So was everyone living way beyond their means

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deadtiger

Guest
First post on here. Had dinner the other day with a few friends and we were just discussing the current financial situation where quite a few businesses in the local area have gone bust etc.

I have a decent job which pays a good wage well above the national average, am married with a young family and I really feel I haven't been affected at all by the Celtic Tiger nor the subsequent collapse. We pretty much carried on as normal, put away a few bob when possible and broke even most other months. We don't spend on luxuries like new cars, expensive holidays etc.

Looking around over the last few years, I've seen people with similar jobs buy the new cars, take a couple of foreign holidays a year etc. So, my question is.. were these people living way beyond their means? Are we doing something wrong in trying to live within our means and not take too many risks? What happens to these people now?

Sorry if this seems like a weird question, just something that's been bugging me recently..
 
A lot of businesses go bust because the owners take out more money than the business was making. So if a business makes €80k and the owner takes a salary of €180k, then the company will go bust. I have seen this happen quite a lot and they blame the "taxman" for destroying their business.

I know a few people whose spending is not really influenced by their income. They live on €50k a year say, and if they earn a net of €70k, they save €20k.

I know others who spend around 10% more than their income. If they get a bonus, they spend it.

Those who have borrowed to buy new cars and who have now lost their jobs are suffering. Read the Money Makeover forum for some real live cases.

Well done on living within your means.

Brendan
 
Cheers Brendan,

I must take a look through the site to see some examples. The fact that you say well done for living within our means is what I'm talking about.. surely, that's normal? What I struggle to understand is what will happen those who I can only assume were living way beynond their means of which there appeared to be so many in recent years.
 
Unfortunately, it's not been unusual for many to have lived WAY beyond their means in the last few years. We have always been fairly frugal, save where we could, bag bargains, shop carefully, pay off the mortgage as quickly as possible etc....likewise, we're not too affected by the downturn.

Many people saw the raise in the value of their home as "additional cash" & used this equity to borrow for the holiday, house extension, designer wardrobe and, of course, the 08 jeep.

We had a discussion last year about whether we are too conservative & should start to splash the cash abit more....get the new car each year & generally use the substanial equity to "enjoy" life abit more. Decided enjoying our life was not about how much we could spend. Glad we didn't!!

Funny thing is, it seems to be fashionable now to boast about the latest bargain got or money saved by shopping around. We're finally fashionable:D
 
Personally, I believed there was going to be a bust from some years back. I haven't spent extravagantly, run a 12 year old car, didn't buy a house, and made sacrifices to save up for a deposit just in case there wasn't a crash. By 2006 I was scared I was wrong, so I upped the savings rate to ensure I wasn't completely left out of the housing market. Now, I'm in a very precarious position job wise as I am self-employed, but I can live for a number of years without working if totally necessary.

My rationale/psychology was based around saving for a rainy day, and having sufficient funds to be able to leave a job if I hated it, and possibly to re-train. It was probably based on growing up in the 70's and 80's. I never bought the hype of the "celtic tiger" and was shocked by the bling and extravagance. I think a substantial number of people bought into consumerism in a big way. The President made this comment in the US, which I thought was correct though inappropriate for her to make, and I wouldn't be her greatest fan, but she did hit the nail on the head.

We blew the boom instead of investing the benefits wisely.
 
Yes, I think most were living beyond their means. Unfortunately it wasn't just a small minority but possibly the majority, and not just in Ireland but most of the western world (UK & US at least). The problem is now so big, I'm afraid that even those of us who were prudent (?!) will still suffer.
Totally agree we blew the boom, all we have left is a country of builders & property "investors" and a few large multi nationals propping everthing up.
 
tiger said:
Yes, I think most were living beyond their means. Unfortunately it wasn't just a small minority but possibly the majority, and not just in Ireland but most of the western world (UK & US at least).
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Tiger - you are not alone in your opinion!! The New York Times agrees with you ().
 
Lots of people were, but not everyone.
I don't understand how anybody didn't see the crash coming; the sub-prime issue was there over a year ago, out cost base was much too high and we were at the top of a property boom... what did people expect?
 
I think the fundamental problem that the Irish State has been living beyond its means - leaving aside the very sad cases in the Money Makeover section, a majority of people are like the OP - hardworking people who didn't go mad over the last 15 years. On the other hand, our State, with its access to the 'brightest and the best' economists and planners went utterly nuts over the last 15 years, like a sailor on shore leave or a City banker on bonus day.
 
Sherman said:
I think the fundamental problem that the Irish State has been living beyond its means - leaving aside the very sad cases in the Money Makeover section, a majority of people are like the OP - hardworking people who didn't go mad over the last 15 years. On the other hand, our State, with its access to the 'brightest and the best' economists and planners went utterly nuts over the last 15 years, like a sailor on shore leave or a City banker on bonus day.
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Very true but the people running the state were the vested interests (Builders and unions) so what did we expect.
 
Getting back to the OPs subject, I agree that many people were living beyond their means. The intresting thing is now that we know that the economy and businesses are in general is in trouble, the same pople are continuing to live in the same way.

