Tuesday, April 12, 2005

"Impoverished Professional" Not Alone

A little dust-up has been going on at the TimesOnline. Lets join the fun. "Rosie Millard, the self-confessed impoverished professional, hits back at her critics. 'All that remains now is for me to work like crazy and pay the money back. The debt, or much of it, is on an interest-free card. When I pay the monthly instalments, it is the capital I am reimbursing.'"

The lady has a wobbly plan, as she admits. "I could make everyone much happier by selling a house. I probably will; I put one on the market last summer precisely because I knew a lot of bills were suddenly going to arrive, but I didn’t sell it because the market was as flat as a millpond."

"'I quite like the theory of one friend who summed it up most succinctly. “Until you are 45, you spend more than you earn.'"


At 11:47 AM, Anonymous RentBoy said...

Interesting article....though the UK economy is in some ways structurally different than ours, the mentality is quite similar. Bloated, upper middle-class debt she thinks will be offset by housing capital gains (even after record above-trend gains in the UK for the past several years and now a cooling market there) and rising incomes.

Little do these folks appreciate the tectonic shifts that are taking place in the global economy that will place extreme pressure on the rich middle-class salaries in developed countries.

Jeez -- ya know, because worrying about debt is so damn "Victorian" anyway. Actually, it's not. It's all puritan ethic, and the impetus behind the mindset that built the US.

I enjoyed the claim that "you are not really supposed to have any money until age 45 anyway" comment. I'm 30 and my wife and I have well over $300K liquid (not home equity!) in the bank. I rent and have zero current foward liabilities.

At 12:31 PM, Blogger Ben Jones said...

great post. sounds like you will be one of the winners..Ben

At 2:57 PM, Anonymous Ace said...

What is so wrong about renting??? Why is "renting" a bad word all of a sudden? These people have no business buying one home let alone 3 or 4! I just don't understand how a person can justify accumulating loads of debt for what? A peice of the American (now World) Dream? It's a society fed manipulation of what's really going on. The Fed has us fooled into supporting a war and a trade gap by accumulating debt and they don't really care how it leaves the average person...broke. I couldn't believe the claim AG made about how it's "OK to have debt and use as much credit as you want" crap. If everyone is running, then that's the time to walk.

At 3:15 PM, Blogger DrBubb said...

Here's a Press Reaction a few days later:

PITY Rosie Millard, the Impoverished Professional. At least, that’s what she was inviting us to do in The Sunday Times this week. She owes £40,000 on credit cards, spends like there’s no tomorrow, but apparently can’t understand why she and her husband never have any money.
Debt, Millard moans, is the new middle-class addiction, and the only cure is simply too awful to contemplate: “A night in with Doctor Who instead of a night out at the theatre. Bracing walks on Hampstead Heath. It’s fun, in Shaker-style, Amish work-ethic sort of way. But habits are hard to break.”

The habit she really must break is not just her extravagance, but her tendency to patronise other, less self-indulgent, families who don’t see anything wrong with bracing walks and Doctor Who.

My sympathy for Ms Millard’s plight was somewhat curtailed by the fact that she and her husband own more property than John “Two Jags” Prescott and Cherie Blair combined. They have two buy-to-let flats, plus another “fabulously chic” flat in Paris that they let to tourists; she has wealthy parents who can afford to buy them a new car and they have just moved in to a “lovely” (and presumably bigger) house to accommodate their fourth child.

No, if the Millards of this world have a problem — and they obviously do — it is not really what most people understand by impoverishment, professional or otherwise. By most people’s standards, with two decent salaries plus what must be a substantial rental income, they are very well-off. Their real addiction is not to debt, but to envy — life envy.

I am, I suppose, a bit of a pioneer in this field. In 1999 I wrote a controversial article that argued that, to lead the approved upper middle-class lifestyle in London, one could not earn less than a combined income of £100,000 without running up huge debts.

I demonstrated this by totting up the cost of every major item in a typical upper middle-class household budget. The sums just didn’t add up, especially if you included school fees.

