Simon is an administrator living in Glasgow, earning £19,750 a year after deductions for tax, National Insurance and pension contributions. He is about to move into a flat with Michelle and her two young children. Michelle works in a café and makes £11,395.84 after tax and national insurance. She also receives £1,820 a year in child benefit. No-one described above has any other source of income.
2.1a Using the Household income equivalence calculator, calculate the annual equivalised net income of Simon and Michelle’s new household together.
2.1b With the aid of the same calculator, comment on how their individual household living standards have changed compared to when they were living separately.
2.2 Draw up a monthly cash flow statement using the following expenditure information for Simon and Michelle in their new shared flat.
Rent: £950 a month
Home Insurance £354 per year
Credit card repayments £53 per month
Council tax: £1200 a year
Food and household items: £135 a week
Alcohol, going out, leisure activities: £175 a month
Water, gas and electricity: £350 a quarter
Phones and broadband: £124 a month
Transport: £350 a month
Clothes: £175 per month
Other spending: £145 a month
2.3 Simon and Michelle want to save up for a family holiday in Spain, and they estimate they will need £2000. Comment on their current financial situation and consider potential adjustments they might make to their cash flow in order to save the £2000.