Can you balance your household books?

One thing I remember very fondly is when financial journalism was generally seen as a bit dull. I would tell people I’m a journalist and they’d say: “Oh how interesting!” at which point I would explain that I specialise in writing about business and money, and they would become a lot less interested.

I find it all fascinating, of course, but for a lot of people, financial journalism is like eating your greens, it’s not exciting but it is important. However, in the last few years the financial news has been far more exciting. In fact, in the last few weeks it’s been genuinely thrilling.

Governments have literally changed because of the movements of the financial markets, political careers have been suddenly cut off. It’s been more dramatic than Game of Thrones.

In fact, for a staggering couple of weeks after the so-called mini-budget, my friends were asking me to explain the gilt markets to them in the pub (which is actually a good place to explain gilts, a drink genuinely helps). However, when my job is that exciting and when people genuinely say things to me like ‘Can you just explain gilts to me, Fliss?’ it’s generally a sign that we’re all facing quite a bit of trouble.

And we have been. Not all of the financial turbulence can be laid at the door of Liz Truss and Kwarsi Kwarteng’s plan for growth; there are similar issues affecting people globally. Energy bills are high because of Putin’s war in Ukraine, inflation is over 10% partly because of supply chain disruption, and there’s a labour shortage affecting many countries, not just the UK.

But the mini-budget spooked the markets and pushed up the cost of government borrowing until the new chancellor Jeremy Hunt essentially reversed almost every measure. And this week we will find out what he has planned when he delivers his Autumn Statement. Spoiler alert: he told the journalists over the weekend that everyone will pay more tax.

Of course, it’s the Scottish Parliament that sets rates and bands of income tax rather than Westminster but the chancellor’s plans to balance the books through tax rises and spending cuts will affect the whole of the UK. And there could be some big changes coming; the new chancellor isn’t so much U-turning on the previous chancellor’s plans, he’s performing a handbrake turn, accelerating away, then getting out of the car and setting fire to it. It’s a dramatic change of plan.

But whether you agree or disagree with what the Westminster government intends, we could all do with looking at our own budgets and deciding if they still work. Because I don’t mean to be bleak but we are in tough times.

Last week we heard that GDP had fallen in third quarter of the year. That’s an indication of our economic health as a country and if it falls again in the 4th quarter of the year then we will officially be in recession.

The Bank of England reckons we will enter recession this year, stay in it for the whole of 2023 and not escape it until halfway through 2024. It’s not predicting a very deep downturn but it does think we face the longest recession since records began in the 1920s.

At the moment, workers are in a very strong position because unemployment at its lowest for 50 years and there are record numbers of job vacancies. But that can change in tougher times and unemployment is predicted to rise to almost 6.5%. Just this week Royal Bank of Scotland warned that Scottish firms face an “extremely difficult period”, with a downturn in new orders.

It's not that I want to be unbearably gloomy, it’s that I think it’s not just governments that need to be looking at whether we can balance the books. This is a very good week to sit down with your bank statements, work out what is coming in and what is going out and consider whether or not you need to U-turn on your own spending plans. It’s one of the simplest things to do to get your finances under control and yet almost nobody does it.

Once you know exactly what your income is and your outgoings you can see much more clearly where you might need to trim back. You’ll know whether you can afford that long term spending on a new bathroom and a week in Spain. You will know how much you can spend on having fun this Christmas and Hogmanay without a painful debt hangover afterwards.

And if the numbers don’t add up, if you can see yourself sliding into debt even once you’ve cut back then now is the time to make like a Chancellor and act.

There might be a way to increase your income. For example, the benefits help website EntitledTo estimates that around £13bn in support goes unclaimed across the UK every single year. That’s millions of people not getting the help that they are supposed to and no doubt struggling as a result. Spending a few minutes putting your details into the EntitledTo calculator could really help ease the squeeze.

Then there are other ways to increase your income. For example, do you have a spare room? You can rent out a furnished bedroom to a lodger and earn up to £7,500 a year tax-free (or half that if you share that income with a partner).

There’s a housing shortage and, especially if you’re in a city, there could be real demand for a room and that could really take the pressure off your household finances. It doesn’t need to be forever, you could plan to do it for a year or two while we get through this belt-tightening.

And once the headlines and the analysis of this week’s announcement dies down, I hope for all our sakes that the financial news becomes a little less exciting for a while.