enough of a grasp of your finances by the end of Part Two to decide whether you want to do something better with them, not just to make yourself richer, but with consideration for wider society.
PART THREE looks at the growing, and important, shift towards arranging our personal finances ethically, from checking the source of the energy you use, to where to invest your pension, in a way that is mindful of its impact on the environment and other people. Being good with your money is not just about making more of it.
Where better to start than with the generation-defining money issue for anyone under forty: where the hell can we afford to live? If arctic rolls and the threat of nuclear war shaped those that came of age in the Seventies, so the Noughties kids have had the Spice Girls, MSN Messenger and a housing crisis.
In November 2017 the estate agent Strutt & Parker (which sells what I would consider to be largely unaffordable properties: a £525,000 cottage in a hamlet outside Totnes, Devon; a £25 million house in Notting Hill, London) issued a report that blew up on Twitter about how first-time buyer couples should be able to save the average £33,000 needed for a UK house deposit, or the insane £64,000 needed for a London house deposit, within just five years by cutting down on six ‘luxuries’.
Some of the numbers: give up one night out a week and save £6,000 annually (that assumes you spend £115 a week on one night out) and £2,640 a year on takeaways (£50 a week!). Make rather than buy sandwiches for another £2,576 (£49.50 a week, but you should still eat lunch over the next five years, and bread is not normally free) and eliminate £832 a year on lottery tickets (£16 a week. Anyone?).
Even after finding that, having given up excessive expenditure that you are unlikely to be making, you are still short if buying in London, here comes the kicker:
‘Those lucky enough to have family that can help will receive an [additional] average of £29,400 towards their goal.’
Whichever way you want to spin it, however much money you think us under-thirty-fives are wasting on Deliveroo, the statistics are tough to argue away. Average house prices have far outstripped average earnings across the UK, which makes it way more expensive than it used to be to buy a house in every part of the country.
In the South East, where, still, many of the most prestigious and lucrative graduate jobs are to be found, it is particularly bad, with London house prices 15.7 times higher than average incomes for people between the ages of twenty-five and thirty-four, according to a report from February 2018 by the think tank the Institute for Fiscal Studies (IFS). Across Great Britain as a whole nearly 40 per cent of twenty-five to thirty-five year olds face a house price to income ratio of at least 10.
A separate report by the Office of National Statistics (ONS) found that in 2017 the price of a home in London was 13 times the wages of full-time workers aged twenty-two to twenty-nine, in 1999 it was 3.9 times the then average salaries. Even in the North East they are 5.5 times, up from 2.46 in 1999.
Bear in mind, as outlined in chapter 2, my guide to whether or not you can afford to buy. You are unlikely to be able to borrow more than four or five times your salary in a mortgage.
Whenever such statistics appear in the press there follows the same reductive, crabby response: ‘Whilst house ownership has collapsed the stag/hen do market in Marbella or Prague has soared,’ one man wrote on thetimes.co.uk. But there was another comment on the coverage of the IFS report that sums it up for me, from someone who says she bought a modest semi in the South East in the 1970s.
It cost £11,500 and I saved a £2,000 deposit (lived with parents), and got a £10,000 mortgage (three times my salary).
I earned around the national average wage, and the house was around four times the national average wage. I drove an Austin 1100 which cost £100 and expired a year later. A bit of a struggle, but not too bad.
Similar houses in the same estate are now selling for 15 times the average wage. The cheapest flat in my area is seven to eight times the average wage. That’s the problem. For sure iPhones, £3 lattes, and holidays don’t help, but they are not the fundamental issue.
FYI, if you went on fifty-two lavish £500 stag or hen dos (sympathies), one every weekend for a whole year, you would have spent £26,000. A typical 20 per cent house deposit in London is now more than £80,000, according to Nationwide Building Society.
With that in mind it makes sense to start any advice on housing with some tips on how to rent well. A third of those born between 1981 and 2000 will be tenants for the rest of their lives, according to the think tank the Resolution Foundation.
I will then move on in chapter 2 to help you work out whether or not you can afford to buy a home, and if you can, how to sort out your credit score, and get yourself the best mortgage possible.
The majority of perma-tenants will be so because they cannot raise a housing deposit big enough to buy close to where they work. I think it is worth stressing, though, that for some people renting is not a result of being unable to buy, but a positive lifestyle decision and a better way of spending, or saving, their salary.
The rental market is riddled with problems, shyster letting agents and landlords promoting property that is not fit for human habitation. Moving constantly between rental properties can be horrendous, as is not knowing when you are going to be booted out or when your rent is going to be raised. Such uncertainty is damaging to mental and physical health, children’s schooling, general morale, your confused cat and your wilting pot plants. All the same, for some tenants spending income on rent offers a better, more flexible, sociable way of existing than tying themselves to a hefty mortgage and a resulting nine-to-five grind for the rest of their days. Maybe you don’t want to carry the responsibility of fixing a leaking roof.
So: you are renting, out of necessity or out of choice. How do you make the best of it?
How to rent a place and lessen the chances of getting ripped off
Should you rent from a letting agent, or a landlord?
When renting privately you will either do so direct from a landlord or through a letting agency. There are pros and cons of each. Going direct to a landlord helps keep fees down, and you may not have to submit to a credit check. Rents can be cheaper because landlords are not paying someone else to find and check tenants for them. I am also convinced that letting agents play a large part in encouraging landlords to raise rents. Cut out the middleman and you may charm your landlord into wanting to hang on to you without charging more. Reliable tenants are assets.
Sites such as Open Rent, No Agent and Homerenter match up tenants and landlords direct, though you may have to pay some low fees if a landlord wants to see a reference.
Going through a letting agent might help if you need repairs doing, when the agent can negotiate with your landlord on your behalf. You also have more consumer protection by signing up to rent through a letting agency. Agents must be part of a redress scheme, such as the Property Ombudsman (TPO), The Property Redress Scheme, and Ombudsman Services: Property. You can turn to these organizations for help with any disputes you may have with your landlord or agent. Check an agent’s membership before you commit.
The massive downside to letting agents is fees. For years