When house prices are strong, household spending is also often high. Home owners think they are sitting on the golden egg, so they just keep spending.
When house prices drop, so should spending. But as we have seen in the past 6 months, housing prices have come off the boil, yet consumer spending is at an all-time high.
Are we in a property bubble? Probably not.
Will there be a crash? Probably not.
You need a bit more than a cooling off of Chinese investors to crash a property market. Factors like a depression, massive unemployment, exceedingly high interest rates, and an excessive oversupply of properties also need to be in play. They’re not.
So, although a crash is not on the horizon, the drop in the value of ‘Your Castle’ should give you cause to ease off your spending.
The Australian Bureau of Statistics says that “if their debt is either three or four times more than their income, or 75% or more of their assets value”, then a household is over-indebted.
Two-thirds of Australians’ debt is secured by their property. So, if your spending keeps increasing, yet your property value drops, you’re actually in a position of borrowing too much. And there will come a time when you need to reign it in. Probably sooner than later.
But managing your spending is easier said than done, right? Firstly, because not many of us know how to create a budget to check just how bad our spending may be. And secondly because it’s easier to ignore it.
Budgeting should be your fundamental starting point to make sure your spending is in control. After all, how can you tell you’re on track if you don’t know where your hard-earned pay-cheque is going?
Some of us, correction: most of us, will find it daunting to maintain a budget. Getting all your expenses together, tracking what should be paid and when, how much you have left for entertainment, saving for long-term goals – it’s enough to make you give up before you start. But what if there was an easier way to manage your cash-flow that didn’t require hours of sifting through receipts or crunching numbers?
Online spreadsheets and budget are a challenge, for anyone. Where do you start, what does this mean, what does that mean? What goes here, what goes there.
Let me help you there. Here is a link to Your Spending Plan as built by a Sydney based company, Your Wealth Vault, which educates people through the process of setting up a personal budget.
They have built an easy to use Course which guides you through the important steps to making a budget, and half way through you’ll have your fully functioning Spending Plan, just by way of following through the quick and easy course.
You’re probably thinking that all sounds too easy, there must be a catch.
There is no "catch", but there is a charge to use this ground-breaking money-saving software. Good thing is it’s no more than the cost of a few cups of coffee a month, or a bottle of wine, and way less than a few hours parking at a Sydney beach.
If you are serious about getting your finances organised and knowing exactly what is coming in and what is going out, then start the Course and create Your Spending Plan. You can always easily cancel if you feel it’s all too hard and life can get back to “overspending normal”.
SO start here >> Your Spending Plan
