Why aren’t we living within our means?

There’s an epidemic sweeping Australia and I fear that it has been for quite some time now. People are not living within their means. It’s quite tragic really. So many of us have nice cars, so many of us have too big houses with too big mortgages, so many of us have boats and holiday homes and so many of us choose to eat out or buy nice things – but it’s all on borrowed money.

When I think of the people I know and call my friends, I can think of at least six who are in very bad debt – even in their 60s. They’ve spent their life doing lovely things, going on great holidays, living the good life but it is all from re-mortgaging their homes and getting loan after loan. One of them has even rolled multiple car loans together after having continues incidents with the vehicles – now the loan is worth triple the car!

One of these ladies I am very close with. I’ve loaned her money before and we’ve told each other our secrets – we never hold back in saying what we think to each other. Last week she came over for dinner and told me she doesn’t know how she will afford to re-insure her car or her mortgage when her annual payment is due next month. In the next breath she told me that her new local coffee shop had changed coffee beans and the new ones were so much better for her daily coffee. I pursed my lips for a moment but eventually said that the $5 she spends on coffee every day comes to $25 a week… $100 a month that could be used to pay that car insurance annual fee. Sheepishly she said she also buys a piece of banana bread. That’s another $4 that she could be saving every day.

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People choose to do the finer things in life like treat themselves to store bought coffee every day but can’t pay their loan repayments or the necessities like the bills that come in each month. We’ve lost touch with the value of a dollar and the meaning of debt.

There are so many people out there who have no choice but to be in debt. So many over 60s lost wealth invested in funds and shares during the GFC. So many of us have struggled as single parents or have lost wealth going through divorces. But most of these people find a way to live within their means. They don’t treat themselves every day. They don’t buy nice things just to have them for keeping up appearances sake.

At the end of 2013, Australian households were in more debt than they have in the last 25 years. Australians owed $1.84 trillion to banks and lenders. That comes to $79,000 for every person living in Australia at that time.

There is a beautiful excitement that comes to buying a first home. Home loans are, if you ask me, a very sensible use of debt. But it’s the rest of it, the re-mortgaging, the borrowing and most of all the meaningless spending that makes me marvel at the Australian people.

We’ve let ourselves get so caught up in keeping up with the Jones’s and living lavish lives that are so far out of our means and it might be too late to reel it all back in.

Why do you think so many Australian’s aren’t living within their means? Do you see people living this way almost in denial of the impacts of their spending?