How much to live on

helensbiggestfan

I visit the debt free board occasionally but only post if I think I can make a worthwhile contribution to the discussion.  Many years ago I worked as a debt counsellor with a special interest in helping people with mortgage arrears.  I learned then that one has to be really ready to commit to debt reduction, the timing had to be right and it takes a lot of willpower to stick to any debt management programme, it can take some people several attempts before they are ready to finally make the necessary sacrifices. .  

Ok a bit of a 4 Yorkshiremen moment here..........one which i think is linked to the debt free board, and which highlights how lifestyle choices are such an integral part of both incurring debt and its polar opposite, building wealth.  

 I wonder how many of the debts incurred are linked to genuine misfortune and unexpected curved balls and how much to lifestyle creep, trying to keep up with the latest gizmos and gadgets, designer this and designer that.  

I look at the credit card debts some people are dealing with and wince.  Mortgages or rent, student loans, car payments etc are all, to a certain extent unavoidable,  but how much of that credit card debt is down to consumer spending, wants rather than needs, clothes, furniture, entertainment, holidays and so on.  

When I first bought a house, I had no carpets or floor coverings,  my mum gave me old sheets that I dyed and sewed up into curtains, no furniture to speak of just a new bed, a cooker and a second hand fridge, a tiny black and white portable tv.  No washing machine, I washed everything by hand.  And that's about it.  Sofas, Chairs, tables were family cast offs, kitchen ware, crockery etc were bought as cheaply as possible (good old Woolworths!!!!).   Coffee tables, bedside tables were old fruit crates with a cloth over them.  As for new clothes, holidays, weekends away, meals out. Forget it. In my dreams. 

However there was no debt, other than my mortgage.  Perhaps as well with the eye watering interest rates.  

I wasn't unusual by any means. Most Boomers and Gen Xers started out exactly the same. Saving up for furniture and household goods, slowly building a home.  I don't think many new home owners these days would be prepared to live like that and maybe that's why they carry so much consumer debt, in the form of personal loans, credit cards.  I think it's mainly credit card debt which torpedoes budgets and makes wealth building, pension planning and in some cases even being able to save up for a house deposit nigh on impossible.  How many people are spending double in rent what they could be spending on a mortgage. 

We Boomers are often accused of having it easy and to a certain extent we did, especially with housing costs.  House price and wage ratios were better in sync than they currently are and there was more job certainty. However, most of my contemporaries all lived a very basic lifestyle for years, skimping and saving to furnish their homes and bring up families.  The foreign holidays, nice clothes and fancy meals out only happened after several years of living very frugally to get established. 

We laugh at the 4 Yorkshiremen sketch because the exaggeration factor makes it so funny but there was some truth there behind the jokes.  Our grandparents and parents lived hard lives, the tales of hardships and want are heartbreaking.  By the time Boomers and Gen X came along things were getting easier but even so compared with the following generations a lot of us lived very Spartan lives, at least in our youth and early adulthood. 

I do agree that Boomers got lucky in the sense that buying a house was easier so we had the chance to build wealth through equity.  And there's no doubt in my mind that the generations that have followed haven't had that same window of opportunity.  My millennial kids and most of their peers have had help from the bank of mum of dad to get started.  But not all that generation had parents who could help out.  

It's easy to criticise folk for what we might call reckless spending and excessive levels of debt but I wonder how many of them "comfort spend" because they see their dreams as unattainable.  So they give up and live for today.  

I went out for lunch yesterday.......very nice mid range independent restaurant but nothing too fancy.  Just a main course and one glass of wine,  £22.50. 😱😂.  No starter, no pudding, no coffee.  We came home and had coffee and desert here......

I'm cheap date😁

Albermarle

helensbiggestfan said:

I visit the debt free board occasionally but only post if I think I can make a worthwhile contribution to the discussion.  Many years ago I worked as a debt counsellor with a special interest in helping people with mortgage arrears.  I learned then that one has to be really ready to commit to debt reduction, the timing had to be right and it takes a lot of willpower to stick to any debt management programme, it can take some people several attempts before they are ready to finally make the necessary sacrifices. .  

Ok a bit of a 4 Yorkshiremen moment here..........one which i think is linked to the debt free board, and which highlights how lifestyle choices are such an integral part of both incurring debt and its polar opposite, building wealth.  

