Tuesday, September 29, 2009

In Your 20s, flushed with "Good Debt"

"You're beautiful, dirty rich" sang Lady GaGa. Young, beautiful, rich, intelligent and switched on. You're the master of your credit card and multiple investment loans, know where you're headed in life and you've had successes. Great. Where to from there?

What is "good debt"? If you're reading this and you've got "good debt" then I presume you're looking for something to validate yourself or your choices. Or maybe to compare how you've progressed in life and where your peers are. Good debt - loans on assets that provide you with investment income or capital growth. Margin loans and investment/mortgage loans are good debt. You borrow money, you buy some shares or buy an investment property and it pays you back in the form or dividends, rental income and/or capital gains. Life is just peachy!

If you find yourself in this situation then you are either a child prodigy, a trust fund kiddo, an ambitious person, operate your own business, high income earner, had an education in finance or had financially literate parents who taught you by their actions or directly. It's not a common scenario at all to be in your twenties, have plenty of savings, assets and also experienced the shady and crazy side of life in your twenties.

So what are you hoping to learn from this?

1) Buy more investment properties
2) Buy more shares/stocks, grow your portfolio
3) Increase your superannuation/retirement savings
4) Watch your asset allocation and rebalance when necessary
5) Keep repeating all of the above for your wealth strategy

That was simple wasn't it? ;)

Ah but now you say, I just wasted my time on reading crap. You know so much, and you've achieved so much but you lack the finer points and the finesse which is probably what led you onto reading about these matters. Congratulations but you've reached the pinnacle of the investing pyramid, early in your life and you are going to be a millionaire.

You should be perusing financial advice for those in their 30s and older, learning the finer techniques of investing in multiple properties, refinancing loans, directly investing and trading stocks, the finer points of calculating returns and reading financial statements, the ideal vehicles to buy your investments under (company or trust structure) and have a fantastic team of accountants/financial advisors/lawyers/solicitors working for you.

Articles about financial management in your twenties should not really apply to your scenario anymore. They focus too much on debt management and how to handle credit cards.

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