14 February

One aspect of cost of living that isn’t spoken about as much is financial illiteracy. Many people in their 40s and 50s still manage their money the way they did when they were 17. Using my favourite example again, of cars. On average people in NSW spend $43,000 on a new car. They keep that car for 6 years, on average. But the cost of a car goes well beyond the day you buy it, you have to factor in the costs of fuel, maintenance etc. Fuel will cost on average about $5000 a year (more in regional areas). Add an average $500 a year on maintenance, and at the end of its 6-year life with the owner its total cost is already nearly $80,000. About double what the owner paid for it originally. It’s a bit like those who say they make a motza buying and selling houses, and leave out the hundreds of thousands in interest repayments to the bank, and maintenance and renovation costs. Ultimately, and it’s not always a popular message, the real route to long-term wealth is always saving. Not investment. Individuals saving, society saving. Investment (in the big ROI sense) is based on exponential growth functions that aren’t sustainable. Even basic compound interest on a bank account is exponential growth.