Needless to say, I was pilloried by talk-show hosts (themselves all earning comfortably more than £100,000, I dare say), who thought that I was claiming that nobody could live on less than a six-figure salary. Most people managed on average incomes that were only a quarter of my minimum, they said.

But my whole point was to open the eyes of my readers before they embarked on the road to ruin, by adopting a lifestyle that they could not possibly afford. To underline the message, I named my imaginary couple Will and Emma M., after that great Dickensian couple Wilkins and Emma Micawber.

Mr Micawber it was, you will remember, who said all that ever needed saying on the subject of middle-class debt: “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Six years on, and Rosie Millard is complaining that nobody warned her of what would happen when she discovered the delights of the “great invention” of the £10,000 interest-free card. Well, Mr Micawber did, if only she had bothered to pay attention. What the Dickens did she think that her education was supposed to be for?

In spite of my irritation with the excuses, I do have some sympathy for the victims of life envy. In the first place, we all suffer from it to some degree. Even the people who follow the approved alternative lifestyle: downsizing. You know the sort of thing: the perfectly restored farmhouse, with its elegantly rustic rooms decorated with primitivist art, picturesque animals grazing outside producing organic food and handwoven fabrics, all fuelled, however indirectly, by urban wealth and urban attitudes.

Life envy, secondly, is driven by another, almost irresistible, force: peer pressure. It starts at school and, once you give in to it, goes on right into retirement.

Once upon a time it was just a matter of keeping up with the Joneses. Now it is a matter of keeping up with people such as the supermodel Caprice Bourret, whose ability to save £7 out of every £10 she earns makes poor Rosie Millard “feel like staying in bed all day”.

You may think that Ms Millard is silly to feel like that, and you would be right, but millions of us do — all the time. Middle-class women read interiors magazines for fun — then are surprised to find that they are constantly depressed. These mags have only one message: unless you, too, can create a home that resembles the sumptuous abodes of the seriously rich, in which to entertain friends who must be presumed also to inhabit such pleasure domes, you will have failed: as a wife, as a mother, as a professional.

Every time we peep into those tempting mail-order catalogues that drop on the mat we are regaled with images of perfection: perfect figures, perfect skin, perfect children, all, of course, perfectly dressed, against a backdrop of perfect homes. The only thing that isn’t perfect is its impossibility of attainment. No sooner have you somehow, by hook or by crook, acquired the latest irresistible but unaffordable lifestyle accessory than fashion has moved on, and your object of desire has suddenly turned into a white elephant.
The catchphrase of our time is “So yesterday!” It implies an attitude to life that is so ephemeral as to be only a kind of virtual materialism. Life-envy addicts don’t crave things so much as the approval (and envy) of others. Such feelings are, however, bound to be transient — and so is the satisfaction they provide. The frantic getting and spending, the debt-juggling and conspicuous consumption is driven by a deep fear of the emptiness that it disguises. Life envy is like bad sex: better than nothing.

Nobody can really afford life envy, though. Six years ago, my two-child family on £100,000 had about £65,000 to spend after income tax, national insurance and occupational or personal pensions. (Thanks to Gordon Brown, all three have gone up substantially since then, and the bottom has fallen out of pensions.) Out of that, I allowed what many would consider miserly sums for prime objects of life envy — £3,000 a year for holidays, for instance, would scarcely pay for the deposit on a Tuscan villa or the air fare to the kind of exotic destination that is now de rigueur. And the seriously envious now believe that one must have two such vacations a year.

Women, who are especially vulnerable to those who are marketing life envy, find that they are “expected” to spend at least £150 on a haircut every two months; £100 a month on gym membership; £100 a month on skincare, facials, massages and manicures; £300 a month on a twice-weekly cleaner who also irons; and £100 a month on cappuccinos at work.

Men have their extravagances, too, of course, and high-flying women have acquired all their male counterparts’ expensive tastes in sport, wine, cars and so forth.

