Is It Worth It? Life As An Average UK Citizen

Life is similar to walking down a dark alley full of muggers. At the start you are unsure of where you are going and where you will end up, you just sort of walk blindly. As you continue down the alley you seem to lose more and more of your money, before coming out the other end, tired and dazed, and wondering where both your time and your money disappeared to.

I want to paint a picture of the average life of Joe Bloggs. I want to see if the life we are told to live, the life we are encouraged to live, is actually beneficial to us. Are we rewarded for our endeavours? Or are we simply caged in the modern life? Is it true what Palahniuk says that “the things you own end up owning you”? Personally, I am not convinced that buying into this society, and this way of life, is of benefit to people. In order to express my point, let us look at Joe.

Joe Bloggs is an average man, with an average life and an average job. He finished three years of education in University, before getting a car, a job and a house of his own. He is now progressing down the career path. He lives near Birmingham where, according to Monster, the average wage is £26,171. Luckily he is male, and so he benefits from the higher average salary they receive. Just as luckily he did not dip into his overdraft whilst at University. Coming away with not only a degree, but a £0 bank balance.

As he is now earning money he must start to pay back his Student Loan and his University Tuition. This is 9% a month, and with the increased tuition fees, his total debt is around £36,000. (Though this figure does not include the interest that is almost immediately added on to what he loaned. In truth the figure he owes is higher than £36,000. MUCH HIGHER). Annually he pays back £2355.39 towards his debt, which split over twelve months is £196.28.

So Joe earns £2180.92 a month. His debt payments (£196.28) are taken out of this and this leaves him with £1984.64. The government then tax him at the rate of 20%, on his earnings which are taxable (£16,731)  which comes to £278.85 a month, he also has to pay rent on his one bedroom flat which is £500 a month, as well as council tax payments which come to £128.43. After these deductions he is left with a monthly take home of £1077.36. Luckily Joe’s flat came furnished so he did not have to go out shopping for a new sofa.

Just as luckily Joe – he is a very lucky man – had driving lessons, passed both his tests and got his license before leaving University. Therefore once he found his job in Birmingham, he only needed to buy a car. And pay for the MOT. And pay for the road tax. And pay for insurance, and petrol, and breakdown cover. Joe decided to get a Ford Fiesta, which is the most popular car in the UK. This costs him £182 a month, he also spends £100 a month on petrol and £175 a year on road tax and an MOT. After these deductions Joe is left with £780.78 a month. Luckily his car is fairly reliable, he does not have to spend anything on repairs and the place where he works has free parking. YES! He does have to insure it though, and protect it against theft, burglary and breakdown. This costs Joe another £900 a year, which equates to £75 a month. RAC provide breakdown cover for Joe’s Fiesta. This is £78.99 a year. Leaving Joe with £699.20 a month.

According to a document prepared by Helen Webb, on average electricity will cost £42 a month, gas will be £61 and water will be £36. Bringing Joe’s monthly disposable income to £560.20. A TV licence costs £12.13 a month, and Sky’s broadband (£25.40) including line rental and a Sky TV package (£21.50), as well as Joe’s mobile phone contract all need to be deducted from his income. This leaves Joe with £471.17. To save money Joe does not have a landline phone, using only his mobile for outward calls.

As Joe has only just moved in he doesn’t really conduct many repairs or maintenance on the house, it is all in good working order, and as mentioned earlier, came fully furnished. Joe also does not pay for house insurance, content insurance, life insurance, and he has no pets, so he does not pay pet insurance either. Joe has a haircut twice a month costing him £40, he buys contact lenses at £10 a month, has a gym membership (£15) and plays football on the weekends (£16). Luckily he has not needed to go to the Dentists lately and he is in good health, probably due to his lack of smoking and active life. After these monthly deductions Joe is left with £390.17.

Once all these things have been paid for, Joe still has to purchase food in order to continue living his joyous life. An average of £44 is spent each week on the shopping. This is £176 for a month, and leaves Joe with the titanic figure of £214.17. That is £214.17 for himself. To live off and to enjoy. After all his hard work, after making a home, heating it, lighting it, after feeding himself, and staying fit and presentable, Joe is left with just over two hundred to spend on himself each month.

This two hundred pound has to cover any dental issues he may have, any health issues whereby he needs a prescription, any repairs needed on his house or his car, any new piece of furniture for his flat, any parking fines or speeding tickets he may receive. This money must cover all his socialising, all his take-aways, all his eating out, all the new clothes he may need to buy, all the charities he wishes to donate money to, all the birthdays he has to attend and buy presents for. This money must cover contributions towards Christmas, towards holidays, towards newspapers, magazines, tattoos, alcohol, DVD’s, music, hobbies, laundry, books and toiletries.

This two hundred pound is his. To do with as he pleases. To enjoy himself. Joe is very pleased with his hard work, he is very proud of what he has achieved. Unfortunately though, when Joe gets his monthly pay check of £2180.92, he feels a little disappointed, a little cheated that he only really receives £200 of that. He thinks to himself, “Is this all worth it?”

