Learn to control money but do not allow it to control you

Firewalker

Today I would like get back to learning to control money: if I don’t manage to figure this one out achieving my goal of financial health would not be possible. And although we have cut down our spending and are paying off the debt, money is still controlling me. Let just say that I am feeling enslaved: several pounds less than expected in our bank account can send me over the edge; numbers keep flying through my mind; and I look lovingly at my spreadsheet showing debt going down.

In my mind, learning to control money has two sides to it: learning to spend money and learning to make money. I will concentrate on learning to spend money first.

For some time, after grasping the full extent of our financial trouble I believed that it happened because OH did not earn enough. But the more carefully I analysed the situation the more convinced I became of the following: 1) it is not so much our income that was the matter but our expenditure; 2) most of this expenditure was wasted in that it had no bearing on our quality of life; 3) I was the consistent wasteful spender; 4) OH is a bi-polar spender oscillating between spending nothing and splashing out big time. In any case, no one in the family was in control of money: we were all its slaves. This brought on an enlightenment of sorts – if we are to get out, we ought to learn to control money

The advice often offered to control spending habits is to ‘stop and think: do I really need this?’. I did try this one, have been trying it for several months now – and every time I ask myself this question, the answer is invariably ‘yes ’. As I mentioned in a previous entry my hindsight is usually better than my foresight in these things and faced with the accounts I usually decide that I did not need ‘....’ after all. By this time it is too late.

Why does this happen? There are obvious explanations – like I am a week person, I don’t remember to ask myself the question, and innate greed. But I don’t believe in obvious explanations. And I am inclined to think that the problem is not in whether I remember to ask the question or how I reply to it – but that it is the wrong question to ask.

Asking oneself ‘do I really need this’ assumes that we are motivated by ‘need’, that ‘needs’ are easy to pinpoint and that the distinction between ‘needs’ and ‘wants’ is clear-cut. Probably none of these is entirely correct.

I believe what propels us forward are not really our ‘needs’ but our ‘wants’. In effect, one can think about ‘wants’ as the skeleton and the muscle and ‘needs’ as the skin of our motivation. ‘Needs’, apart from the very basic, physiological ones, merely make ‘wants’ more acceptable. That is why ‘needs’ and ‘wants’ are so difficult to separate.

Most of our behaviour is underpinned by our ‘wants’ and the value systems we use to prioritise these. But there are behaviours that are also underpinned by compulsion – we call these ‘addictions’. Over-spending can result from ‘wants’, from addictions and from a combination between the two.

What is the practical relevance of all that? If I am to learn to control money the question I should ask is not ‘do I need this’ – I can always justify any ‘want’ or compulsion by dressing it as a need. What I will try to do is to examine my ‘wants’ – and order these in to reflect my value system. During the next week or so I will look at ways to do that.

Firewalker

savingwannabe

Intrigued!

:j

Firewalker

Today was a relaxing day. Most of the morning I spent reading a novel – very rare treat these days. At about lunch time little boy woke up – bless him, I don’t even wish to imagine what he is going to be like in his teens – and we decided to look at my mum’s recipe notebook and make something from there. Ended up making honey biscuits (very messy, this was) and to use a tub of double cream made orange ice-cream as well.

For dinner prepared a classic Greek dish – souzoukakia. This is meatballs in tomato sauce and doesn’t sound very appetising. This is before one knows that the meatballs are made from minced steak, this is mixed with white wine, olive oil, garlic, an egg and a bit of soaked bread, and is spiced with cumin. The tomato sauce is prepared by boiling tomato, water, a bit of butter and cinnamon. And the combination of cumin and cinnamon is really divine.

It is also time for the end of April debt report. Here it is:

January 2010 - £95,000
May 2010 – £77,996

Paid off: £17,004 (17.9%)
Emergency fund: £3,850

And here is something that made me smile.

“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.” – Mark Twain

Firewalker

savingwannabe

Well done Firewalker. Great progress.

I knew the saying but did not know that Mr Twain was person who had originally voiced it.

I will find a way to use it in my class next week!

:j

Firewalker

‘Mummy, do you know what is dilemma?’ – little boy asked me today. Yes, son, I know what is dilemma. In fact that is how I describe my life when feeling generous. When feeling less generous I think of it as an ongoing nervous breakdown.

What was the latest dilemma? As I mentioned currently we are trying to meet most of our expenditure and put £300 in First Reserve every month using only what we earn every month. In effect this leaves all additional income – from OH’s business and any consultancy or little job that might come my way. This is how we managed to take so much off the debt in four months.

By the end of August we are expecting to have earned about £19,000 over our regular monthly income. One thing we could do with this money is to change the roof and put solar panels.

Now, our roof probably could do with changing but this is not really a ‘need’ – it is perfectly serviceable for the time being and as far as we know is not leaking. Solar panels seem to be a good idea –certainly an asset although might be not a terribly savvy investment. It would be great to generate our own electricity and to be able to sell some to the grid – God knows that one of the things we have loads of is roof. Micro generation is supposed to be ‘green’ although there is some debate here. And to top it all, putting solar panels on is likely to put quite a bit of value on the house (not that it matter since we are not selling but sounds good).

