“The consumption practices of the average 40-60 year old are alarming. $500k-$1M in RE; 3-4 newer vehicles; less than $100,000 in savings; debt $300,000+; income $120K-$200K. Buying anything that catches their fancy.”

mohican, a financial planner, in the comment section of his own very fine blog, housinganalysis, 11 Nov 2010 1:52pm“[Debt taken by consumers based on rising housing prices] is very concerning for the future of our society. The consumption practices of the average 40 – 60 year old are alarming. They just can’t seem to stop spending money and expect that the good earning years will continue forever with no regard for – emergencies, family issues, job loss, retirement, or really anything beyond immediate gratification.
I meet many of these people and they typically have $500,000-$1,000,000 in real estate, 3-4 newer vehicles including boat/RV/quads/etc, less than $100,000 in savings (RSP/TFSA/etc) and typically owe $300,000+ on a combination of a mortgage and HELOC. They make huge debt servicing payments each year since they typically make a healthy combined income of between $120,000 – $200,000 but everytime something catches their fancy – they go right ahead – whether it’s a new Harley, fancy vacation, or ‘lending’ their kids money to buy a house.
These personal financial practices are unsustainable and will likely result in these folks getting a very rude shock one day.”

5 responses to ““The consumption practices of the average 40-60 year old are alarming. $500k-$1M in RE; 3-4 newer vehicles; less than $100,000 in savings; debt $300,000+; income $120K-$200K. Buying anything that catches their fancy.”

  1. Village Whisperer

    Gee Mohican… allow me to quote:

    “You have to take a deep breath and realize that the world you thought you knew is not as it appears. You must understand and accept that there is untold wealth that exists within our city. A paltry $2.5 mil is chump change. What we are experiencing now is only a beginning.”

    Ergo my $500,000 to $1 million real estate will be worth $2-4 million in 10 years, so why worry.

    (sorry… I couldn’t resist)

  2. I’m 50 and I know lots of people like this.
    I’d probably be like this myself except I’ve been pretty conservative regarding debt throughout my life. I’m mortgage and debt free and have 750K+ in savings. A little different than those described above.

    • metalHead, have you considered the possibility that you are TOO conservative. If you die with $1 million in assets, that is money that you could have used during your life and your conservative spending was not necessary. Being free of debt is not a goal with value in itself if your net assets remain large.

      Of course, if you have made a considered choice to leave the money to an important charity or you think your kids really need it, then my comment does not apply. However, many people seem not to have really considered what they want to do with their assets and fail to use them effectively.

      • Yes, I have considered that. I’ve also been accused of being too conservative by others.
        I do have my reasons though.
        1) I went through a foreclosure in Edmonton in the early 80’s crash.
        This experience “mentally scarred” me towards debt.
        2) I work in a volatile business (oil) where when I work I make a huge wage but it is very easy to be out of work for a period of time in the busts.
        It’s pretty easy to burn though cash when you are out of work for a while.

  3. Can’t help but wonder…how many of the kids that are helped into RE by their parents will return the favour when their parents want to retire. If I was 60, with 100k in the bank/rrsp/tfsa, and no other source of retirement income, I don’t think I would be lending anyone money for a house. Specially given the overwhelming sense of entitlement that most young adults have today. I don’t actually have kids yet, but my biggest worry is that I am going to be picking up the “babysitting” of my siblings when our parents stop providing the room and board.

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