What is the common problem shared by most budgets? It is a fact that they simply do not work.
This is because most budgets are formulated by well-meaning households on the fly. Rather than careful planning, people have a tendency to make up their budgets as they go along.
This is a shame, given how careful budgeting can pave the way for a more comfortable and prosperous financial future. More specifically, a well-planned budget can help you determine two important things:
- Are you spending more than you earn?
Without exception, outgoings that exceed income equal a recipe for disaster. Not to mention a mounting debt spiral that could prove catastrophic. If you are spending even slightly above your means, you need to make the necessary adjustments as soon as possible. This is the single most important reason to plan your budget carefully.
- How much can I afford to spend?
This is basically where you conduct all the calculations needed to work out your spending power. If you are making things up as you go along, this means you are running the risk of spending more than you can afford to. Meanwhile, working out exactly how much disposable income you have paves the way for financial stability. You know exactly how much you have to spend, so you can make sure you don’t spend too much.
Essential tips for household budgeting
All budgets are different, but they are nonetheless built around the same six considerations.
Each of the following will help you produce a workable budget for your household and avoid falling into debt:
- Collect all receipts and record all expenses
Keeping track of even a single week’s expenses mentally is practically impossible. Over the course of the average month, there will be dozens of minor (and not-so-minor) outgoings you completely forget about. Hence, the only way to be sure about what you are spending is to keep a full and formal record of every expense. Keep track of every receipt you’re handed and log your expenses in a journal or spreadsheet.
- Establish your objectives for your budget
Budgeting is only effective and satisfying when you have a specific goal in mind. Are you looking to put away more cash for a rainy day? Maybe save up for a well-deserved holiday. Or do you simply need to establish a financial safety net in case things take a turn for the worse? You need goals and objectives to work towards in order to make things happen.
- Avoid the temptation to guess or to round things up
Accuracy is the key to an effective budget. This means being as accurate as you can with your records and your calculations, avoiding the temptation to guess or to round things up. Over the course of time, minor discrepancies in accuracy can add up to a big difference on your long-term balance sheets.
- Divide your outgoings into ‘wants’ and ‘needs’
After recording your outgoings for a month or two, take the time to separate all expenses into two sections. One of these sections should be necessary expenses: rent bills, mortgage payments, utilities, groceries, and fuel bills, all mandatory and unavoidable. The other should be optional expenses, eating out, personal indulgences, entertainment, and anything else you don’t strictly need. It’s from this column that things can be adjusted as necessary in order to save money.
- Consider repaying smaller debts
If possible, it is worth considering repaying some (or all) of your smaller debts. With credit card balances, personal loans, and overdrafts, the interest payable on facilities like these can quickly stack up. The more debts you repay, the more interest you convert into extra cash in your pocket at the end of the month.
- Calculate your disposable income
Calculating your disposable income is as simple as tallying all of your monthly outgoings and subtracting this figure from your monthly income. The figure you are left with is your disposable income, minus things like pension contributions, savings, and so on. Once you have an exact end-of-month figure to work with, it becomes much easier to make safer and savvier spending decisions.
Average UK rent prices continue to break all records on file, yet the demand for quality rental properties across the country remains at an all-time high. As a result, many now believe that the potential profitability of BTL investments could lead to a major spike in irresponsible letting practices as many new landlords enter the market.
A poll conducted by Get-Ground found that more than 80% of established landlords believe current market conditions could trigger an increase in irresponsible BTL activities. 75% of those polled believe that tenants are finding themselves with little choice but to be less demanding and discerning, potentially playing into the hands of unscrupulous landlords.
From excessive monthly rent payments to higher utility bills to monthly rent hikes imposed without warning or justification, tenants are willing to accept wholly unacceptable treatment simply to gain and/or retain tenancies.
“With recent history as our guide, it’s easy to imagine how the PRS could be brought into disrepute by bad actors: disproportionately high rents, unexpected bill increases, unfairly terminated tenancies, and so on,” said Faizullah Khan, CEO at Get-Ground.
“Landlords and tenants alike need the right protections and safeguards to ensure none of this poor behaviour is able to happen, particularly as high mortgage and energy costs continue to put even more pressure on landlords to find means to stay solvent.”
A perfect storm
Khan’s sentiments were shared by Ben Beadle, CEO at the NRLA, who warned that the escalating living-cost crisis combined with skyrocketing monthly rents could create the ‘perfect storm’ for those affected.
