Bernard Hickey wrote in his Herald column that we are spending our way into debt.
You can read the full article here. Two events that appear to be unrelated, have occurred this month.
The first is the opening of the H & M Store in Sylvia Park, Auckland. There are probably not too many people around Auckland who hadn’t heard something, somewhere about the opening.
I happened to be in Sylvia Park late in the afternoon of the opening, not to go to the store (does that sound defensive…), but to the movies. At 5pm there was still an hour wait to get into the shop! Neither myself nor my girlfriend had any interest in joining the line; we were much more focused on a glass of wine before the movie and a good old fashioned chin wag!
The second event probably wouldn’t have come up on your radar unless you were particularly looking forward to reading Treasury documents. I can’t say it is my favourite thing to read either. I prefer to let the experts like Bernard Hickey do the detailed reading and then I follow up on the key points.
What the report showed was that, “we got back on the spending horse in earnest from 2014 onwards.” Household debt did fall for a couple of years after the GFC (Global Finance Crisis). The shock of what was going on around us did make us think a bit more before spending and we started saving.
That however, was short lived and we are now in a time when the household debt to income ratio is 5% higher than the lofty highs of 2002-2007. What is even more concerning is that this trend is continuing and, “rising quickly as debt rises around twice as fast as incomes.”
In other words we are in a spending spree. Which would be fine if we were using our own money, but we aren’t, we are borrowing it!! Are we crazy?!
When I read the article, it really struck a chord with me. In 2007 I attended a National Bank (as it was then) economic briefing and Cameron Bagrie told us the average kiwi was spending $1.08 for every $1.00 they earned. Being an accountant, I couldn’t help but go home and look at my own numbers, much to my surprise, I was spending $1.15 for every $1.00 that earned. This revelation was the starting point for what is now Money Mentalist. This same spending ratio is approx the same and in some cases worse, for Aussie, the UK and the USA.
So, why do we do this? Why do we continue to spend and not save? More importantly, why do we do this on borrowed money?
The answers to these questions is what I have spent the last nine years pondering, researching and learning about and has resulted in the four mentoring programmes you can see on our website. If you want to know more about why you do what you do with your money, then give us a call, or drop us an email.