Debt Man Walking

A 10-Step Investment and Gearing Guide for Generation X

Bruce Brammall

• Publisher: Wiley
• Year: 2012
• ISBN:
  9781118303771
• Edition: 1
• Topic: Personal Development
• Subtopic: Personal Finance

The key to wealth is... a four-letter word.

Debt, growth assets and time are the perfect ingredients forGeneration X to create real wealth.

If you were born in the '60s or '70s, remember Billy Ray Cyrus, BMX Bandits, Sony Walkmans, the fall of the Berlin Wall, 'Who Shot JR?', the dot-eating Pac-Man-- and you're wondering how any of that could improve your financial position-- then this book is wa-a-ay overdue. Debt Man Walking will have you marching to a different financial beat, because Gen X's money needs are distinctive. Inside this book you'll discover:

• how to maximise your opportunities using investment debt
• that there are actually three types of debt: dumb, okay and great
• that your 'relative' youth + diversification = wealth
• how you can double your super nest egg in 15 minutes
• why life as a Gen Xer is an excellent adventure... dude.

Write your own ticket

• Your lotto dream dollar figure
• Providing the incentive
• Fear and greed
• Nailing down some goals
• When plans change ...
• A neverending money supply?
• The X-Flips: just ... Say ... yes!

How much would you have to win in lotto to quit work forever?

It’s a great discussion to have with any bunch of friends or in any workplace. What’s the dollar figure and why? Would you keep working regardless?

I was talking about this with journalist colleagues one day many years ago (about 2000). Journalism is a great job for spending hours talking bollocks. Most of those conversations are considered ‘research’. It’s almost encouraged in a newsroom — the ‘swapping of ideas’. In many other jobs, such frivolous discussions might be considered time-wasting. But not among ‘reporters’.

One colleague said he’d quit work forever tomorrow if he won $1 million. He was one of the younger Baby Boomers and his mortgage (the non-deductible bit, at least) was gone and his kids were almost off his hands. He reckoned $1 million could get him through to accessing his super and see him shift into retirement.

Two Gen Xers in the group scoffed. They would still show up for work if they won $2 million or even $3 million on a Saturday night. They were late 20s, had above-average mortgages and one had two kids. Both of them said their absolute minimum to give up work forever was $4 million.

WASTED ON THE WRONG PEOPLE

How many times have current affairs shows run stories about people who win $1 million to $2 million, but are broke again within years? What they didn’t give away to family and friends, they wasted on the frivolous. And then it’s back to work. They didn’t even pay off the mortgage! D’oh! It was their big financial opportunity and they blew it.

The problems for the jackpot winners who burn the lot are numerous. They clearly had no idea how to handle money. Even though they presumably dreamed about it for years, they had never given any consideration to how to make the most of it, if they did get it.

They’d planned on doing things such as buying a new car, getting rid of the mortgage, helping out the kids or grandkids, a bit of an overseas holiday. But they blew it on short-term gratification. Lump sums like that can create an income for life. A sum of $1 million is enough to get an annual income of, potentially, about $70000 that will rise with inflation forever (see step 2).

The chance that your numbers will come up to win division one is one in 2 million (if you play four games). Your chances don’t get any better if you play once a week for 20 years, but at least you’ve had 1000 shots at it.

But lotto is not a plan to become rich. It’s punting — a great, big gamble with impossible odds. If you added the money the average Australian blows gambling (such as lotto tickets, scratchies, pokies and the horses) each year, you’d have something that could really be turned into a serious figure.

Grasp this concept early — getting rich has nothing to do with luck. It’s not about picking winners. It’s not about a big bag with $$$ signs falling in your lap. Making your fortune is actually a process, or a recipe. And Generation X, led by Gordon Ramsay, has just arrived in the kitchen. (Move over Margaret Fulton. Off you go, Gabriel Gaté.)

What’s your dream dollar figure?

Everyone can name their lotto price. The actual number is sort of irrelevant. What’s important is what that number means to you and how you got to it. Why did the Boomer choose $1 million? Why did the Gen Xers choose $4 million? That’s a pretty serious difference for people only about 10 years apart in age.

Your number should boil down to the minimum figure that would allow you to achieve all of your life’s goals. It might buy you the home you want, in the neighbourhood of your choice, with leftovers that allow you to achieve other goals you’ve set yourself. Perhaps the annual rental of a ritzy holiday home, buying a beach house, new cars, being able to retire early, travelling the world following your favourite sporting team or having a personal masseuse, hair and clothes stylist, like you were one of the Heathers.

