Financed lifestyles

Financed lifestyles

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Discussion

JulianPH

4,172 posts

58 months

Saturday 20th July
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djc206 said:
The average pot of a 45-54 year old is £71k according to an article in the independen. It’s not just millennials who can’t plan their finances sensibly.
I think a major problem here is the complete lack of financial education in schools and universities.

The generation before this were at least hounded by financial salesmen (before they became know as independent financial advisers) who ensured the bought products they otherwise wouldn't have.

Despite much of these being very expensive the magic of long term compound growth at least gave them an income in retirement.

Now days there is (rightly or wrongly) great distrust of financial advisers by many and costs are far clearer. This has led to people shunning the type of conversations that may have stopped them from ignoring the fact that part of the money they earn throughout their working life needs to be set aside to cover their retirement.

Also:

rockin said:
Well, I was reading in the paper the other day that one of the greatest tricks that's been played on the general population in the past 25 years or so is the re-labelling of "debt" as "credit"....
^^^ This is absolutely spot on.




Edited for my usual typos! smile



Edited by JulianPH on Saturday 20th July 14:16

red_slr

8,936 posts

133 months

Saturday 20th July
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hyphen said:
You won't have to find the rent? The benefits will pay the rent.
That's my point though, you might get free money but its going on rent. I doubt many people are better off at SP age who have to collect PC vs when they were working given the minimum wage is twice the SP.

I know there will be career benefits claimants who never work a day in their life and can milk the system all the way through life but your average joe who works for 40 odd years is going to be in a different position.

NRS

14,776 posts

145 months

Saturday 20th July
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I'd agree. I had nothing taught about finance/ savings etc at school or university. This is going to create a huge problem when combined with parents having sheltered their kids from a lot of financial realities. It improves with time, but at university the amount of people saying they felt bad about running out of money and needing more from their parents so they felt bad was a lot. Didn't stop them buying a holiday to Thailand the next month though...

I was brought up to save, but actually nothing much more than that. I learned a lot through PH - for example the important effect of compound interest, risk of shares in short term but often best longer term, etc. A few people I know are interested in learning more, but more just seem to think it will all work out at some point without any planning. As mentioned earlier the "no pension anyway so work longer" line is often used. Problem is many will not have the health to do so, or get let go of and no one will employ a 55yo expensive unemployed person - at least not in the numbers needed.

djc206 said:
The average pot of a 45-54 year old is £71k according to an article in the independen. It’s not just millennials who can’t plan their finances sensibly.
Pretty shocking. However was also thinking a lot (not sure how many that actually is) talk about paying off their mortgage first, and then do pension later. So depending on house prices in future they'll have more savings with equity release stuff based on the house.

Olivera

3,458 posts

183 months

Saturday 20th July
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Shnozz said:
This is part of the problem.

With annuity rates as they are (and unlikely to change as interest rates now have to be kept low to avoid the debt-hungry to stay upright), how do you encourage those already stretched (through their own want it now needs or otherwise) to save towards a pension? The concept of them saving £100k is alien to most who have a negative net worth.

And then to tell them their £100k buys them £3k a year in retirement is hardly the dreams of Caribbean cruises or blasting around Europe on roadtrips.

You can try and explain the virtues of compound interest etc etc but when you are trying to pile away £500k or so to see a proper pension pot to have fun in retirement its going to be met with laughter from those incapable of saving a £1 of their monthly wage.
It is therefore entirely rationale and sensible for such people to save nothing at all for retirement, then rely entirely on the state for support.

Testaburger

2,513 posts

142 months

Saturday 20th July
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Olivera said:
It is therefore entirely rationale and sensible for such people to save nothing at all for retirement, then rely entirely on the state for support.
Absolutely, I think (and I’m 35) that my generation and younger voluntarily entered into a sense of resignation regarding life’s big financial decisions, because for many, it seems sadly futile.

Your average earner is going to struggle to get 30k to put down on a place worth 10 times his salary, after he’s paid rent and bills. When he’s told he’ll need a million quid to get a 40k pension drawdown, he just figures it isn’t worth the sacrifice and will roll the dice on being able to work until he drops. He has a point - what’s the point in having a st life to provide a financially secure retirement? There isn’t one.