 I wonder how many of the debts incurred are linked to genuine misfortune and unexpected curved balls and how much to lifestyle creep, trying to keep up with the latest gizmos and gadgets, designer this and designer that.  

I look at the credit card debts some people are dealing with and wince.  Mortgages or rent, student loans, car payments etc are all, to a certain extent unavoidable,  but how much of that credit card debt is down to consumer spending, wants rather than needs, clothes, furniture, entertainment, holidays and so on.  

When I first bought a house, I had no carpets or floor coverings,  my mum gave me old sheets that I dyed and sewed up into curtains, no furniture to speak of just a new bed, a cooker and a second hand fridge, a tiny black and white portable tv.  No washing machine, I washed everything by hand.  And that's about it.  Sofas, Chairs, tables were family cast offs, kitchen ware, crockery etc were bought as cheaply as possible (good old Woolworths!!!!).   Coffee tables, bedside tables were old fruit crates with a cloth over them.  As for new clothes, holidays, weekends away, meals out. Forget it. In my dreams. 

However there was no debt, other than my mortgage.  Perhaps as well with the eye watering interest rates.  

I wasn't unusual by any means. Most Boomers and Gen Xers started out exactly the same. Saving up for furniture and household goods, slowly building a home.  I don't think many new home owners these days would be prepared to live like that and maybe that's why they carry so much consumer debt, in the form of personal loans, credit cards.  I think it's mainly credit card debt which torpedoes budgets and makes wealth building, pension planning and in some cases even being able to save up for a house deposit nigh on impossible.  How many people are spending double in rent what they could be spending on a mortgage. 

We Boomers are often accused of having it easy and to a certain extent we did, especially with housing costs.  House price and wage ratios were better in sync than they currently are and there was more job certainty. However, most of my contemporaries all lived a very basic lifestyle for years, skimping and saving to furnish their homes and bring up families.  The foreign holidays, nice clothes and fancy meals out only happened after several years of living very frugally to get established. 

We laugh at the 4 Yorkshiremen sketch because the exaggeration factor makes it so funny but there was some truth there behind the jokes.  Our grandparents and parents lived hard lives, the tales of hardships and want are heartbreaking.  By the time Boomers and Gen X came along things were getting easier but even so compared with the following generations a lot of us lived very Spartan lives, at least in our youth and early adulthood. 

I do agree that Boomers got lucky in the sense that buying a house was easier so we had the chance to build wealth through equity.  And there's no doubt in my mind that the generations that have followed haven't had that same window of opportunity.  My millennial kids and most of their peers have had help from the bank of mum of dad to get started.  But not all that generation had parents who could help out.  

It's easy to criticise folk for what we might call reckless spending and excessive levels of debt but I wonder how many of them "comfort spend" because they see their dreams as unattainable.  So they give up and live for today.  

I went out for lunch yesterday.......very nice mid range independent restaurant but nothing too fancy.  Just a main course and one glass of wine,  £22.50. 😱😂.  No starter, no pudding, no coffee.  We came home and had coffee and desert here......

I'm cheap date😁

I agree with most of what you say, but regarding the comment in bold, I would just add what I already said in a previous post.
It was also a time of high social mobility and a lot of people from low income backgrounds were able to haul themselves up the career/salary/class ladder. Probably mainly due to a big increase in people going to Uni/Poly for free and an increase in white collar type jobs relative to blue collar.
So buying a house also became easier for these people as they earned significantly more than their parents.

Before anyone says anything, of course not everyone benefited from this .

helensbiggestfan

Definitely.  Free tertiary education was a huge leg up for the working class.  Now student debt is a huge burden. I wonder how many are scared off by the prospect. 

I was talking to my son yesterday.  His girlfriend was saying how lucky she was in being one of the last not to have to pay tuition fees and benefitting from a bursary for her nursing degree.  She managed to get qualified without incurring any debt, although she did work part time whilst studying, so that probably helped.  

My son is still paying off his student loan but again he is more fortunate than some because my husband and I did manage to help out.  His debt is comparatively low but even so his repayments are £250 a month, so not an insignificant amount.  Thankfully he only has a couple of years left.  He has already said that because he is used to managing without that money when the debt is cleared he will channel it into his pension and his investments.  

