A Little Too Gold

Lots of things on the agenda today, but I am taking a short break to clear my head some and think into the future a bit. The kitchen renovation is ongoing currently and hopefully today, the fridge and freezer can be installed, as that is something I need a bit of help with, as I am not as strong as I used to be. The last kitchen renovation I did six or seven years ago, I did it by myself and although hard, it was manageable.

I'm getting too old for this.

Well, perhaps I am not and more likely, I am just getting too out of shape, weak and disillusioned by life that I feel that instead of putting in the effort, I would rather just sit back and watch someone else do the work.

But that takes money.

That I don't have.

Well, we are using professionals for what I can't do of course, but I think that given the events of the last few years, if I had a little bit more, I would have them do all of it. Wouldn't that be nice? Wouldn't it be great to never have to worry about money?

How much would it take?

For us at least, not really that much, since we tend not to be over materialistic. However, that is the challenge, because when more comes in, it often ends up going out just as fast, as we tend to expand our tastes and preferences based on available resources. Double the income and near double the monthly expenses and then, when things take a downturn, we are still left with the processes of pre-crash, so we not only likely have greater obligations, but also our habits of desire - more consumption.

From talking with friends over the last few months, I get the sense that lots of us are in this position, where while things were humming along nicely through the growth and stability periods, suddenly we have found ourselves overextended and chasing. One of my friends has bought a house, car and had a child in the last three years, with two of those being largely on credit and the third carrying only costs with no utility for eighteen years.

And, I think that this isn't uncommon, where during the "Covid years" people expanded their tastes and obligations, getting into a habit of spending more on less and buying on debt at higher prices than they would normally have paid. Now things are heading in the other direction, they are still saddled with the debt, but have a decreasing ability to service it.

In Finland, inflation has returned people to what was 2013 levels of purchasing power, but the problem is, that in 2013, people were more financially cautious. Now though, there is the "throw caution to the wind" mentality in terms of spending, but with less to do it with, which leads quickly into a debt spiral that will take years to pull out from, and some never will.

Living a little too gold.

And this is the problem with "living within your means" because normally, that means spending less than what one earns. But there is an expectation that what we earn is going to stay static or increase going forward. When what we earn decreases through job loss or inflation, we very quickly are unable to leave within our means unless we adjust equally as fast - something that is hard for most of us to do at a species level. Once we are accustomed to do something and have something, we don't want to give it up.

This happened a lot in 2008, where a lot of people continued living "their best life" despite the global financial crisis, which left them less capable to take advantage of the investment opportunities at the time. I think it is happening again now, where even though it is clear that the economy is struggling and inflation is high, after a couple years being "locked down" (for no reason), people feel that they should expand their lives, because they deserve it.

Maybe we do deserve it, but what we need to remember that deserve or not, fair or not, it will be us who have to pay for it and live the consequences of our actions. Soend what you want, go on holiday, buy a car and a new TV, invest into a house - but know that going forward, these decisions are yours and living with what happens is yours too.

Ownership of actions.

That is owned too. Like it or not.

Sometimes I think that we should have held off on doing the kitchen, as while we haven't taken on additional debt, it means that we are less capable to deal with the coming conditions of economic crisis and increased expenditure on necessaries for living costs. However, I also try to remember that if we didn't do the kitchen, we would have still been unlikely to save all of outlay or invest it and we probably would have taken a holiday instead, as well as spent more on other items. While we would still be financially better off and have more of a cushion, it isn't a 1:1 relationship.

And, worst case scenario...

If we do have to sell, at least with a new kitchen it is going to sell faster, as the entire living area of the house is now newly renovated, something that a lot of people don't want to do now, because of the massive costs involved, due to material and labor inflation. This would mean we would have to downscale in order to benefit from the sale however, as the prices of real estate have also gone up. But, for us who bought pre-Covid, we likely still would have more equity in the house than we have invested, so it should be okay.

Did we live a little too gold?

Yes.

Like many, we are overextended and overinvested. This weighs on my mind a lot at times, but I am also seeing it somewhat like the dips in crypto, just have to ride it out. As long as once things recover we are in a position that we can grow quickly from (meaning not too much debt obligation), things should be okay.

Nothing is set in stone though.
Especially these days.

Taraz
[ Gen1: Hive ]