Long Post: get yourself a cuppa and some biscuits.
Coronavirus: Poorest forced to borrow more to get through crisis
The above headline caught my eye this morning (link) and although it doesn’t actually say how many people were included in their survey, one in four poorest households are having to increase their borrowing compared to one in eight of the richer community.
Budgets are my thing. Hubby and I are officially in Severe Poverty according to the Government’s website. Of our income, we are lucky to put anything by as savings, and this month we have had some hefty bills for the vet, car insurance and our quarterly water bill on top of the normal monthly expenditure.
We are more fortunate than most as we have no rent or mortgage to pay, own the car outright, have no loans or overdrafts and no balance owing on our credit card.
Despite the Banks and Finance Institutions offering breaks in interest application or loan repayments, there is money to be made in debt, and the only true beneficiary is the lender.
I have been in the position of many today, borrowing against one credit card to pay the minimum plus interest off the other, and although getting no further in debt, I wasn’t getting out of it either.
Partner of the time was self employed, so if he didn’t work, there was no money coming in other than my wages and the bills still had to be paid. There was no such thing as ‘payment holidays’ if you were struggling, though obviously in the ’80s there was no Virus to blame, and the buck stopped at me as I ran the household budget. However, the lending companies answer to ‘struggling’ was simply to put the card limit up, and I found myself with two maxed out credit cards with limits of £5K EACH, an overdraft of £800 and no savings to fall back on.
I have faced bankruptcy twice, but on both occasions have managed to get myself out of trouble over time, self discipline and anger at getting myself in the predicament in the first place. In the second instance, I had a good Bank Manager and some equity in a property, even though my solicitor of choice cost me thousands by not pushing the point for a court order to sell and I had to wait two years before everything was eventually settled.
The problem now is that no-one was prepared for the lockdown and furlough system to be in place for so long. I wonder how long it took those poorer households with £1900 in savings to put that money by compared to the higher earners’ savings of £4700. When you consider the average family’s monthly food bill is about £500 (source), when there is little money coming in, that’s a lot to find. Add bills and other monetary commitments, savings do not go far and any interest on them isn’t worth spit.
There are two and a half of us, and our annual food bill is around £1800. The above charts are for a post I did at the time about food shopping. For the record, our food bill for 2017 was £1767.95, 2018 £1761.43 and last year £1763.69. Todate for 2020, we are up to £1208.54 but that does include £260 of extra shopping when the virus hit (and no, that was not on a surplus of toilet rolls!)
I am currently working on the budget for 2021/2022 as this year is ‘covered’. That doesn’t mean to say we can relax as the same bills (plus inflation) will still have to be paid next year and that is what I’m working on.
Our outgoings are fixed, life insurance, gas/electricity, telephone landline for our internet, council tax, and water, plus the annual bills of car insurance and car running expenses such as fuel, maintenance and road tax, household insurance, food of course, medical care including eye tests and vet bills.
Knowing what the costs are for the current year, I add 10% on all of them, and that is what I have to cover for the next year. The joke is our income does not go up by 10%, and last year we took an additional hit of £2000 on an already stretched budget when Hubby lost 60% of his disability allowance.
Once I know what is expected to go out in the coming year, I can work out a monthly plan and thus spread the cost. However, this is not by going into the red periodically, more of allowing a small monthly surplus to tide us over on those more expensive months.
I realise this is us, and not thousands of families struggling in today’s current situation. We don’t drink or smoke, entertain or have kids to worry about, and are used to just having ‘enough’, which are the basics, a few treats such as the occasional DVD or steak dinner cooked at home, and a little cushion for emergencies, such as Maggie’s two hefty vet bills this year (a potential third has already been put aside) and new glasses for both of us.
The hardest thing is to get started on preparing for the next year whilst still struggling with the current one. It’s a juggling act, taking what has to be paid and removing or reducing the ‘mad’ expenditure on nothing in particular or a bit of what you fancy. When there are two incomes coming in, it’s not as difficult as when you are a single parent or an individual. All I can say is if you can manage to save a few pounds here and there, it does mount up and can take the pressure off later.
Our tweakables are food and petrol as they are the easiest to reduce if need be.
