Since when were decent wage rises a bad thing? Since this week it would appear.

As of January to March this year, according to the figures release on Tuesday by the Office for National Statistics, wages rose (excluding bonuses) by 6%.

Taken against the current CPIH inflation (the ONS’s preferred measure) of 3.8% and we’ve got 2.2% real terms pay increase, on average, for British workers. This means Brits are getting a proper pay rise for the first time in many years.

Now, we last had real-terms wage rises in 2021, so it wasn’t that long ago – but this was mostly cancelled out by monstruous inflation in 2022/23. Collectively even if we’re getting pay rises in earnest, there is still some way to go to get back ahead of the price increases we’ve all felt.

There is a longer-term story here though and the ONS’s own figures illustrate this. In the graph below, you can see real pay growth vs CPIH inflation.

When the blue and orange lines are higher than the zero-axis line, this means real pay was growing. The post-2008 drop off is clear, and there has been no consistent reversal since despite a couple of spikes.

This is confirmed by research from from the Trade Union Congress (TUC), whose recent figures suggest real pay hasn’t really moved in about 16 years. The TUC says the average worker in the UK would be £200 a week better off if pay had grown at the same as its pre-financial crisis rate.

What is going on here? And why are real-terms wage increases (i.e. people becoming better off) treated like a bad thing by the Bank of England and other vested interests?

Read more by Mouthy Money editor Edmund Greaves

Why we all got poorer

The reason why the news of strong wage growth is being touted as bad news is because it is evidence of a ‘wage price spiral’.

In effect, wages are rising due to a labour shortages and workers being more assertive in the face of soaring costs.

But productivity (i.e. how much the average worker makes) isn’t increasing at the same time. So we’re being paid more but not producing more as a result.

Economists treat this kind of wage increase as ‘inflationary’ because it means the economy isn’t actually growing, there’s just more money sloshing around inside it.

This means the Bank of England, which watches all of this very closely, is likely to maintain its bank rate higher as a result. The bank is worried that if we’re getting more pay rises then we’ll just spend it and this will perpetuate more price rises.

But maybe…just maybe…the reason that people are getting proper pay rises now is because we’ve had enough of below inflation pay settlements and have finally found our collective voices. We’re tired of the erosion of our living standards and now we have the power to say enough is enough.

The 2010s were a decade marked by below-inflation pay rises. This was a core pillar of austerity government and a deliberate policy decision our leaders made.

The idea was this – in the post-GFC world government and big business couldn’t afford to hand out pay rises that matched inflation, and needed to control costs because, well, they were pretty broke.

This led to a novel idea whereby instead of saying to workers “no you can’t have a pay rise this year” you gave them a pay rise, but you give them an under-inflation pay rise. For example, if inflation was 3% – you’d give your employee 1.5%. It’s something and enough to quieten any immediate discontent.

But it is in effect a cost-cutting measure as over time it will reduce the business/government salary bill as income from goods and services (or taxes!) rises.

It is a way of softening the blow while also making the balance sheet look better.

It is a boiling frog strategy.

This idea was the lovechild of behavioural economists, illustrated in the book Nudge (published in 2009) and the ‘Nudge Unit’ which was created by the Coalition Government in 2010.

It became a widespread tactic used by Government entities and businesses all over the UK to slash their wage bills.

It was so effective the economy had basically become addicted to it, as the ONS wage data shows all too clearly. This attitude reached its perverse peak in 2022 when Bank of England Governor went to the press to beg workers not to ask for pay rises.

The Russian invasion of Ukraine was days away at this point, and the ensuing energy crisis turbocharged the inflation crunch. But that crunch was ultimately the product of the Bank of England, in cahoots with the Government, printing money into oblivion to pay for the pandemic.

And this leads us to today, where the labour market is tight, workers are getting actual pay increases and the economic ‘theory’ for getting away with meagre pay rises appears dead in the water.

It is bad news, but only if you’re a bean counter who doesn’t care about the human cost of eroding people’s earning, a business owner seeing your profits curtailed, or a government finding it harder to limit costs. Sound familiar?

At this point, if higher wages means higher rates then so be it. The era of (effectively) zero rates should never return as an idea anyway because it promoted irresponsible borrowing and an unhealthily debt-fuelled economy. It caused the inflation that has had to be confronted.

Higher rates will enforce financial discipline on business, government and households, and that is ultimately not a bad thing.

