised heavily if you withdraw funds early? It is
YOUR MONEY after all.
Why is now such a critical time?2
For nearly 50 years, many governments of the western world have
keenly endorsed their commitment to support older people in their
2. Excerpt from Goodbye Welfare.
86
retirement. Alas, that commitment has reached its use-by date and there
isn’t a fail-safe measure installed to protect it. In other words, for most
of the time over the past 40 something years, the economy has been
buoyant enough to support the number of people retiring at any given
time. This is because the numbers of people expected to retire are based
upon the history of those retired in the past. Unfortunately, the numbers
are increasing rapidly, so fast in fact that the economy just won’t be able
to support the numbers. This is due to a severe lack of homework by past
and present governments, which have now realised the impact that our
ever-increasing number of retirees will have on our economy. What’s
more, the percentage of people who will retire in the next 20 years will
escalate dramatically, causing great concern as to how our population
can be sustained financially. There will be fewer working as opposed to
those needing to be supported. This has occurred as a result of the larger
than ever ageing population, better known as the baby boomers.
The baby boomer generation was born after World War II, from
1946-1964. Following World War II, people became more at ease with
their future and children were produced readily and in abundance. That
generation of children is now looking forward to retirement but unless
they have a healthy superannuation fund or retirement plan they will
require the aged pension from our already strained systems. In essence,
governments have failed to respond adequately or in a timely fashion in
preparing for this critical situation and the dilemma of the ageing
population has now tip-toed up with dire consequences.
The ageing population will grow to more than 20 percent by 2030.
This is compared with 14 percent in 2005 or 4 percent in 1921. (ABS
Cat 3222). Governments have realised the revenue needed to fund aged
pensions will not be available for future retirees. There will be many
more people requiring an aged pension (as shown in the ABS report)
than ever before, with a proportionately much lower workforce to
support them. The lack of groundwork that was needed to prepare for
this event has now created urgency in overhauling welfare policies.
Governments are now forced to respond to the issues, with radical
implications. In other words, the restructure will mean that the
availability of welfare support will no longer be a foregone conclusion.
Welfare will become increasingly more difficult to get over time and
those severely disadvantaged will be given welfare support as a
privilege, not a right. Moreover, strict changes to current expenditure are
a matter of urgency because people are living longer, health costs will
continue to escalate and the ratio of workers (and therefore taxpayers)
87
continues to reduce substantially. As a consequence, the economy will
not be equipped to support the much higher population of retirees.
The actions taken by governments will ultimately affect each of us
one way or another, which is why we must work towards ensuring our
own financial independence without delay. The urgency of the matter
requires that we start right now! The longer you wait the more difficult it
will become to establish the foundation.
If you’re under 30 years of age you have less than 25 years before
there is an eradication of the current support system. That’s what welfare
reform is all about. The urgency for implementation radical changes is
recognised by economists and politicians alike and they know how
imperative it is to make these changes happen quickly. This means that
your children and grandchildren will simply not have the propping up of
financial support that we believed was our right.
Two million people in Australia currently get an aged
pension. At the time of writing this book the pension is paid
at a rate of $269 per week. For those unfortunate people who
do not have any other income to supplement that income, and
remember that compulsory superannuation wasn’t
introduced until 1992, many are forced to live out the rest of
their lives on the ‘poverty line’. Baby boomer women in
particular fall into this category as they are the ones who
usually had broken patterns of employment, reared children
when it was expected that women stay at home and earned
relatively low wages compared to men. Research indicates
that Australian baby boomer women have spent more than a
third less time in paid employment than male baby boomers.3
3 Excerpts from Goodbye Welfare, T. Harvey 2006, from the comment for this chapter.
88
Story Time
How do you think people who have been highfliers one minute, then
declared bankrupt the next, managed to claw their way back on top?
It takes a great deal of tenacity, never giving up and always keeping
the dream.
