We're living beyond our means
Page 1 of 2 ....5:00AM Saturday July 26, 2008
By Brooke Donovan

As the economy boomed and the good times rolled, spending money was easy and credit was there for the taking.

But financial advisers are dismayed at the number of New Zealanders who have been living beyond their means, forgetting the basics of money management and now paying the price.

Even the well-off have proved to be vulnerable as finance companies - the latest Hanover Finance - hit the skids, potentially taking large chunks of investors' cash with them.

And the younger you are, the more you're likely to struggle with the new need for frugality.

New Zealanders are wealthier on paper than ever before, but we also have more debt. Only the rise in property values has prevented us from collectively sinking into the red.

Statistics from the Reserve Bank paint a rosy enough picture of New Zealand households' total net wealth - it increased from $268 billion in 1997 to $614 billion last year.

But a closer look reveals most of that increase comes from the rise in property values, and that household debt nearly tripled to $170 billion. Of that, mortgage lending rose from $53 billion in June 1998 to $159 billion in May this year.

More here.