Benefits in Lent (Week 6) – Post Balance Sheet Events

Benefits in Lent ended with a total budget deficit of £18.62. A respectable performance. However, as alluded to in previous weeks, Benefits in Lent was not a perfect simulation and another trick was to defer purchases until after Lent. But this gives a false picture of what I actually spent during Lent.

For this reason, audits take place after the end of the financial year. Transactions and events after the year end give information about conditions during the year. These are called post balance sheet events.

What I did afterwards

I needed a haircut two weeks ago. However, I avoided the immediate cost by waiting until after Lent and using a comb more often. I’ve just done a large online Tesco shop and replenished vital supplies of washing powder, cleaning products, peanut butter and pheasant. Adjusting for post balance sheet events, I should have a deficit of around £103.20+ (unaudited figure).

This week I most looked forward indulging my Starbucks coffee habit at will. I drunk many caffè lattes and re-identified myself with accounting trainee-literati. But I never used to buy coffee so regularly before Lent, so why should I change now?

starbucks

I believe in corporate coffee. Photo by rudolf_schuba.

Final Thoughts

If I’m honest, the last six weeks have not been that challenging. The problem with Benefits in Lent was that it was always temporary. The fact that it was only 6 weeks made it easier because I could pre-buy and then defer purchases. If it was permanent, I would find it impossible.

I’ve learnt the importance of using what resources we have wisely, whether it is money, time or bandit-avoidance skills. Most of all I will remember Benefits in Lent for the awesome spreadsheets.

Benefits in Lent (Week 5) – Credit, Savings and Budgets

I saved £10.84 in week 5. It makes up for some of the previous weeks budgetary excesses and brings the Lent Debt down to a manageable £5.71. That’s 8.9% of my benefits income and favourably compares to the UK national debt, which is 53.5% of GDP. Therefore, I believe that should be considered for this man’s job:

alistair_darling
Alistair Darling and the Budget by HM Treasury

Credit

Most Britons have access to cheap credit. It’s useful for unexpected emergencies, such as car repairs or a broken economy. I used “notional credit” to cover my spending overruns but this was unrealistic because I wasn’t charged any interest.

In real life, the poor only have access to the most expensive forms of credit. For example, I found a website that offered a one-day £50 loan for a finance charge of £14.75 – giving an APR of 2222.46%. Crazy – but what alternative is there when things break and food runs out?

Savings

Low income means that there is no slack. Building wealth and safety buffers is not possible. In Britain, the top 10% of the population owns 53% of the wealth and the bottom 50% own 7%. The point is, nobody ever escaped poverty without saving.

Budgeting

The natural argument is that those on benefits should not live beyond their means. No-one disputes this, but that doesn’t explain why budgeting is often absent. I venture two reasons:

1) Poor financial education – Financial education in schools is currently not compulsory and its delivery is varying (source: FSA study). Financial habits are learnt at the home. However, what message do you learn when you see everything going on a credit card, or a quick loan company being used. Unfortunately, there’s evidence that the under-40s are less financially capable than their elders (source: FSA study). The bankers have highlighted the dangers of a lack of financial nous.

2) Societal expectations – Eating out used to be a rare treat. Now I’ve memorised the Pizza Express menu and eating out is one of my bigger expenses. Mobile phone are everywhere. Computers are considered essential. Everyone has a high definition TV (except me). It’s easy to say that the poor should do without these things. But we can’t live our expensive lifestyles and wonder why others don’t want the same.

Now we have a difference between income and expectations. Debt is the only way to fill the gap. Most of society is in debt – I’m in a negative wealth position if you count my student loan. However, the poor suffer more intensely from debt because of much higher interest rates.

Financial Services

Financial services, such as credit, have made our lives better by making it possible to withstand unexpected events. This is why I welcome the government’s decision to make bank accounts universal for all.

However, the poor are still disadvantaged. They live on the edge of a cliff with loan sharks waiting if they fail.

Benefits in Lent (Week 4) – Time

I do not have the time to live on benefits. In a 168-hour week I have to work a full-time job, study for accountancy exams, keep the flat habitable, cook, train for bandit-defence and write blog posts. £64.30 does not buy me enough time.

time
Time by ToniVC

I have talked about how my existing possessions and working full-time makes living on benefits easier. However, I have not been able to substitute money for free time. I’m used to regularly eating out, convenience food, home delivery for groceries and a cleaner. None of that is possible without money.

Organising for Victory

Without money or time you have to organise beyond German efficiency levels to make things work. My life is run by my diary, to-do lists, revision plans, meal plans and New Year’s resolutions. However, being 100% efficient is not possible and leads to unhealthy psychological conditions. The need to buy time is one reason that I’m £7 over budget this week. I didn’t need to spend money on dishwasher tablets and a cleaner, but it saved me about 4 hours of time.

Everyone suffers time poverty and I don’t expect any sympathy. I have been questioning how I spend my resources. I can either:

  • wring out every last useful second and use up every single pound to maximise enjoyment and achievement. Economists call this “utility-maximising behaviour”.
  • leave gaps

Gaps such as the one where a pertinent conclusion to a blog post should go.