Tag Archives: personal finance

Should I buy a flat screen tv?

In the last few weeks, maybe a couple of months, the volume on my tv has been on the blink. The remote control works only sporadically (it works fine for other functions) and the control panel on the side of the screen sometimes changes the volume, sometimes the channel. It seems as though the wires are crossed at times.

The tv itself is about 10 years old. My sister and brother-in-law had it originally, but I bought it off them some years back when they upgraded their tv. As things stand at the moment, I don’t need a tv. In fact no one needs one; they are a luxury item that we in the decadent west have in many of our homes.

There is no question of affordability. One can get quite a good model for around £200 these days. The way I organise my finances, I have an account that is called “treat” which I put a bit into each month and buys a few luxuries. For example, last year I had a holiday. That was my third in 13 years. I haven’t got enough for a holiday yet but I have got more than enough for a new tv. It would be nice to have a flat screen (the current one is a cathode-ray Sony Trinitron wide, which takes two people a lot of effort to lift!) and at present it seems like an expense that one could at least rationalise.

My worry is this: what if I become unemployed? Readers who have kept tabs on this blog for the last 2 years will know that I got made redundant in 2012. That could happen again. I don’t know that it will, but there have been some changes in the company I work for over the last few months. It’s not unthinkable that a corporate shake-up could result in me being out of a job. Or I could become ill. I am very thankful that I have good health and have only had need to take 2 sick days off work in the last 7.5 years. One never knows when one might have an accident that puts them out of work, or be diagnosed with some debilitating condition.

It’s not that I would suddenly be unable to pay for a new tv since I would have bought it whilst employed, but if our tabloid press government and its parroting acolytes are to be believed, then there are fewer evils that are more symptomatic of a dysfunctional society than an unemployed person in possession of a flat screen tv.

The fact that hundreds of thousands of people have been driven to use foodbanks over the last few years is, of course, not a problem at all. After all, Iain Duncan Smith must have the best interests of the poorest and most vulnerable in society at heart. The fact that I spent 6 months unemployed in 2012, filling my days with job applications, interview preparations and travelling to and from interviews where each job had anywhere from 6 to 30 applicants going for it, was merely a side effect of my own laziness and unwillingness to work. At least, that’s what I am to believe if I accept the coalition’s rhetoric.

The same goes for all those who are now in the shoes I once wore. When Esther McVey told people to get a job at Costa, of course she knew full well that over 1,600 people had applied for just 8 jobs. Those that didn’t find employment will soon realise that the reason for that is because they are workshy freeloaders, not willing to obey the simple imperative to “get a job” since that simple command is, naturally, capable of being followed without the need for intervention or a decision being made by any person other than the jobseeker. After all, employers have no choice but to accept all applications from anyone who wants a job enough.

Don’t they?

Putting my money where my mouth is

The 6th of April marked the start of a new tax year. At this time, there were a number of changes to the rates and bands in income tax and national insurance. Other changes to the social security system began on the 1st, with the government coming in for much criticism, in my opinion rightly so. One of the consequences that was much vaunted was Iain Duncan Smith declaring on radio 4 that he could live on £53 per week. I don’t think I could. During my time of being unemployed last year, I received £142 per fortnight. This was to cover all expenses: rent, council tax, food, utilities and travel to and from interviews. Some people told me that I ought to have been able to claim more, but this was flatly contradicted when I asked staff at the Job Centre Plus. Anyway, there was a public demand for Iain Duncan Smith to stay true to his word and demonstrate that he could live up to his claim. This was later dismissed by him as a “stunt”. Yet over 19 times as many people have signed that petition as voted for him at the last general election (at the time of writing, the figure stands at 438,210 compared to his election vote of 22,743). I wonder if his election was a stunt too.

It struck me that since he was being asked to put his money where his mouth was, it would only be right to be willing to do so myself. I ran some figures through the BBC budget calculator and worked out that in the 2013-14 tax year I will be about £179 better off. The thing is, though, I don’t think I should be better off. If I didn’t contribute to a defined contribution pension scheme or didn’t gift aid any donations then I would be a higher rate tax payer. As such, I know that means I am a hell of a lot better off than most people in this country.

The economy does have a problem with a large deficit and efforts should be made to reduce it. However, I disagree with the way the coalition government has gone about doing this. Instead of asking those who are most able to pay, the onus has been on those who have the fewest choices: the poor, the disabled and the unemployed. There is a paranoia among those on the political right that if you apply the sensible notion of “from each according to their ability, to each according to their need” then this will result in those who pay the highest marginal rate of tax choosing to leave the country, thereby denying the economy of their spending power and robbing the treasury of potential tax revenues. So those are paid excessively more than they need to live on have been given a tax break. But remember, even at the highest marginal rate (i.e. the rate you pay for every ‘extra’ £1 on your earnings), their effective rate (total income tax & national insurance paid divided by total gross income) is far lower. For example, though I am a higher rate tax payer, I only pay 42% (40% income tax and 2% NI) on the top few pounds of my earnings. My effective rate is 26.5%.