I am lucky in that I can make what we have coming in stretch, but I can’t do anything if it’s not coming in in the first place, and that is the dilemma facing so many households today.
If it helps, these are our three questions before we spend any precious ‘excess’
Do I want it? (on the boat: Can I eat it?)
Do I need it? (on the boat: Can I wear it)
Is my life going to end if I don’t have it? (on the boat: Where am I going to put it?)
If you can answer No, you don’t need to buy it and can put that money aside instead. Maybe saving for a rainy day is going to make a comeback.
I found I can do with so much less. It’s an amazing, freeing thing to discover. I’ve saved money during lockdown too because of not going out to eat. Restaurant meals really soak up the cash…
We used to go along the prom to the cafe twice a week or so and have tea and cake at £7 a time, so 15 weeks not spending £14 paid one of Maggie’s bills. We’ve also saved on fuel as we’re not driving around so much. It’s little things, but noticeable over time.
I have always saved for a rainy day and for nearly 2 years, that rainy day was needed, until I was in second job last September.
Now as you know, I am saving what I can in what I hope for a deposit on a house. Preferably I would like to do that by next summer. But I may have to except a few months later after that planned date.
But I have allowed a few tteats this month. Next month, I plan to stick away £300 instead of £200. So no treats that month.
But I feel lucky that I can at least put £200 away per month. Anything more, is a bonus.
That’s the ticket Liz. You have a plan to achieve your aim, and that’s half the battle.
One month when we were saving like stink to get out of the negative equity trap, I rebelled and didn’t save anything one month. At the end of it I cried, because I had nothing to show for it and realised I had wasted all that money.
Those 3 questions are SO important Di. And if you take them seriously and answer them thoughtfully and honestly, it is truly enlightening to discover how little we really do need and what a satisfactory life we can have. Great post!
Thanks Fransi. You OK today?
I am, thanks, Di. Hot, humid and threatening rain here (which is needed) so I am getting some cleaning and tidying done (also needed 😁). You must be tired after your sleepless night. Hope you are taking it easy now.
I’m exhausted and will probably have an early night, Maggie permitting of course!
I hope you sleep well!
Interesting post, good advice.
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Good advice! I too use the want vs need model.
Works well for us.
That is so informative, roughly how we work, though we are both on pensions being of a certain age and have savings. Though what we have we have worked for, and own. We can and help our children. Though happily the all have our work within. The sad thing is so many are in poverty, or boarder line poverty through no fault of their own . Also many just have no idea how to budget, cook or save . Even more are of the “must have ” generation and now are being rudely awoken! It hard for some, well many to cope for many reasons in these pandemic days. Well done you for bringing this up. 💜💜💜
Thanks Willow. Number crunching is what I’m good at and I really do feel for those who are struggling because they have been living close to the edge already. When I worked for the bank, a colleague was on about £1000 less than me, but his partner was earning £30K plus, had a company car, and also worked on commission. They rented their flat for £600 a month which was £200 more than our mortgage at the time, but with all that income, they had no savings. I can;t get my head round the figures quoted these days and wonder if I’m living in the same world as everyone else as we manage on our income. It does help not owing anything to anyone, and we intend to keep it that way. It’s laughable that we are considered in ‘severe poverty’ because of our income bracket, yet we don’t go without the important things, we’re just not ‘posh’! We’ve got no kids, and although paying off our mortgage when Hubby lost his job wiped our savings out leaving us with £200 in the bank, it was the best thing we ever did.
I agree Di, the more some people have the less they seem to manage. Like the couple you spoke of with car and rent, it’s all show. We are probably old school, own your own home as soon as you can, pay for everything as you buy it, save up for it before you buy, pay all cards off in full each month. That’s the key, that’s what we have tried to instill in the boys 💜💜💜
That’s what we do. My Dad told me I could have anything I wanted………….. provided I saved for it. So I did, and have ever since.
Us too and our boys 💙
I shouldn’t say I “enjoyed” reading your post – as it is about survival – but you have written it very well and expressed the concerns of many.
We also live very frugally – my main expense is the luxury of an overseas trip to visit family every few years – but I’ve not been for 3 years!
You get those sudden demands on a tight purse – eg leaking roof – and then you struggle.
