Anyhoo, lets try a little back of the fag packet budget for Mr. & Mrs. (or shacked up) Average and 2 sprogs. Some like to use the dual income model when assessing affordability. I will leave Incomes to the end. The calculations will be rough and ready and include assumptions and averages, so massive amounts of room for arguments – I also aim to err on the conservative side. But that is not the purpose. The purpose is that you recognise much of what follows, not necessarily all, and are able to take a pragmatic view of the current situation.
So, first some assumptions – sprogs at school – one boy one girl. Two parents working. ‘Only’ one car. £135k mort off £150k. Had £15k deposit. 3% rate = £640pm repayment. House fully furnished and decorated – all large items paid for and relatively reliable.
No Sky, No debt (credit card/personal loan), nothing beginning with an I (pad/phone/pod/pad), No football shirts, PS3 games, Blu rays, princess outfits. No job loss insurance, no mortgage insurance, No private pension, No charitable giving, no money put away for saving or emergencies, no pets. No Christmas, Birthdays or Anniversaries. Wedding paid off years ago.
Might have Expenses – all Monthly
Child care Granny £0 Creche £200
Car Loan Average £200?
Holiday (£1,000 for 4) £80
Bldg & Contents Ins £20
TV licence/Line Rental/Internet £35
Mobile phones x2 £30
Car Ins £75
Car Tax £15
Car Maint (tyres/service/MOT) £40
Car Fuel (social & work) £100
Social Life (fags/booze/mags/papers/bet/eat out/cinema/swim/zoo) £100
School x 2 (Lunch £3 daily, uniform, shoes, trips) £150
Work x 2 (clothes, odd lunch, coffee) say less than £2 daily £80
Ocassional expenses (replacement/upgrade TV/PC etc) £40
House maint internal/external, furniture, decorating £50
I make that a conservative £1825 expenditure, post tax joint income, before a car loan, holiday, child care or any other debt – Student, credit card or personal loan. Which I think is unrealistic. And look at all the other exclusions to get here.
A car loan, holiday and childcare put this to £2,300 per month without any other debt, frivolities or, dare I say it, luxuries.
Now here’s the thing – a 4% rise in interest rates ups the mortgage to £954, an increase of £315 per month making £2615.
Inflation is 5%, there is little sign of wage inflation and job security is tight. Imagine if one or both lose jobs.
Mr and Mr average, in an average house on average (dual) household income.
On the edge.
Edited by Shotoflight, 31 August 2011 - 05:19 PM.