Yet I am unconvinced by scaremongering which suppose that the rich will flee the country to avoid taxes. Even if a small minority do, shame on them. By choosing to squeeze those with the least disposable income, the government has tried to fix the problem in the most inappropriate way. While it is a good thing in principle to encourage people into work, there have to be jobs for people to go to. Not only that, but they should be jobs that pay a decent wage. To use an analogy, imagine someone being asked to walk along a tightrope. What’s the best way to keep them safe? I would say it is to help them stay on the rope, not by removing chunks of the safety net. Yet the recent raft of reforms seems to be doing the latter

As my salary is above the national average (see link to the report from the Office for National Statistics above for details on the average being £26,500), I think I ought to be paying a greater proportion of my income in taxation. Yet I still get this £179 ‘bonus’ because of changes in the bands and rates. What should I do with this? Well, it would be hard to ‘donate’ it to the Treasury, so I am here, publicly, pledging to donate this to charity. On top of any other giving I may have, I promise I will set up a standing order for £20 per month (I rounded up) to a new charity I have not previously made a commitment to. What I need is your help.

Firstly, I need your help in choosing which registered charity to donate to. Ideally, I’d like it be one that helps those who are worse affected by the changes to social security that the government has brought in. I would appreciate your nominations from which I may then choose.

Secondly, without anyone else taking up this challenge, this will be a mere act of tokenism on my part. I would like this to become ‘A Thing’ amongst those of us who are socially minded, are paid more than it costs to live and who feel it wrong that they should benefit while those who are worse off suffer. So I would like to encourage you, even issue you a challenge, to undertake a similar commitment.

Tips on personal financial management

Seeing as I am once again on an enforced sabbatical, I decided it might be good to use some of my financial experience to come up with some handy tips for you. What follows are only suggestions that I have found work for me. They may not work for you, but I hope they will. Figures are for illustrative purposes only. If you want any spreadsheet templates, let me know by leaving a comment; if you include your email address as you fill in (don’t put in the text of the comment!) then I, as web administrator can see this but no one else can.

I will assume that you get paid monthly. I always work with net income. So regardless of any deductions for tax, national insurance, pension contributions, student loans, etc. always think of your income as the cash you receive. For illustrative purposes, I will assume for the sake of argument that your net pay is £1,500 per month (about the average salary).

What I then do is siphon off some fixed amounts. These are for the regular, monthly payments that are known and fixed. For example, my rent is £750 per month and my council tax is £89 per month. I put that in a physically separate bank account. I do this for 2 reasons: 1) psychologically, it is no longer “spending money” and so I am not tempted to touch it; 2) A separate savings account typically has higher interest than a current account.

After this, I put aside an amount for regular payments that are not monthly and not fixed, but which can be reasonably estimated. My list includes water, gas, electricity, tv license. You may also have other things such as insurance in there. What I do with this is I have a spreadsheet where I input the dates the last bill ran from & to and the amount of the bill. For example, my last electricity bill was £73.60 and ran from 22 May to 22 August. From that, the spreadsheet works out what my average cost per day was (80p) and how long it has been since my last bill. What I then do is multiply the average daily cost by the time since the last bill to give an estimate of what the next bill will be if it were to arrive now. To be cautious, I always add about 5%. If you do this for all of these types of expenses, you can aside an amount each month, so that when the bill does arrive you already have the money ready and you can then start again.

What this does is it means I don’t really get nasty surprises when a bill comes through. It’s not perfect; I recently had to buy new glasses which I hadn’t set any money aside for, so that hurt a fair bit. But when I got my first gas bill for over 2 years, I already had the several hundred pounds needed easily to hand.

Once I’ve deducted my fixed and variable expenses, what is left is what I would deem to be my disposable income. What you do with this is very much a personal choice, though you might want to note that I didn’t take out an amount for food – I pay for this from my disposable income – you might want to do it differently. To help budget, I then divide this amount by the number of days left until the next payday (again, a spreadsheet template is easier than faffing about with a calendar and calculator).

If I set myself a target, then I can easily track if I am above or below that target as I go through the month. Typically, if I am over-spending then I just cut back and if I am under-spending then I transfer the excess into long term savings. Though at this time of year, I tend to put the excess into a fund for Christmas, so when it comes to December I have all the money I need for the family’s presents and for travel expenses.