Friday, 6 August 2010

A foray into personal finances

According to the Daily Telegraph today, "New figures from the Department for Work and Pensions show that there are 100,000 households who receive benefits and tax credits worth more than £23,244 a year". Apparently 50,000 people also get more in benefits than my household income... before my Tax Credits of £2,080 per year of course! That's 0.6% and 0.3% of the poulation respectively, assuming an average of four people per household.

The recent budget has begun to sort all of this out as, in the next couple of years, families such as my own won't be eligible for tax credits, despite earning roughly 13% below the average family income in the UK (£30,000 per year last time I checked). Of course, once this little dependency benefit goes, we'll still have £33.25 per week in Child Benefit, which will give my family £73.25 per week to pay for food, toiletries and entertainment for four people, or £2.62 per person, per day. Actually, it doesn't sound a lot when I put it like that, but then, it isn't really.

I suppose we, like many others, have lived well beyond our means in the past few years. We have a store card, credit cards and an overdraft to clear (but can't seem to get a consolidation loan that brings the interest rates down). We're locked into paying off the DFS sofas, the mobile contract, the free laptop with the Mobile Broadband, the Virgin Media Phone, Broadband and Cable TV. Of course, we haven't had a proper holiday since our honeymoon 6 years ago, and we don't go to restaurants or out clubbing, so these are our treats. I figure we're in a similar place to many in terms of paying for monthly luxuries, though I could be wrong.

We spend about 42% of my income in rent, or £650 per month. We can borrow £130,000 for 25 years, at 2.89%, as a 70% mortgage, according to my bank, which will cost £40 per month less than our rent. Yet, despite there being a house for sale at £120,000 within 1 mile of my daughter's school, which would cost us £90 per month less than the rent at my bank's rate of 2.89%, we have no chance of getting a 100% mortgage. Of course, we could start saving money, but any money we saved would go on joining the company pension scheme and getting contents insurance first.

So what is the point of this little diatribe on my family's finances? Well, there may be many who get tens of thousands in benefits, and many of those may not need as much as they do get. There are, however, tens of thousands of families, like mine, who earn just above or below the average who will feel the reforms to the welfare system on a very personal level and who can ill afford to suddenly lose, say, £40 per week when they have so few options for tightening their belts. Let's not forget, after all, I do work. I'm not sure for how much longer it will pay to do so mind you.

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