While having dinner together with a young couple in their mid-twenties, we ended up talking about changing phones, with them being excited about the new iPhone 15 being released soon. In Finland, the phone is going to cost around €2000.
Bargain.
What was interesting is that this couple of newlyweds, are also thinking about their future together and what they want in life, with a house being next on their list, as neither of them are apartment people. And at some point, they are looking to have a child or two, though they are not in a rush for this.
While we sat there eating tortillas, they were looking around at our house and commented on how nice it is. They are family, so this is definitely not the first time they have been in the house, but now that they are moving into that stage of life where they are exploring more permanent options for themselves, they are paying attention to different things, which is natural.
Since I had finished a bit earlier, I did a quick search on a real estate site for houses around the region that might interest them (older houses like ours), looking at the price ranges from everything from fully renovated down to the classic, "fixer-upper" (like ours). The difference can be quite extreme, depending on location too, but the lowest was around 200K and they went up to about 800K, and they probably still needed some work.
We bought ours in the "low-ish" bracket.
Now, old houses are quite daunting propositions, because one never really knows what to expect and what surprises lay beneath. And, while the house itself might be relatively cheap, the costs of renovation materials and all the work can be insane. It definitely isn't an undertaking for many people, because it is guaranteed to cause a range of stress and budgets are "budgets", because nothing comes in on price.
However, this young couple are looking to own, which is a good thing for them, regardless of what kind of home they start with. Currently, they are paying a decent amount in rent and getting very little for it, so they could likely pay less for a mortgage and starting early, will mean paying it off early too.
However, there is always a challenge with getting the deposit together, which is around 15% of the purchase price. If they were to need a renovation loan also, that would be a separate loan and would also require some kind of collateral to secure. But, looking at the low 200K, the least they would need for a deposit is 30K. That is probably about what one of them earns in total in a year, before tax. This means that while renting, it is going to be difficult to collect the money.
Bu it is interesting, because whilst this is in their mind, at the same time, they are thinking about getting the new iPhone, which is around 7% of that deposit - that is insane! However, like most people these days, they wouldn't actually buy the phone outright and would put it on a plan, paying it off monthly for two or three years. This means that whilst they don't have to pay that lumpsum up front, the overall cost is going to be higher.
Their car is on a similar plan.
I wonder how many young-ish people really know how much they are spending each month and what kind of impact it makes on their abilities to do something like, buy a house. And, sure, while they might "know" the monthly costs, what many don't realize is that if they had to pay upfront, they would actually spend less, not just because of the interest saved, but because they would have to save that money, making it harder to let go of. Spending a little each month is far easier than dropping €2000 in one fell swoop. It is hard to let go of larger sums.
This means that instead of replacing cars and tech as new models are released or as their contracts come to an end, they would be far more likely to hold onto the items for longer, cost averaging them down over time. Instead of a phone every two years, it is more likely to be every four, or even more.
But, I believe there is more to it than this also. Because I think that there are multiple lessons that can be learned from having to wait, including being less influenced by advertising and, learning to be more patient, less "instant gratifier". When we practice saving for what we want, what many find is, that when they have enough, they no longer want it. The impulse has gone. But, even if it hasn't gone and they still buy it, the appreciation for what they bought is higher than if they got it easily, without having to do the work first.
These lessons are grains of gold.
They talk about having a "growth mindset", but culture these days and all the influences embedded into it, are teaching us a different framework. The on-demand, subscription-model, rent all, own nothing mentality means that not only is our financial health being bled, our psychological and emotional capabilities are being bled too - it is
Death by a thousand influences.
Just like our bodies, if our head isn't in the right frame of mind to support us getting to where we want to be, we aren't going to get there. If people aren't seriously looking into the different aspects that affect their outcomes, dreams are always going to be just that, a fantasy.
There are grains of gold everywhere, but if our attention is always drawn to the shiny and drama-filled world of advertising and media, I think we are going to miss a lot of the value. Rather than building ourselves to be the kind of people who can, we end up being the ones who can't because of...
We reap what we sow.
But to sow, we first need some seeds.
Taraz
[ Gen1: Hive ]
