Tuesday, 7 July 2009

A friend in need...

I recently used the Joseph Rowntree Foundation's minimum income calculator. This year, the minimum for a single person household has gone up to just under £14k before tax. It changes quite a bit when you key in your actual rent or mortgage outgoings and what you spend on transport. 

Say you earn £25k, an amount which usually requires some level of higher education and which many on lower incomes would consider okay. Take off approximately a third for Tax and NI and you're left with around £600 or so a month on top of the bare minimum. It gets you thinking doesn't it: I mean, how do you buy a house, replace a fridge, cooker or washing machine; which car can you afford to buy; and where do you take a holiday? Many just borrow against the future. 

Personally, I think that this is precisely what the mega-wealthy are banking on, especially now that interest rates have plummeted. It made me sick to read in The Times last week that homes are being repossessed for as little as £4,000 in credit card debt. Borrow at your peril, I say.

Today, The Independent reports: “Union anger at the threat of public sector pay freeze”. Too damned right they are angry – so would you be, if you did the maths! But before you pooh-pooh me for being a teacher, with six weeks summer holiday and all, I want you to look at the figures, not what you think the work entails.

The reality of the “earn up to £35k” teacher recruitment campaign is that three and a half times £35k is some £30,000 short of the average house price in this country. What's more, to reach an income of £35k, (without taking on extra responsibilities) can take some ten years. Not so if you're the Principal of one of these new fangled Academies of course, where your salary is likely to be off the upper limits of nationally agreed pay scales and in excess of £100,000 plus benefits, with little or no accountability if you mess up. I'm sure nurses and firefighters can offer even better examples.

The truth is that inflation figures are a decoy. They are derived from now bipolar trends, rendering them totally inoperable as a meaningful average. The massive drop in interest rates is countered by huge increases in food and fuel costs, such that anyone who does not have a mortgage for which repayments have dropped is increasingly and significantly worse off.

My advice? As final salary pensions come under threat and many of us look set for retirement at 70, think long and hard before borrow a penny – you could very well be paying for it the rest of your life.

Posted @ 18:53:16 on 06 July 2009
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