This article is about three couples that I’ve come across over the years. Only one are clients. Two wanted more (whatever that is) and one didn’t. As you will see, more is not always better.
Jenny & David
David and his spouse, Jenny, are in their mid-late forties. David is considered quite successful in a superficial sense. They have a house in Baulkham Hills (in Sydney’s north-west) which they have paid off and a couple of late model Japanese cars.
Last year Jenny changed jobs doubling her salary. Also, David was promoted and got a 45% increase in his salary.
Initially, Jenny wanted a European car. Why not? She could easily afford it now. She came to us for a lease and within a few hours she had the financing in place to buy a shiny new sports car with a three-pointed star on the bonnet.
Then, a couple of weeks ago, Jenny contacted us and asked what was the maximum amount they could borrow given their new financial status.
She wanted to raise her kids somewhere more…well, more.
We did some quick sums and found that they could borrow $2.3m. We also advised them to see a financial planner as we felt they were moving a little too fast and that they may land themselves in serious financial strife if/when circumstances changed.
Jenny wanted to place a bid on a $4m home in Gordon in Sydney’s upper north shore. David was happy with his lot in life and just wanted to stay put and cruise to retirement.
You see, Jenny has been sucked into “the vortex” of the more you earn the more you spend. She maintains she always wanted to move out of Baulkham Hills but settled in the area because they couldn’t afford anywhere else at the time. David grew up in Gordon and doesn’t understand why Jenny wants to move there. I’m within walking distance of Gordon and I have to agree with David.
David spent the last 20 years repaying one mortgage and doesn’t want to gear himself up to start another one. Especially one that’s over $2m.
For those not in Sydney, Baulkham Hills can best be described as a middle-class suburb around 32kms from the CBD. It is home to many families with professional parents. Gordon is also middle-class but Goronians would say they are upper middle class (whatever that is). Gordon is around 15kms from the CBD and on a direct train line to the city. It is also populated by many professionals but has a much older demographic than Baulkham Hills.
Meet our second couple…
Brad and Carmen.
Brad and Carmen’s story is a little like David and Jenny’s.
They lived in a northwestern Sydney suburb. Got promoted. Saw a doubling of their household income. Traded up. Signed up for a $1.8m mortgage after being debt free for a few years. Moved to the North Shore. Then Brad was retrenched. Within 12 months Carmen was also retrenched. Brad and Carmen spent 24 and 12 months out of work respectively. The bank came calling. They now rent.
The problems Brad and Carmen face now are no longer financial ones. They’re mental health issues arising from up-rooting their family (they have three kids) from one suburb to the next and then once again when they fell on hard times. This meant losing touch with critical support networks (like friends and family).
Carmen is holding it together but Brad has spent time in a clinic to address his anxiety and depression. Two of his three kids have developed mental health disorders as well. One has OCD and the other suffers from anxiety.
They are legally separated but still live under the same roof as they can’t afford to live on their own. It makes looking after the kids easier. Brad sleeps in the garage or shares a bedroom with one of the kids when it gets too cold or too hot.
They try and get their kids help under medicare but trying to afford a psychiatrist who charges over $400 per hour is beyond them.
The mistake that Brad and Carmen have made is to over-extend themselves. They should never have borrowed so much money at their age (they were in their mid-forties). But hindsight is a wonderful thing. Brad and Carmen are friends of mine not clients – they still maintain they have a good relationship with their bank – they have never used mortgage brokers.
I took Jenny (remember her from couple no. 1) out for a coffee last week and told her about Carmen and Brad.
All precautions were taken to protect the identities of the couple in question. To my surprise Jenny said that she knew or knew of several such couples. Then why?
Her response didn’t shock me. “I just want more. And when I get more I want even more.”
Now meet couple number three…
Barney & Elke
I introduced them at our place of work about 25 years ago. At the time Barney had purchased a town house in the lower north shore and Elke had emigrated out here from Europe.
They both still live in the same town house. Elke still works and Barney retired not long after they were first introduced. He was 42 at the time. He said something to me that has always stayed with me. I’m happy with my lot in life. I don’t need a sports car or a fancy house to have a good life. I don’t want to be sucked into the vortex of earning more and spending even more.
He has, thus far, had a very comfortable life with a Ford Festiva or Hyundai i20 or similar small car. He prefers public transport. He goes to Europe or the US a couple of times a year to visit with Elke’s family. He loves to read and does so with tremendous focus. He also loves movies and sport. He spent the first couple of years of his retirement following the Australian Cricket team around the world. Each year, when the Oscar nominations for best film are announced, he sees each film prior to the winner being selected. Same with books. Each year he waits for the Booker Prize finalists to be announced and reads each one prior to the announcement of the winner.
Many of his co-workers from that time did what our second couple did and things went awry for some of them. Barney didn’t want any more than he had. He wanted to experience life not accumulate more stuff or a better postcode. Elke didn’t need a wardrobe full of Hermes handbags or whatever item makes some people feel good about themselves temporarily.
You may be thinking that you couldn’t possibly do what Barney and Elke have done. Think about that for a minute. Why can’t you?
Is it because you want more?