What I would like to show you is that it is possible to get into your
own address and keep it, even when the price of housing seems
unworkable. In order to get the point across I have opted to use a method
that has shown to be a valuable tool in learning. I have used it
throughout the book to illustrated how some challenges can be overcome
and that method involves telling a story. The stories are based on people
who have touched my life and who have inspired others.
One-legged Warren4
Warren was a healthy, physically active young guy that played ‘A’ grade
football and represented his school in the men’s athletic finals, but sitting in a
classroom all day, every day, just wasn’t his thing, so as soon as he was old
enough to leave school he did.
His first job was on a construction site, labouring hard as an apprentice
builder. One particularly hot day, he decided to lie down in the shade during his
‘smoko’ break. He dozed lightly, enjoying the rest when someone yelled at the
top of their lungs to get out of the way! But it was too late, the crane above him
had snapped, toppling downward until it crashed to the ground. The crane
narrowly missed several other workmen, but it didn’t missed Warren. He was
rushed to hospital in a critical condition and was left unconscious for weeks,
4 Based on a true story.
89
sustaining massive injuries.
To the surprise of doctors and family members, Warren gradually recovered
but his left leg suf ered irreparable damage. The leg became gangrenous and
needed amputating. It was removed just above the knee. Unfortunately, the
injuries were far worse than first diagnosed and further amputation to the thigh
was required later on.
Warren would receive compensation for his lifelong injuries, and did but not
without a long, tedious, drawn-out process. While he was waiting for his
payment he was forced to live totally dependent on his parents while undergoing
numerous treatments and further surgery. He bat led on for several years, with
the compensation claim constantly being postponed, or held up for one reason
or another. Eventually, he could wait no longer and decided to accept the first
of er of $100,000, with no option to go back later for more money. The time was
1978, and $100,000 was a considerable amount by any standard, but was it
enough to see him through countless medical bills, a long-term place to live and
the lack of any potential earnings?
When he was finally given the compensation money, Warren went straight
out and bought himself a brand new station wagon, which would accommodate
the apparatus he now needed and his beloved dog, Rex. He then bought a little
unit to live in, believing that he was set for life. He knew he would still struggle
with life’s challenges because of his disability, but the basic comforts of life
would be taken care of. Or so he thought.
By
the time Warren was 20 years old, he had undergone many more
surgeries to combat the constant pain he was experiencing. He also suf ered
with post traumatic stress, and niggling phantom pains, where the amputated leg
had once been. Then one day he met a young woman and fell hopelessly in
love. Shortly after, he got married and became a father, but the nuptials didn’t
last long and he soon found himself taking more and more medication to
overcome the constant pain of the accident and the end of his marriage. The
drugs not only increased in amount but also in potency. He eventually became
dependent on morphine.
In the meantime he had been dipping into his compensation money at an
alarming rate without any consideration as to how he would replenish it. The
money was kept in a savings account which could be accessed at any time.
Within three years he couldn’t af ord it and he could no longer pay the body
corporate fees or rates on his unit. Meanwhile his ex-wife was looking for a
set lement.
Warren was about to lose everything.
So what happened to Warren?
Warren had a situation that looked potentially bleak. He was about to lose his
90
unit through a forced sale in order to pay out his ex-wife and all the money he
had left from his compensation claim was now gone.
Nevertheless, Warren had something that would turn his life around. He had
a precious daughter he adored. It was during a weekend visitation with his
daughter that Warren came to realise he had been self-focused about his own
need and in doing so had inadvertently neglected his little girl’s long-term
financial future.
This was the turning point for Warren - he realised that nothing was going to
change unless he changed.
That night he scanned the newspapers looking for a job he could physically
do (the internet hadn’t been invented yet). He spent the day writing up a resume,
photocopying it and sending of applications for work. The following day he
washed and ironed his clothes, and had a much needed shave and a haircut (by
his mother). That night, with the help of a friend he worked hard at cleaning and
tidying his home, emptying out cupboards and sorting out items he could sell.
By the time he had finished he was exhausted, but felt bet er than he’d felt in
Goodbye Renting Page 11