Photo by Robert Bye on Unsplash

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Tourism in many parts of the UK is booming right now. 

As we exit the pandemic some people are venturing abroad again. But many others (perhaps partly due to the cost-of-living crisis) are discovering – or rediscovering – what this country has to offer.

This in turn has led to a growing demand for holiday rentals. That is only likely to increase as overseas visitor numbers return to pre-pandemic levels as well.

There is undoubtedly money to be made from holiday lets, so today I shall look at this subject in more detail.

How much can you make?

Being a holiday-let landlord has many attractions, including significantly higher returns than are achievable from residential buy-to-lets.

An apartment in a popular tourist area, for example, can generate £1,000 a week or more (in peak season at least).

A recent report in Which? found that the average annual yield on a holiday let was just over 10%. This compares favourably with residential buy-to-lets, where around 7% a year is typical. The Which? article mentioned above forecasts holiday-let yields rising in future to 14% or more.

According to Sykes Holiday Cottages, the average holiday let owner is earning approximately £28,000 per year. You can also enjoy cheap holidays staying at the property yourself.

And there are tax advantages too, as running a furnished holiday let (FHL) is considered a trade rather than an investment. This means you can offset mortgage interest costs against your income, as well as council tax and other bills.

On the downside, being a holiday-let landlord is likely to be more hands-on. New tenants will move in every few days and the property will need to be cleaned, tidied and restocked on a regular basis. Covid precautions added an extra dimension to this (though rules are now easing).

There will be more admin dealing with a steady stream of enquiries and visitors. You will need to budget for advertising too, or risk ‘voids’ when your property is empty and you are losing rather than making money.  And finally, any garden at the property will need tending as well.

You can of course outsource some (or all) of this work to a management agency, but naturally there will be a cost to this, impacting your bottom line.

Setting and location

You won’t be surprised to hear that setting and location are two key considerations for would-be holiday-let landlords.

A recent survey by Suffolk Building Society found that for potential holiday-let buyers the setting of a property was more important than other factors such as renovation potential or proximity to amenities.

According to the SBS survey, key aspects for would-be landlords when considering buying a holiday let were:

• A property that is in or near beautiful scenery (31%)
• A property that is near the beach or coast (30%)
• A property that is easy to manage and doesn’t require much upkeep (28%)
• A property that is in an area that the landlord already personally knows or loves (27%)
• A property that is in a popular tourist or holiday destination (23%)

A further consideration – though not one mentioned in the SBS survey – is whether free and convenient parking is available for visitors. In many popular tourist areas car parking can be problematic. So if a holiday let has its own parking spot (preferably off road) that will make it more attractive for potential visitors.

As regards location, the SBS survey ranked the popularity of different areas of the UK as follows: (1) Devon (2) Cornwall (3) Lake District (4) Peak District (5) Yorkshire Dales (6) Kent (7) Dorset (8) Somerset (9) Essex (10) Snowdonia (Wales).

Buying a holiday let with a mortgage 

If you’re planning to buy a holiday-let property with a mortgage (as most people do), it’s important to realise that this differs in some significant ways from buying a home to live in or even a traditional buy-to-let.

In particular, many holiday-let mortgages require a potential landlord to own their main residential property already (with or without a mortgage). Some lenders also have age restrictions for first-time landlords.

Affordability assessments for holiday-let properties are usually calculated on the property’s rental potential rather than personal income and outgoings, but the lender will still want to understand your financial position.

You should also check the amount of personal use allowed by the mortgage company so as not to breach their terms and conditions. Companies will always allow the owner a certain amount of personal use, but this can vary.

Suffolk Building Society – with whom I have worked myself in the past – specialise in holiday-let mortgages, but there are of course many other potential lenders you can try as well. 

Tips for maximising your holiday let income

• Allowing visitors to book short stays from 1 to 4 nights will open up many more bookings than if you limit stays to a week or longer. Short breaks in the UK are very popular with people who may take their main holidays overseas.

• Offering luxuries such as a log fire in winter or a hot tub in the summer can significantly increase the attractiveness of your holiday let to visitors and allow you to charge higher rates.

• An attractive garden will also boost the appeal of your property. Obviously a garden will need tending during the summer months. But according to Sykes Holiday Cottages, an attractive garden can boost your property’s income potential by up to 15 percent.