 This from the once debt ridden spendthrift, who is now a reformed character and is quietly stashing away for the future.  😁

Albermarle

helensbiggestfan said:

Definitely.  Free tertiary education was a huge leg up for the working class.  Now student debt is a huge burden. I wonder how many are scared off by the prospect. 

I was talking to my son yesterday.  His girlfriend was saying how lucky she was in being one of the last not to have to pay tuition fees and benefitting from a bursary for her nursing degree.  She managed to get qualified without incurring any debt, although she did work part time whilst studying, so that probably helped.  

My son is still paying off his student loan but again he is more fortunate than some because my husband and I did manage to help out.  His debt is comparatively low but even so his repayments are £250 a month, so not an insignificant amount.  Thankfully he only has a couple of years left.  He has already said that because he is used to managing without that money when the debt is cleared he will channel it into his pension and his investments.  

 This from the once debt ridden spendthrift, who is now a reformed character and is quietly stashing away for the future.  😁

Just to be a bit pedantic and to quote Martin Lewis.
The student loan is not really a debt, but a tax for graduate employees earning over a certain amount .
A majority never have to pay all of it back ( and many pay nothing back).
Still it was a lot better when it was totally free !

Smudgeismydog

With regard to the student loans, my daughter has just started University (we live in Wales) and I am helping her to avoid a loan for the following reasons; 

- interest is daily compound starting from the day the first loan payment is made
- the interest rate is RPI plus 3%
- she would start paying it back once she earns over £28,470
- her loan would be cancelled after 30 years 


The Welsh system is more generous in some ways than the English system, as they use a higher starting salary and shorter repayment period. However, with the average student debt at around £50,000, I felt this would feel like such a weight for her to carry after graduating, as she embarks on her career.

Many might never pay it back because of the added interest, they may well repay the amount borrowed. Certainly reading diaries on the debt free wanabee board, there are many people counting down the years to be free of it, this is not something I want for my daughter.

Without wanting to take the thread completely off topic, I feel fortunate that I am in a position to provide her with financial assistance, and this feels a better use of money to avoid her being charged an interest rate of 7.6%.

Pat38493

Smudgeismydog said:

With regard to the student loans, my daughter has just started University (we live in Wales) and I am helping her to avoid a loan for the following reasons; 

- interest is daily compound starting from the day the first loan payment is made
- the interest rate is RPI plus 3%
- she would start paying it back once she earns over £28,470
- her loan would be cancelled after 30 years 


The Welsh system is more generous in some ways than the English system, as they use a higher starting salary and shorter repayment period. However, with the average student debt at around £50,000, I felt this would feel like such a weight for her to carry after graduating, as she embarks on her career.

Many might never pay it back because of the added interest, they may well repay the amount borrowed. Certainly reading diaries on the debt free wanabee board, there are many people counting down the years to be free of it, this is not something I want for my daughter.

Without wanting to take the thread completely off topic, I feel fortunate that I am in a position to provide her with financial assistance, and this feels a better use of money to avoid her being charged an interest rate of 7.6%.

The argument that Martin Lewis used on this was along the lines of opportunity cost of the gifting - if you can afford to give your kids a large amount of money, it usually makes more sense to save that money to help them buy a house, rather than paying off their student loan and/or giving them money whilst at University to avoid taking out a loan.  Also - if you pay back your student loan early and voluntarily, you can never get that money back again if you change your mind or run into other issues.

This goes partly back to the point above that for most people, it doesn't make financial sense to pay off your student loan early unless you are on track to earn enough money that you will pay it all off in your working career.

Obviously though, if you have enough money that you can gift your kids enough to avoid the student loan and help them with other things as well, they will of course be better off.

Admittedly in Wales, the case is slightly weaker as the interest rate is above RPI - in the other areas of UK, the interest rate is RPI which effectively means the so called debt does not grow in real terms.

However, for example if you earn £40K, your student loan repayments will be about £1K per year, no matter how much student loan you have - doesn't matter if it's £10K or £1 million.  If your "loan" is £50K, it would take (very roughly and actually generously to the pay off argument) 50 years to justify the decision to pay it off, which is more than most people's working careers and in Wales would be written off 20 years ago by then.  In this hypothetical situation it's arguably cheaper for you to just gift them the money each year equivalent to the loan payment they are actually making.

