Pom_Chch

With so many conflicting articles and statistic it's difficult to know what is happening with inflation and the recession. It all affects us in different ways making it even more difficult to say if it's improving or not. Some people may feel better off, others will not.

There's an article out today talking about young people not being able to get on to the property ladder due to unrealistic house prices and huge deposits. This affects me because I have not yet made it on to the property ladder and cannot see myself doing so in the near future. There's no way I could save up that kind of money, and even if I could I would be living in a small flat. This affects me in a big way, but may not affect those who are not first time buyers.

There's also the matter of train travel. After being made redundant and replacing my full time salary paid job with part time self employed work, it is becoming increasinly difficult to keep up with train prices rising above the current rate of inflation (what ever that is!) Again, if you don't catch the train this will not affect you.

There's another article out today about the poor having to pay the price of fixing the recession by increasing tax and benefit cuts. "Cuts to benefits and tax rises will reduce incomes for the country’s lowest paid families by 15 per cent by 2020, a bleak report warns." This is obviously going to affect the lower paid people of the country, those that have bigger salaries and not claiming benefits will not be as affected.

I guess we all have to put facts and figures aside and look at our own individual lives. From the points I've just mentioned it's clear the recession and inflation are affecting me in a bad way, whereas other people may be feeling it in other ways with pay cuts, petrol prices etc.

dunroving

If you reduce everyone's situation to broad "necessities", you get:

Housing (including furnishings)
Utilities
Transport
Food
Insurance
(I didn't include health, because NHS makes this a "non-expense")

Broadly-speaking, "luxuries" include:
Holidays
Entertainment and recreation
Toys

Anyone/everyone should be able/willing to reduce expenditure on the latter, but I think a lot of people (employed and unemployed) look at them as necessities (I almost never dine out or go on holiday and am amazed at how many people on lower income than me seem to go on holiday a lot, dine out frequently, and have the latest toys, including nice cars - I can't believe the number of luxury cars that seem to be on the road).

As far as necessities are concerned, as you rightly point out, I think housing and transport are the most variable (in terms of people's situation), and potentially housing is the most influential on people's financial wellbeing.

On the one hand, I feel sympathetic to younger people who are struggling to get on the ladder. I think 30-, 40-, and 50-year mortgages may become the norm (though the higher that interest rates get, the less will be the proprtional effect on mortgage payments of extending the term). However, I think many younger people benefit from the fact that their baby-boomer parents are financially very well-off so either they will get help, or inherit at some point.

Pom_Chch

[QUOTE=dunroving;10297128Anyone/everyone should be able/willing to reduce expenditure on the latter, but I think a lot of people (employed and unemployed) look at them as necessities (I almost never dine out or go on holiday and am amazed at how many people on lower income than me seem to go on holiday a lot, dine out frequently, and have the latest toys, including nice cars - I can't believe the number of luxury cars that seem to be on the road).[/QUOTE]

Definitely agree on this one! It's the people who moan about not having any money but go and blow £30 on a takeaway.

If you're wondering why people are doing better on a lower income it's probably due to help in the form of benefits to bump up their wages? Not totally sure on this but the lower earners often get more help from the government. So there's only one way forward - quit our jobs, have loads of babies and claim as much as we possibly can since benefits are going up wuth inflation! I might be better off doing this than actually working for a living..

dunroving

I definitely wouldn't be better off on benefits (except I might be a little more active, instead of spending about 60-80 hours each week sitting at a desk). I do spend a lot of money each month paying the mortgage, plus extra payments. I'm also paying extra voluntary contributions to my professional pension because I didn't start in a pension scheme until I was 40.

I think for many families where I live, their mortgage and rent expenses are low because they live in council properties or bought council properties. The guy next door bought his house from the council for £30,000 (he had lived there for several years), whereas mine cost £165,000 plus £20,000 renovations (the same year he bought his). Other folks have lower mortgages because they bought before the boom, and the bust has gone down nowehere near to prices from the 90's or early 2000's.

From the statistics I have read, very few people are investing in their retirement. I think that's another reason - they are spending money on luxuries now and presumably will not be especially well-off in their retirement.

I just hope I live long enough to have the last laugh.

Zen10

I read something just the other day referring to the growing number of people who were seriously relying on winning the lottery to fund their retirement.

pompeyblonde

Cardboard box int' middle of motorway??? bloody luxury! dont know they're born!!

chris955

Daily Mail ?

Bud the Wiser

Out of interest I googled <lottery retirement> . Results were quite amusing, in a scary sort of way.

Here's just one example....

http://www.advisorone.com/2006/02/01...ement-planning

When asked what was the most practical way they could save several hundred thousand dollars for retirement...............

...........Twenty-one percent of the individuals said that winning the lottery would be the best way to save that much. Among the least affluent and those over age 55, the percentages that were betting on the lottery were much higher--38% and 31%, respectively, the study found. Individuals without high school degrees were more likely to choose the lottery than those with college degrees--30% versus 8%, the study found.

Bevm

Well, it could be realistic, especially for the less affluent, who may not have any slack in their budget.

The respondents who have cut their discretionary spending in order to save for eventualities and retirement will already have some money put aside and know how to accumulate more.

If a person either truly has no discretionary income, or can't accept the idea of cutting spending (eating out, holidays, pubs, simpler Christmas, new cars etc) in order to save, then the lottery is their only chance!

Bev

dunroving

The survey question is pretty loaded - if you delete the words "several hundred thousand", you'd likely get very different answers.

Most people could never save "several hundred thousand" even over a lifetime, so a lottery ticket is probably the only way they would end up having that kind of money in retirement (other than robbing a bank).

Bud the Wiser

Fair point. Though starting early and the wonders of compound interest could make it achievable, even with a relatively small regular contribution.

I read somwhere that mandatory pension contributions will begin in the UK, on Monday I believe. It'll be intersting to see how that works out long and short term.

Bud the Wiser

Daily Telegraph article on food price inflation that supports your quote. Surely this is more relevant to the majority of households than inflation figures that include a sofa purchase.



http://www.telegraph.co.uk/news/9572...U-average.html

Zen10

Ah, deflation kept at bay only by wild money-printing, collapse of the financial industry, heavy revisionist power expanding its military and threatening democratic neighbours with conflict...

Your starter for 10 - is it the 1930s or the 2010s?

Bud the Wiser

So long as we've all got the latest iGadget and we can download the food app we should be okay

bingobob777

I think this thread sums up perfectly the financial illiteracy of a large proportion of the British population (i'm not saying anywhere else is better).

Don't understand the difference between deficit and debt
Don't understand that a fall in inflation to 2.5% actually means prices are still rising at 2.5%
Don't understand that the items used to get to the 2.5% are totally rigged
Don't understand that without the expansion of hundreds of billions of pounds of credit the UK would have been in, or near recession since early 2000's

The cost of housing is going to affect the UK economy for at least another decade, no one has money to spend, there are no new jobs (of any meaningful scale), the Govt debt is getting larger every month.