The Joseph Rowntree Foundation has released a study discussing what amount of money is needed to maintain a basic, but acceptable, standard of living.

More than survival

The report differs from many others in that it considers the level of expenditure, which, according to those interviewed, allows for a standard of living which is socially acceptable. This is obviously more than the money required for those goods and services that most would agree are absolutely essential (rent, food, heating, council tax etc). People with a range of income took part in the research, and the results are analysed for different social groups (single people of working age, pensioners, couples, families etc).

Soletrader sacrifices

This idea of a basic level of income, but one above the poverty line, and which allows people some degree of comfort, and ultimately enjoyment of life, is an interesting concept for us at The Business Lounge. Our readers (and writers!) include sole traders who may have given up well-paid careers, or chosen never to pursue these, in order to start their own businesses. The ultimate aim may be in many cases to become wealthy, but some business-owners merely wish to achieve a better work-life balance, and earn “enough money to live” while enjoying what they do. This report may help quantify what is “enough money to live”.

Need versus want

Whatever the wealth aspirations of entrepreneurs, many will have cut down on personal spending when first starting, and then trying to grow, their businesses. Is a bottle of wine in the weekly shop then a luxury? Or would that be going to gigs, theatre, cinema? How essential is a holiday? There is no doubt there is a difference between this list of “wants” and real “needs” - a distinction that we may be less well equipped to make having enjoyed recent times of readily-available credit. However, the report suggests that certain items, different for each social group, are real necessities that allow us to “participate in society”, and which our incomes must cover.

Apparently, no social group concluded that keeping a car was a necessity and cigarettes were not included but both alcohol and an annual holiday in the UK were. There were some obvious and less obvious differences between the groups too. Families were “allowed” a digital camera and a weekly takeaway, whereas pensioner couples were allocated £10 per year in charitable donations.

£13,400 before tax

The report was two years in the making and so does not reflect the effect of the credit crunch on attitudes to necessities, but perhaps the credit crunch is making people think about their real needs. The conclusion is that a single, working person requires £158 per week before rent etc, so when rent of a modest council property is included, this totals £13,400 per year.

Visit the website of the Joseph Rowntree Foundation www.jrf.org.uk, or the following specialist site www.minimumincomestandard.org for the results for other social groups, and to see the full details, such as how much a single male of working age needs for mayonnaise (13p a week to put towards a bottle costing 52p every four weeks - if you are interested).

What use is the report to soletraders?

This is obviously of social interest, and perhaps will become a useful “historic” record, although obviously not based on one person’s actual expenditure, but an average of many expenditures with an incorporation of attitudes too.

However, given the level of detail, it may be useful for personal budgeting, given that it lists all sorts of expenses including all kitchen equipment, clothing etc. You would then have to personalise this for yourself (e.g. if you own a car, all associated expenditure would have to be included); factor in the differences in between these average costs, and your actual costs for the same items; and take account of the fact that you would not be buying all these items at the same time.

That said, someone say moving into their own home for the first time might find it useful to truly appreciate how much this will cost when all items that need to be bought are considered.

As with all our information in The Business Lounge, this is not comprehensive financial advice, and may not apply to your specific circumstances; to discuss the relevance of these issues to you, contact your accountant.