Sunday, 15 December 2019

Money guilt responsibility

There is not a day that passes when I do not reflect on how lucky I am. I retired at 55 and have a lovely home and a boat plus no real money worries looking into the near future. I then read a story posted online as it was linked to a lady living on her boat in Oxford  - link here Click Me

My initial reflection was "that's a challenging financial position" no doubt one experienced by many all over our country. Then I got to compare it with my situation.... but not how I live now, how I lived when I was in my twenties and it was very different to now.

I recalled a week when we ate only beans on toast  - yes each evening as that is all we could afford.

When we did go shopping I took a calculator and we had a set budget, I seem to recall it was £18 for a weeks shopping, we chose wisely and when we hit £18 we stopped putting things into the trolly.

Our first house (we never rented - there may be a clue there, but I accept it was a different time with interest rates up to 14% IIRC) we did not have fitted carpets, we had a hand me down rug from Rachels mum, no central heating just one gas fire for the whole house. Our three piece suite was a second hand one we stripped and revarnished it and Rachel made all the cushions to sit on. It was was was affordable to us - no debt for easy comforts.

When we did eventually get a car (we cycled, motorcycled and bussed before) and the clutch went I did it myself using straps and bungee cords to hold the engine in place while Rachel caught the bus to the parts department to get the replacement.

I could bore you more but you get the gist .... make do and mend, no credit apart from the mortgage spend within your income and try and save for that expense you did not foresee.

Of course you need income, we both worked hard to get good jobs, took calculated risks in changing those jobs, stretched ourselves in our work places by seeking promotions. We both also stretched ourselves academically to support or gain the promotions both attaining Masters degrees while working, studying into the small hours and at weekends to make ourselves more employable - our focus our responsibility.

Then when interest rates hit record highs and a half a percent rise took all our end of month cash float,  we adjusted and once again budgets were set to the point cash was withdrawn and put into a draw and when it was gone that was that weeks spending.

So I read the article and felt a little guilty. The I reflected on much of the above and more, not typed here and congratulated myself (ourselves) on what we had achieved but more critically HOW we achieved it, hard work, calculated decisions, academic progression and above all planning. Fail to plan plan to fail...

So there are routes to financial sustainability but they are rooted in self, don't ever expect anything from anyone and make sure you know where the buck stops. Believe in yourself, plan, review adjust and plan some more. Don't be lazy, its not good for your health your financial status and your mental wellbeing. There is no better feeling that self congratulation for a thing done well, a goal achieved. If it does not work out analyse, self appraise what you did where you went wrong, what will you do differently. Don't just think that was bad luck, analyse and don't seek out blame as that is just too easy.  Far too many people nowadays expect it to be someone else's responsibility for their health and welfare and financial status.

Well that turned into something more than I set out for it to be. Maybe black Friday (day I am typing this) got under my skin as bit as well.... too much 'stuff' people are buying they cannot afford and do not really need.... but maybe that is for another rant !


Marilyn, nb Waka Huia said...

Hi Nev,
David and I had much the same financial path (without the post-grad studying). We did rent for about two years and then bought a very little house. All furniture (apart from our bed) was secondhand, bookcases were planks and blocks.

The main differences between then and now, I think, are the relative costs of housing and income. (Then add in the lower number of full time jobs, with automation, loss of manufacturing, and outsourcing all claiming their share, and the problem gets worse.)

For both of our first two homes, the lending rule was that the mortgage payments could not be more than 25% of your take home salary. And a high income in the mid 1970s was $10,000 pa.

We paid $12,000 for our first house in 1975, $27,500 for our second house (big, old, a wreck) when we shifted to Wellington in 1980. We sold that house (renovated and beautiful) in 2014 for $685,000 and purchased our small, current (and hopefully last) house for $377,500 in Waikanae the same year. Now just 5 years later, the latest market valuation of it is close to $600,000 - that is just ridiculous as nothing we have done in its redecoration justifies that rise.

Both our incomes over the years rose astronomically as well with the rising starting in 1980 - our salaries back in 1975 were about $3700 pa as teachers. I was earning that in a week by the time I retired from consultancy. But it sure as hell didn't buy as much as it did back in 1975. I remember in about 1978 winning a meat raffle at the local butcher's shop: $75 credit, that lasted us 6 weeks... Now it would buy 3 roasts.

Kids from middle class families now tend to start with much more than we did because of generous parents, but kids from poor families start with the same as we did, but most often without the way up and out that we had - through good well paying jobs to some sort of ongoing financial stability.

One problem now that is very very difficult to overcome is that the cost of housing, either rental or to buy, has outstripped income. Some young and not so young people now are spending well over 50% of their income on rent or mortgage. Add in food, power, travel to work, clothing, medical costs (not free in NZ, but subsidised dependent on income level) and credit seems the only way to go - not wise, but understandable.

And credit wasn't available to us back in our 20s. We couldn't have got an overdraft, and credit cards didn't appear here in NZ until the mid 1980s I think.

I would NOT like to be in my 20s starting out again at this time, that is for sure!

Cheers (I think ...), Marilyn

Tom and Jan said...

Hi Nev,
Your mussings bring back memories. My first salary in 1967 was $7 per fortnight. The army provided food and accommodation at no cost. I saved and saved living on as little as possible. Whilst my mates went to the pub and had a great time i hit the books gaining more qualifications. Eventually I had sufficient money to buy a second hand car. At the time cars were very expensive in NZ and the country was full of old cars. My father told me a car was one years salary and a house three years. Well that car soaked up money in running costs and friends (all those people who hadn't saved and wanted a ride).

Jan and I married in 1971. I had enough to pay for the wedding drinks plus a sack of spuds and onions. It was a boring diet until the next payday :-) I made the bed along with the wardrobe for our few clothes. Promotion came... along with small mouths to fed and cloth.

Eventually we had enough money to purchase some land and I started building our first house. Three mortgages with any 'surpus' cash going towards that extra sheet of wallboard or plumbing. Interest rates were 19%

It wasn't until the last of our children that we really started to save money towards retirement.

Today you can purchase a new car for much less than one year's salary. But houses are more than three times the average salary. Of course the homes have become larger with more 'essential' content.

My parents married and saved for the essentials.... a washing machine and fridge. We purchased those in the first week of marriage and saved for the essentials.... A TV set! Our children just expect to see the fridge, washing machine, TV. etc with their 'essentials' list being things like coffee makers, home theatres, etc.

I'm damned if I'm going to feel guilt when some Generation Y tells me I'm a baby boomer from the lucky generation.

Merry Christmas

Tom & Jan
nb Waiouru

Nev Wells said...

Hi Both,

Thank you for your extensive and very interesting comments. It does seem our generation and specifically our lives followed a similar direction that involved all the same ingredients. I was gobsmacked to read of the house inflation Marilyn you enjoyed, we too had what was in fact another hidden 'wage' being generated in the house inflation of our family home as the lads grew up. Nothing like the NZ returns on house investment. of course you seemed shrewd to buy low and get the increase. There were many in this country that got caught out buying around the 2008 banking crisis when house prices in the UK dropped through the floor. I guess some may still be caught in the trap of negative equity from this. In the UK we can see what people paid for their homes going back some years, some made vast gains and other must have lost based on when they brought.

Tom a 19% interest rate wow, I think we peaked mid teens in the UK (just checked 15% in 1981 and again in 1991.) My son works in the banking sector and assures me (sadly as I am now a saver) such interest rates will not be seen for the foreseeable future. Thanks again for the comments very interesting. Take care Nev