“Get-Ground’s snap poll data highlights a perfect storm that’s coming, combining the increased cost of living with rising rents,” he said.
“That rents continue to rise is due to the impact of a lack of supply and record demand in the PRS—this is very much a problem of the government’s own making.”
Recent data published by the Office for National Statistics does not make reassuring reading for anyone already struggling to make ends meet. Average monthly rent prices are up across the entire country and are predicted to continue heading skyward over the months to come.
- Private rental prices paid by tenants in the UK rose by 4.0% in the 12 months to November 2022, up from 3.8% in the 12 months to October 2022.
- Annual private rental prices increased by 3.9% in England, 3.1% in Wales, and 4.4% in Scotland in the 12 months to November 2022.
- The East Midlands saw the highest annual percentage change in private rental prices (5.1%), while London and the North East saw the lowest (3.5%).
While commenting on the findings, the ONS highlighted how some letting agents are actually registering fewer tenants, as they simply do not have the available inventory to support them.
“The Association of Residential Letting Agents (ARLA) reported in their Housing Insight Report that they are now seeing a slight decrease in the number of prospective tenants registered per branch because of the ongoing lack of supply. ARLA also reported an increase in rent prices was seen across the UK,” read the ONS report.
“The Royal Institution of Chartered Surveyors (RICS’) UK Residential Market Survey reported tenant demand remained strong across the lettings market, driving rents higher.”
“These supply and demand pressures can take time to feed through to the Index of Private Housing Rental Prices (IPHRP). This is because the IPHRP reflects price changes for all private rental properties, rather than only newly advertised rental properties.”
The FCA has issued a formal call to the credit information sector to alter its approach to the provision of information to UK banks and lenders. Regulators have proposed new measures aimed at enabling lenders to make better lending decisions based on the broader financial circumstances of applicants.
Proposals presented by the FCA to benefit borrowers and lenders alike include the following:
- Establishing a new, more representative, and accountable industry body to oversee arrangements for the sharing of credit information
- Improving the quality and coverage of credit information
- Enabling greater competition and innovation through potential changes to data access arrangements and more timely data reporting
- Simplifying ways for consumers to access their credit files and dispute any inaccurate information held about them
Speaking on behalf of the FCA, Executive Director of Consumers and Competition, Sheldon Mills, emphasised the importance of a fair, effective, and accountable credit information market.
“It is vital that the credit information market works effectively for firms and consumers. We want to see industry reform to help deliver the changes, but in the meantime, it is important consumers know how to access their credit information and talk to their lenders if they are facing difficulties,” he said.
“Our proposals will help consumers get better decisions from lenders, and lenders will have confidence that the information they have access to is sufficiently comprehensive.”
Research suggests that while 90% of people have a basic understanding of what a credit score is, there is widespread confusion about the kinds of activities that can affect a consumer’s credit rating. For example, almost 50% of borrowers facing financial difficulties believe that simply contacting their lenders to discuss their issues will have an adverse effect on their credit score.
Meanwhile, 43% of people are not aware of the fact that they have the legal right to access their credit reports for free.
One in three consumers does not know their credit score
Elsewhere, a study conducted by the Post Office found that as many as one in three people do not know their credit scores. The poll was carried out to determine the extent to which the average person understands financial jargon and the impact complex terminology can have on a typical consumer.
One in five of those polled admitted that their lack of confidence regarding financial jargon had discouraged them from applying for financial products at some point in the past.
Commenting on the findings, the director of financial services products at Post Office, Ed Dutton, said that the figures illustrate just how important it is for banks and lenders to cut out the complexities when dealing with customers.
“We believe it’s important to speak to customers using straightforward language so that they feel confident in their decisions when borrowing,” he said.
“Personal loans can be used for a variety of reasons, such as buying a car or extending a home, and offer people a different option to other products, such as credit cards.”
“It’s always worth taking the time to read about any financial product you are considering and taking the time to seek help on jargon if anything is unclear.”
40% of those polled stated that while they have consulted with finance experts in the past, they felt confused or even intimidated due to the presence of complex terminology. Among them, 20% said they lacked the confidence to request clarification of such terms.
Worryingly, 22% said that even if they did not fully understand the language it contained, they would still sign a financial agreement or contract.
The latest official figures from HM Revenue & Customs (HMRC) indicate that residential transactions in the UK grew by 29% annually to reach 110,850 in October 2022. Meanwhile, non-residential transactions in the UK for October were down by 5% compared to the same time last year, totalling 9,940 transactions.
