How are people paying for their lifestyle

2 points.

alot of older people have seen their houses increase in value from the £7000 they bought them for to €750,000+ in the last few years. These people die and the money goes to their children who are free to spend it as they choose. Surely this accounts for alot of the conspicuous spending?

Releasing equity is not always done over 30 years. Many release equity over shorter periods and there is nothing wrong with this.


I would suggest to the OP that he is saving quite a lot. There are many people who are happy not saving, or just saving €200/month. You are saving €850 and have the capaility to save ALOT more in all honesty. There are plenty of people earning half what you earn and also have 2 cars, kids and a holiday and get on just fine.

“Nothing so impairs your financial judgement as the sight of your neighbour getting rich.”

JP Morgan

Thanks for the replies. I didn't want this to become a discussion on how I was spending/saving my money. This wasn't the purpose of the original post. I know we could be saving more, and are probably doing so, as we have a current account mortage, with the balance in the facitilty account steadly/slowing rising. I didn't want to include this in savings for simplicity. And we have bought a new house last year, (by the way, saved A LOT of money towards that, so we are taking a bit of a savings break, hence the 850 pm), and and there is extra spending going in on that - attic insulation etc. And one poster was right about the dog <grin> we got him last year and he has cost a lot in the first year, kennel, dog fence etc. I just renewed the house insurance policy and we get €260 if he dies, hmmmmmm.

The answers to my question can be summarised into.
1. Some people are living within their means.
2. Some people have released equity to fund thier lifestyles
3. Some people have inherited parents houses that are worth a lot of money
4. A lot of cars are company cars/older people with no mortgage.

It is a difficult question to quantify, bar going up to people in the street and asking them. I suppose I was looking for stats/opinions, e.g. 80% of new mortgages are equity releases etc., or car loans are typically over 10 years.

By the way one poster pointed out my use of the word "survive".... fair enough, probably the wrong word to use.

Thanks again,

I've noticed a strange phenomenon amongst some of my friends, that when they buy their first house they also end up maybe buying a new car, or a new kitchen, or put the downpayment on an apartment in Bulgaria. Maybe when you're borrowing 400, 500k, another 40k doesn't seem like much. Some of them seem to believe they are only getting a prepayment on their "equity" in advance, because their houses will surely rise in value by 20% within a year.

It's all nonsense, completely dependent on the good times continuing. Not a situation I'd like to be in.

Buddyboy said:

We regularly see people with 2/3 kids, two '06 cars, etc. and know that they cannot be earning twice as much as us.

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How do you know that this is the case? Or that they don't have other means that they can use to fund their lifestyle? Or (as you seem to be implying) that they are actually living beyond their means?

ClubMan said:

How do you know that this is the case? Or that they don't have other means that they can use to fund their lifestyle? Or (as you seem to be implying) that they are actually living beyond their means?

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To be honest Clubman, I don't know. It's all just supposition on my part, hence the original question. Some of the people I would know/be friends with, and have a guess at the circumstances, knowing the jobs they had and guessing at the income. The rest is just curiosity, standing on the road watching all the shiny cars go by, or going to Smths Toys and seeing the trolliies loaded with stuff coming out.

Hmm's post gives food for thought, some people are obviously taking out the mortgage and including the wedding, car, holiday etc. on the amount. Maybe everybody else is just a better money manager, or inherited money, or bought property early and sold it for a large return.

So that's why I thought I'd through it out to AAM and see if anybody could shed some light on it.

I think it's just that some people like to spend money and will do so if it's available, whether borrowed or not. Simple as that. Those who choose to be more prudent (or less obviously affluent) are less visible.

Our transition to a society of conspicuous consumers has been relatively quick: Any ex-pats I know who come back for the odd visit are astonished at what they see. Many compare our conspicuous wealth displays unfavourably with the more restrained attitudes of 'old money'. This kinda misses the point: A lot of the money in Ireland is indeed new money, and it would be more astonishing if this new money wasn't accompanied by a lot of what you might call typical 'new money' behaviour. It will pass. Enjoy it - whether as a participant or an observer.

Perhaps people don't save as much as 850 per month...plenty to pay off car loan. Strange how about 30/40 years ago, living on credit was frowned upon in Ireland and people who had to do so were considered 'losers'. Nowadays, if your not approved for credit the position is reversed!