I agree with Albermarle and Martin Lewis that the name should be changed to "Graduate tax" or "Graduate contribution".  Calling it a loan puts off a lot of people from going to University unnecessarily.

Albermarle

I have a friend who paid most of the fees upfront for their potentially high flying son.
Although he did well at a good Uni, he never pursued a professional career ( for various reasons) and now earns barely above the minimum wage, has two kids, partner on UC,  and renting as can not afford a mortgage. The £35k spent on fees, would come in very handy now to help him out.
It is one of those difficult decisions, that you need a crystal ball for.
Of course there is always a halfway house, where you pay some of the fees and get a student
 loan for the rest
You normally have to help them out financially ( if you can) even with a full loan.

helensbiggestfan

Albermarle said:

helensbiggestfan said:

Definitely.  Free tertiary education was a huge leg up for the working class.  Now student debt is a huge burden. I wonder how many are scared off by the prospect. 

I was talking to my son yesterday.  His girlfriend was saying how lucky she was in being one of the last not to have to pay tuition fees and benefitting from a bursary for her nursing degree.  She managed to get qualified without incurring any debt, although she did work part time whilst studying, so that probably helped.  

My son is still paying off his student loan but again he is more fortunate than some because my husband and I did manage to help out.  His debt is comparatively low but even so his repayments are £250 a month, so not an insignificant amount.  Thankfully he only has a couple of years left.  He has already said that because he is used to managing without that money when the debt is cleared he will channel it into his pension and his investments.  

 This from the once debt ridden spendthrift, who is now a reformed character and is quietly stashing away for the future.  😁

Just to be a bit pedantic and to quote Martin Lewis.
The student loan is not really a debt, but a tax for graduate employees earning over a certain amount .
A majority never have to pay all of it back ( and many pay nothing back).
Still it was a lot better when it was totally free !

"What's in a name? That which we call a rose
Would by any other name still smell as sweet .....

Student loan/graduate tax.  Makes no odds really.   It all comes out in the wash. 

If the powers that be want people to see it as a graduate tax then they should sell it as such.  If it is marketed as a student loan, then that's how people will see it. 

Perfect autumn day here.  

helensbiggestfan

I have set myself a 90 day challenge.  90 days to change my world.  Finances (of course), health and fitness, decluttering and organising.  

The great reset has to start somewhere so breaking it down into easy 90 day chunks.  

Time to get back on the path of righteousness. 🤪

Albermarle

helensbiggestfan said:

Albermarle said:

helensbiggestfan said:

Definitely.  Free tertiary education was a huge leg up for the working class.  Now student debt is a huge burden. I wonder how many are scared off by the prospect. 

I was talking to my son yesterday.  His girlfriend was saying how lucky she was in being one of the last not to have to pay tuition fees and benefitting from a bursary for her nursing degree.  She managed to get qualified without incurring any debt, although she did work part time whilst studying, so that probably helped.  

My son is still paying off his student loan but again he is more fortunate than some because my husband and I did manage to help out.  His debt is comparatively low but even so his repayments are £250 a month, so not an insignificant amount.  Thankfully he only has a couple of years left.  He has already said that because he is used to managing without that money when the debt is cleared he will channel it into his pension and his investments.  

 This from the once debt ridden spendthrift, who is now a reformed character and is quietly stashing away for the future.  😁

Just to be a bit pedantic and to quote Martin Lewis.
The student loan is not really a debt, but a tax for graduate employees earning over a certain amount .
A majority never have to pay all of it back ( and many pay nothing back).
Still it was a lot better when it was totally free !

"What's in a name? That which we call a rose
Would by any other name still smell as sweet .....

Student loan/graduate tax.  Makes no odds really.   It all comes out in the wash. 

If the powers that be want people to see it as a graduate tax then they should sell it as such.  If it is marketed as a student loan, then that's how people will see it. 

Perfect autumn day here.  

If it was a real loan, then you would have to keep paying g it off whether you could afford to or not . You could even be made bankrupt/ get a CCJ if you could not repay it.Also it would be taken into account if you wanted another loan, like a Mortgage.
None of these things apply with a Student’loan’
So quite a lot in a name in this case 🙂