As for dress: in 1999 I allowed £2,000 for work clothes and school uniforms, plus a further £2,000 for casual clothing and shoes. These budgets were tight even then; six years on, despite low inflation, they would be impossible. The tyranny of the designer label is more onerous than ever.

It is the same story with food. I reckoned £100 a week for the supermarket run, plus £20 for specialist groceries. The cost of basics hasn’t gone up much, but many now spend as much or more on the fancy (and organic) food and drink their families now “expect” to eat every day. Life-envy addicts entertain almost entirely from a smart deli or, indeed, at a restaurant. Eating out is now routine, not just an occasional treat.

All these are luxuries masquerading as necessities, and the inability to distinguish between the two is at the root of life envy. Even the things that God gave us — light, water, air, sea — are subtly transmuted into luxuries.

So what is to be done? Well, there is no way round the main solution: just say no. I don’t know about you, but I can live quite happily without the John Pawson-style wet room, the Geraldine Bedell-style glass conservatory, the Peter Mandelson-style modernist furniture, or the Frog baby buggy.

What is needed is a bonfire of the vanities. The phrase wasn’t invented by Tom Wolfe, and it is good to be reminded that life envy wasn’t invented in America. The original bonfire of the vanities took place in 15th-century Florence, just as the Renaissance was taking off. A charismatic monk called Savonarola persuaded the citizens to pile up all their luxuries in the main piazza and burn the lot. True, the Florentines soon had second thoughts and burnt Savonarola instead. But he had made his point. Michelangelo didn’t come cheap: the rebuilding of St Peter’s, the Pope’s last resting place that we have all been admiring this week, practically bankrupted Christendom, requiring taxes that helped to provoke the Reformation. It isn’t a good idea to spend money you don’t have on things you don’t really need.

You may imagine that it is no longer “acceptable” to be happy with an eclectic, untidy home that does not boast original Saatchi Gallery-style works of art or a landscaped garden, and that you are the last of the Mohicans in whichever middle-class ghetto you inhabit. But you are mistaken. Bohemians of the world, unite! You have nothing to lose but your plastic!

@: http://www.housepricecrash.co.uk/forum/index.php?showtopic=7865

At 3:17 PM, Blogger DrBubb said...

And he's my own Reaction to it:

SO LONG AS "Need" is defined as keeping up with the neighbors, and credit is widely available, and widely used, the spending will not cease. It becomes competitive. The neighbor has a nice car. I want a better one. He gets a new extension; then I get a bigger one. So long as the bank is willing, and I can easily borrow against a Property whose value is rising, the increase in debt seems painless. And, hey, why not throw in a BTL flat, before he buys two.

That is the trip they are on, the Kirsties and Rosies of the world. They are encouraging us to pursue Life Envie, and competitive spending. They want us to constantly upgrade our lifestyles, and zoom up that so-called property ladder. And replace our old fashioned pensions with a string of high geared property investments.

But this game works only as long as debt is cheap, credit is widely available, and collateral prices are rising. If any part of the equation comes unstuck, it all becomes unstuck. And that is where we are now. Rates are rising. Credit is tightening. And property prices have stopped increasing. Suddenly it looks as if what went up, can go back down again. But it will not be the same. We cannot easily return to yesterday, if prices fall. The property values may be lower, but the higher amounts of debt, from refinancing and spending are still there. And the bankers will want their interest, and their loan repayments, even if their borrower's cash flow is less after the smaller pay rises, the higher taxes and rising energy prices.

So Life envy brings those who practice it most aggressively to the brink of disaster. For some, it is to late to voluntarily change the habits of excess spending. The banks will force the change by foreclosing on the collateral, and cutting off the credit. Then the new bankrupts, some of them, may face genuine poverty, particularly if their jobs melt away. Others, who were somewhat less profilgate, will learn from the mistakes of their neighbors, and cut back voluntarily.

In days to come, we will see less spending. Life envy may be replaced by a new fashion: bragging about how frugal we can be.

At 3:40 PM, Blogger Ben Jones said...