I'd have to agree with original poster, that there does seem to be a lot of spending that doesn't seem to be related to income...
An anecdotal story I have is a coworker made Eu20-30k from selling her apartment this year, then 'invested' it all on a brand new 06 hairdressers car, last week she was complaining because she had been decline a 0% credit card transfer for her Eu5k balance...
I even see it in my family, an in-law has refinanced his house 3 times in the past 8 years, releasing equity for loans and to clear credit card debt...
I do think a lot of people are relying on the 'never never' but Visa rather than the old reliable HP of years gone by.
I think it will really hit home if we see another couple of interest rate increases...

extopia said:

Those who choose to be more prudent (or less obviously affluent) are less visible.

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Excellent point!

Given ,to put it mildly, the "unusually large" debt levels, Ireland has been a good example of an economy that can boom by spending other people's money and employing an army of people in the service sector to facilitate that spending!

I think the essential motivator to have people behave this way is a personal feeling of wealth growth brought about by booming house prices.
If you see your house as a free ATM out into the future then why worry about borrowing and spending now ?

If the housing boom is ending then I think we will see some adjustments. Difficult to predict how things will unfold but I would think a continuation of "business as usual" as seen in the past few years is unlikely.

Ye are all being very hard on buddyboy I think - imo he is right in that I see the scenario he painted all the time - ie. average salaries, 2 new cars, big holidays etc - i see nothing wrong with it I might add as all such choices are personal, sure feck it, nothing wrong with living it up either. But it does make one curious, so here are my musings.
The truth is there is an awful lot of money available to people through equity release, and tbh they as well avail of it, if they were financially prudent enough to purchase 10yrs ago, the value of their property will have increased 4/5 fold, their salaries will also have increased massively and now, it's probably quite possible that even with taking 100K out for lifestyle, their LTV is about 25%, repayments are similar in nominal terms to their repayments 10 yrs ago, so they're much better off. We should also bear in mind that many couples marrying in the past 10yrs would have retained one of their properties for rental - there's a nice 500K injection, and as someone else pointed out, inheritances and parental money help too.

We are the most indebted nation on Earth, that's whats funding our lifestyles. Equity release is a deliberate 'marketing misnomer' Glenbhoy you don't pay interest on equity, you earn interest.

Duplex said:

We are the most indebted nation on Earth, that's whats funding our lifestyles. Equity release is a deliberate 'marketing misnomer' Glenbhoy you don't pay interest on equity, you earn interest.

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Just shows the power of marketing. I remember when people would whisper how someone had to "re-mortgage" their home, invariably in response to some personal financial crisis.

Now people talk glibly about "equity release" as though their home was just a big pile of banknotes it would be foolish not to tap into.

"affordability" and the laughable "affordability index" are my favourite BubbleSpeakisms...

Nothing wrong with an equity release if your mortgage is already down to a comfortable level and you don't have any other significant borrowings. No point in paying for a car, holiday, kitchen etc. over 20 years though.

I'm not too sure about the company car arguement. The benifit in kind you pay on a company car is not much less thatn the repayments on a car loan for a car of similar size. Advantage of buying your own car is that you have an asset (though probably only worth a few thousand euro) at the end of the 4 year loan. You never own the company car, and when you leave the company you've nothing.

Agree that company car means you don't need loan approval or anything and allows you a slightly bigger car than if you had to pay the money yourself in the form of a loan. But I doubt it is that relevant tin this discussion.

walk2dewater said:

"affordability" and the laughable "affordability index" are my favourite BubbleSpeakisms...

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Why do you find the concept of affordability so amusing? Do you not feel that it can be a very important aid to comparability?

Now people talk glibly about "equity release" as though their home was just a big pile of banknotes it would be foolish not to tap into.

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Why is that necessarily a bad thing? It should be remembered that we only have one life, sometimes it can be fun to enjoy it too

Glenbhoy you don't pay interest on equity, you earn interest.

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Equity refers to ownership interest, it may or not pay interest (though more commonly divdends?).

Glenbhoy said:

Why do you find the concept of affordability so amusing? Do you not feel that it can be a very important aid to comparability?

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If you're comparing like-with-like, then yes. Adjusted for inflation, yes. Adjusted for higher proportion of take-home pay, yes.

But if you're comparing the affordability of a 15-/20-year "average" mortgage from 1986 and a 35-/40-year "average" mortgage from 2006, and both figures seem to suggest that affordability hasn't changed much, well then that is pretty laughable......