How are people paying for their lifestyle

[DirtyH2O]

While I agree that people have borrowed a lot of money I can't help comparing the situation to Ireland in the last two decades when cheap credit was not available.
There were a lot of people in the 1980s who only saw their current accounts leave the red the day their salaries hit their account to return back to overdrawn as the month progressed. With mortgage rates way beyond anything we will see in the next few years at least.
I worked in the lending review section of a bank in the 1990s and there were so many customers who owed a multiple of their salary on car, holiday and personal loans while still renting or living at home and were in the type of jobs that didn't promise any major pay rise to help them escape. As soon as they reduced one loan enough to qualify they would add another to pay credit card or take another holiday.
If this is bleaker than either of those periods I don't see it yet.

 

[conor_mc]

Technically, this is where a lender will make the greatest profit. They will happily allow it. It's up to the individual to have more knowledge than to allow this, not the ability to do it to be removed.

Absolutely. My point being that in the hands of the financially astute, it's simply a way of being financially astute i.e. lower interest rate.

In the hands of the financially challenged, it's a weapon of personal financial destruction.

That's why I disagree with the heroine comment. It's more like the McDonalds burgers, y'know. Be sensible and eat them in moderation and they're pretty darn tasty. Be an idiot and eat seven a day... well don't come looking to sue McDonalds cos you're overweight.

 

[homeowner]

I think the biggest problem with all this borrowing is going to be when people who are living beyond their means settle down and have kids. With a 40 year mortgage there is no way one of the parents can give up work or even take a career break. You will be working till you're 65.

Its all very well while you are single and have no kids to be changing your car every 3 years and living the high life, but every luxury item you buy is another month or two that you could be spending at home and not working. It all has to be paid for eventually.

Personally I think that the OP is very sensible. So you dont have the flashy cars now, but in a few years if you do start a family, you will have a nice nest egg put away and perhaps one or both of you can take some time off work and enjoy being a family together and get out of the rat race for a while. To me that would be a much better way to spend your money than on a car or wide screen tv or foreign holiday.

 

[TTV]

Originally posted by Satanta

Apologies if I'm taking you up wrong, but if it's an issue simply with mortgage equity release I wouldn't agree. Those same people will/would live beyond means and rack up debt with or without that outlet of credit. Where there's a will and a lack of self control, there's a way!
If it's an issue with the general spending habits of some, then fully agree. They will find themselves in trouble in the very near future, if they aren't some of the ones who've already arrived there.

No problem, as pointed out by conor_mc my analogy wasnt the clearest. The macdonalds one is far better and to represnt our current situation closer it is like a village that has never had a macdonalds or anything and then suddenly one opened. Now the villagers fell in love with Macdonalds - the convenience, the price. They know they are bad for them but watching adverts sponsored by macdonalds with skinny healthy models they continue day by day eating them. Thats how I see the current situation. After that I am all analogied out and also cannot stand macdonalds......

 

[baby_tooth]

everyone here is looking at it from a mortage-interest rate perspective.

what about the flip side of earnings.

i know of carpenters, bricklayers, electricians who take home over 2k a week in cash, after tax, and then have aprox 1k a month in nixers...

things won't be like that for ever....but do they realise this?

 

[extopia]

Ah, but Conor, since our economy moved into this new paradigm we will all now work for the full 35 yrs, back in the day the bank knew you'd be lucky to work for 10 of the 20 yrs term, thus we've more time and income to pay it back.

What makes you so sure that you are immune to losing your job - and being unable to find another job with a similar wage - in the event of a downturn in the economy?

 

[extopia]

well don't come looking to sue McDonalds cos you're overweight.

Actually that happens all the time.

 

[ClubMan]

everyone here is looking at it from a mortage-interest rate perspective.

what about the flip side of earnings.

i know of carpenters, bricklayers, electricians who take home over 2k a week in cash, after tax, and then have aprox 1k a month in nixers...

things won't be like that for ever....but do they realise this?

Maybe they're squirrelling some of it away for the possible rainy day?

 

[RainyDay]

but yet, shopping centres are packed...Very sad. Go to the Square in Tallaght, just to give yoa an example, and see the kind of people that are spending fortunes that obviuosly don't have any money! I wonder, if tomorrow one of their kids or themselves got sick, or lost their jobs, how would they manage? .

How can you tell who has money and who hasn't, just from a casual encounter in a shopping centre?

 

[Raskolnikov]

Some deluded nonsense posted here. A bank won't let you remortgage your house to buy a car or pay for foreign holidays unless you've taken a significant chunk out of the mortgage (ie, you're middle-aged and earning more than average). If you want a new car, then you take out a car loan from the bank and that's assuming you're managing your mortgage payments. Your credit rating is constantly updated and monitored, if things start getting out of control, it's not long before alarm bells go off and the credit tap is stopped.