• Nowadays wifi is regarded not as a luxury but an essential. You will need to ensure that a reliable wifi connection (password protected) is available for all  visitors to your holiday let. Comfortable beds and mattresses are another must-have, so don’t try to cut corners on this.

• You will need a website to advertise your property and may also want to promote it via sites such as Airbnb and Booking.com. These sites are hugely popular and can attract a steady stream of enquiries and bookings. But of course they charge fees, so you will need to allow for that. 

• Visitors can also review your property on these websites, so it’s important to be available quickly and easily if a problem arises and resolve it to your guests’ satisfaction. Again, good reviews will boost your holiday let’s popularity and allow you to charge higher rentals.

Good luck, and I look forward to booking a break at your holiday let soon!

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

Photo Credits: Unsplash

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Mouthy Money is pleased to bring readers a new series of articles from Michael Taggart, one of the original founders of the blog.

Michael now runs a small business, MDTea, with his wife Helen and is going to be filling readers in on the trials and tribulations of what it is like to run a small business in the UK in 2023.

Expect laughs, tears, and even some mustachioed analogies as Michael bares his small business soul to the internet. Watch this space for more.

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Dave Ramsey has become a household name in the US, and is now making a name for himself here in the UK. Truth be told, he is a man a bit like marmite – you either love him or hate him.  

But one thing is for sure, the baby steps he developed to help people get out and stay out of debt have helped millions of people across the globe secure a brighter financial future. 

So let’s take a look at what these baby steps suggest as the roadmap to a financially peaceful life. 

Baby Step 1 – Save £1,000 for your starter emergency fund 

The goal of this step is to have something to fall back on before starting the journey, and to try to avoid going further into debt if an emergency crops up. £1,000 may not cover all levels of emergencies, but it probably would cover most types of emergencies. 

Baby Step 2 – Pay off all debt (except the house) using the debt snowball 

The debt snowball method requires you to list out all of your debts, from the smallest amount to the largest amount (not taking into account the interest rate on the debt), and pay off the smallest debt first and work your way up to the largest one.  

This is one of those controversial steps as it makes more financial sense to pay off high-interest debt first. However, Dave Ramsey argues that by paying off the smallest debts first, you’re more likely to stay motivated to tackle all your debt. 

Baby Step 3 – Save 3–6 months of expenses in a fully funded emergency fund 

At this point you should still have the £1,000 in your starter emergency fund, and now you would work to top it up to cover 3-6 months’ worth of all your expenses. This means you will need to sit down to actually calculate how much money it takes for you to live month-to-month. This is one of the many reasons a budget is useful.  

Baby Step 4 – Invest 15% of your household income in retirement 

Dave Ramsey suggests to not invest until you’ve reached step 4. At this point, 15% of your household income would be suggested to go towards a retirement account. In the US, this would be a Roth IRA or 401k. In the UK, this would be some form of employer pension or self-invested personal pension (SIPP).  

Baby Step 5 – Save for your children’s college fund 

This step is somewhat Americanised as the university loan system is far different in the US than the UK. However, this step could just be considered as savings for your child/children’s future in any capacity you see fit. Of course, if you don’t have children, you would skip straight to step 6. 

Baby Step 6 – Pay off your home early 

This is the last and final debt to tackle on this baby step journey. I think it goes without saying that most people don’t expect to pay their homes off any quicker than the standard 25-30 year mortgage term. However, Dave Ramsey is a big advocate of getting all debt cleared once and for all to completely free up your income. 

Baby Step 7 – Build wealth and give 

Reaching this final step would mean you would be absolutely debt-free! The financial focus would be whatever your heart desires. As Dave Ramsey is quoted to say “if you will live like no one else, later you can live like no one else.”  

Photo Credits: Unsplash

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Are you looking for a fun and potentially profitable hobby? If your options for side hustles are limited, maybe entering competitions, or comping, is a good option.

It is something you can do from home and all you need is a smartphone or computer. Here’s a beginner’s guide to start comping.

There are many serious compers who win big prizes on a regular basis. In fact, an old colleague of mine, Martin Saiz, was winning a holiday almost every year at the height of his comping efforts.

His last big win was 10 nights in the Philippines, which he gave to his daughter for her honeymoon. He has also had trips to Moscow, Italy, Switzerland, France, Ireland and in the UK. One particularly exciting win was a €9000 weekend on a giant yacht in Ibiza, where his name was picked out live on Facebook.

