Resisting Rampant Consumerism: A Moan

Just last week, I was forcefully reminded of the battle between investment and spending by my long-suffering wife K, when the topic of remodelling our house came up.

We have lived in the same house for the last 20+ years, and have just recently completely updated the entire ground floor, including new floor tiling, new windows, a new wood-burning stove and a completely new kitchen. At great expense, I might add...

But now K wants to also “finish” our secondary residence (yes, I know we are lucky to have one), involving a new round of expensive remodelling both interior and exterior. My heart sank, having just finished paying off the last round of bills for the first remodelling exercise.

Please don’t misunderstand me - K is by no means constantly spending but is actually very reasonable, allowing us to save and invest consistently for ourselves and our children. We don’t take lavish overseas holidays, our (only) car is not new but 6 years old, and we don’t have subscriptions to Sky, Netflix, Amazon Prime, Disney+ or Spotify.

But still, in my efforts to invest for our futures, I do sometimes resent these occasional large outlays that eat into our investment capital, as it is denying us the possibility to take maximum advantage of the compounding effect. After all, one of the biggest advantages a patient investor has on their side is time itself, to allow compounding to work its magic on one’s investment portfolio.

Lockdowns have been good for household savings, on average

During the recent COVID-19 related lockdowns, households’ savings rates have soared, as we were all prevented from consuming in our normal way by the restrictions on travel, shops, and entertainment and sporting venues. So while enforced, lockdowns have on average boosted household finances.

Naturally, this has been more true for those of us who have a) kept our jobs, b) hold white-collar jobs which have allowed for remote working during the pandemic, and c) earn higher-than-average annual salaries.

In the 12 months to December 2020, UK households’ aggregate net wealth rose by £950 billion to an unimaginable £11.4 trillion, or £172,000 per person, driven by sharp rises in house prices, improved pension wealth and higher savings. This was naturally biased to older, home-owning households.

UK household savings rates touched 25%, versus 5-10% prior range

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