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My name is James and I have an overdraft.
Have times got so tough that Rich People’s Problems needs to focus on the cost of living “crisis”? The answer is simple. Yes.
Inflation is running at over 10 per cent. Over four-fifths of UK adults are concerned about their day-to-day living costs, a PwC survey found. And who can blame them, when grocery costs jumped 16.7 per cent last year, according to Kantar research?
The richest 5 per cent of our nation is getting richer, according to the Resolution Foundation think-tank. But the research doesn’t take into account the wealth tied up in non-income producing property and the costs associated with maintaining your home(s). So for many, unless you’re an ultra wealthy individual, or crystallising property gains by selling up, things aren’t looking rosy.
If you can’t stuff your money into a tax haven, the tax burden has risen. If you don’t have oodles of cash on deposit, any debt you have has become more expensive. Bills for pretty much everything have risen. And, disappointingly, efforts at Waitrose to keep down the costs of essential goods does not extend to capping prices on quails’ eggs, smoked salmon, a decent bottle of fizz or any of the things one really goes to Waitrose for.
Yes, I can hear the strains of tiny violins, but I haven’t got enough money. I’ve got cash flow problems and need to take urgent action. The question is, what action should I take? And where do I start if I want to take a hatchet to personal spending?
I could make a spreadsheet of my expenditure. However, I’d rather eat my own toenails. Life’s too short, and I don’t want to face up to what I’m really doing with my money. Last week, for example, I dropped £72 on chocolate in Alain Ducasse. I only bought a small bag of goodies. One was a box of 16 chocolates, weighing in at 150g. They’ll set you back £26. Nestlé Munchies (pretty much the same thing) can be purchased for £1.99 a bag. But luxury costs. And you cannot apply savings to a Valentine’s Day gift, can you?
I tried turning down the heating, switching off the Aga and the pool heating. But a gas bill of just over £2,000 in 2021 became £5,700 in 2022. Goodness knows what the electricity costs will be. Payments for my relatively small mortgage doubled. The rate was fixed, thankfully, before Liz Truss and the Bank of England sent mortgage costs soaring last year. But I don’t have free cash to repay the debt. Insurance for property here and overseas, and the cars, has risen by 40 per cent.
Meanwhile, the household costs keep coming in. It turns out the garden fence I’m responsible for is now in such a state of disrepair that the neighbours have offered to mow our lawn. That quote has come in at £7,200. The cars need servicing, our cleaner wants a pay rise and broadband, mobile and streaming TV costs are up too. The list is endless.
I’m asset rich and cash poor. I’m also earning more than I did last year. Not because my employers are paying more, by the way. I’m working harder. But it’s still not enough. My bank account is a bit like an old fridge with a few tired vegetables, some out of date condiments and food remnants that even desperation wouldn’t force me to eat. It needs replenishing.
Things got so bad last week that at the ever-winning fruity — the ATM — I was refused a withdrawal. This was partly caused by one of my employers deciding that payment this month wasn’t essential. But also by HM Revenue & Customs, which drained my resources a few weeks ago to pay my tax bill. Ugh.
I could monetise a few assets. But that’s a sticking plaster over a gaping wound. After all, income is required to cover expenditure if I don’t want to deplete assets over time. A quantum shift in the costs of everyday activities means a change in approach is required.
It’s got to be more radical than reining in my Deliveroo habit, buying Nike trainers instead of Balenciaga or Burberry, or cutting back on where I choose to eat out. Last week I took some friends out for lunch at one of my clubs. Three hundred pounds later, after a delicious lunch and a few glasses of fizz, I concluded that perhaps the time for belt-tightening had finally arrived. But why should I? I’m not a student and have little interest in fulfilling a dining treat by “going Nando’s”.
Then there’s the mirage of retirement. Last November, I concluded that I’ll never be able to afford to retire. Chancellor Jeremy Hunt thinks we should be working even longer before we’re able to access the state pension. The present threshold for retirement at 66 is expected to move to 67 in 2028. It is due to hit 68 in 2046. But ministers are looking to bring that forward, affecting anyone under the age of 54 today.
I won’t be relying on the state pension in retirement — but it’s a useful addition to the pot. Especially as the government seems intent on eroding private pension benefits and contributions. Anyway, top-ups from me into savings are on hold as all free cash is being used for current expenditure. Sigh. Clearly, I’m going to be working forever.
Radical action is required. Yes, I will cut expenditure, use Aldi and FarmFoods for basics to keep down costs. But I can’t go too far. The other half has lodged a complaint. “Are things that bad that we have to have unbranded loo paper”? In other radical moves, I may halt the acquisition of more bubbly for a while. At least until stocks have depleted to emergency levels. I may even sell one of the cars from the fleet. I’d have the capital it produces and reduce running costs too. However, you can only sell an asset once.
Keynesianism won’t work for personal finance. You cannot spend or borrow your way out of recession. I can’t put it off any longer. It’s time to fire up the cylinders of personal economic growth. I’m polishing the CV. Stuff the four-day week . . . I’ll get another job to add to the portfolio. Wish me luck!
James Max is a broadcaster on TV and radio and a property expert. The views expressed are personal. Twitter: @thejamesmax
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