It is particularly bad for the poor in this country during Lockdown – which is why it has been eased rather too soon – even though food parcels were supposedly delivered. There is no Dole.
I have always admired your ability to make do on little and to do so well. Poor Maggie; old dogs can become very expensive – even Little Monkey, the street mutt who was healthy her whole life, ended up with very heavy vet bills in the last year.
Still, as you have said before, as long as you have each other it’s OK.
Stay Safe! 🙂
You too Sci. Maggie is doing pretty well now and hopefully the next thing will be a worming pill which we can ask for in the post or buy from the pet shop.
We do OK and I surprise myself sometimes at the end of each month and see we have coped with everything thrown our way. We’re a good team, and it helps no-end that Hubby is a good Mr Fixit.
Yes – teamwork makes all the difference, and being of like mind.
Keep safe 🙂
It takes discipline to budget. And in my opinion, a lot of skill. I am not blaming anyone for my situation at all (I put me here and I own that), but I do realize that poor role models growing up and bad habits learned early on still impact me today. I’m thankful enough to get the end of each month with bills paid off. I have a very very slender cushion, which with one major debt (broken down car, washer, refrigerator, bad furnace or plumbing) will be wiped out. Things keep getting more and more expensive too, especially in the face of C-19. It seems that merchants want to recoup their losses at the cost of the customer, which is capitalism at it’s worst. I just hope not to drag on getting older and older and having less and less because some twerp in government decides that the old, handicapped or truly poverty stricken are ‘sucking off the government’ and not doing their share – even if those same old people etc, did contribute and were assured they’d put enough away for that rainy day. It can get depressing. Bravo for you being so smart! 🙂
I got myself in a right muddle with ex partner, and swore never again. I guess my job at the bank as an analyst enhanced my home budget methods. Luckily for me Hubby isn’t extravagant or has expensive tastes, so he’s content to leave the money side to me. We had to be careful having got into negative equity with our first house, and it just became habit I guess.
That’s what people forget about us old’uns, we’ve paid our way via our taxes throughout our working life. I chose not to work after 2007 so never signed on for unemployment benefit. As a result I shall get a reduced pension as they’ve moved the goalposts for qualifying and I lose a vital 2 years contribtuons because I started work at 16 and now they only start the calculation from 18. I could pay in what’s missing, to the tune of £8,000, but even if I had it, it would only make a difference of about £10 a week, so would take me 15 years to break even!
I have to be honest, when I get my State Pension we should be able to relax as it will be extra, not instead of! I don’t know what I’m going to do other than squirrel it away, though we want to replace the carpets here and treat ourselves to some built in wardrobes and a holiday.
So sensible. We are similar – the 80’s were hard, but we managed and got to level ground. Once again we weigh everything before spending.
We had saved so we could take care of ourselves as we got older and not be a drag on anyone. It bothers me when after years of working and putting money into the fed. retirement system – the gov. finds more and more ways to cut what we should be getting – and charging more and more for insurance which is mandated and necessary because you never know, but the increases are ridiculous and we never get up to the deductible limit before the insurance kicks in. Luckily we are mostly healthy, and try to stay that way when others do not. After working so hard, we feel scammed when we see what others stomp their feet and are handed.
I hear you. We stopped Maggie’s insurance when it more than doubled following a claim, and we had to pay the first £100 and 15% of the bill as they’d changed the policy cover.
Both being over 60, I’m glad we get our prescriptions and eye tests free.
Excellent advice (of course; you are a wise person!). I’m sorry you have to live so close to that tight belt. 😦
We have five children and therefore A LOT of expenses, many unforseen (or, perhaps, unforhopedthey’dneverbreak).
Setting by WHATEVER one can right at the intake of income is a great way to save, and I like your boat analogy. I also learned to make my money work for me, from a finances book -that is, have money in things that earn money instead of just sitting somewhere.
We have some savings but can’t tie them up in case of an emergency, but we’re doing OK, for which I’m grateful
This is a big reason people want to get the quarantining over with, so they can get back to work. Not everyone has a job where they can work from home…
Exactly John. I don’t think I could have done my analytical job from home. Many have stretched themselves beyond limits and playing catch up will be difficult. The promise of financial help in a few months does not help them now.