 

[extopia]

You're forgetting about "passive" equity due to a rising property market. In other words your house is worth a lot more so you can "top up" your mortgage.

What you spend the money on is up to you. You can't be forced to take out a car loan to buy a car.

 

[No-one-home]

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.

I live in a small estate of 50 houses built 5 years ago. A quick scan around (and from chats at residents meetings etc.) would suggest that about 20% of the householders are what I would consider "prudent" or "living within their means" the rest seem to be on the "spend, spend, spend" train to no-where. Mercs, BMW's, "investment properties" in Bulgaria or Dubai (or in one case both!) you name it. I was chatting to an EA a few months back and he told me that some of my neighbours have mortgages 5 times that of my own!

I would say that a huge amount of people have blown money on short term purchases through long term borrowings on "equity release".

"Keeping up with the Joneses" has reason to an art form in this country, I nearly burst myself laughing at one house I had to call too recently. It was a 3 bed semi and the driveway wasn't long enough to park a car in and close the gates, not to be detered however the owner had fitted electric gates at the side of the house! They served no useful function but to keep the dog in, but I guess the remote control looks good with the car keys (Lexus) when they are down the pub.

 

[triplex]

interesting thread. Looking at a lot my friends and colleagues ages 28+, who matierally always seem to have everything - hair done weekly, fashionable expensive clothes, houses done to the last, i'm convinced it's because they don't know what else to do with their time...they have no hobbies, conversations are always of a shallow nature - even tv schedules are intellectually starved... so they go shopping, with the credit card..and then drinking at the weekend - cos they can't think of anything else to do.. the debt is never discussed...

keeping up with the Joneses is only a part of it...

 

[Johnny1]

€110k a year no children driving a couple of bangers and you are wondering how other people manage your troubles are small.

 

[baby_tooth]

€110k a year no children driving a couple of bangers and you are wondering how other people manage your troubles are small.

is that not the point!!!....ones prudential and alot of others aren't.

makes you think, either the others he is refeering to are amazing money managers and can extract amazing value from each and every euro, or else, they are pulling down alot of debt.

which the stats out there prove to one and all.....

 

[Johnny1]

is that not the point!!!....ones prudential and alot of others aren't.

makes you think, either the others he is refeering to are amazing money managers and can extract amazing value from each and every euro, or else, they are pulling down alot of debt.

which the stats out there prove to one and all.....

anyone with this sort of income and no expenses should not be worried about how other people manage.

 

[baby_tooth]

anyone with this sort of income and no expenses should not be worried about how other people manage.

tell me again what the tax rate was again less than 15years ago!

tell me again what fraction of tax the paye worker paid.

come on...coffee time

 

[Johnny1]

tell me again what the tax rate was again less than 15years ago!

tell me again what fraction of tax the paye worker paid.

come on...coffee time

You might be able to find the answers to these questions when you lose a few of your baby teeth.

 

[baby_tooth]

You might be able to find the answers to these questions when you lose a few of your baby teeth.

toucheee...lol..

but in fairness it does have a large bearing on everybody.

everything here is property obbsessed and every tom-dick and harry see property as an investment...to the detrement of all other types such as manufacturing or technological companies and so on.

each country needs capital to invest in its country, be that infrastrucutre or manufacturing etc...

instead we buy items made in other countires and send our money abroad. we give them jobs in that they make the goods, tey give us the money to buy the good, we give them the jobs and the interest...

seems a bit one-sided, where they get all the benefit!

 

[Evolu]

... I think the vast majority of people here are safe. We are looking at "askaboutmoney.com" don’t you know!

Its the people that are not questioning there situation on an ongoing basis (like potentially the people the poster posted about originally) that are in trouble (maybe).

It all comes back to financial education doesn’t it!

The difference between

1. Net worth and cash flow (I personally know a farmer worth 20-30 million and struggles monthly with the milk quota to support him).

2. The difference between a cashflow asset and a cashflow liability. (One puts money in the pocket monthly the other takes money out... even if its your car and worth 50k. !). I personally know a professional landlord... spent the last 10 years only buying cash assets... now he has 11k a month without working.

3. The difference between good debt and bad debt. Debt to purchase a cashflow asset is good, debt to fund a boat (which takes money out each month... bad!)

It all comes down to a bit of fundamental financial education! Who knows if these people are financially astute or not, who knows if most of the 04+ BMWs are leases... who knows!

I tell you one thing do, there is definitely an air of 'keeping up with the jones' and definitely an overvalued property market here boosting peoples spending habits...