How much do you spend/save?

deemy2004

Yep, you can't take it with you.

I passed the point where I said to myself I would start spending many grands ago... So now AM starting to spend on holidays .... starting with short-breaks and may progress to longer holidays....

You have to enjoy the money as well as saving ...


Maybe once the interest generated exceeds your expenses, thats the point where you need to shift gears to spending more than you save so as to enjoy the money.

lipidicman

Responding to Deemy:

lex05 wrote:

What about for self respect and pride? Privacy?

No grown Man wants to live off his parents - you don't pay rent! Christ! - especially when he has his own family to support. How must your wife feel living in this situation....

It is easy to save money when you live off mummy and daddy.

The rest of us live in the real world.

I thought this for about a second, then gave a more measured response!

We know only what Deemy has told us. As I said in my reply if my parents had a big house that they only needed part of then I would lap up the chance (provided the accommodation provided suitable privacy etc). In other countries what Deemy is doing is the norm.

How would Deemy's wife feel? Probably very secure. Deemy IS fortunate to live in this way. However he is also very astute - he is saving, investing and maximising his earnings so if that rainy day comes he is prepared. I cant really bring myself to criticise him for this.

Walletwatch

deemy2004 wrote:

Maybe once the interest generated exceeds your expenses, thats the point where you need to shift gears to spending more than you save so as to enjoy the money.

Absolutely. And that is the point I aim to get to in the next four years. Where I do not have to rely on a job for subsistence. After that any further cash inflow will only work towards increasing my asset base, which in turn, should increase my passive income, thereby enabling me a progressively better lifestyle.

I am not sure I see the reason to ever make a transition and eat into the asset base itself. If the whole idea is to have a positive spiral working for you, then your lifestyle should gradually improve from an increase in your passive income itself, and provide you with enough for treating yourself like a king, and then some for charity as well.

lipidicman

This post is inspiring. Of course (as I think Deemy mentioned earlier) you want to be spending the interest less the inflation. ie interest at 5% and inflation at 2%, then if you can live off of 3% then you are laughing. This is how the rich get richer....and if you have to scrimp and save to get there then it is still worth it. So many people I know have outgoings which scale with their incomes and they never really get anywhere. They have nicer cars, computers and more beer than me....but it doesnt seem to make them happy or secure.

hobbesandco

I'm glad others agree. I too thought I was being a bit too tight and every time I opened my wallet I would get the usual joke from my partner. But I think he's secretly proud of me because 4 years ago (when we met) I was 10k in debt, he had no debts but no savings either. Within a year I had got rid of 8K worth of debt. It helped that I moved in with other people to share bills and that I got a bonus I could use to clear off my debts. That made a huge difference and from then I made changes slowly and steadily rather than change my habits overnight. I think that seems to have worked because my partner doesn't resent me for curbing our spending. We both agree preventing sleepless nights is worth about a 10k pay rise. Also we want to get married some day and not having to worry about finances means we can find other things to argue about! Just kidding.

I am slightly envious of other people having bought homes earlier than I did and meaning they have their mortgages paid off early or whatever but then again they're asset rich and cash poor. Not exactly a position I want to be in either. To each his own.

Walletwatch

hobbesandco wrote:

I am slightly envious of other people having bought homes earlier than I did and meaning they have their mortgages paid off early or whatever but then again they're asset rich and cash poor. Not exactly a position I want to be in either. To each his own.

I agree fully with you, H, except for your specific point on calling those owning houses asset-rich. I really have my doubts on that one. If I were to buy a house to live in it, I am not sure I'd consider it an asset at all. An asset is something that either gives me a steady cashflow stream or which I can sell in the market sometime in the future for a capital gain.

If you were to buy a house to stay in it, the steady cashflow is not an option, as you aren't letting it for rent. Also, since you've bought it to stay, you would not sell it for a profit, and leave yourself homeless. Consider the possible outcomes when you buy a house to stay:

1. You never sell it - in which case, it is not an asset by my earlier definition of an asset, as it has neither given me the cashflow, nor the capital appreciation.

2. You sell it for the same price or lesser than what you paid for it - Again, it is not an asset as it has neither given me the cashflow, nor the capital appreciation.

3. You sell it at a higher price than what you paid for it - You've made a capital gain here, but you now have to arrange for a place to live - you'll probably trade your house for a bigger house, which will mean that you'll end up paying again, for that bigger house. Alternatively, if you trade in for a smaller house and pocket any difference, it is not in line with the fundamental underlying assumption of a progressive lifestyle, bigger houses, more comforts / luxuries, etc.

Don't get me wrong - there are a number of benefits of owning your home, it is a dream for a lot of us (including myself), and there are a lot of emotions attached to a home you can call your own. What we need to understand though is while staying in your own home is a dream come true and all that, I am not sure it can be categorised as an asset, even if your mortgage is fully paid.

Question to the forum in general:

What are your thoughts on the above? Do you agree / disagree? Why?

Cheers
WW

deefadog

Well a house (Bungalow in my case) is a home, I bought just over 5 years, which was such a good thing and have only a small amount of my mortgage left! But with a young family it's very hard to save, dipping into the overdraft at the end of each month is not to all uncommon!

But info on this site has reduce the bills (thanks everyone) and i hope to start saving substantial amounts it the not to distant future!

When we decide to move (3 years'ish) then we will have to become unattached to the home and think of it as an asset!

hobbesandco

I take your point walletwatch. I still think your house is an asset albeit one you are more attached to than say an ISA or pension. It doesn't help me pay the bills like earning interest on a bank account or capital growth in equities would. However at some point I will be selling the house and moving back to Canada which will buy me a much larger house than the one I have now so by your definition of asset I will count it as such.

I know I have probably digressed already, but I am uncomfortable with the UK obsession with property. I admit I have probably got sucked into the hype myself but friends say they still want to invest in buy-to-let even though they're not saving much into a pension or ISAs. When the housing market does crash and/or unemployment increases then what are people going to do? They have little by way of savings if they get made redundant but they have a huge mortgage! Gulp!

Walletwatch

hobbesandco wrote:

I take your point walletwatch. I still think your house is an asset albeit one you are more attached to than say an ISA or pension. It doesn't help me pay the bills like earning interest on a bank account or capital growth in equities would. However at some point I will be selling the house and moving back to Canada which will buy me a much larger house than the one I have now so by your definition of asset I will count it as such.

Not intending to bring in a dampener, but what if there is a house price crash in the UK and a bull market in Canada when you decide to migrate? How will the house count as an asset in that case? Are we not leaving that to chance?

hobbesandco wrote:

I know I have probably digressed already, but I am uncomfortable with the UK obsession with property. I admit I have probably got sucked into the hype myself but friends say they still want to invest in buy-to-let even though they're not saving much into a pension or ISAs. When the housing market does crash and/or unemployment increases then what are people going to do? They have little by way of savings if they get made redundant but they have a huge mortgage! Gulp!

Exactly. In such a situation, they'd be tied to their jobs, while those working towards subsistence from passive income would be free from their jobs, and the only reason they'd be working is because they actually enjoy what they're doing, not for the money.

hobbesandco

Just to respond to your point about housing in Canada. Even if there was a massive housing crash here and a bull market in the UK I'd still be able to buy a bigger house over there. Property prices here are far higher than what I'd expect to buy in certain parts of Canada.