Rich/Poor mindset

[Introuble83]

My only advice: spend as much as you can buying a house, spend as little as you can buying a car.

Good advice but many young men grow up dreaming about having nice cars and having to wait years and years to buy it . I can see why someone would splash out on a car notwithstanding it’s a depreciating asset unlike a home . Each to their own . You can’t be sensible all the time

 

[Gordon Gekko]

It depends on each individual’s circumstances. If someone has maxed out their AVCs, done their 10% mortgage overpayment through Avant, and has an emergency fund, buying a nice car isn’t a heinous crime.

 

[nest egg]

It depends on each individual’s circumstances. If someone has maxed out their AVCs, done their 10% mortgage overpayment through Avant, and has an emergency fund, buying a nice car isn’t a heinous crime.

That order makes a lot of sense, though I'd guess very few do it that way! Some may try to juggle the 3 at once. So if you're someone who likes a nice motor, here's a question...

Assuming new in both scenarios, better to "buy" car on PCP at 3%, to ensure you could maximise funds for pension contributions (returning an average of 6%), or take the hit on the pension for a couple of years, and save up and buy a car outright?

I've never thought car credit to be a good idea, but in those scenarios it does seem (slightly) more so.

 

[Gordon Gekko]

I don’t think borrowing at 3% to contribute to a pension makes a whole lot of sense.

Which is, in effect, what that would mean.

 

[PGF2016]

Good advice but many young men grow up dreaming about having nice cars and having to wait years and years to buy it . I can see why someone would splash out on a car notwithstanding it’s a depreciating asset unlike a home . Each to their own . You can’t be sensible all the time

You can't be sensible all the time but two times when it's more important to be sensible is when buying a house or a car. The two largest purchases for most people.

 

[Silversurfer]

That order makes a lot of sense, though I'd guess very few do it that way! Some may try to juggle the 3 at once. So if you're someone who likes a nice motor, here's a question...

Assuming new in both scenarios, better to "buy" car on PCP at 3%, to ensure you could maximise funds for pension contributions (returning an average of 6%), or take the hit on the pension for a couple of years, and save up and buy a car outright?

I've never thought car credit to be a good idea, but in those scenarios it does seem (slightly) more so.

The old rule applies to car loans. Always own more of the car than you owe. If possible be your own banker.

 

[galway_blow_in]

The old rule applies to car loans. Always own more of the car than you owe. If possible be your own banker.

in a time of high inflation , buying a car with cash instead of availing of sub 3% finance makes little sense , buying an EV usually means buying new so availing of finance makes sense , Im doing it , I ordered an MG EV in early January , 7 K upfront and 2.9% finance rate over four years , no way was i buying in cash as contrary to popular belief , there is no saving in buying in cash , car companies and banks are hand in glove nowadays , there are no savings for a cash deal on new cars

 

[Bluefin]

in a time of high inflation , buying a car with cash instead of availing of sub 3% finance makes little sense , buying an EV usually means buying new so availing of finance makes sense , Im doing it , I ordered an MG EV in early January , 7 K upfront and 2.9% finance rate over four years , no way was i buying in cash as contrary to popular belief , there is no saving in buying in cash , car companies and banks are hand in glove nowadays , there are no savings for a cash deal on new cars

Would be interested in hearing about your decision to purchase the MG and how the test drive went?

Which version did you go for and what's the interior design like?

 

[Gordon Gekko]

It is all about balance really. Retirement planning is important, but so too is enjoying yourself and enjoying the journey, not just the destination.

 

[Steven Barrett]

Youd wonder what the point of having all the money was

It is built up over a lifetime by being thrifty and not overpaying for things. Driving a €30k car instead of a €100k car etc. They are then able to maintain this lifestyle well into retirement as they have lots of money and their lifestyle isn't overly expensive. It is not about not having a good life, saving loads of money and dying with millions in the bank.

 

[Silversurfer]

in a time of high inflation , buying a car with cash instead of availing of sub 3% finance makes little sense , buying an EV usually means buying new so availing of finance makes sense , Im doing it , I ordered an MG EV in early January , 7 K upfront and 2.9% finance rate over four years , no way was i buying in cash as contrary to popular belief , there is no saving in buying in cash , car companies and banks are hand in glove nowadays , there are no savings for a cash deal on new cars

Congratulations on your new car. My point in being your own banker was not to get a cash discount on the purchase price of a car. It was so that you would never have to owe money every month over the four years. With inflation running at 8% and a car depreciating at 15% it makes no sense to borrow.

 

[galway_blow_in]

Congratulations on your new car. My point in being your own banker was not to get a cash discount on the purchase price of a car. It was so that you would never have to owe money every month over the four years. With inflation running at 8% and a car depreciating at 15% it makes no sense to borrow.

EV,s do not depreciate at anything like the level you list

whats the problem with " owing money every month " ? , that sounds like some sort of ideological opposition to debt , that philosophy is no guarantee of wealth , its just a personal principle

 

[galway_blow_in]

Would be interested in hearing about your decision to purchase the MG and how the test drive went?

