UK "one of the wealthiest countries on the planet & getting wealthier by the day"

chucknorris

Tancred wrote: »

The phrase 'net worth' is meaningless as it includes assets that are not practically accessible, e.g. pension funds and property. Your pension fund is meant to buy you an income upon retirement - nothing more. And a house is for living in - you can't rip out a few bricks and sell them for cash!

Depends on your circumstances, I/we are currently boosting our pension investment so that we can spend more capital in retirement, it is an insurance against living longer. That capital that we will be spending will come from selling property.

But whatever your circumstances 'net worth' is not meaningless, it quantifies where you are financially.

michaels

CLAPTON wrote: »

most of us don't spend our housing wealth; we spend our income

It is an interesting line - Say I borrow 50k and extend my house from 3 to 4 bedrooms. With unchanged house prices it may now be worth 50k(+) more. I am neither better or worse off but I have added 50k to the economy. However then I borrow another 20k and buy a new kichen that only adds 10k to the property, in this case I am clearly spending capital not income to effectively 'consume' the new kitchen....

Carl31

michaels wrote: »

It is an interesting line - Say I borrow 50k and extend my house from 3 to 4 bedrooms. With unchanged house prices it may now be worth 50k(+) more. I am neither better or worse off but I have added 50k to the economy. However then I borrow another 20k and buy a new kichen that only adds 10k to the property, in this case I am clearly spending capital not income to effectively 'consume' the new kitchen....

but thats borrowing, not spending current 'wealth'

To spend your current wealth, you would need to sell all or part of your house, which may or may not sell for its market value

Loughton_Monkey

Tancred wrote: »

The phrase 'net worth' is meaningless as it includes assets that are not practically accessible, e.g. pension funds and property. Your pension fund is meant to buy you an income upon retirement - nothing more. And a house is for living in - you can't rip out a few bricks and sell them for cash!

I beg to differ.

All other things being equal, if I have a £200K pension fund, and you have a £300K pension fund, then that is a distinct and measurable difference in net worth. Presumably you would assess, say, my £250K Cash ISA as being exactly worth double your £125K Cash ISA (at retirement). Basically the same thing.

People don't take their cash ISA, the minute they retire, and blow it on a Porsche and a world cruise. They let it roll up, perhaps taking £10K a year out to buy a few extra goodies, and generally live on. So having it in a pension is the same. OK, pensions have a bag of rules [but we got 'free' money for that] and it pays out in a way consistent with the requirements of 99% of retirees....

As for the house, it is still wealth or 'net worth'. At the very least, the owner reaps a reward (just like a pension, really) in being able to live in it rent free. The full value can be fully materialised, and eventually will be, but (agreed) not necessarily by the owners themselves [but their heirs].

My £24 million rather poor painting of a daisy by some Dutch fellow is truly 'worth' £24 million, but I can't cut it up with a stanley knife into 24 pieces and sell them at £1m each.

Loughton_Monkey

CLAPTON wrote: »

most of us don't spend our housing wealth; we spend our income

Although true, I don't think that detracts from the truism that when my house goes up in value by another £10K, then I am £10k 'richer'. My accounts will show that in an increase in net worth.

Whether I spend it or not is a totally different, and generally unconnected argument. Someone, at some stage will ultimately spend it - even if that's 5 generations down the line....

Most of us don't spend our other [cash] wealth. We build that up. We might dip into it a bit when we retire, but it's all wealth. Perhaps I might build up a £500K to spend (when I die) on a trust fund to educate my grandchildren. That's pure 'wealth' too.

There are perhaps more people than you think who do spend their house. Around these parts, there are thousands of so-called 'caravan parks' [basically mobile homes] that cost - maybe - £25K/£40K. This is very fertile ground for 'Maggies children' who bought their council house, copped £150K profit, but neglected to put anything into pension - preferring to spend all their income on tattoos, bingo, ear-rings, and 70" home theatre TV's......

Now they can spend their retirement boozing away £100K.....

the_flying_pig

Loughton_Monkey wrote: »

Although true, I don't think that detracts from the truism that when my house goes up in value by another £10K, then I am £10k 'richer'. My accounts will show that in an increase in net worth.

Whether I spend it or not is a totally different, and generally unconnected argument. Someone, at some stage will ultimately spend it - even if that's 5 generations down the line....

Most of us don't spend our other [cash] wealth. We build that up. We might dip into it a bit when we retire, but it's all wealth. Perhaps I might build up a £500K to spend (when I die) on a trust fund to educate my grandchildren. That's pure 'wealth' too.

There are perhaps more people than you think who do spend their house. Around these parts, there are thousands of so-called 'caravan parks' [basically mobile homes] that cost - maybe - £25K/£40K. This is very fertile ground for 'Maggies children' who bought their council house, copped £150K profit, but neglected to put anything into pension - preferring to spend all their income on tattoos, bingo, ear-rings, and 70" home theatre TV's......

Now they can spend their retirement boozing away £100K.....

:rotfl:


The idea that higher house prices make one country morewealthy than another is, well, I don’t want to use insulting language, but I’mreally not at all sure that it stands up to scrutiny.

Let’s try to tease this out, building up the explanation stepby step, in simple language.

Imagine three countries, let’s call them France, Germany,& the UK, & imagine that they all have about the same GDP per capita,call it $35k.

But the UK has more ‘wealth’, due to higher house pricesthan the other two.

Let’s say, given the identity of the OP, that the reason forthis is differences in ‘supply’, namely that the UK builds fewer houses percapita than the other two countries.

So the UK is wealthier because it builds fewer houses/hasfewer houses.

What’s the next step in this chain of reasoning? I mean, honestly, someone help me out here.

wotsthat

CLAPTON wrote: »

most of us don't spend our housing wealth; we spend our income

I think it's fairly well established that if someone's net worth increases they spend more. Yes they can't spend housing wealth but they can spend a bigger % of income instead.

Thrugelmir

wotsthat wrote: »

I think it's fairly well established that if someone's net worth increases they spend more. Yes they can't spend housing wealth but they can spend a bigger % of income instead.

So I'm retired person living in a £75k mortgage free flat.

My private pension is a fixed income annuity for life of £20k.

Every year my pension buys less as inflation erodes it's buying power.

How does the flat increasing in value by 10% , i.e. £7.5k make me "wealthier".

How do I spend more of my income?

chucknorris

Thrugelmir wrote: »

So I'm retired person living in a £75k mortgage free flat.

My private pension is a fixed income annuity for life of £20k.

Every year my pension buys less as inflation erodes it's buying power.

How does the flat increasing in value by 10% , i.e. £7.5k make me "wealthier".

How do I spend more of my income?

You should have planned for your retirement much earlier Thrug, it is next to useless thinking about it now after retirement. What is it they say, failing to plan is planning to fail.

Loughton_Monkey

Thrugelmir wrote: »

So I'm retired person living in a £75k mortgage free flat.

My private pension is a fixed income annuity for life of £20k.

Every year my pension buys less as inflation erodes it's buying power.

How does the flat increasing in value by 10% , i.e. £7.5k make me "wealthier".

How do I spend more of my income?

A. You buy a £20K 'flat' annuity (rather than an escalating one) you have to be a complete muppet to spend the lot every year because it's obvious that the purchasing power diminishes. So you spend only £16K, and increas by inflation.

B. Still not enough? Then try a Lifetime Mortgage.

C. Alternative to B, get your kids in and blackmail them. Either you pay me £1,500 a year 'supplement' to my income, or the house goes to the dog's home.