Life? Sorry, you can't afford it

As the cost of seemingly everything rises, Harvey Jones explains how to prioritise exactly where your cash should be going.

One question baffles me these days. How did life get so damn expensive? From the day you are born, life seems to be an endless demand for payment.

With inflation above 5%, the bills are only getting bigger. I don’t know how I can afford it. How the rest of you can is a mystery.

Increasingly, you can’t. Since January, energy bills are up 19%, motoring and public transport are up 9%, and food is up 7%, according to new research from Aviva.

Incomes simply haven’t kept pace. Savings rates have slumped. People are cancelling holidays, days out, children’s activities, and anything they consider a “luxury”.

Life? Sorry, you can't afford it.

Birth, school, work, DEBT     

Growing up is schockingly expensive. Going to school (all those uniforms and school trips), University (£9,000 a year tuition fees), your first motor (£1,000 plus insurance premium), your first home (£40,000 deposit), getting married (average cost £18,500). And just wait until you have children.

The average total cost of raising a child to age 21 is an astonishing £210,000, according to research from insurer LV=. This includes food, clothing, holidays, toys, pocket money, childcare, school uniforms and tuition fees (but not private school fees). Astonishingly, the cost is up 50% since 2003.

Kids? You can’t afford them either, sorry.

Still more money

You might have thought the financial crisis would have made stuff cheaper. Like houses, for example. Perhaps they are, a little, in the West Midlands and North, but people still can’t afford to buy them.

Instead, they’re forced to rent, and you can guess where rents are heading. Upwards. Rapidly.

Interest rates are one of the few things to have fallen since the credit crunch (although mortgage rates haven’t always followed). When they finally start rising, life will get impossibly expensive for millions.

Peace of mind? Nope, you can’t afford that either.

Work, work, work

Although young people and families have taken the brunt of the crisis, it isn’t exactly child’s play as you get older, given that there has never been a worse time to retire.

Stop working? As if.

Get your priorities right

So what can we do about it, aside from wondering at the sheer unfairness of it all? Some people have set up a campsite outside St Paul’s, but that won’t pay the bills either.

You could start by working out what you CAN afford. If you can’t afford everything - and who can? - you have to prioritise. Focus on paying off your most expensive debts first, such as credit cards, store cards and bank overdrafts. That might give you a bit of breathing space.

If you can only afford to repay one debt, make sure it’s your mortgage. You don’t want to lose the roof above your head. If you have taken out a loan secured on your property, prioritise that too.

If you rent, your landlord can evict you if you can’t pay, so that’s a priority as well.

Tax, National Insurance, council tax and any overpaid tax credits are also high on the list, because if you don’t pay them, you could end up in court.

Next up? Utility bills. Gas and electricity companies can disconnect you if you owe them too much money. So can your telephone company.

If you need a car for work, make sure you cover any HP or loan repayments.

A matter of life and debt

If you’ve got all that covered, congratulations! You’re financially solvent, by modern standards. Life may be too expensive for you, but at least your debt isn’t.

Life was too expensive for many before the credit crunch, but in those days, there was a simple solution. You simply borrowed the difference.

Not anymore. The days of easy credit are over. Most of us don’t want to load up on debt these days, and lenders won’t let us in any case. If the last three years have taught us anything, it’s the importance of living within our means.

Debt? You can’t afford that either.

Money’s too tight to mention

The dice seems to be loaded against us. It is heartbreaking to fuss over every penny, when your fatcat utility supplier doesn’t think twice before hiking your gas bill 20%.

It is infuriating to have spent years telling your kids how important it is to get a decent education, only for the government to price it out of their reach.

Or to have to choose between getting married, buying a house or having kids. A generation ago, most people would do all three before they were 30.

Now they are hard-pressed to do one before they turn 35 or 40.

It’s not fair, but the only thing you can do is make more of the money you have. You can’t afford to do anything else.

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