Debt has undergone a massive face lift in the last 40+ years. Once for a farmer to get a loan he/she'd have to prove they virtually didn't need it before they could get a loan. Nowadays main requirements are a legal name & a pulse. Somewhere in between we saw interest rates hit 25+% and some folk that survived or avoided that debt period learnt good but very hard lessons.
Nowadays housing has turning into a investment currency whereas it used to be somewhere for the family to buy & live in. The rise of investor buyers meant that housing prices rose faster than actual value or to put it another way, the market value was greater than the real value so we had what most people call...a bubble. It's not burst, but it is slowly leaking, faster in some areas than others.
Last night on TV a chap in severe mortgage stress was interviewed. He is at the point where he's using what equity he has in the family home to pay the latest payments. This should scream serious mis-strategy.
He's reducing what equity he has because he can't pay off that which he hasn't.
His debt is ballooning, he is losing his home and the sad part is he's going to lose more and more along with whatever credit rating he has.
It comes down to this, the old adage I was told as a kid fresh out of school.
"There's a good time to use debt, there's a bad time to use debt but there's absolutely no such thing as a bad time to pay debt off"
It seems we have all sorts of financial advisors, most are motivational speakers pretending to be financial gurus. Selling seats in the latest strategies to make it great but how is it so?
Possibly some of their advice & strategy are useful, some definitely isn't.
We teach mathematics in school, but not the basic fundamentals in finances.
I think its time to teach school kids the basics of finance, the traps, the pit falls and the strategies to avoid financial horror.
Its time to teach financial literacy.
It's time to teach financial fundamentals.
Its time to teach financial strategies.
Its time to warn of the traps, the pitfalls and the ruthless that will sell people up the river with way too much risk.
I see a young couple in town who've bought a rough fixer-upper house.
They have the skills, the plans the drive and the support family to help turn it into something far better than it is.
They could have gone for a massive loan and bought a new or near new 4 bedroom, 2 bathroom McMansion. They didn't. Its very hard to add value to a finished top end home.
The fixer-upper, they may even double their money if they buy it, fix it and either rent it out or live in it for 4 or 5 years.
They're not lucky. Its not luck. They're fortunate to have parent like they do who have worked out what works, what doesn't and how to get ahead at a slower & safer pace. Chances are these 2 happy kids will not be 2.4kids and a massive double mortgage at 55 years of age.
Thing is, if all of WA were taught both in school and after school these sort of financial fundamentals we may well see less artificial growth in various sectors like housing but we'd see a much less heart breaking amount of financial grief that inevitably brings undue stress and hardship with untold pressure on marriages.
Time for a political party to push financial literacy policy for schools.
Time to financially drought proof farms, town businesses, communities, families & government budgets in WA
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