In its online publication, HMRC stated that current monthly property transaction levels are similar to those recorded at the end of 2019, prior to the COVID-19 crisis.
Key details published by HMRC include the following:
- The provisional non-seasonally adjusted estimate of UK residential transactions in October 2022 is 110,850, 29% higher than October 2021 and 3% lower than September 2022.
- The provisional seasonally adjusted estimate of UK residential transactions in October 2022 is 108,480, 38% higher than October 2021 and 2% higher than September 2022.
- The provisional non-seasonally adjusted estimate of UK non-residential transactions in October 2022 is 9,940, 5% lower than October 2021 and 3% lower than September 2022.
- The provisional seasonally adjusted estimate of UK non-residential transactions in October 2022 is 10,110, 1% lower than October 2021 and 2% higher than September 2022.
However, some experts have said that the figures quoted are not in line with the ‘economic reality’ of the bigger picture the UK is facing right now.
“On the frontlines, it’s now a very different story,” commented Lewis Shaw, founder of Teesside-based Riverside Mortgages.
“The phones have stopped ringing, buyers are holding off, and with the World Cup and Christmas upon us, most people have decided to sit tight and wait until next year.”
“That said, I still think the doom-mongers will be proved wrong and that a reduction of 10% to 15% in asking prices merely takes us back to pre-COVID levels, and as long as you’re able to negotiate a price reduction along the chain, I’d say most people should get on with it as it becomes a zero-sum game.”
A gradual return to normality
Speaking on behalf of mortgage broker Coreco, managing director Andrew Montlake said that even though the data published by HMRC does not take into account the economic turbulence of the past couple of months, transaction levels are indeed beginning to head back to some level of normality.
“The fact that the mortgage market has now stabilised and that rates are not set to peak as high as we thought has brought some confidence back into the market, despite the predicted long recession that lies ahead,” he said.
“After two years of surreal house price growth, some froth had to come off the market, and that will drive transaction levels rather than destroy them.”
Elsewhere, chief executive at later life lending platform Air, Stuart Wilson, said that the figures came as no real surprise to those who have been monitoring activity on the UK real estate market.
“Rising interest rates and soaring inflation have all contributed to a challenging climate; however, the robustness of the UK housing market should not be underestimated,” he said.
“Indeed, UK residential transactions have shown their typical stability in recent months and have remained at levels comparable to late 2019, before the pandemic.”
“While economic data like this is an indication of market trends, we should not lose focus on the reality faced by advisers and their clients every day.”
“Advisers need to be actively seeking to speak to clients about their options and helping them to understand that it is less about the headlines and more about what is right for their individual circumstances now and in the future.”
Once again, it is looking increasingly unlikely that the UK government will come close to meeting its own lofty housebuilding targets. Available inventory (particularly where affordable housing is concerned) is at an all-time low, and the country’s escalating housing crisis shows no signs of abating.
While all this is going on, a study conducted by Unlatch has shed light on just how much of the UK’s total land space is being used for residential developments. Or should that be, how little space is being utilised for such purposes?
Across the UK, there is an estimated 13.3 million hectares of available space. Of which, only 152,380 hectares of space have so far been used to develop residential properties, equating to a mere 1.1% of all available space.
Unlatch set out to determine which local councils across the country are making the most efficient use of the space they have available. And in doing so, we discovered that just under 99% of all UK land is being used for entirely non-residential purposes.
The figures should come as no less than shocking to anyone who understands the true extent of the housing crisis and the near-impossibility of getting on the UK housing ladder for the first time; fresh calls have been directed at the government to significantly step up housebuilding over the coming years, even though the likelihood of its own targets being reached is practically zero.
The new housing supply remains significantly lower than the government’s ambition of 300,000 new homes per year, with just 216,000 new homes having been supplied in 2021.
Public perceptions are misguided
Commenting on the findings, the head of the UK for Unlatch, Lee Martin, said that while most people think a sizeable proportion of UK land space has been allocated for residential developments, this really could not be further from the truth.
“There seems to be a common misconception amongst the public that the nation is bursting at the seams when it comes to the number of homes already built and that we simply have no available land left to address the current housing crisis,” he said.
“This simply isn’t the case, and, in fact, land used for residential development currently accounts for just over one percent of the nation’s total land area.”
“Of course, in major urban areas, this percentage is far higher, particularly in London, where the demand for housing is greater due to a larger population.”
