To think living within your means has become the exception?

[SmokeyApo]

Hi all, I just wanted to share some observations and hear other people's inputs.

It seems to me that is becoming more and more rare for people to live within their means and try to save a little money for a rainy day. In my circles I know many people on good and even great salaries, that lead seemingly extremely expensive lifestyles and don't save a penny, or even go into debt to afford extravagant holidays or cars.

A good friend of mine is a senior executive in tech, makes an absolute fortune and had to ask around his friends (me included) to borrow money when he bought a house last year, because he couldn't cover the down payment. Another friend of mine got divorced last year, both spouses on really excellent wages, and it turned out that they had almost no assets to share after being married for 15 years because they had spent everything they got.

I am starting to wonder if I live in a bubble of financial irresponsibility or if this phenomenon is widespread. AIBU to think that saving and being mindful with money has become the exception rather than the rule?

Define: "The Rich"...

The older generation have forgotten how easy it was for them

Except it wasn’t. Income tax was 32% in the 1980s. The interest rate was 17% at one point - lovely for savers, horrific for people with mortgages. The late 80s crash and recession put huge swathes of people into negative equity and arrears, people who couldn’t pay their mortgages were handing their keys back to the building society before they were repossessed. If we have another recession like that we’ll see it all again.

@TulisaIsBrill

I’ve got £800k of value in assets saved up at the moment. Expect that to go up a lot in £ terms as sterling continues to be trash. I still live like a grad student despite being on 150k per year. Works for me.

Jesus, that’s crass. Was it really necessary?

@swimlyn

Define: "The Rich"...

On MN, it tends to be "anyone earning more than me"

The older generation have forgotten how easy it was for them

Except it wasn’t.

Statistically it was though.... some periods of high interest rates don't change that.

The late 80s crash and recession put huge swathes of people into negative equity and arrears, people who couldn’t pay their mortgages were handing their keys back to the building society before they were repossessed. If we have another recession like that we’ll see it all again.

I think the way society works nowadays that recession will be like the 08 one, less job losses & less repossession. More wage stagnation & longer term mortgages.

@terribleg

The late 80s crash and recession put huge swathes of people into negative equity and arrears, people who couldn’t pay their mortgages were handing their keys back to the building society before they were repossessed. If we have another recession like that we’ll see it all again.

I think the way society works nowadays that recession will be like the 08 one, less job losses & less repossession. More wage stagnation & longer term mortgages.

I do hope you’re right because I’d hate to see people go through that again. It was horrendous.

I just think banks are more likely to switch you onto interest only or part & part or extend the terms. There is so much debt loaded against housing these days that I don't think some banks would survive numerous repossessions.

The £3-a-day thing isn't just budgeting for new glasses, though. People could use that £1800 to be a real cushion in their lives but many people never get into the positive spiral and instead get into the negative spiral of putting £1800 on a credit card and never quite paying it off and those payments reduce their disposable income even further so they don't save so the next £1800 is also put on a credit card... As opposed to the £1800 being an insurance in case of unexpected difficulty and if the difficulty doesn't happen you've still got £1800.

£1800 could come in very handy to get yourself out of several sticky situations. Think of how many people are told to LTB but don't because they don't have the money for escaping. Or how many people are stuck in dreadful jobs because they need to get paid every single week. Or are renting the most awful places but can't cover the move to somewhere decent.

It's just not the case that savings are a binary state. You don't have either £0 or £100k for a house deposit. I mean, if someone offered you £1800 right now you wouldn't tell them not to bother, would you?! Every £3 saved is another feather in the safety cushion of your life.

“ Jesus, that’s crass. Was it really necessary?”

Yeah, the thread is about living within your means 🤷🏻‍♀️

I live on 25% of my net income, excluding dividends and asset gains, and save/invest the rest. I’ve never understood the idea of lifestyle creep. I’m just pointing out an extreme example where people can and do live within their means.

Governments including our own are the biggest borrowers, That's why interest rates will stay low as long as they can manage it, which incentivises borrowing by individuals. If only a few people were extreme borrowers it would be a problem for them. Now that many people are, it's a problem for society. Savers are effectively being punished with low interest rates. We save a lot but more for security and peace of mind than financial advantage.

