house in Australia

I have two aunties, both are earning a net income of $7000 dollars monthly but their life is so different like one in the sky and another one on the land. Why I say so? Now let’s see their life. The first auntie is having a car purchased with cash and without any car loan. What makes her stress is the housing loan for two houses she own.

First auntie’s portfolio

  • Income: $7,000
  • Monthly fixed payment: $4,100 ($3000 for first house and $1100 for second house)
  • Remaining income: $2,900

Because both of the monthly payments on housing loan has taken up more than 50% of her income, she left $2,900 for living each month. This means every day she can’t spend more than $100 dollars. Now let’s see the second auntie’s portfolio.

Second auntie’s portfolio

  • Income: $7,000
  • Monthly fixed payment: $2,000 monthly payment on mortgage
  • Monthly car payment: $500
  • Remaining income: $4,500

The life quote for second auntie is “Once in a lifetime”. She goes for the best for everything, the best hotel during travel, the best meal, best dinner, best car, and never really think too much when spend money on something. According to the numbers above, she can spend $150 dollars each day.

If we analyze both cases, second auntie is living a happy life because she doesn’t have to worry much each day while the first auntie have to be careful on her spending due to her investment to an extra house. However, in terms of assets, first auntie tends to have extra money compared to second auntie. Both of them are 57 year-old and 55 year-old this year. Let’s say the first auntie sell off one of her house after 10 years at $500,000. She will have an extra $500,000 compared to second auntie at the age of 57 while second auntie may not have this extra cash from the investment first auntie made.

First auntie scarifies a ten-year time to live a simple life and wait to have $500,000 at the age of 67. My question is, is it really worth to do so? For my second auntie, she spent everything she wants and enjoyed the best for her 10 years which is cool. However, she end up own nothing more at the age of 65. For me, I think Balance is important here. We should invest part of our income to something that will bring huge return in the shortest time possible, but we should also allocate enough money to have a good life each day. If you look at top 100 riches people in Forbes, none of them became rich by eating out less. They became rich by working in industries that paid extremely well or by building business that they later sold.

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