HEY, BIG SPENDERS
Maya Fisher-French asks if our generation has lost the plot when it comes to the cost of living
Does our generation spend more on nonessential items than our parents did? This question came up recently at a business breakfast while I was chatting to someone about our coffee addiction.
When did a daily cappuccino become a necessity? I am as bad as the next person when it comes to my daily caffeine fix, so is it because of people like me that high-end coffee shops are mushrooming across city centres?
According to Coffee Mag – yes, there is a whole magazine dedicated to coffee – the number of coffee roasters has increased from 20 to more than 150 in just 10 years.
When did this happen? And it doesn’t just stop at coffee. Compared with our parents’ generation, we are spending more on eating out, branded clothing, cars and entertainment. Remember growing up when there were only two TV channels to watch? Now DStv is considered an essential item, with surveys showing that people will cancel their life polices before they cancel their DStv subscriptions.
Growing up, it was a big treat to go out for dinner. This was usually reserved for birthdays and other special occasions. Now my kids eat out at least once a week.
Recently, my mum sent me an email after reading one of my articles about the pressures facing the middle class. She wrote: “We of the older generation are often horrified at the waste. The war years taught us how to make every penny count. There are hundreds of money-saving tips that I can think of. Maybe when things get really tough, people will go back to that way of thinking.”
She makes a great point. We may be complaining about financial pressure, but is it that tough yet?
At the business breakfast, we began to discuss how it is that we are able to live a lifestyle our parents could not afford. One of the reasons was that we save less, which is probably true, but I think it is also because we borrow more, thanks to the proliferation of credit cards, store cards, personal loans and car finance.
Many of us used the equity we built up on our homes in the property boom of the 1990s and early 2000s to borrow more. Economic Freedom Fighters chief Julius Malema even said recently that the middle class had mistaken creditworthiness for being rich.
Our lifestyles are funded by debt. It is the only way we can maintain those standards. And we have all bought into the idea that this is the way we must live: we can only buy a car on credit; we can only survive with a credit card; we can only buy clothes with our store cards.
In a recent interview, the CEO of Truworths was asked about the effect of international retailers like H&M and Zara arriving in South Africa. His response was that they were of little threat to Truworths because they do not offer credit. Truworths has more than 3.5 million account holders. What he was saying, in essence, was that, without credit, people cannot afford to buy clothes, because they don’t have the cash available.
As if this wasn’t already proof of a perfect storm, I then heard some longevity figures that made me afraid. Over the past 40 years, the world’s population grew by 100%, yet the number of people living beyond the age of 80 increased by 324%.
Living longer means that if we are retiring at the age of 60, we will need to be prepared to fund at least 25 years of retirement. This means more saving and investing than ever, yet what we are seeing, according to the Old Mutual Savings & Investment Monitor, is that more retirees are entering retirement with debt than before.
We have a big problem. We are addicted to credit and the lifestyle it affords. But how do we kick that addiction before it kills us?
Changing our lifestyles is hard. People feel very deprived when something is taken away from them, and it is unlikely that the majority of households would adjust voluntarily. What if we just made a commitment to stick to the lifestyle we have and not fund it any further?
Maybe the solution is that we decide today that what we have is enough, and that all future salary increases and bonuses go towards investing in our future rather than towards spending in the present.