Is $1 million sufficient? Is $4 million just plain greedy? Maybe and possibly. In any case, it can be a fascinating conversation to have with friends. It will give you a great idea of what their dreams and aspirations are. They’re effectively telling you what their dreams are and how much they need to fund them.

Everybody’s dreams are different. The figure I named that day is still about the same figure I’d say is the amount that would get me to quit fulltime work forever. My dreams haven’t faded with inflation (even if I’m substantially closer to reaching that goal).

But I’ve got less of a chance of winning the lotto than most. For a start, you’ve got to be in it to win it. And I’ve never, ever, bought a lotto ticket.

There’s nothing necessarily wrong with buying lotto tickets. (Personally, I think you’d probably be better off buying shares in one of the big gambling companies.) So long as you understand that the technical mathematical term for the chance of you ever winning lotto is ‘sod all’ and that it’s only spare cash that you’re blowing, and that you understand that your real chances of picking the right six numbers are slim and lotto is therefore unlikely to pay off your credit card for you ...

So what you need to take from this discussion is: ‘What is it you want money to help you achieve?’ Don’t answer that right now. Tony Barber will give you some Sale of the Century thinking music and time to write some answers later in the chapter.

‘Can’t Buy Me Love’

I can’t remember where I first heard it, but it’s stuck with me for life: ‘Money doesn’t solve all problems. And it creates new ones’. What sort of problems can too much money create? The worries of the wealthy are no less concerning — and just as likely to induce sleepless nights — as those facing people struggling to make ends meet (see table 1.1).

Table 1.1: the financial concerns of those who live ...

Payday to payday	Comfortably
How will I pay this month’s utility bills?	I’ve made my money, but I’m scared that I’m going to lose it.
If I give up buying a morning coffee, I could save enough for a house deposit or for an investment. But that will take forever.	How would I cope if the Australian or international stock markets collapse?
How can I get what my partner/kids want for Christmas?	What if the property market implodes tomorrow?
Where can we have a cheap holiday this year?	How can I get back up to date with all this investment paperwork?
How will I get my credit card back to zero?	If interest rates fall, will I be able to survive on a lower income?
	Where’s the next big deal coming from?
How am I going to meet the rent/mortgage this month?	Will the kids be ready/want to take over the family business?
What happens if I lose my job? We’re so far in debt.	Is what I’ve got really enough?
Interest rates have risen. I’ll have to redo the home budget.	Should I say no to this investment opportunity?

Personally, I want my problems on the wealthy side to include: ‘A customs officer of which country is going to be the next to put a stamp in my passport?’ Which of the two groups has the more serious concerns? To each group, plus anyone who thinks they fit in between, their concerns are very real.

Don’t think for an instant that reaching your chosen financial destination — whatever point you choose that to be — will be the day you get to cut loose. It’s possible, but don’t count on it. It’s a rare person — rich or poor — who can claim not to be concerned about money. The few that I’ve met would actually be happy whether they were loaded or struggling week to week.

Being content is more a state of mind. That said, most of us would rather have the concerns of the wealthy than the poor.

Wealth can bring a fantastic boost to your confidence that can flow on to other aspects of your life. There’s little more satisfying than the sense of achievement you get from putting in place a financial plan that delivers everything you want for yourself and/or your family. Think of the wealthiest friend you have. You’ve probably noticed that they have a higher level of self-esteem than others. They don’t necessarily brag about money (some, obviously, can’t help themselves), but they have an inner confidence that comes with the pride of having achieved financial security.

No incentive, no point

I’ve been playing indoor cricket since about 1998 with some mates. We’re called the Tossers and I’m the wicketkeeper. I’d like to think I’m the Rod Marsh of the squad. However, they assure me that I’m only the 18th best keeper the team’s ever had — a compliment that probably ranks alongside the ‘as cool as Michael Bolton’ variety. Thankfully, it’s more about the beer after the game than being Bodyline serious. And that’s not too hard to s...

Table of contents

• Contents
• Title
• Copyright
• Dedication
• Acknowledgements
• About the author
• Prologue
• Introduction
• Step 1: Write your own ticket
• Step 2: Money’s simple rules
• Step 3: Risky business
• Step 4: Gen X’s investment edge
• Step 5: Home: investment central
• Step 6: Investing: the debt mantra
• Step 7: Tax, Santa and other little helpers
• Step 8: Blockbuster budgeting
• Step 9: Cover your ass(ets)
• Step 10: Choose your own ... neverending story
• Conclusion
• Appendix A: The X-Flips
• Appendix B: 50 investment, gearing and ‘Gen X Rules’ rules
• Appendix C: Glossary
• Recommend to a friend
• Index