I am no angel when it comes to saving but I suppose I've lived withing my means given that i have no consumer debt and save a little (but not a lot) every month. That doesn't mean I'm prospering though or saving enough for a rainy day. Maybe we should come up with a sensible list of things to do to be truly be living within our means?
 
I am not sure many were. Anyone I know havn't been buying expensive new cars over the last 5 years. They all have houses and decent amounts of savings.

Plenty of people at work on big salaries driving old cars and dont seem to be big spenders.

The thing I dont get is people spending 40-50k on a new car but are living in semi-detached houses - to me anyways I would rather save the money and eventually get a nice detached house on a big site.
 
aristotle25 said:
I am not sure many were. Anyone I know havn't been buying expensive new cars over the last 5 years. They all have houses and decent amounts of savings.

Plenty of people at work on big salaries driving old cars and dont seem to be big spenders.

The thing I dont get is people spending 40-50k on a new car but are living in semi-detached houses - to me anyways I would rather save the money and eventually get a nice detached house on a big site.
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Location location location. Some people are into cars, some into houses, property and yet others into money.

Have to say though I see lots of people who seem to be able to spend like theres no tomorrow, and I can't see where the money comes from. Then again some people seem to be on large salaries for unremarkable jobs.
 
Purple said:
Lots of people were, but not everyone.
I don't understand how anybody didn't see the crash coming; the sub-prime issue was there over a year ago, out cost base was much too high and we were at the top of a property boom... what did people expect?
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I dunno either. We've been talking about the credit bubble, for so long its actually became old news and people stopped talking about it a few years back. I think the crash was so long in comming that, people started to think it would never happen, or at least they'd make enough that they'd still come out ahead.

That said even if your in a comfortable position it doesn't take much to turn it on its head. You get sick or injured, lose your job and unable to get another one, or get one paying far less than previously, or have to look after someone, and thus unable to work. Who is really secure from that?
 
AlbacoreA said:
I dunno either. We've been talking about the credit bubble, for so long its actually became old news and people stopped talking about it a few years back. I think the crash was so long in comming that, people started to think it would never happen, or at least they'd make enough that they'd still come out ahead.
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When people such as David McWilliams and near the top Morgan Kelly pointed out that we were in a bubble and a crash rather than a "soft-landing" was likely there was no shortage of vested interests shouting them down. If you predict a bust for long enough eventually you'll be right and so on. Even this website had/has a policy of not discussing property prices. A large number of people didn't want to hear it.
 
The part I don't understand is how people were apparently living beyond their means and continue to do so. Are these people just excellent at budgeting and can break exactly even each month or is something else going on. I look around and I know of some people living on a limited income but who always seem to be able to afford to dine out etc. Maye it's a different mentality to my own in that some people don't need savings etc..
 
deadtiger said:
The part I don't understand is how people were apparently living beyond their means and continue to do so. Are these people just excellent at budgeting and can break exactly even each month or is something else going on. I look around and I know of some people living on a limited income but who always seem to be able to afford to dine out etc. Maye it's a different mentality to my own in that some people don't need savings etc..
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This is a very interesting thread. This particular comment holds true to people very close to me. They are in huge financial difficulty through several property ventures yet you would not know it to look at their lifestyle. I've got it straight from the horses mouth about the scary level of their debt yet foreign holidays are still the norm as is the pub scene every weekend with ridiculously lavish gifts for all the kids at Christmas.

I'm only 26 so I've experienced nothing like this before. During the 80s, I was too young to care about the recession then :) I think the big difference now though is people are used to living a certain way and just don't want to lower their standard of living just because "some person on the news" tells them to.

Like other people, I've been saving for a while expecting a crash/soft landing and around 2006, I actually starting wondering was the Celtic Tiger going to defy history and actually keep booming. I considered buying a house in 2006 which would have left me deep in negative equity now but thankfully I didn't go through with it.

I feel very sorry for people who did go ahead with such purchases but it is time that people really stood up and made the tough decisions. There are too many people with their head in the sand even still and things will only get worse for them if they don't bite the bullet now!
 
I think that it was not the way beyond means but the small, frequent little bit beyond means and it all just added up.

From Dicken's David Copperfield:

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery.”


There were those who just went nuts of course.
 
deadtiger said:
Looking around over the last few years, I've seen people with similar jobs buy the new cars, take a couple of foreign holidays a year etc. So, my question is.. were these people living way beyond their means? Are we doing something wrong in trying to live within our means and not take too many risks? What happens to these people now?
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I know lots of people my age (20's) who are struggling with debt. But they didn't take multiple foreign holidays, buy new cars, shop at BT. The mortgage alone is enough to crush these people.

On the other hand, the only people who I see taking the foreign holidays and buying the new cars are the 40+. I guess they've built up so much equity in their homes, they thought it was a great idea to release it.
 
Yes, but that's because many older people had enough equity in their houses to "release" a lot of it and still be in "profit".

But we have to remember that "equity release" is a euphemism for borrowing, and houses are not ATMs.
 
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