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  • The Great Avocado Incident | Column by Deborah Carlyon

The Great Avocado Incident | Column by Deborah Carlyon

 COLUMN Deborah Carlyon 
As seen in Issue 021 of Renovate Magazine

 

Referring to himself as a secret middle-aged moraliser, Bernard Salt partner of accounting firm KPMG, caused a social media storm with his recent column in The Australian newspaper’s weekend magazine.
Writing an amusing satirical piece about ageing baby boomers feeling out of place in hipster cafes, he noticed young people ordering “smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop”.  “I can afford to eat this for lunch because I am middle aged and have raised my family. Shouldn’t they be economising by eating at home.  How often are they eating out?” he ponders. “Twenty –two dollars several times a week could go towards a deposit on a house”.
There was outrage on Twitter as millennials took umbrage at the suggestion they should save for a house whilst forsaking life’s luxuries.  Professional media organisations joined in with the Sydney Morning Herald calling for “smashed avo toast” to be made the national dish. CNN and the BBC World Service reported on Australia’s Avogate storm, with the BBC proclaiming “give up your smashing avocado toast brunches and buy a house instead”.  There was mockery over the mathematics. Australian comedian Deirdre Fidge decided to share her life story on SBS online entitled, “I Stopped Eating Smashed Avocado and Now I Own a Castle”.
But the comic reaction masked a concern by some that young people are so disheartened that no matter what they save they can’t access the housing market - so they are spending their cash on smaller pleasures instead. “What do you do when you can’t afford to buy somewhere to live? Well you decide to live”, Bridget Delaney wrote in The Guardian.
There were a number of wild calculations. Just how many smashed avocado toasts would you need to sacrifice to save a 10% deposit on a city home? The BBC reported 3,863 smashed avocado brunches for a deposit to buy in Sydney, 8,988 in New York City, 7,800 in East London, and a whopping 40,000 to buy in Hong Kong.  Whilst the media storm created some great headlines, it did hit home the rather boring message that cutting spending can pay off.  And the very obvious message that you’ll need to cut more than one avocado brunch a week to get anywhere fast.

It’s easy to feel overwhelmed especially with average house prices so high in major cities.  But start by focussing on the median home price, not the average which is skewed upwards by those $5 million and $10 million homes. 

The median is the mid-point in a series of sales, in other words what most people are paying for houses. For example, the median in the largest city in New Zealand, Auckland, is closer to $800,000 not the average $1 million so often reported on . Yes, that’s still double compared to eight years ago, but a 20% deposit is a more achievable $160,000. How achievable? Well, let’s say a young couple both working full-time are earning $140,000 before tax. After superannuation contributions, their net annual household income of $106,000 would be around $2,000 per week. Rent could chew up around $500 and basic living costs (food, utilities, transport) say, another $500. That leaves $1,000 each  week for discretionary expenses and savings for goals. Saving $500 per week at 2% net interest will see you reach $160,000 in 5.8 years. Cut two weekend brunches as a couple, and you’ll get to your $160,000 house deposit a year earlier.
Crucial to achieving goals is awareness of where your money goes. Tracking your spending has never been easier, with some great apps. Gone are the days of trawling through bank statements and receipts and entering figures into spreadsheets.  Most good apps link directly to your bank account, plus you can set categories and request notifications.  Watch those brunches appear on your smartphone at the same time you are wiping the egg off your plate and finishing your flat white. 
Check out cash trackers your bank offers or there are lots of free apps using the same encryption standard as banks.  “Mint” is owned by the makers of personal finance legend Quicken, or Australia’s “Pocketbook” and New Zealand’s “Pocketsmith ”which all sync to bank accounts,  credit cards and loans. The aim is “fun budgeting” (no longer an oxymoron?)  with features such as “safely spend” letting you know how much loose change you have.  
Set goals, divert money to separate “no touch” bank accounts and watch your savings grow.  Once you have that dream home, maintain the savings habit – you’ll probably want to renovate one day!   

 

Deborah Carlyon is an Authorised Financial Adviser. This column does not provide personalised advice. Her Disclosure Statement is available on request and free of charge by emailing deborah@stuartcarlyon.co.nz

  • Delilah Southon