Recently we booked a trip to Europe. The tickets came in at $A5,900. And we're not yet done with trip costs. On the other hand, the people I am going to work for in Sweden are going to pay about $A2,500 of that, but probably not till October. Also I bought a new laptop for $A2,199. I'll gradually get some of that back over time through depreciation deductions on my tax but only 15-30% over 3 years.
Both of these were initially paid for with a credit card. But we will have the credit card bill paid off by the end of this month. I immediately paid off $A2,000 of the credit card bill with cash we had in a cash management account at Adelaide Bank. My pay went into when I worked for the Uni here and all Australian dividends etc. which are not reinvested are paid into. OCP.AX will be paying $A1,200 of a capital return into this account in two days time, which will help pay this back. My rationale is that I want to have an immediate Australian credit line available for emergencies. The card limit is $A10,000. Now we have close to $A4,000 available.
Next move is to set up to borrow $A4,000 on my Australian margin loan for a couple of weeks time just before the credit card is due. With that and the cash in the Adelaide account we can pay off the credit card. We had about $A32k of borrowing power, so I feel safe using an eighth of that. Over time it will eventually be paid back. The interest rate is lower than that on the credit card so that makes sense.
I'm still waiting to be paid for the two consulting jobs I did recently. The money should be paid in US Dollars for those.
7 comments:
I remember shuffling money around like this too. However, looking back, when I was doing this, it was because I had bought things I couldn't really afford... If you don't have the liquidity for $8,000 of discretionary consumption, should you really be spending it? Just a thought.
Well, I could sell some shares or mutul fund units immediately to cover the cost. After all they are worth about 50 times what I just borrowed... But where the stock market is right now that doesn't sound like a good idea. So instead borrow against them for a little while. That's the point of the post. I'm waiting to get paid $US3,000 very soon and $A2,500 of this expense is refundable in a few months. That more than covers the extra borrowing here. So seems justified to me. I don't believe in having to "save up" the money for every expense.
The laptop isn't discretionary - I can't really work without it which is why it's tax deductible. And $A2,500 of the flights isn't discretionary either. I just have to pay myself up front to fly to Sweden to work (will get paid expenses plus SEK50k).
That's exactly the way I was thinking when I last did this, but that was back in mid 2008. Shortly afterwards, stocks dropped further than I thought they would, and I ended up with some relatively nasty margin calls. It worked out that had I not "borrowed" the money from myself, I would have avoided the margin calls, and ended up much better off in the long run. Particularly bad timing on my part perhaps, but something I have since regretted.
I agree that it is a bad idea if you are anywhere near your borrowing limits on your margin loan. But this was only 1/8 of the available borrowing power. So we are nowhere near that. And of course, we could use the credit card in the event of a margin call. It's very sensible not to borrow too much, but people often seem to go to the other extreme and become afraid of any borrowing. Somewhere in between there is a sensible use of credit.
Of course you could have bought a similar-spec Dell Laptop for under $1000 rather than the Apple ;)
Since your last Apple laptop only lasted a couple of years before kicking the bucket, I'm surprised you didn't shop around for computing grunt.
Perhaps there are some apps you use for work that aren't available in Windows version? If you spent the extra $1,500 simply for "ease of use" I'd question whether you really *had* to spend that much for the new laptop...
I'd also have to buy Windows versions of all my software then. I think that would definitely wipe out any supposed gains. The new Mac laptops do seem more robust and the previous one I had was definitely defective from the get go. There is though just no way I'd switch to Windows after 20 years of using Macs.
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