Less than 10% of the British population can afford to live an average lifestyle. The high cost of living is forcing tens of thousands of Britons into debt – one person is becoming insolvent every three and a half minute in the UK, according to latest research.
This article is written by Joanne Wood and Tim Wood. Joanne declared herself bankrupt in February 2006. From the age of 17 Joanne worked as a court reporter at the Central Criminal Court. She is the author of Bankrupt 130 of 2006 – a remarkably candid account of what happened to a family after bankruptcy.
Plagued by pressure to pay the bills many Britons plunge hundreds of pounds into the red each week. The reported average net household income of £558 a week is just half what a family of four actually needs to lead an average lifestyle.
The middle classes have never been so hard hit. It is no wonder MP’s were carping during the expenses scandal that their £60,000 per year salaries were not sufficient to meet their lifestyle expectations.
So what is the average expenditure needed to live a relatively modest lifestyle in 21st Century Britain?
The industry standard usually used to show what an average household actually has to spend comes from retail giants ASDA. Their research for September 2009 indicates that an average household has only a net disposable income of £29,016 a year – £558 a week
But that is well short of the £765 disposable income a week Mr.& Mrs Average need to spend to bring up a family of four. If both parents are working with child care cost this figure hits £1,000 a week – £52,000 a year, which equates to a joint annual gross salary of £70,000.
This means that both parties would need to earn way above the £28,000 average gross salary in the UK.
The table below shows what it really costs a husband and wife and two children to live in Britain. It covers a £150,000 mortgage, household bills, running a car, owning a dog, a basic Sky TV package and a £20 fish and chip take away for four at the end of the week. A romantic meal for two is a once month treat of £50 and a two week family holiday. The figures also include two minimum interest payments for £5,000 for unsecured debt – credit card and HP agreements – which is the average amount per person in the UK.
All figures are taken from the latest research on what the average family spend.
| Outgoings | Weekly £ |
|---|---|
| Mortgage (£150,000 2 year fixed-rate repayment | 183.48 |
| Utilities – Counsel Tax, Gas, Water, Electric TV Licence, Internet/phones Mobiles x 2,buildings Insurance |
77.63 |
| Running and maintaining one car (Tax, MOT, insurance, Petrol and repairs | 73.07 |
| Shopping (Food, alcohol, toiletries and laundry) | 127.20 |
| Season Ticket/Bus Travel costs -For husband and wife – travel (47 weeks ) | 80.42 |
| Keeping a dog | 16.01 |
| Sky TV | 4.63 |
| School uniforms, equipment, trips and lunches – one primary schoolchild £683 p.a/one secondary school child £1195 p.a. | 36.11 |
| Fish and chip supper (once a week) | 20.00 |
| Eat out at a restaurant once a month | 11.53 |
| Minimum interest payment for unsecured debt x two adults | 28.84 |
| Total | 658.92 |
Further expenditure:
| Outgoings | Weekly £ |
|---|---|
| Clothing | 19.38 |
| Christmas Budget | 16.69 |
| Holiday Budget | 53.84 |
| Medical & Grooming:
Medical 1 prescription per adult per month. (£7.20 each x 2 ) = £ 14.40 Dental check-ups – 2 adults 2 per year (£16.50 each) Hairdressing (haircut for 4 people 8 times a year – £10 per haircut Dry Cleaning (one suit each x once a month) Total |
13.04 |
| Hobbies Gym membership. p.a. x 2 adults |
23.07 |
| Gifts Birthday gifts – 1 gift per family per month – £10 |
2.30 |
| Home contents and boiler/insurance | 3.06 |
| Children pocket money x 2 min | 6.60 |
| House maintenance/repairs | 1.92 |
| Extra | 139.90 |
| Total
Deduction of Child benefits x 2 children |
798.82
33.20 |
| Total Cost | £765.62 |
* Optional extra – Childcare Fees [£159 per week (47 working weeks) per child] = £7144
Note: Average weekly Rent = £158 a week (The Halifax)
Luxuries – Not included: Health Insurance/medical, Pet insurance, Socialising, Restaurants, Beauty Products, Driving Lessons, Life insurance cover, University Assistance, Pension Contributions, Savings/Weddings, Cleaners/Gardener/Ironing Service, Private School Fees, Weekend Breaks, Car valet, Horticultural goods, garden equipment and plants, House maintenance/repairs, Opticians, Second car, Children Weekend hobbies, Window Cleaner, DIY services, Extra dry cleaning and shoe repair
This shows why the credit card has become an extended salary. Cash strapped Britons now rely on their credit cards to pay for the weekly shopping, paying interest on other credit cards and in extreme cases used to pay the mortgage.
Research carried out by Shelter, the housing charity reported that by June 2008 4.1 million households had used a credit card to help meet their housing costs within a twelve month period.
Luxuries for the average family now include home contents insurance, dental treatment and a £10 hair cut. The temptation to put it on the plastic is too great an attraction to ignore.
For thousands of frustrated families across the country staying out of the red is now proving a challenge. Recent figures from the CCCs (Consumer Credit Counselling Service) have shown that an estimated 250,000 Londoners alone suffer from mental health problems as a result of debt – a 40% increase from a year ago.
But now credit crunch Britain is facing an even bigger threat as a result of the worldwide collapse of the financial sector. With energy bills at an all time high, tax, VAT and interest rates expected to increase and reports of one house being repossessed every ten minutes, the future looks grim as we struggle to recover from the worse depression since the 1930’s.