Di Coke, also known as Super Lucky Di, says that she has won an average of £12,000 a year in prizes since she took up comping in 1997.

Put in regular effort

If you want to be successful as a comper you need to put in regular effort, rather than just entering the occasional competition you come across. Set yourself a specific amount of time to enter competitions.

Martin spends around 60-90 minutes each evening after work, but you could allot your morning bus or train ride to start comping, use your lunch break, or get up half an hour early and to enter whilst you drink your morning coffee. 

If you systematically enter as many competitions as you can as often as possible, you are much more likely to win regular prizes than someone who just goes in for the odd comp.

Before you begin, Di suggests that you set up a special email address, as entering competitions definitely means more spam. Don’t forget to check your inbox daily in case you have won, including your junk mail box. 

How to find competitions

Fortunately, these days it is easy to find competitions. There are reputable comping sites that have hundreds of opportunities every day, as well as competition forums where members share competitions and draws they have come across.

Here are some of the best places:

• Loquax 
• Super Lucky Di
• MSE competitions forum 
• Latest Deals UK competitions
• HotdealsUK competitions

Social media platforms can be a good source of competitions, especially Twitter, Facebook and Instagram. Search for the hashtags #win #competition #competitiontime, etc.  Radio shows and their websites also feature regular competitions, such as Heart, as do magazines like Marie Claire and Prima.

Super Lucky Di has a great list of places to find competitions here.

Beware of scams and read the Ts&Cs

Super Lucky Di says that it is best to stick to competitions run by brands that you trust. She says to beware of competitions or draws that require you to hand over too much personal information. Some unscrupulous sites will sell this on and you are likely to be bombarded with spam emails and phone calls. 

The Money Saving Expert forum has a thread where scam competitions are posted. They warn against competitions that say you are a winner but demand money for admin fees, etc.

If you win a genuine competition you will never be asked to pay to get your prize.

Make the best use of your time

It is easy to get swept up when you start comping, meaning that you enter everything in sight. However, to make best use of your time, it makes sense to only enter competitions with prizes you actually want to win. It is pointless taking the time and effort to win something you will have no use for.

Having said that, Martin tells me he used to enter everything, and once won a breast pump! (His kids were grown up at this point…)

Read the rules and follow the instructions, including the terms and conditions, and any time limits on the prize. It would be disappointing to win tickets to an event for a day you aren’t available.

Martin also suggests using autofill whenever you can, as it is a real time saver.

Find low entry competitions

Martin recommends entering competitions with tie-breakers, such as completing a sentence, writing a rhyme or a slogan, as you are statistically more likely to win.

People assume they won’t come up with anything funny or clever enough so don’t bother and entry numbers are lower. He advises that you keep tie-breakers short and to the point, as the judges will need to read through many entries and you want yours to stand out. 

The odds of winning any competition where extra effort is required are better than easy entry comps and draws. Many people can’t be bothered.

Increasingly, competitions run on social media channels request that you submit a photo along with your entry, and the odds can be better on those.

Competitions that are run locally, in newspapers, shopping centres, on local radio and in newsletters can give you good odds of winning, since there will be fewer entries than for national comps.

However, sometimes the same competition is run across all of the newspapers and radio stations within a group, so your chances won’t be as high.

Consider purchase-necessary comps

Di Coke recommends that you consider purchase-necessary competitions as well as free-to-enter ones. She says, “Over 25 years I’ve won thousands of pounds of prizes in purchase comps, including a car and several holidays – the biggest being my 2021 win of £15,000 plus £10,000 of shares in Brewdog! 

“In 2022 my biggest purchase necessary wins included an LG tech bundle worth over £2,500, a £500 Easyjet voucher with Walkers – £1,000 from a Lu biscuits standard rate text entry prize draw at the Co-op, and a £100 voucher with Glade Candles at Wilko.”

Di recommends that you take a photo of your receipt alongside the product in case you lose it. You may need it to validate your win.

Text competitions with an entry fee often have a low number of entries, so if you really want the prize it is worth entering.

Stay motivated

Obviously the biggest way to keep motivated with your comping hobby is to win regularly! If you keep a list of the prizes you have received you can see if your efforts have been worthwhile.

It’s also fun to join comping groups and forums for hints and tips, to make friends and to see what others have won. Di Coke’s Facebook group is Lucky Learners.

Are you start comping this year? Or have you already had some good wins?

Photo by Japheth Mast on Unsplash

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