I appreciate you posting more on the story, its a big help.

(Life envy may be replaced by a new fashion: bragging about how frugal we can be)

It could happen and would that be so bad? Thanks Dr.!

At 3:59 PM, Anonymous Melissa said...

I like these articles. I wonder if Rosie has a glimmer of a point, though, about enjoying things when you're young. I don't agree with her about the credit card debt type stuff, but since this blog is about housing, it makes me think of the movie It's a Wonderful Life. The bit about an honest banker who loans money to people so they can live in nice homes earlier rather than later.

So far it's worked out pretty well for Americans, in some regards.

But now it's getting a bit pricey.

At 9:43 PM, Blogger Ben Jones said...

(I wonder if Rosie has a glimmer of a point, though, about enjoying things when you're young)

I completle understand you position, and agree with your optimism. But what I see coming out of the housing bubble is less affordability for younger folk.

At 12:12 AM, Blogger DrBubb said...

Rosie is know for various things, apart from her Debt problems:

"Millard, 38, has something of a reputation for speaking her mind. Three years ago, she was reportedly reprimanded by senior management after telling newspapers that she was "sad and disappointed" that Robert Nisbet had been made entertainment correspondent, covering part of her beat, without her knowledge. She says now that she has no quarrel with Nisbet, but that she was "bewildered and cheesed off" by the way managers handled his appointment.

YET she has had a mixed press herself. The Sunday Mirror called her "a blatant attention-seeker who has never been the same since Liz Hurley told her she had magnificent breasts", the Daily Mail labelled her "a gold-medallist self-promoter", and The Guardian has twice made fun of her in Pass Notes.

A fellow reporter sees her "larger than life" TV persona as evidence of Millard's fiery ambition: she stamps her personality on most of her stories and, unlike many reporters, employs a top showbiz agent. "There is a line you can't cross as a reporter, and she comes close," the colleague says. "But she gets away with it because it's only arts, not the NHS, that she's talking about."

@: http://www.davidrowan.com/2004/01/interview-rosie-millard-bbc-tvsunday.html

At 12:15 AM, Blogger DrBubb said...

(Life envy may be replaced by a new fashion: bragging about how frugal we can be)

In the UK, we call those who embrace the Frugal Lifestyle, tghe "Frugalistas". With Property prices so high and higher rates biting, it is a growing trend.

At 7:13 AM, Anonymous Melissa said...


Yes. I've got friends and family who are obsessed with frugality. My sister, for example, must have a coupon for everything she buys or else berates herself mercilessly. I find that I don't have time to search through scraps of paper when I've got three little kids under 5 and a house to take care of.

But I do enjoy using them when I've got them and buying what I can on sale.

My husband and I are selling our expensive house and are going to enjoy breathing for a year or two with money in the bank. (for a change). Perhaps buying ourselves some new clothes and shoes. (within a budget that we actually have now that our house isn't taking up 70% of our income).

At 7:21 AM, Anonymous Anonymous said...

To me the ultimate sign of a bubble were the guys buying cars at the Barret Jackson auctions this winter.

People, mostly greying baby boomers were paying 100K$+ for 1960-70s muscle cars with 400HP V8 engines. These sales are bringing in 10s of millions of dollars.

I think there is also a bubble in muscle cars these days. Do you know how much fuel a 400 ci V8 would use ? What would you do with such a car other than drive it occassionally and otherwise look at it. I think people expect them to be an "investment" and appreciate over time.

After the housing bubble bursts, people aren't going to have money to buy a gas guzzler to look at.

At 8:04 AM, Blogger Ben Jones said...

(After the housing bubble bursts, people aren't going to have money to buy a gas guzzler to look at)

There are reports of collectables being in a bubble as well, which one would expect in a credit blow-off. Good point anon.

At 6:12 AM, Anonymous Eremos said...

RentBoy- I would be interested to hear more about your thoughts on "the tectonic shifts that are taking place in the global economy".

Please tell me more!


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