You are as wealthy as you feel
I walked past ‘blanket man’ today and he smiled at me. For those of you who do not live in Wellington, do a Google search. You will find a homeless person that is happy and at peace. Now ‘homeless’ in New Zealand is a lifestyle choice. We have enough welfare protection in this country that anyone who is living on the streets is there because they want to be. I don’t judge people for their choice of lifestyle. Everyone has their own path on life’s journey. I did however wonder what he had to be happy about.
By the time I got back to my office I was thinking about all of the people I had met over the years with all of their different financial positions. For the last 20 years people have exposed themselves to me (financially speaking). Now some of those people were happy and some were fearful, worried and stressed. What is interesting to me is that there appeared to be almost no correlation between the amount of money that someone had and their feelings of security and certainty about the future. Or in other words there did not appear to be a correlation between how wealthy someone felt and their level of wealth.
It seems to me that the reason we want more money is entirely because of the way we expect to feel because we have more of it. Great wealth may give us a greater sense of freedom, peace, security… or not. So perhaps being rich is not about how much money one has but rather about how one feels about the money that they have.
Now a lot of people are not feeling rich at present. To a great extent this is due to the way that information is presented in the daily newspapers and television news. Financial crisis this, another great depression that. So I thought it would be timely for me to give you some information to help you feel wealthy.
Consider the facts. At the start of the depression of the 1930’s, there were no government safety nets for unemployment, housing and health. People could literally be left homeless and penniless if they were out of work. And not by choice as in the case of blanket man. Many banks were left to fail rather than being rescued or assisted by governments and central banks. The current environment is massively different and can not even be compared with that time.
The 1987 share market crash which is perhaps more like now, was followed by a property crash in New Zealand that did not recover for another 7-8 years. However interest rates at that time were extremely high. Some borrowers were paying 20% + for their residential mortgages. The current environment has interest rates falling dramatically to levels that will soon make positively geared property investments common.
According to Wikipedia http://en.wikipedia.org/wiki/World_population the current world population is estimated to be 6.7 billion and is expected to reach 7 billion by 2011 and 8 billion by 2024. To get some perspective on this consider that the expected growth in the world’s population is the current population of the United States (approximately 300 million people) in the next three years and the population of China (approximately 1.3 billion people) in the next 16 years.
Now these people may not need Sky T.V. But they will need food (We make it) and shelter in preferably a first world country that provides a relatively safe environment to live in and raise a family (we are that).
So around the corner is a massive population driven increase in demand for something we have in a low interest rate environment. If that is not cause to make you feel wealthy then you are beyond help.
As always I am happy to respond to any questions on this article or anything in previous issues. Send your questions to mortgages@nzij.co.nz