01 Aug 2010

Debt a ‘four letter word’ as mortgage owners opt for simpler lifestyles

Despite Australia’s buoyant economy concern about debt is weighing on consumers, especially mortgage owners, which is leading to a reduction of spending on non-essential items and a streamlining of lifestyles.

Leading market researcher, Datamonitor has released its latest findings on ‘key financial issues facing consumers’.

Consumer behaviour over the past two years is trending toward recessionary-style actions where average consumers with home loans are keeping a close eye on their spending and movements in interest rates despite a thriving economy.

The research shows that 41.7% of consumers in the 25-34 age group and 46.2% of consumers in the over 65s age group are implementing the highest levels of lifestyle streamlining.

“The main evidence for the switch to streamlining is the high proportion of consumers reducing the number of big purchases that they are making, cutting non-essentials from their budget, scaling back on treats and generally adopting a lower-key lifestyle with an emphasis on making do with less,” says Andrew Haslip, senior analyst at Datamonitor and author of this research.

Datamonitor notes that the days of care-free spending in Australia are not yet a thing of the past. However, as a nation, we are demonstrating caution about using unsecured credit when it comes to making high value purchases as we can see from a number of first home buyers entering the property market with the likelihood of taking on substantial mortgage repayments, to Seniors who are likely to be on fixed incomes that are vulnerable to rising costs are rethinking their purchases and opting to free up their budgets and time to spend on leisure-related activities.

In the Datamonitor survey 55% of Australian respondents said they were cutting back on non-essentials ‘all of the time’ and 60% said that they were budgeting more closely.

These findings are aligned with a seismic shift worldwide to simpler and more sustainable ways of living. Consumers are seeking happiness in other ways that don’t necessarily result in frightening credit card bills and strangling home loan repayments by finding ways to live within their means.

Duane Elgin, author of ‘Voluntary Simplicity’ sums up the concept of simple living as: “Living in a way that is outwardly simple and inwardly rich.”

Wanda Urbanska, author of ‘The Heart of Simple Living’ and host of the popular US television series, ‘Simple Living with Wanda Urbanska’ describes simple living as a road map to a more balanced life – a life centred on self discovery. Fewer possessions, means more time, more friends and more meaning, which in turn will help identify objectives for life and create awareness of actions and finances, while planning for the future, she says.

Switching to a simple but rich life begins by taking baby steps.

Consider a financial makeover:

  • Request a Free Home Loan Health Check from your Mortgage Lender to identify if you can pay your mortgage off faster and save interest.
  • Move to suburb that has a lower cost of living.
  • Become a planner. For example set a date when you will pay off home loan or car and work diligently towards that goal. Organised, goal oriented people reduce stress and clutter in their lives.
  • Ensure that you and your partner are signatories on each other’s accounts in case of a health emergency.
  • Close bank accounts that charge a fee and don’t pay interest.
  • Decide if your fear of debt is rational or irrational. If the interest on your mortgage is less than rent being in debt makes sense.
  • Take an in-depth look at your expenses and ruthlessly decide if you are consuming in order to escape problems. If so, address the problems and you will find that your level of consumption automatically reduces.
  • Have a ‘buy nothing day’.
  • A practical tip: Try consuming half your usual amount of toothpaste, shampoo and detergent.

Simplicity does not mean misery. On the contrary; simplicity means de-cluttering financially, emotionally and physically and allocating time, space and energy to do what you enjoy in this hectic world.

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