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7 thoughts on “Is It Worth It? Life As An Average UK Citizen

  1. After some criticism and after using the “Repayment Calculator” on studentfinance.direct.gov.uk, I must correct myself with the figures used in Joe’s student loan repayment.
    He WILL NOT be paying £196.28 a month, and will instead by paying the rather modest sum of £24.58 each month. This gives Joe an extra £171.70 to play around with each month.

    This then has an obvious impact on Joe’s disposable income at the end of the month, which increases to £385.87. Roughly £100 a week to spend on himself. An improvement on the figure I originally posted but still not a tremendous amount of money for someone on a £26k a year salary.
    The main point of the article stands, though it may not be as jaw-breakingly hard hitting as it was when I originally posted (in error).

    What the “Repayment Calculator” does highlight though is the astronomical sum of money Joe is going to have to pay back. Even though his loan was only £36,000, the final figure he must pay back is a disgustingly high £84,760.
    The incorrect figure of (almost) £2500 I stated in the article, the figure that Joe would have to pay back on his loan, is nothing compared to the annual repayments he is set to face in reality. A decade after leaving Uni his repayments have gone over £4000 a year, four years after that they have climbed again to £5000, three years later, they are at £6000 a year.
    Incredibly Joe does not even begin to pay off his loan until the 16th year after he has left Uni. Until then he is simply paying off interest.

    1. Don’t these calculations assume he never gets a raise? And isn’t the loan wiped 30 years after graduating? Also please explain what cost you would put on higher education. If you think it should be free, please justify that comment.

      1. Yes, these calculations would assume he never got a raise. The online Repayment Calculator did not have the function for an ever-changing income. I would assume that a raise in wages would not make a tremendous difference to the repayments made anyway. Proportionally and as a percentage it will still be a large chunk out of his earnings going on paying back interest.

        “England or Wales – From 1st September 2012. Your student loan is cancelled 30 years after you become eligible to repay”
        http://www.slc.co.uk/services/loan-repayment/loan-cancellation.aspx
        So yes, your loan is wiped, but that is either after you have paid the large majority of it off (interest first), or it would be after 30 years of struggling financially.

        Of course I believe that it should be free, I don’t think that comment needs justification either, but I shall for the sake of discussion.
        Tuition fees for University were only created in 1998. I see no reason why the new generation has to pay to attend Uni when the previous generations (the one’s running the country) did not. If the argument is that too many people would attend Uni if it were free then the solution would be to make Uni harder to get into. Money and wealth should play no factor on who attends higher education, intelligence should. Free tuition for University is not a burden to society and the taxpayer, it is proven that people with degrees earn more money on average than those without degrees, they are more economically productive, and the increased wages and earnings mean more money will be recouped in taxes. Education is an investment and not an expenditure, it is an investment in the future. I am envious and proud of the education system in other countries, Scandinavia for example. They have free University tuition and their economies are not struggling. Various magazines, newspapers and websites have run articles on how well the Scandinavian model does.

  2. Please explain your assumption that an increase in wages would not result in a material increase in repayments. Please justify this conclusion by showing your actual calculations. Please note that the Repayment Calculator is not the only method of calculating student loan repayments.

    1. I find it strange, but pleasantly surprising, that this post is attracting so much attention from Hong Kong (WordPress tells me that is where my blog is being viewed from). It is also strange that you are using different email addresses and names to comment on this post.
      Nevertheless.

      Discovered another fantastic tool on MoneySavingExpert.com
      Student Finance Calculator. I am not a mathematician or an accountant (though I do have an A Level in Accounts) so what makes most sense to me is for me to use an online tool. The maths has been done, the formulas devised.

      Using this tool. Using the £9000 a year tuition loan, the £3000 a year maintenance loan and the starting salary of just over £26,000.
      According to the calculator if our wages increase by 5% above inflation (and that is A LOT), and inflation remains constant at 3%, then we will repay our loan 24 years after we finish the University course. This will result in a total loan repayment of £94,920. Which is almost three times the size of the original loan he took out. This monumental loan repayment is only possible if our wages increase by 5% (above inflation) each year. Our Salary by the time we have paid the loan back will stand at £165,500 a year. A figure which is not only ridiculous but entirely unreachable.
      If then we lower our salary expectations to a 3% (above inflation) increase year after year we will not pay our loan back within the 30 year bracket and will have paid out £93,790 in loan repayments. Our Salary at the end of the 30 years will stand at almost £150,000. Again ridiculously unattainable.
      To be more realistic lets give ourselves a 1% salary increase (above inflation) each year. Our final salary at the end of the 30 years is just over £84,500, we have repaid over £39,000 of student loan (all of it being interest) and the debt had to be wiped because we were not able to repay it over the 30 year allowance.