Worth also remembering, as an aside, that when final salary pensions were conceived, along with the state pension, life expectancy was far lower. As such, said income streams were only anticipated to cover a few years, not the 20+ that’s required now. That’s completely unsustainable. But, who will pay, and how?

Joey Deacon

1,579 posts

120 months

Saturday 20th July
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A few weeks ago I overheard a group of 19/20 year olds talking about their cars and most of them seemed to have Audis. One girl mentioned her 60 plate Fiat 500 and one of the group asked her why she drove such an old car. Thinking back to the very early 90s when my friends all passed their tests everybody had a rusty old heap that needed constant maintenance to keep going. Now it seems that youngsters will turn their noses up at anything that is more than a few years old.

I did not know a single person with a new car 25 years ago, now it seems everybody I work with has a new car, even the guys on the support desk are driving 19 plate Corsas. We live in a "have it now" society, nobody is going to save for something or even think about the actual cost when it is "only £199 a month". As long as their salary covers the car payment, rent/mortgage, credit card minimum, gym, mobile phone etc. they are OK even if they are living month to month.

I work with a guy who has £30k of credit card debt and after his shed failed it's MOT went out and leased a BMW 140. We got talking about finances and he told me that even though we had been paid a week earlier he had £280 of his £1200 overdraft to last until pay day.

I am seen as the weirdo as I am happy to drive a 12 year old megane, for me the fact I don't have to care about it or have £200 leaving my account every month to pay for it is a massive benefit.

Being in debt and having to go to work every day to earn money to pay for things you have long since forgotten about seems a stupid state to get yourself into.

orangesrule

Original Poster:

445 posts

92 months

Saturday 20th July
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Testaburger said:
That’s completely unsustainable. But, who will pay, and how?
Exactly my thoughts, it will be those who have been sensible, and worked hard bailing out the system.

That said I couldn't think of anything worse than being in massive debt (apart from a mortgage).

brickwall

3,044 posts

154 months

Saturday 20th July
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Joey Deacon said:
I work with a guy who has £30k of credit card debt and after his shed failed it's MOT went out and leased a BMW 140. We got talking about finances and he told me that even though we had been paid a week earlier he had £280 of his £1200 overdraft to last until pay day.
When I went to pick up my 140i, the salesman told me he'd actually sold the car 10 days prior, but the buyer had failed the credit checks!

The pension timebomb is a massive issue. Over the last 20 years pensioners incomes have grown far faster than the rest of the population. Over the next 20 I think that trend will reverse.

NRS

14,776 posts

145 months

Saturday 20th July
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brickwall said:
When I went to pick up my 140i, the salesman told me he'd actually sold the car 10 days prior, but the buyer had failed the credit checks!

The pension timebomb is a massive issue. Over the last 20 years pensioners incomes have grown far faster than the rest of the population. Over the next 20 I think that trend will reverse.
Stupid triple lock when the current pensioners already have a massive benefit over future ones (equity in houses and DB pensions).

RobinBanks

10,131 posts

150 months

Saturday 20th July
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This thread is now nearly 2 days old and we are still on page 2 but if you dared criticise PCP as part of the personal debt problem this country has you would be at page 20 in no time!

Testaburger

2,513 posts

142 months

Saturday 20th July
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orangesrule said:
Exactly my thoughts, it will be those who have been sensible, and worked hard bailing out the system.

That said I couldn't think of anything worse than being in massive debt (apart from a mortgage).
Agreed. Means-testing will be a start, but that will obviously have a decades-long lead-in time.

Most of the debt that modern living has bestowed on us isn’t massive, though, which I think is why we’re so open to it. Phones on credit, appliances on credit, furniture on credit... it’s all small potatoes individually. Granted, cars can be big ones, but they can be handed back and the finance settled. The problem is it all adds up.

I don’t know what the solution is. If I’ve resigned myself to not owning a property or finding a retirement, damn right I’m going to have some additional fun. That’s obviously the mental trade-off you make.

I think the best investment the U.K. could have made for itself would have been in financial education. Like others have said, I wasn’t taught a damn thing about personal finance at school. Economics/business, yes, but nothing about personal finance/pensions/ISAs/investment avenues. Fortunately I did come from financially responsible parents, so despite being a bit of a liability for the first few years of adulthood, their influence never entirely left me. Many don’t have that, and the bigger (growing) concern is that the current indebted, financially-uneducated generation are now bearing loin-fruit.

