Spending pie

We all have a spending pie. By that I mean if you draw a circle to represent your income, net of tax of course, and then divide is into cake slices each as wide as each major expense you have, then you have your spending pie. (And remember the rule, expenses rise to meet or exceed income, so there won't be any left over slices).

Now what happens if one of the slices gets larger, for example Ofgem says energy costs are going to go up by 20%? You have two choices, use less energy (insulate your house - but you need money for that, wear jumpers, or go into debt) or cut spending somewhere else.

Now this is what it is all about. If the basics of food, energy, car entertainment, etc went up then what is left has to go down - say your mortgage. But that implies the house value and loan have to go down. How can that happen? Well today your house value is determined by the companies that loan you money to buy it, at the market value at the time. So if the house value goes down, maybe the mortgage company should share some of the hurt and reduce your loan?

Why not, that would be a flexible market? But no you are stuck with negative equity (your house is worth less than the mortgage) and in the worst case repossession.

That is not right.

You cannot live in a flexible world, where governments or the market can throw increased costs at you, but have one of your main expenses inflexible.

Can you?