Friday, October 10, 2008

And still the borrowing continues...

I am exceptional, I think, even for a member of my generation. I have never been in debt. No, I haven't even had a mortgage. When, at the age of 24, I decided I wanted a house, I worked every day for two years at The Japan Times, my principal place of employment, and also took on a few part-time teaching jobs. (Every English-speaking person in Japan teaches the language.) After two years, I had my house.

It wasn't much of a house. It was what I used to call a "matchbox house", because it was tiny, made of wood (lauan timber from the Philippines), and a little flimsy. After several earthquakes has loosened things up, so to speak, I would sometimes see a flash of daylight through a tiny crack that had opened up in a join in one of the exterior walls. But when I sold it, in 1972, I made more than the $NZ14,000 I needed to buy a house in Palmerston North.

When we settled here, we didn't have anything except the house, and a few items of essential furniture - a kitchen table and chairs, a double bed and two single beds. But we didn't borrow to buy the other things we wanted. We saved, and bought them one by one as we could afford them. Within five years or so, we had virtually everything. And because we had always paid cash, we had paid less than we would have paid if we had taken out loans. This meant that, as time passed, we were able to enlarge our house, make a few overseas trips, and save more than $NZ400,000 (at the time of writing) for our retirement.

The superiority of this procedure is so obvious, I can't understand why more people don't adopt it. Yet even today, as the world sinks deeper and deeper in the credit crisis, the thinking of the average person seems to be that, if you want something, you should have it right away, and that the best way to get it is to borrow, borrow, borrow - even if the interest rate is close to 20 percent.

Hence today's finding of a Consumer Credit Expectations Survey, conducted by credit reporting agency Dun & Bradstreet, that one in four Kiwis expect to use their credit card to cover purchases they otherwise could not afford in the next three months.

That figure jumped to 31 percent, up from 22 percent in the last quarter, for those aged 18 to 49 and for those earning between $30,000 and $49,999.

The survey also found that 19 percent of 18- to 49-year-olds expected to apply for a new credit facility in the coming three months, as did 17 percent of middle- and high-income earners.


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