Capital expenditure instead of savings in inflationary times
Discussion
My wife and I are 68 and 74 with State Pensions and a savings and investments pot. We are currently spending a substantial proportion of those savings and investments on home improvements.
Recent spending includes or will include:
25m2 single storey extension
Summer house
New kitchen
New bathroom
Terraced rear garden (DIY with a lot spent and to spend on materials)
A few other things we fancy
Our thinking is this, with returns on savings poor and inflation going mad, the purchasing power of our money will dwindle so we should invest in the house. We can then enjoy the house and when the remainder of the money runs out, downsize and live off the difference.
I'll probably buy a newer car as well but see that as a depreciating asset whereas the house will be, if not actually increased in value, at least easy to sell in its improved state.
We're thinking of it as a way to defer the inevitable in comfort.
You can't dissuade me, it's too late. But I'd be interested to hear your views.
Recent spending includes or will include:
25m2 single storey extension
Summer house
New kitchen
New bathroom
Terraced rear garden (DIY with a lot spent and to spend on materials)
A few other things we fancy
Our thinking is this, with returns on savings poor and inflation going mad, the purchasing power of our money will dwindle so we should invest in the house. We can then enjoy the house and when the remainder of the money runs out, downsize and live off the difference.
I'll probably buy a newer car as well but see that as a depreciating asset whereas the house will be, if not actually increased in value, at least easy to sell in its improved state.
We're thinking of it as a way to defer the inevitable in comfort.
You can't dissuade me, it's too late. But I'd be interested to hear your views.
Sorry for the delay in responding, it's been a bit hectic round here. Having said that, hectic by an old fella's standards may seem quite relaxed to the less chronologically challenged. Anyway...
My interest is more in the effects of inflation. During the massive inflation of the seventies I had a well paid job and could keep pace. Now, I can't. But rather than desperately sitting on a savings pot and watching its value dwindle, we have decided to spend quite a lot of it. Not on things like once-in-a-lifetime holidays, where the money just goes, but things for the house which will probably see us out.
We aren't being altruistic but if people can be encouraged to spend surely it must help the economy. Not spending has to contribute to stagnation.
Our fall-back position is to downsize when our remaining savings are getting thin. With luck we won't have to but we are prepared to. Better that than equity release. There's a scandal in the making. The benefit for the perpetrators is the victims will have died. A disappointed inheritor's argument of, "You swindled my parents," will always sound weak.
I'd hoped to answer all the responses in one sitting but I'm going to make use of the weather and carry on with terracing the back garden. The more I do the less daunting it looks. I must be getting fitter. No, okay, probably not. I will be back, I have to lead off a bit about builders.
OutInTheShed said:
Spend on these things because they are what you want.
When you come to sell your house, the buyers may love them or hate them, but I doubt you'll make a good return.
Most people prefer to choose their own kitchen etc, and anyway, it's only new for somewhere between 10 minutes and 18 months.
Although inflation is high, at the moment builders and so forth are scarce and charging high rates.
Prices may be keener before long, if belts are tightened?
But if you were going to do these things in the next 5 years or so, you might as well crack on and avoid the risk of things getting more expensive.
Yes, I understand we won't get any return on renewing the fixtures and fittings. But, I picture when we - or the kids - sell the place, a nicely presented house will sell better than a tired house. When you come to sell your house, the buyers may love them or hate them, but I doubt you'll make a good return.
Most people prefer to choose their own kitchen etc, and anyway, it's only new for somewhere between 10 minutes and 18 months.
Although inflation is high, at the moment builders and so forth are scarce and charging high rates.
Prices may be keener before long, if belts are tightened?
But if you were going to do these things in the next 5 years or so, you might as well crack on and avoid the risk of things getting more expensive.
My interest is more in the effects of inflation. During the massive inflation of the seventies I had a well paid job and could keep pace. Now, I can't. But rather than desperately sitting on a savings pot and watching its value dwindle, we have decided to spend quite a lot of it. Not on things like once-in-a-lifetime holidays, where the money just goes, but things for the house which will probably see us out.
We aren't being altruistic but if people can be encouraged to spend surely it must help the economy. Not spending has to contribute to stagnation.
Our fall-back position is to downsize when our remaining savings are getting thin. With luck we won't have to but we are prepared to. Better that than equity release. There's a scandal in the making. The benefit for the perpetrators is the victims will have died. A disappointed inheritor's argument of, "You swindled my parents," will always sound weak.
I'd hoped to answer all the responses in one sitting but I'm going to make use of the weather and carry on with terracing the back garden. The more I do the less daunting it looks. I must be getting fitter. No, okay, probably not. I will be back, I have to lead off a bit about builders.
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