KPMG (Global network of professional services) estimate that 411 people a day will become insolvent by way of bankruptcy or entering into an Individual Voluntary Arrangement (IVA) every three and a half minutes throughout 2009.
Britons are now faced with the financial horror of hanging on to their jobs just to put food on the table. Insuring the house and paying the gas bill is a bonus. With unemployment rocketing millions will be fighting to stay out of debt.
| Living Costs | £ | Source |
|---|---|---|
| Mortgage (£150,000 2 year fixed-rate repayment) | 183.48 | Money Supermarket |
| Rent | 158.00 | The Halifax |
| Utilities (Council Tax + Gas + Water + Electric + Internet/phone + Buildings Insurance + TV licence £142.50) + Mobile phones x 2) | (27.98 + 15.21 + 8.46 + 8.60 + 4.29 + 2.47 + 2.74 + 7.88) £77.63 | 1. Daily Express article November 12, 2009 – Page 39 of Money Supermarket 2. This is Money |
| Run and maintain a car (Car tax, insurance, MOT and repairs and Petrol) | 73.08 | 1. Perrys (reported: Daily Express: Sept 24 2009 – £3,800) 2. Daily Mail (£4997 pa) |
| Food (includes alcohol, toiletries and laundry) | 127.20 | Mirror |
| Travel (Season Ticket + Spouse – Bus Travel) | £80.42 (66.92 + 13.50) | First Group |
| Keeping a dog (food, vaccinations) | 16.01 | Average cost of keeping a dog – Adrian Holliday The Observer 2 May 2004 – £833 pa – Guardian; The Observer |
| Sky TV Package | 4.63 | This is Money |
| School uniforms, equipment, trips and lunches primary and secondary years | 36.11 | Average cost of education, uniforms, equipment etc – Friday, 21 August 2009 – one primary school child £683/one secondary child £1195 – cost £1878 – £36.11 per week – BBC |
| Fish and Chip supper family of four | 20.00 | Once a week |
| Eating out once a month for 2 adults | 11.53 | £50 |
| Credit Card Payment x two adults | 28.84 | The average APR (annual credit rate) on credit cards is 15%. This means on a £5,000 credit card debt you will be paying an annual interest fee of £750 which is £62.50p a month. That is without paying anything off what you have borrowed – 14.42 x 2 |
| Clothing | 19.38 | Lloyds Bbanking Group – PDF £84 x 12 = £1008 |
| Christmas Budget | 16.69 | Average spend £868 Daily Mail |
| Holiday budget | 53.84 | Average cost of a two week family holiday – £2800 – E-tid.com – 09 June 2009 |
| Total Grooming and Medical: (1 prescription a month each @ £7.20 + Dental x 2 adults Two check-ups /PA + Hairdressing x 4 people + Dry Cleaning – one suit each once a month) | £13.04 (3.32 + 1.27 + 6.15 + 2.30) | Two prescriptions a month – £14.40 x 12 – (£172.80) + Adults £16.50 each visit (£66 pa)/children under 18 free NHS + 8 times a year (every six weeks) £10 a hair cut/four people (£40 x 8 – £320) + £5 per suit – £10 per month x 12 – £120 |
| Hobbies + Gifts/birthday | £23.07 + £2.30 | Two Adults – gym membership £1200 p.a. + One birthday or gift per month per family of four £10 (£120) |
| Insurances (Home Contents + Boiler insurance) | 1.54 + 1.52 | £79.04 p.a – British Gas |
| Children pocket money x two children | 6.60 | Two children £3.30 each min UK Family |
| House maintenance and repairs | 1.92 | £100 a year – miscellaneous |
A situation: £70,000 gross household – Two adults working full time – Both earning £35,000 gross – net £25.957.60 x 2 – household net – £51.915.20. Calculate
| Annual | Monthly | Weekly | Hourly | |
| Gross pay | £35,000.00 | £2,916.67 | £673.08 | £16.83 |
| Income tax | £5,793.00 | £482.75 | £111.40 | £2.79 |
| National Insurance | £3,249.40 | £270.78 | £62.49 | £1.56 |
| Net pay | £25,957.60 | £2,163.13 | £499.18 | £12.48 |
More information?
Childcare Costs - £159 per week –Daily Mail Jan 29 2008: author Sarah Harris) (47 weeks working – £7473 per child) [Aska Mum]
Average Credit Card Debt, Debt Fact file, Money Advice Trust – £4,825 per person.
Min Interest Payment (Barclaycard APR ) – Monthly: £125
Family of Four – two adults and two children – (Asda: Charles Davis Economist – Unit 1, 4 Bath Street, London EC1V 9DX.direct line: 020 7324 2863) ASDA Income Tracker – August 2009:
The average Gross income for 1.8 adults is £35,840 (p.a)
The net income is £28,500 (p.a) (Weekly £558)
Cost of Weekly living – £396
Average family weekly spending power – £162 – Other living costs
Quotes:
Below – Debt facts and figures compiled by Credit Action – 1 August 2009 –
KMPG (Global network of professional services) estimate ‘One person becomes insolvent every three and a half minutes in Britain’ – 411 a day throughout 2009.
BBC News – ‘An estimated 250,000 Londoners suffer from mental health problems as a result of debt’ – 16 ~September 2009
Shelter carried out a one off research with Gov – between June 2007 and June 2008:
| Who the allowance is for | Current weekly amount |
|---|---|
| Eldest or only child | £20.00 |
| Additional children – per child | £13.20 |
| Guardian’s Allowance – per child | £14.10 |