Do we do a Singapore, and have mandatory savings of 15%, which are inaccessible unless for certain purposes (retirement/house purchase/healthcare/education)?

I think that’s a better option than the mandatory 5% we have. Most folks aren’t motivated by a 45 year horizon.


brickwall

3,044 posts

154 months

Saturday 20th July
quotequote all
NRS said:
brickwall said:
When I went to pick up my 140i, the salesman told me he'd actually sold the car 10 days prior, but the buyer had failed the credit checks!

The pension timebomb is a massive issue. Over the last 20 years pensioners incomes have grown far faster than the rest of the population. Over the next 20 I think that trend will reverse.
Stupid triple lock when the current pensioners already have a massive benefit over future ones (equity in houses and DB pensions).
yes

The IFS reckons the triple lock costs £6bn per year compared to earnings indexing. That's enough to buy 2 new aircraft carriers every year.

Plus the annual November cash bonus (sorry "winter fuel allowance"), free bus pass, TV license, and for a long time a higher tax-free income allowance.

They're starting to unwind some of these, but it'll take a long time.

Shnozz

20,645 posts

215 months

Saturday 20th July
quotequote all
Olivera said:
Shnozz said:
This is part of the problem.

With annuity rates as they are (and unlikely to change as interest rates now have to be kept low to avoid the debt-hungry to stay upright), how do you encourage those already stretched (through their own want it now needs or otherwise) to save towards a pension? The concept of them saving £100k is alien to most who have a negative net worth.

And then to tell them their £100k buys them £3k a year in retirement is hardly the dreams of Caribbean cruises or blasting around Europe on roadtrips.

You can try and explain the virtues of compound interest etc etc but when you are trying to pile away £500k or so to see a proper pension pot to have fun in retirement its going to be met with laughter from those incapable of saving a £1 of their monthly wage.
It is therefore entirely rationale and sensible for such people to save nothing at all for retirement, then rely entirely on the state for support.
I agree with your (underlying) point in that it’s head in the sand stuff. However, when we dismiss a £70k pot as being as good as nothing it’s hard to then sell the concept to people to who the idea of saving even that £70k seems like a mountain way greater than they are able to climb.

djc206

5,300 posts

69 months

Saturday 20th July
quotequote all
Joey Deacon said:
A few weeks ago I overheard a group of 19/20 year olds talking about their cars and most of them seemed to have Audis. One girl mentioned her 60 plate Fiat 500 and one of the group asked her why she drove such an old car. Thinking back to the very early 90s when my friends all passed their tests everybody had a rusty old heap that needed constant maintenance to keep going. Now it seems that youngsters will turn their noses up at anything that is more than a few years old.

I did not know a single person with a new car 25 years ago, now it seems everybody I work with has a new car, even the guys on the support desk are driving 19 plate Corsas. We live in a "have it now" society, nobody is going to save for something or even think about the actual cost when it is "only £199 a month". As long as their salary covers the car payment, rent/mortgage, credit card minimum, gym, mobile phone etc. they are OK even if they are living month to month.

I work with a guy who has £30k of credit card debt and after his shed failed it's MOT went out and leased a BMW 140. We got talking about finances and he told me that even though we had been paid a week earlier he had £280 of his £1200 overdraft to last until pay day.

I am seen as the weirdo as I am happy to drive a 12 year old megane, for me the fact I don't have to care about it or have £200 leaving my account every month to pay for it is a massive benefit.

Being in debt and having to go to work every day to earn money to pay for things you have long since forgotten about seems a stupid state to get yourself into.
They almost have a point. I used to run a knackered old punto, it cost me a bloody fortune to keep it going. So when I got a pay rise (from £15k to £21k) I went to Mazda, chopped the punto in under the scrappage scheme and chucked in another £1000 and they delivered a shiny new Mazda 2 for a whopping £94.51 per month. When I sold the Mazda 18 months later I had £1200 of equity in it. It was seriously cheaper to buy a brand new car (scrappage scheme helped obviously) than run that stty old punto. Even had air con as standard....

djc206

5,300 posts

69 months

Saturday 20th July
quotequote all
RobinBanks said:
This thread is now nearly 2 days old and we are still on page 2 but if you dared criticise PCP as part of the personal debt problem this country has you would be at page 20 in no time!
What’s problematic about it though? If repossessions were common it would be a problem but the reality is simply cars are bloody cheap in this country. My wife leases (not quite PCP but along the same lines) her Cupra 300 for £260 ish per month, that’s madness, that’s not much more than our bloody council tax and it’s an insignificant proportion of her income.