Dilemma – do we change the roof and put solar panels or use most of this money to pay the debt? What would you do?

Firewalker

savingwannabe

Wants vs needs? Pay debt. Then you can worry less and enjoy time with your son without feeling guilty.

:j

ninky_2

pay the debt absolutely. we have 'needed' double glazing at the front of the house for the last five/six years (since moving - we live on a noisy road). but i'd rather pay off the mortgage quicker. we have however put lots of extra insulation in the loft. this is fairly cheap (a couple of hundred quid) whilst the double glazing having to be wood will cost around 3 thousand.

Firewalker

The die has been cast, a decision has been made, white smoke is coming out of the chimney. OH and I discussed the situation and there is not going to be any roof changing and solar panels installation. Although there are three other house related things that will need doing – and although I would class all these as ‘wants’ they are quite high in the hierarchy. In order of importance these are: paint the house outside (the woodwork is not going to last much longer); re-do two bathrooms so they don’t leak in the kitchen (this is very unpleasant and damages the house); and do the kitchen ceiling (which has holes in it because of afore mentioned leaks). This probably could all be done within £8-9,000. The rest will go off the loan.

Savingwannabe and Ninky – thanks for the support. I just needed a bit of support to put my foot down and convince OH that the first priority should be the debt.

This all leads me to the two goals that I mentioned sometime ago and delayed sharing. These are practical and easily measurable.

Goal 1: Pay £35,552 off the debt by January 2011. You might be wondering about the number but this will bring the loan down to £57,998 (which sounds very nice) and the CC down to £1,450. Please note that in this case the CC is at much lower APR than the loan. If this is achieved it will be a major step towards my heart’s desire to be DF by or around my 50th birthday. I am 47 ½ at the moment.

Goal 2: Loose 10 kg before October 31st. OK, confession time. I think of marathons as child birth (not much experience with this one; and by all accounts natural childbirth is terribly overrated): one needs time to forget the pain to do it again. I am ready – have been setting my next marathon and it will be the Lausanne marathon on October 31st. I also would like to run this one in under 4 h 30 min and for this to happen I need to become a stick insect. But I always knew that one day I will look like Julia Roberts.

And I will sign off for today with another saying I like:

“Beware of little expenses; a small leak will sink a great ship.” – Benjamin Franklin

Firewalker

savingwannabe

Fantastic decisions on all counts. Well done. I would be happy to sponsor you. I will pm you when it gets closer to october!!!

Gosh you are so brave.

Firewalker

Have you heard (seen) the news from Greece? I find the situation very worrying on several accounts. One, the Greeks are burning their own country again and history shows that every time they do that there is worse to come. Two, killing bank clerks, one of which pregnant, seems to be a total madness – these poor people had nothing to do with that, they only worked in a bank. How about the corrupt politicians and, let say it, the ‘compulsive gamblers on cocaine’ or otherwise known as the high ranking bankers? How about economists and academics working on accounting and finance who came up with all these wonderful intellectual innovations like ‘options’ and ‘derivatives’? Three, everyday normal people from the countries discussing the ‘bail-out’ for Greece starting to mention that they ‘don’t wish their taxes to go to support lazy people who cannot organise and run their own country’. These are not lazy people – they work just as hard as we do, sometimes harder. Greeks certainly know how to organise and run countries – they did it for the Ottoman Empire for centuries. And the ‘creative accounting’ that the Greeks seem to have indulged in is practiced by many organisations and governments (as we learned the hard way in 2008). But it is necessary mainly when ambitions exceed resources. Regretfully, these ambitions are hardly ever the ambitions of everyday citizens or employees.

On a more personal note, I have a very close friend in Athens. Two days ago she sent me an invitation to join a support group called ‘I can’t pay, I won’t pay.’ And guess what – I did sign on, which I hope you will understand does not apply to my personal finances. But the destiny of nations is never the destiny of a particular nation. And if we would all like to see the current economic and financial crisis over Greece needs help not chastising by a bunch of neo-liberal half-wits (probably a bit strong but this is my name for the World Bank).

This also made me remember Douglas Adams’ Hitchhiker’s Guide to the Galaxy. Pure genius and so appropriate – on page one the main character is worried about the Council demolishing his house to build a motorway; by page two he has learned that this is not really a problem because Earth is being demolished to make space for a trans-galactic highway. Can you think of anything that illustrates better the fruitlessness of everyday concerns? I can’t.

So here I am, worried sick about my ‘unit’s’ debt and probably my real worry should be national debt – Greek national debt, the way it is going to hit Portugal, Spain and Italy (all countries with level headed past – just being sarcastic here) and what is going to happen to the UK, France and Germany.

Back to work now.

Firewalker