Great Income, No Assets: Avoiding the Curse of the GINA Generation

If you are aged between 25 and 45, earn a good income, but are still renting and have no assets of any real value, you could well be a GINA, as in Good Income, No Assets.

So you're not saving for or paying off your home. So what? You earn good money. Drive a nice car. Wear nice clothes. Travel to exciting places. Have a great life. And you have compulsory superannuation for the future. What's wrong with that?

Well, unfortunately, there is just one little snake in your Garden of Eden. Your whole quality of life depends on your income. If that stops, life as you know it stops. And in this world, there are only two sources of income: exchanging your labour for dollars, or saving and creating capital that earns income.

If you are a GINA, all your income at the moment is generated by selling your skills on the labour market. But that is only the first stage of your financial journey through life.

The next stage in this personal financial journey is about transitioning the source of your income. That is actually what financial planning is all about. It is the slow, gradual transition of income from labour to capital.

And the reason why not saving or paying off a house separates the GINAs from the mainstream of 30 to 40-year-olds is that home purchase is the most common way to convert some of your income into an asset, instead of just using it to pay rent.

What happens to you if you don't make that transition? If you continue to be a GINA, you will never accumulate capital and invest it in assets. In effect, this means that the writing is on the wall for the GINAs. They may have a great income (that is taxed) and a great lifestyle right now, but 20 years down the line, after they've had a lovely lifestyle in their working life, they are looking down the barrel at 20 to 30 years of hard times. (Do you think you would enjoy swapping an annual household income of $100,000 or more for a compulsory super payout of $20,000 to $35,000 a year in retirement?)

That's the problem with compulsory super. It lulls you into a sense of false security. But in fact, if an 18-year-old started work today with a reasonable income and had a compulsory super contribution of 15%, they could just manage to live (assuming markets behave themselves) in retirement. So if you are not socking away 15% or starting at 18, then you can forget about relying on compulsory super to get you through retirement comfortably.

It is worth asking what turns someone into a GINA. The root cause seems to be a mental attitude of ?can't afford to buy, can't manage to save for a deposit, barely can afford to pay the rent? that leads to giving up on the idea and compensating by lifestyle spending. It's a live in the present mentality that says: - I can't do that anyway, so what's the point, have the holiday, have the nice rented apartment, have the good furniture, have the eating out?, which in turn perpetuates the problem of having a great income and no assets.

This is a chicken and egg problem. Capital is the chicken, and chickens lay eggs, and eggs are the income. That's what being a GINA is about - eating that chicken and gorging on that chicken and then there are no eggs, and finally wondering why there are no eggs. There will never be eggs, because the chicken's been eaten.

And the only escape is to change the attitude - today. To stop thinking 'now' and make a conscious decision to consume less and save and invest more. And to make that work, you need a goal and a plan. Better still, you need a financial adviser, who will help you define your goal, develop a plan to achieve it and keep you true to your decision. (Otherwise it's like giving up smoking or going on a diet with no support or strategy - good intentions that somehow never last).

The goal of a financial plan is about growing the chicken, not eating it, to a point where its eggs will sustain you. So the best thing a GINA can do is work hard to start getting their hands on some chickens. That could mean buying a house or a range of other strategies that a qualified financial adviser can tell you about.

Of course, Moneytree Partners would like to be your financial adviser, but you don't have to choose us. Choose anyone you trust and respect. But if you want to break the curse of the GINA, talk to a financial adviser - any financial adviser - while there is still time.