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Is £40,000 Really A Liveable Income For Families In The Uk?


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I made it to about three paragraphs before giving up!

http://www.bbc.co.uk/news/magazine-15197860

The average income for a British family with two adults working is £40,000 a year. But while there are people who feel well-off living on this, for others it is a daily struggle.

"I try and buy myself a new-ish car every two years," says Kate Golding.

Cars are a particular weakness for Kate, a nurse who lives with her partner Jai Rossiter in Bristol.

"I could easily impulse buy a car," she admits.

Kate and Jai, an electrician, both own cars, putting them among the 30% of UK households owning two or more vehicles.

They own a £300,000 detached house, and say they feel "comfortable and stable" living on a combined income of £40,000. That is the average family income for a household with two people working, according to the Office for National Statistics.

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New-ish car every 2 years, probably not that bad a strategy.

Buy cars 1 year old (takes a chunk of depreciation out), then get warranty for 2 year (no repair cost), sell at the end of 2 years and use the money to buy another.

How does that compare with buying one say 2 years old and keeping for 10 ? Shouldn't think there's a massive amount in it.

Worth thinking about it a bit more.

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As many people have pointed out, the problem with this story, plus many others, is that they don't give all of the facts in relation to the people's finances.

It's one thing having a £300,000 house but if you're in month 1 of a 120% mortgage it puts you in a different position to somebody who inherited £500,000 and bought cash.

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I'm not ashamed to admit that I do things the same way as Nevil in the article.

I have an 'elaborate finance system' (a spreadsheet) and mythical pots for car costs (service, MOT, insurance, tax), Christmas and Birthdays and an 'other' section for a little bit of savings to keep to hand.

It's worked well for the last six or so years and keeps me straight each month.

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a £40k income, with a £300k house?

depending on how much they paid, if it was a 100% mortgage at that price that 7.5x income.

Or sold two properties to move in together, giving them a sizable deposit. Bit more likely than 7.5x income I think. Tbh, that couple seem to have their head screwed on.

"I don't have a credit card. I haven't ever been overdrawn," says Kate. "I've had a loan once, £5000 for a car. I had the loan three months and I paid it off".

Nothing there for HPC'ers to get their knickers in a twist about!

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"I could easily impulse buy a car," she admits.

I suddenly think my wife isn't to bad!

Yeah, makes the odd couple of hundred on a dress seem like peanuts! Having said that, my partner can spend her disposable income on anything she damn well wants, otherwise what's the point of earning it?

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New-ish car every 2 years, probably not that bad a strategy.

Buy cars 1 year old (takes a chunk of depreciation out), then get warranty for 2 year (no repair cost), sell at the end of 2 years and use the money to buy another.

How does that compare with buying one say 2 years old and keeping for 10 ? Shouldn't think there's a massive amount in it.

Worth thinking about it a bit more.

I think it depends on what you buy - I still see a fair number of VW Golf GTis (Mk IIs) in great condition on the roads.

How many similar age Renaults are still going?

It wouldn't surprise me to find that buying and running a Merc or BMW that's a couple of years old and repeating that cycle every few years actually works out cheaper than holding onto a Renault for a decade.

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As others have pointed out, your income means nothing in isolation. What determines your standard of living is the combination of total family unit (i.e. including spouse/partner) income to total family unit outgoings, and what proportion of those outgoings are essential vs. discretionary. The factors determining this can be quite complex, e.g. accommodation costs, any benefits or tax credits you receive, whether you have a wage-earning partner or not, etc etc.

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New-ish car every 2 years, probably not that bad a strategy.

Buy cars 1 year old (takes a chunk of depreciation out), then get warranty for 2 year (no repair cost), sell at the end of 2 years and use the money to buy another.

How does that compare with buying one say 2 years old and keeping for 10 ? Shouldn't think there's a massive amount in it.

Worth thinking about it a bit more.

Car is worth circa 50% of purchase cost at three years old, and say it drops by 10% in the first year- so buying at one year and selling at three years old may cost about 40% of the original price of the car, in depreciation terms.

If you have to do that four times compared with buying a two year old car and keeping for eight years, then you'll pay out 160% of the price of the new car.