@TulisaIsBrill you said you live like a grad student but I assume 60% of your income isn't going on rent?

@Alsohuman

The older generation have forgotten how easy it was for them

Except it wasn’t. Income tax was 32% in the 1980s. The interest rate was 17% at one point - lovely for savers, horrific for people with mortgages. The late 80s crash and recession put huge swathes of people into negative equity and arrears, people who couldn’t pay their mortgages were handing their keys back to the building society before they were repossessed. If we have another recession like that we’ll see it all again.

It was excellent for people with mortgages, because wage inflation was simultaneously high. I’d far rather have a 75k house at 15% interest rates and 15% wage inflation, and overpay on it than a 300k house and 3%. You would pay off the former scenario way faster + your real terms debt is inflated away rapidly. Do the maths.

I agree with that point!

I agree OP. In the past I couldn't save much but as soon as I could I did. Not having a safety net worries me. There's less I want to buy as I get older anyway.

We live in SE. Combined income over 100k. No benefits such as child benefit. We can afford to rent here, 2k a month but can't save much. Feel that we'll never be able to buy here. Had house in the north that was still in negative equity 6 years after buying so no cash to put down for deposit once we eventually sold. I have modest car loan, always pay of credit card at end if each month and we have 25k savings which has taken a while but it will get us nothing around here. We're definitely not as poor as we were 10 years ago but still no further forward property wise.

@terribleg

I just think banks are more likely to switch you onto interest only or part & part or extend the terms. There is so much debt loaded against housing these days that I don't think some banks would survive numerous repossessions.

But what if you can’t afford interest only - which is most of your payments in the first few years. If you’ve paid a 20% deposit far better from the bank’s viewpoint to repossess and sell the property for the other 80%.

It was excellent for people with mortgages, because wage inflation was simultaneously high

Wage inflation was irrelevant if you lost your job. Unemployment was massive.

I think they would extend the terms. i'm not saying zero repossession, i just don't see on the scale plus lending is much tighter these days.

[quote terribleg]@TulisaIsBrill you said you live like a grad student but I assume 60% of your income isn't going on rent?[/quote]
No, about 1k is going on rent. After maxing my pension contributions with salary sacrifice, and a cycle to work scheme bike, I’m left with around 6k net p/m in paye income. Which I’m spitting feather about because I’m losing my personal allowance and have a marginal rate of 60%.

So tl;dr - about 17% of my income is going on rent.

And as you correctly deduced - a pile of bricks is not part of my assets.

At the foodbank we see a lot of people who can’t live or even eat within their means.

In most cases that is due to circumstances such as illness, relationship breakdown, loss of job, poverty wages, zero hours contracts, reducing or unavailable social security safety net.

We don’t distinguish between those who “deserve” our support and those who don’t. Our only basis need.

However, in a majority of cases the need arises because of factors outwith people’s control.

I must be one the rare exceptions I guess I scrimp and save to afford things even things we need like washing machine rather than get on credit. Not on a huge income and do struggle but I think we'd struggle more if we had mountains of debt. I see alot of people I know who do ok, not struggling but not on a great income use credit but then are struggling to pay off that so I never see the point in going down that route and dealing with the extra stress.

I have colleagues who in the 90s earning 20k borrowed 5.5 times their salary for a 95% interest only mortgage with some of the deposit coming from a credit card. Crazy! but they are the ones in million pound houses.

To add to my post. I grew up 'poor'. Poor mental health in family and lack of opportunity meant there was low or no income. Lived on one of the worst estates in the city and my family all still live there. I fought hard to do well at school and go to a local university, thanks to labour government at the time, my university education was free. I still have student loan to pay off though. First house was new build money pitt in a bad area. I'm weathered by the struggle and often felt jealous of friends who had parents pay their house deposit etc. but I would 100% help my own children and I try to help my family as much as possible.

(But I count my pension payments (40k per year) as part of my overall ‘income’ before anyone pedantically points out that leaves 500 quid for everything else). So on a net income of 10k p/m, I live on about 2.5k.