Social media went nuts this week when the media reported stories of people who said they were struggling to get by on $100,000 a year.
You can understand why — put like that, a six-figure income seems like a lot of money. Surely these people should be able to cope? But the reality can be quite different and delving into it a little illustrates how an individual's circumstances can vastly affect their quality of life.
If you own your house freehold, the kids have left home and you're working and earning $100,000 you probably won't have a worry in the world.
But if you have a mortgage and kids to look after, $100,000 might not go as far as you expect. If you had a $500,000 mortgage at a rate of 6 per cent, paying it off over 25 years, you'd spend about half your take-home pay each month just on your home loan.
Then, if that was the sole income for a family, you'd have your food bill — about $800 to a $1000 on average, according to statistics, your power, school costs, rates, insurance ...
You might wonder why we care. Why should it matter how well other people can manage on what they earn? It shows that what's most important when it comes to having a comfortable financial life is living within your budget, however big that is.
You need to understand what's coming in each month, what's going out and what you can afford to spend. When you borrow more than you can afford to repay, it's easy to get stuck in a cycle where the debt snowballs and it's impossible to get ahead.
Many people who start earning more just let their spending increase steadily along with it, so they never actually feel any better off.
Time spent planning and examining your finances will never be wasted.
When you have a clear idea of what's happening now, you can make a better plan for the future.
Jeremy Tauri is an associate at Plus Chartered Accountants.
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
If we had to sum up Brent and the team at Plus CA it would be - humorous, efficient, professional with a real focus on making your money work to its best ability for you...we will continue to deal with them even though we are moving overseas as we know they have our best interests at heart.
Jeremy thank you for your patience, assistance and general chit chat over the years. I would have absolutely no issue in recommending your services to everyone and anyone – in fact, I do.
We recently employed Jeremy Tauri of Plus Chartered Accountants and have been thrilled with the improved service we have received. Jeremy is really approachable and always available to answer queries. At his instigation we have set up quarterly meetings so that we are regularly reviewing our business and avoiding any ‘end of year surprises’.