Which version did you go for and what's the interior design like?

I have not taken delivery yet , be lucky to have it by September , I was very impressed , interior not in anyway cheap or nasty , I went for the ZS , the 5 is quite bland but a newer one is being released next year

 

[Paul O Mahoney]

I don't get this mantra that "debt is bad" , I've always lived with the rule that if you can cover the repayments and not go short on the essentials, roof over your head being the most important, why not buy a new car on " the tick"?

I don't like being in Debt but I also don't like being miserable or feel that frugality is healthy.

My wife would like to change her car now, and she won't buy out a car eventhough its affordable and has been for over 20 year's, she has a Jaguar now and resisted " flipping " it when the 3 year PCP finished, she has a car Allowance which obviously is taxed but the net after tax is about €800 a month and she feels it's her perk.

That maybe an extreme example but if anyone can afford say €300 a month not go hungry and enjoy having a new car or a family holiday why not.

I was speaking to my brother in law over the weekend, he feels he has nothing, its difficult as he is wheelchair bound , but I sat with him and " valued" his house , the pensions now accessible, his social welfare and the few bob he earns as a dog minder, and it's not insignificant, first thing he said " new car with wheelchair access " type? Apparently Tesla truck......


Living life is important too, and like greed can be a little good, debt isn't totally bad.

 

[cremeegg]

Congratulations on your new car. My point in being your own banker was not to get a cash discount on the purchase price of a car. It was so that you would never have to owe money every month over the four years. With inflation running at 8% and a car depreciating at 15% it makes no sense to borrow.

Each to their own on matters of opinion, and I would be very catious about debt, however high inflation makes borrowing less of an issue rather than more.

Borrowing to buy a depreciating asset well that's to be avoided.

 

[Gordon Gekko]

Each to their own on matters of opinion, and I would be very catious about debt, however high inflation makes borrowing less of an issue rather than more.

Borrowing to buy a depreciating asset well that's to be avoided.

In general, perhaps. But Ireland has changed somewhat. For example, there are tens of thousands of people who have share options and bonuses coming from multinationals. Something like PCP might suit those people really well if they already have share options that just haven’t vested yet. Or anyone who has cash coming to them.

 

[T McGibney]

you could buy an income producing asset with the proceeds or invest it in the stock market , it would not be that difficult to put the money to work and derive an income from a sum like that

It still has to be put to work somewhere so its not exactly riches, just a means of putting food on the table. In my hypothetical example he'd normally be much better off keeping the land.

T - some might just look at the €2m figure and not even think of the small yearly amount of €42-48k p/a until the €2m is gone.then realise they bought or spent a load of nothing.

Exactly.

 

[Blackrock1]

It is built up over a lifetime by being thrifty and not overpaying for things. Driving a €30k car instead of a €100k car etc. They are then able to maintain this lifestyle well into retirement as they have lots of money and their lifestyle isn't overly expensive. It is not about not having a good life, saving loads of money and dying with millions in the bank.

there is a balance to be struck to be fair, a life time of thrift isnt for everyone.

 

[Peanuts20]

To me, there seems to be a lack of understanding between being asset rich and cash flow. Plenty of people during the Celtic Tiger thought they were millionaries because of the value of property and lived the appropriate life style, often funded on credit. When the boom went burst, they did not have the income to maintain that lifestyle. Same applies to farmers, whilst the asset may be worth a couple of million, are they really rich unless they are getting a return on that asset. ? In a lot of cases ( and I can think of a few bachelor farmers I know), they are not generating an appropriate return on that asset and live often close to the poverty line. However if they sold the land, it would destroy then mentally.

As for the urban/rural divide, there are swings and roundabouts. yes, the mortgage payments are higher in Dublin but so, in a lot of cases, are the salaries to attract and retain staff in Dublin. Converse of that is that transportation costs are significantly dearer in rural Ireland, no 20% reduction on Luas fares in Listowel, instead a massive hike in petrol or diesel.

As for education, I can think of a few "cute hoors" who left school at 15 and are plenty rich. To me, whilst education can and does help, it's often about attitude and effort as well

 

[Steven Barrett]

there is a balance to be struck to be fair, a life time of thrift isnt for everyone.

I haven't read the Millionaire Mindset but The Millionaire next door is a very good read.

For instance, buy an expensive car when you have made it. Not when you are trying to make it. No point in buying a €100k+ car when you aren't rich. Invest that money and buy a decent, cheaper car. In years to come, when you are rich, that €100+ car will then be a small percentage of your overall wealth. In other words, be the middle age man driving a Porche.

It is all about living within your means. Too many people have lifestyles that they may not be able to maintain. As Peanuts said, there are a lot of high earners but they aren't rich because they spend their money. Unless you plan to work until you die and earn the same level of income, there will come a time when you are going to have a drop in income. And because you haven't saved for the future and are not wealthy, there will be a drop in lifestyle...or more likely, you will spend what you do have in the initial years and then run out of money.


Steven
www.bluewaterfp.ie