“However, in some areas, residential development accounts for a tiny fraction of total land available, and it’s ironically in these areas where current homeowners are often most passionately against the construction of new homes.”
Regional land usage differences
The figures from Unlatch suggest that land usage for residential purposes across the UK is fairly consistent. However, there are some areas where a much larger or smaller proportion of available land is being used for such purposes.
For example, the highest land usage levels were recorded in the North West and the South East, both coming out at 1.4% land usage; elsewhere, the lowest land usage level was recorded in the Southwest of England, with just 0.7% of available land being used for residential developments.
Land usage rates in busy urban centres were the highest of all, with London recording a total combined residential land usage rate of 10.1%. Chelsea and Kensington had the highest land usage levels of all, with 22.3% of the space available being used for residential developments.
Ryedale, Richmond shire, Craven, West Devon, and Northumberland featured at the opposite end of the scale with a 0.2% utilisation rate, along with Eden, where just 1% of the land has been used for residential developments.
Time is ticking for landlords to get on board with the government’s new minimum energy efficiency ratings, set to come into force by April 2025. At this point, it will be a legal requirement for all rental properties in the UK to have an EPC energy rating of C or higher.
Those who fail to meet the new requirements face heavy fines and will be legally barred from allowing tenants to reside on their properties.
Even so, research conducted by Shawbrook suggests that around 70% of UK landlords still have properties in their portfolio with an EPC rating of D or lower. Worse still, almost four in ten (38%) of landlords have portfolios that consist exclusively of rental properties with a D rating or less.
As things currently stand, landlords are able to let out properties to tenants with a D rating or higher. But as this is considered insufficient to support the UK’s ambitious energy-efficiency goals for the next decade, all rental properties will be legally required to have a minimum C rating in England and Wales by April 2025.
On the whole, the UK is aiming for a sizeable 80% reduction in overall emissions by 2050.
Average costs are increasing
The longer private landlords wait to make the necessary improvements to their properties, the higher the likelihood they will face higher costs to do so. It is currently estimated that the average cost of bringing a D (or lower)-rated property up to a C standard is around £2,000. But as material and labour costs continue to increase, these costs are almost certain to rise over the course of time.
Among landlords who still have an active mortgage, almost 80% own at least one property that does not meet the upcoming C rating requirement. Given the time required to organise and conduct what can often prove to be the extensive renovations required to bring a property up to scratch, landlords are once again being urged to take action as soon as possible, rather than waiting until the last moment.
“It’s likely that efficiency standards will become tougher in the future, which is just one of the reasons that landlords should take note of these proposals and start making a plan,” warned Emma Cox, Managing Director of Real Estate at Shawbrook.
“Landlords should know that they are not alone in this. Lenders, including Shawbrook, are working hard to help drive awareness of regulatory change, support creative product options, and offer practical support to customers and partners.”
“Standard products like bridging finance can also play a role in securing the future of the sector.”
“During such a challenging period for the UK in general, we remain committed to bringing together all industry stakeholders to develop the conversation around EPC and to make real progress towards our shared goals”.
The most energy-efficient property improvements
With government incentives available for a limited time only, landlords stand to make considerable savings on a wide range of energy-efficient home improvements by acting early.
Some of the most popular improvements landlords already make to their less energy-efficient homes include the following:
- More efficient insulation.
- Larger windows and doors.
- Draught exclusion.
- Double or triple glazing.
- Solar panels.
- Upgraded lighting.
- Rainwater harvesting.
- Heating, recovery, and ventilation systems.
- Smart boilers and heating systems.
- Appliance upgrades.
With bridging finance, such upgrades can be funded with a fast-access, short-term loan designed for prompt repayment after six to 18 months.
The effects of the escalating living cost crisis are being felt by almost every household across the UK. A new report published by Halifax suggests that cash-strapped parents are even being forced to reduce their kids’ pocket money payments in order to help make ends meet.
Figures from Halifax’s annual pocket money tracking index suggest that the average UK child now receives £4.99 per week in pocket money. This represents a significant 23% decrease from last year when the average came out at £6.48.
Worse still, the average weekly pocket money payment is now lower than it has been since 2001. At this point, the average child pocketed £2.81 per week. The annual tracker hit its all-time high in 2017 when the average pocket money payment was £7.04.
According to Halifax, parents and guardians struggling to cope with skyrocketing inflation are taking a more dynamic and flexible approach to pocket money provision than ever before. Around one in three households have been forced to reduce kids’ pocket money payments, with more expected to follow suit as inflation surges to a predicted 13% high later this year.
