Aug 292007

Live for today, people! That’s the general message being touted by financial institutions and so-called financial advisors, according to this site I came across in the morning news mail. I’ll be bookmarking this site as it seems to have some interesting commentary on matter fiscal.

The article in this morning’s mail asks some perennial questions and makes challenges to the great Australian dream as to its validity. Just how pertinent is it in today’s world to own your own home? Can you live a full and satisfying life without owning the roof over your head? Is debt good if it gives you that full and satisfying life?
All really valid questions, especially the full and satisfying life implications. Is debt good? To my mind, no, it’s not. What possible point is there in working hard for someone else’s benefit? Take the average Aussie home-owner, as an example. Average home loans hover around $250k, so clearly, there are a lot which are much bigger. My own is under the average, but that’s a passing relief to me as I know for a fact that with 15 to 20 years of working life left to me, it’s highly unlikely I’ll ever own the property before I retire. Not that I really want to, because it’s in the heart of suburbia and I loathe suburbia. That’s another tale. Suffice to say, I don’t own the property, I only rent it off the Bank on a rent-buy scheme we all know as a home loan. Does that scheme make me sleep well at night? Hardly! Does it give me a full and satisfying life? Are you kidding?! So what benefit does ‘owning’ a home give me?
I look at my property in this light. I’ll accrue as much equity as possible before I decide to sidestep society and fade into retirement on a few acres at the back of beyond. That equity will fund my retirement years to a style which gives me that much vaunted full and satisfying life, at least what’s left of it by then. I’ll be using debt to give me that lifestyle, which is rather perverse because for most of my adult life, I’ve been striving, as all good breadwinners do, to pay off that home in the ‘burbs and give my family the life I think they all need, yet haven’t managed to succeed on my own behalf. Why? Because I’ve always been concerned with debt. For me, debt is bad, but when I cease working for a living, debt will be good. I’ll use a lending product which is euphemistically called ‘equity release’, or in blunter terms, a reverse mortgage. I’ll still be renting my roof from the Bank, but in reality, the contract will be an operating lease, not a rent-buy deal. I have no desire to leave anything behind for my off-spring, and they know it. Our family’s philosophy is to look after number one because no-one will do it for you. So, I’ll extract maximum equity from my retirement property and invest for an income to maintain a lifestyle until I no longer need to be concerned about that lifestyle. At the end of the day, when I’m gone & my wife follows, the Bank can take back their property and hock it off to recover their debt and dispose of any surplus in accordance with our estates. Nice and simple.
So, I guess the answer to ‘is it necessary to own your home?’, as far as I’m concerned, has to be ‘no’. Have some equity, certainly. Buy wisely in a growth market, for sure, but in reality, there is no urgent, driving need to own the asset free and clear at the expense of a full and satisfying life. This ownership thing is a figment of our collective imaginations implanted by the very same lending institutions which continue to plunder our cashflows with more and more promises of cheaper debt and materialism, at the expense of what they claim they’re providing, being that full and satisfying life. My suggestion is to treat your home or investment property as superannuation. Make it grow while you can, if you can, but not to the detriment of your lifestyle now. Don’t be sucked into the whirlpool of consumer debt because it’s a one-way journey to a Part 10 arrangement.
As with all things in life, a balance needs to be achieved. That balance is a very personal thing and no one person can tell you what’s right or wrong for your preferred balance. If you want my advice, if something feels right, then do it. If you have second thoughts, go do something else. You’ll rarely wind up with regrets.

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