The two year old car will maybe cost you 75% of the new price, and say will be worth zero at the end of eight years ownership.

So you are basically 85% of a car down in monetary terms between the two scenarios, but you hopefully enjoy the marginal increase in reliability with the four newer cars and maybe some reduced servicing costs to reflect this edit warranty. Not sure if no MOTs applies to the first scenario, as in order to get the best resale price at three years old buyers will surely expect a 12 month ticket.

People manage to convince themselves that buying new cars or nearly new cars is cheaper than running old ones, and in the vast majority of situations(ie non mega-milers with continued improvements in efficiency) it simply ain't the case, nor even close to being the case. There are perfectly good reasons for wanting to run newer cars of course, but saving money is not one of them.

For an idea of depreciation, my old banger cost £1,600 quid four years ago. The depreciation per mile (assuming it is now worth zero) is still high enough to be a little under half the cost of fuel, in pence per mile, over the 30,000 miles I've owned it.

If people also saw the depreciation racking up on the dial at the petrol station, they would be shocked. eg in the above example, 85% of a car costs say £8,000, so over the eight year period you've shelled out about 8p a mile in depreciation for an average (12,000 miles/annum) driver. A 45 mpg car will cost about 11p per mile in fuel.

Edited by cheeznbreed
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Buy, or finance?

I wouldn't have thought a recent bankrupt could get finance for a car these days.

That couple aren't bankrupts. To be fair, apart from the negative equity (How do bankrupts manage to stay in their privately owned house?), even the bankrupts seem to be managing their finances now.....

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The couple in the video state that they made the cash they used to start their cafe/restaurant business by buying, "doing up" and selling houses. Did anyone else hear that bit?

Looks to me like they saw how much money they made in their property "business" and misconstrued this as a sign that they must be savvy business people.

Surprise surprise, less than a year later their "real" business goes bust. Says a lot about how easy it was to make property money in the bubble. Being savvy and attentive was actually a disadvantage; the more gung-ho and bullish you were, the more reckless and leveraged your investments were and the more dosh you made.

Bloody property bulls, thank smeg they're a dying breed.

EDIT: It's at about 1:41 in the video.

Edited by ska_mna
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This video should come with a health warning for thse with high blood pressure.

Why the feck should I feel sorry for a bankrupt who still lives in their £310k house? Why wasnt it taken form them and sold to someone who can afford to live there, freeing them up to find somewhere more affordable thus negating the need to be spoon fed tax credits!

Edit for numerical accuracy and chance to wipe foam from the side of my mouth!

Edited by Caveat Mortgagor
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I think it depends on what you buy - I still see a fair number of VW Golf GTis (Mk IIs) in great condition on the roads.

How many similar age Renaults are still going?

It wouldn't surprise me to find that buying and running a Merc or BMW that's a couple of years old and repeating that cycle every few years actually works out cheaper than holding onto a Renault for a decade.

I have an Audi and it's very expensive to service. Saying that I looked at a Fiat the other day that had done half the mileage and looked far far worse.

Anyway, the point I would make is that they are not buying a new car every 2 years. They are trading an older car for a slightly newer one, which is a significant difference.

There are lots of things that will work against the depreciation. No MOTs. Better fuel economy, no repairs because of warranty and probably no replacement of tyres etc.

Plus it doesn't say anything about the husbands car. he's an electrician right ? So he's probably working on different sites. So he might have a company car, or costs payed for by the business.

Too little information to bother coming to a mouth foaming conclusion. You don't know anything about their personal circumstances as other people have pointed out. Maybe they have already inherited from one set of parents or grandparents. And they have no kids.

Can't draw any sensible conclusions without knowing the full facts.

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Or sold two properties to move in together, giving them a sizable deposit. Bit more likely than 7.5x income I think. Tbh, that couple seem to have their head screwed on.

"I don't have a credit card. I haven't ever been overdrawn," says Kate. "I've had a loan once, £5000 for a car. I had the loan three months and I paid it off".

Nothing there for HPC'ers to get their knickers in a twist about!

Once you earn £50k that puts you in the top 10% of earners in the UK. Plenty of people around where their wife earns something modest and it all amounts to £50k pa. And, £40k pa is not that much anymore, primarily because we have STUPID housing costs in this country.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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