Lifestyle alterations to compensate
On the plus side, there was at least some positive news to come out of the Halifax report. Most of the parents and guardians surveyed said that they were willing to make adjustments to their own lifestyles and spending habits in order to sustain their kids’ pocket money payments.
For example, around 50% of the parents surveyed said they would be willing to eat out less and curb their general leisure activities to safeguard their kids’ piggy banks. 25% said they would work towards reducing the costs of their weekly shopping, while just under half said they would cut down on unnecessary personal items and luxuries.
The spiralling living-cost crisis has prompted more households across the UK than ever before to switch to cheaper supermarkets, make additional efforts to reduce food waste and reconsider unnecessary purchases.
Interestingly, the report published by Halifax found that just 40% of parents and guardians give their kids pocket money on a regular basis.
As for how this money is spent, the Halifax survey found that just under 40% of kids spend most of their pocket money on sweets and gaming. 30% allocate their pocket money to toys, 29% to clothing, and 28% to books and hobbies.
However, just 22% of parents said that their children actively save most or all of their pocket money.
Talking to kids about pocket money problems
Understandably, the tendency among parents is to protect their kids to the best of their ability from the realities of economic turbulence. But as the current situation could worsen before it gets any better, parents are being advised to be a little more transparent with their kids.
Speaking on behalf of Halifax, Emma Abrahams advises taking an honest and open approach to discussing affordability issues with children.
“As household costs continue to rise, some parents are having to make difficult choices as they adapt to the conditions they face, from cutting down on the family grocery bill to passing on date night or that much-wanted personal purchase at the shops,” said Abrahams.
“Having an open and honest conversation with your children about what you can afford to give [as pocket money] is likely to improve their understanding and relationship with finances in the future.”
Planning permission rejections are anything but uncommon. In fact, around 25% of all planning permission applications submitted in England are unsuccessful.
When a request for planning permission is rejected, it can lead to major disruptions and potential financial losses. Submitting repeat applications is an option, but it is far from the most desirable course of action.
Irrespective of the type of project you are planning, the same basic rules must be followed to give your application the best possible chance of being accepted. Understanding the most common reasons planning permission is denied is a good place to start, as most declined applications fail for the same basic reasons.
A few examples include the following:
- Use of hazardous or prohibited materials.
- Overlooking other people’s properties.
- Modifications that would block a neighbour’s natural light.
- Potential impact on trees, nature, and habitat.
- not keeping in with the character of the area.
Conducting adequate preparation when planning an application means understanding and anticipating these potential issues. All aspects of your proposal must be presented in a way that shows you have considered all applicable regulations.
Enlisting expert help at an early stage could also prove invaluable. For example, if you are seeking third-party funding for an extensive project, your provider and/or broker may be able to help with your planning permission application.
In some instances, applications submitted by (or with the support of) a skilled third party carry more weight. The same can be said for those who carry the support or recommendation of a reputable surveyor.
But irrespective of whether you plan on going it alone or seeking outside help, there are four important things you need to do to ensure your application is successful:
- Make sure you provide all the required information the first time: With each declined planning permission application, your likelihood of success the next time around decreases. You, therefore, need to ensure that you have all the required information and documentation in place the first time.
To submit an application for any kind of project, the following will be needed:
- Five copies of the application form.
- A signed ownership certificate.
- A Design and Access Statement.
- The planning permission fee.
- A site plan, which shows the planned changes in detail.
- A block plan that shows the location of the site in the local area.
- Elevations of the proposed site.
Be mindful of the fact that if any documentation is absent or incomplete, the application as a whole will be rejected.
It is advised that you:
- Provide detailed building models: If possible, accompany your planning permission application with a detailed digital model of your proposed building (or modification). BIM models can be great for showing how the finished project will look in its surroundings and whether it will comply with all applicable regulations.
- Demonstrate your understanding of the rules: Your job is to convince the local council that you have considered and carefully considered all applicable rules and requirements. From accessibility to sustainability to health and safety, a demonstration of compliance and understanding holds the key to a successful application.
- Provide evidence of due diligence: Finally, you can also boost the chances of the application being successful if you provide robust evidence of due diligence. This means showing that you have conducted extensive research into how your project will comply with all local and national regulations. For example, you could accompany your application with an architect’s drawing, providing a clear indication of how your project will fit in with its surroundings.