  3. Please explain why you have used the assumption that inflation will remain constant at 3% when it has been below this figure for 17 of the past 20 years? I would suggest that a fairer assumption would be that inflation will remain constant at 2%, given that this is closer to the historical average since 1994 (2.17%), and is also the Bank of England’s current target.

    Please also explain why you insist on stating the total loan repayments in a manner which completely ignores the effects of inflation? The Student Finance Calculator which you used very clearly shows two figures: one figure (which you prefer to use as it has more dramatic effect) which shows total repayments over time; and a second figure which takes inflation into account and therefore shows the cost of the loan in “real terms”.

    The effect of a) using a more justifiable inflation assumption and b) taking into account the effect of inflation on the cost the loan in “real terms” on your calculations above are as follows:

    If Joe’s wages increase by 5% above inflation, his total loan repayment in real terms will be £56,460, and he will pay off his debt after 25 years.

    If Joe’s wages increase by 3% above inflation, his total loan repayment in real terms will be £43,880, and his debt will be wiped after 30 years.

    If Joe’s wages increase by the (allegedly more realistic) 1% above inflation, his total loan repayment in real terms will be £14,590, and his debt will be wiped after 30 years. This will mean he will have paid back 40.5% of his loan before it is written off.

    Not quite “Debt Slavery” after all.

    I look forward to hearing your comments.

    1. Very fair point about 2% inflation. We will use that figure instead.

      I choose to use the second figure because this is the amount of money that will leave Joe’s bank account over the next 30 years. It is true that it looks more dramatic but I think its the necessary figure to use. People will not be paying back their loans in one lump-sum using todays monetary value. It will be slowly passing out of their account, month after month, year after year, for the next thirty years. If they were to keep a running tally of this figure then they would end up with the figure I use, and not the money in “real terms”. There is no point in saying someone will pay back £40,000 of todays money, because todays money is for now, it will not exist in the future. It is better to use the future predicted figures I feel. Though it is important to note that the value of money does change. Everyone should be aware of that, so yes £90,000 or whatever in the future, does not equal £90,000 currently.

      Obviously, we are both aware we are dealing with huge hypotheticals. IF this, IF that, so we must remember that this is not an exact science.

      Firstly Joe’s starting wage is the average wage for a worker in the UK right now. Nobody, or very few people at least, are going to walk into a job, straight from Uni and get paid the average UK wage. So the chances are he will have to work for a good number of years before he even reaches the figure of £26,000+ starting salary. Perhaps this is a mistake on my part, maybe I should have given him the average University graduate wage, rather than the average UK wage.

      Secondly, Joe will not gain a 5% pay rise year after year above inflation, nor will he receive a 3% pay rise and the likelihood is that he would not even receive a 1% pay rise above inflation year after year. The facts are that “Average earnings in the UK have risen by less than the rate of inflation for the fifth year running, according to the Office for National Statistics (ONS)” – http://www.bbc.co.uk/news/business-25347403

      So not only do your real term figures distort the amount Joe will pay back over the next 30 years, the figures are undoubtedly going to be inaccurate, perhaps from both of us. His starting salary, the rate his salary increases etc.

      The most likely outcome is that Joe will never pay off his debt. 30 years will pass and Joe will have paid a proportion of the interest off but the debt will stand and then it will be wiped because he has been unable to pay. That is the most likely outcome I feel, though you are free to play around with the figures and number estimates. If we use the rate of inflation you suggest and the fact that salary’s are not increasing at the same rate, Joe will be making loan repayments for the next 30 years to cover a debt he will never have a hope of paying off.

      True, it is not debt slavery in the sense that you are literally enslaved, but I am sure you are aware I am not saying it literally. The ridiculous University tuition costs added to the fact that the government are now looking to sell off student loan debts to private investors effectively leaves any graduate in a constant state of debt, a debt he must pay off if he wants to live comfortably, a debt that will cost far more than the loan they took out, and a debt that can only be paid off if they work.

      Interesting article by Sovereign Independent talking about University fees being precisely debt slavery
      http://www.sovereignindependentuk.co.uk/2013/07/17/student-loans-debt-slavery/

      As I said at the start of this discussion, I am against University fees in general. That is the basic principle I stand for. Free education for people that have the ability and desire to partake in it. Any circumstance that does not result in this I am opposed to. Whether debts are written off, whether debts are repaid, whether debts are in real terms, whether salaries rise with inflation… none of it really matters because these are the details of a system I am against in its entirety. I can not pick and choose to agree with certain aspects, or say that “in actual fact, it is not too bad” because essentially it is. From the moment people have to pay in order to learn, that is the moment where I am against it.

      I appreciate your comments, and your interest, and to be honest scrutinising my work is very helpful. I have seen that I have used the wrong figure for inflation, and I have seen that initially I did not take into account any pay rise for Joe.
      Thank you for this.

      I stand by my remark that it is Debt Slavery

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