I do see your point to some extent. I think credit is far too easy to come by especially when talking about cars. On a positive note it means our roads are full of nice modern, safe metal.

Schmed

1,112 posts

16 months

Saturday 20th July
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Anyone with a mortgage is financing their lifestyle to some extent. Doesn’t make it a bad financial decision though. PCPing that white Audi S3 with your first job’s minimum salary is probably not quite so good however.

Grandad Gaz

4,614 posts

190 months

Saturday 20th July
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Jakg said:
Hmm. Wonder why younger people rent? Could it be a myriad of economic factors, such as incredible house price inflation?

Nah, must be 'cause their getting iPhones on credit obviously. rolleyes
Let me explain. smile
I occasionally work with a couple of recently qualified plumbers, so I do have an insight to what goes on.

First thing they do is move out of their parents house and move into rented with their girlfriends. ( My girlfriend and I stayed at our respective parents houses for two years before scraping up enough of a deposit to buy our own home)

They get a brand new car on finance ( I had an eighteen year old Morris minor)

They always go into town to buy a roll and a coffee during the day ( I used to take sandwich’s and a flask to work)

They go abroad with their mates twice a year ( I never did)

And I haven’t even mentioned phones or Sky packages!

I could go on but you get the picture.




djc206

5,300 posts

69 months

Saturday 20th July
quotequote all
Grandad Gaz said:
Let me explain. smile
I occasionally work with a couple of recently qualified plumbers, so I do have an insight to what goes on.

First thing they do is move out of their parents house and move into rented with their girlfriends. ( My girlfriend and I stayed at our respective parents houses for two years before scraping up enough of a deposit to buy our own home)

They get a brand new car on finance ( I had an eighteen year old Morris minor)

They always go into town to buy a roll and a coffee during the day ( I used to take sandwich’s and a flask to work)

They go abroad with their mates twice a year ( I never did)

And I haven’t even mentioned phones or Sky packages!

I could go on but you get the picture.
With all due respect your formative years sound less than desirable and theirs quite pleasant. Wasting money isn’t clever and if it’s borrowed really stupid but living whilst you’re young is no bad thing.

My father in law is a working class bloke from the north east in his 70’s, he and his mates used to go on several foreign lads trips each year so it’s not a new thing. Maybe you missed out?

Testaburger

2,513 posts

142 months

Saturday 20th July
quotequote all
djc206 said:
Grandad Gaz said:
Let me explain. smile
I occasionally work with a couple of recently qualified plumbers, so I do have an insight to what goes on.

First thing they do is move out of their parents house and move into rented with their girlfriends. ( My girlfriend and I stayed at our respective parents houses for two years before scraping up enough of a deposit to buy our own home)

They get a brand new car on finance ( I had an eighteen year old Morris minor)

They always go into town to buy a roll and a coffee during the day ( I used to take sandwich’s and a flask to work)

They go abroad with their mates twice a year ( I never did)

And I haven’t even mentioned phones or Sky packages!

I could go on but you get the picture.
With all due respect your formative years sound less than desirable and theirs quite pleasant. Wasting money isn’t clever and if it’s borrowed really stupid but living whilst you’re young is no bad thing.

My father in law is a working class bloke from the north east in his 70’s, he and his mates used to go on several foreign lads trips each year so it’s not a new thing. Maybe you missed out?
Very true. And compounded by the fact that most now look at what’s needed for a house deposit and retirement and just think ‘screw it’, and spend more.

Condi

8,338 posts

115 months

Sunday 21st July
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My biggest concern (as a millenial) is that because our generation will be so financially fked by the time we get old, that even those who have saved and who are not that reliant on the state will be raided by whatever government is in power to help pay for those who haven't bothered or have been unable to save.

You think you are doing the right thing, paying into a pension, buying a house, but if the government could turn around and change the rules it does make you a bit more suspicious about saving.


And don't get me started on the buying of pensioner votes by recent governments. There is a massive feeling that the young have been shafted with lower wages, lower public services, and increased taxes, while the pensioners have been gifted free bus passes and a guaranteed increase in pensions, irrespective of any other factors.