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

Choc-addict

Wishing you luck on your journey ahead firewalker. You have way to go but not without support from others on here, i'm sure. Take care x

Firewalker

Well, panicking is all too well, and having palpitations and weakness in the knees is probably ladylike. But not appropriate if one wants out of the rut...So, next I started looking at what we spend...Regular expenditure first...

There is a saying that expenditure usually raises to match income. And that is how our household lived for close to twenty years – we earned more and we spent more. Except may be in our case earning fell somewhat behind spending to find ourselves in such a fine mess. Anyhow...looking at expenditure.

Again figuring out the regular monthly expenditure was not that hard – one just had to look at several bank statements. And that is what we did. We had a number – not a clue whether this is a high number, a low number or about right number. And here, the MSE website was a God sent – I spent my evenings reading and learning about this wonderful world of prices, and comparison websites and the lot. It was time to experiment...Started with the insurance.

Life insurance was first. This was an item in the regular expenditure column that stuck out like a red berry. We were paying over £300 per month on life insurance and the dilemma was: do we completely stop paying it or find a way to reduce it. Not having life insurance probably would not have been wise – we had a kid who is likely to be in education for another 10-14 years. If one of us crocked it – not good for the survivor. A search using the comparison sites on MSE lead to a quote that insured us for higher amount at about £120 per months less (my quote increased because with all the worry I had raised blood pressure for the check up; but now this is down so time to look again soon).

Next tackled the house insurance – we were not only paying over £1,200 per year, and had done for about 10 years. We were also paying monthly so when interest was included this worked even higher. Again, using the comparison websites on MSE (thanks Martin) we got house insurance for about the third of what we were paying and paid it outright.

Car insurance – hart-breaking amount. But this was partly because we had two very under-used cars. Sold one and changed the other one. Insurance went slightly down but we are confident we got the best we could get. Paid this bill outright as well. No more interest and by that time I was feeling really self righteous.

Until we looked at the other expenditure this is.

Firewalker

Firewalker

And here was the big surprise that made me feel more humbled and resolved the matter of forgiving OH. It was quite obvious that I was the largest single drain on our resources – my spent was even higher than what we spend on DS. Going to work cost me £10-12 and this did not include the petrol. But it did include up to five espressos, lunch (and not a very good one at that), and other things I did not even notice. On top of that, looking closely at my pay slip I noticed that my employer charges me to park when going to work. I am a bit of a socialist and object to this in principle – so immediately cancelled my car park permit. This meant that I stopped driving to work as well but cycle or go on the bus instead. Altogether a saving of about £40.

And so the story goes. But we managed to cut our regular monthly expenditure by about £1,000 per month. As a result for about four months now we have not only managed to live within our base line monthly income but also to put £300 regularly aside.

The hard bit is the monthly expenditure that can vary – food, other regular and exceptional. Will discuss this next time.

Firewalker

Firewalker

Back to my second question, which is how much do we spend? The part of expenditure that I refer to as ‘regular’ was already discussed – here the important thing is to remember to shop again – for insurance and possibly for new energy provider. The cold winter did not do us any favours – the bills are high, in fact the bills have increased.

The variable monthly expenditure – food, other regular and exceptional – is the one I am still struggling with. We have been doing a ‘spending diary’ for four months now. And just like in the case of ‘eating’ diaries the findings are quite interesting and rather revealing. Have you noticed how if you scoff something really quickly your brain does not register it? This is one of the main reasons why people keep thinking they don’t eat much even when everyone around them knows they do. It is the same with spending – and this syndrome – I call it the ‘scoffing syndrome’ – is very obvious with this kind of expenditure.

Let me have a look at food then. In our previous life no one knew how much we spent on food – most of it came from M&S, most of it came in packets one puts in the oven, and loads of it made it to the rubbish in one smooth transition. In our new life, shopping for food is done in two shops. Once a month or so we go to Costco where we buy meat, chicken legs, cheese, olive oil, washing powder, rice – mostly things that either can be frozen or last. And, quite lucky really, we have Aldi across the road and there we buy fruit and vegetables, cold meats and cookables (these are the things needed for cooking but not sufficient like passata etc.). We do believe that our food bill has gone dramatically down though will never be certain by how much – no idea what did we use to spend.

What is the problem? There are posts on the forum stating that it is possible to spend £12 per person per week and eat decently. We are four – three adults and one child (who probably eats more than me). I reckoned that £50 per week should be enough but we have never managed to do that. Our lowest food bill for the month is £305 but this seems to be a one off – the average is more like £350. Want to bring this one down

Any advice gratefully received and eagerly awaited.
Firewalker

Firewalker

Although our ‘other regular’ and ‘exceptional’ spending has to be control controlling this is probably easier than the food. Most of it is a matter of just not doing it – and there is loads of good advice about this here. I have also joined two challenges – ‘weekly spend’ and ‘NSD’ - which I find useful. Why is it easier than food? Because buying (and spending on) things that are not a life necessity is very similar to addiction. And just like in the case of addiction, one can completely stop feeding it. I, for example, can stop completely buying electronics – it is not necessary and I have more than enough anyway. But I still have to buy food – am I addicted to spending? Is it coming through shopping for food? Or do we really need the foodstuff I buy?

Which neatly brings me to my third question, which is ‘how do we spend’. It is rather obvious that spending is not the problem – we need to spend to keep alive. It is impossible not to spend and it is ruinous to over-spend. Where spending is concerned, it seems that Socratic principles apply. Socrates, among other things, claimed that the road to happiness is to observe ‘measure in all things’.

Applied to spending, this means that one not only can but should spend. The important thing is to spend consciously. In other words, put an end to the ‘scoffing syndrome’.

How does one spend consciously? Any suggestions here very welcome.

Firewalker

Firewalker

Not a very good day - quite a lot of scoffing, I am afraid. Mostly chocolate and mostly for little boy and a frown up boy coming home from University tomorrow.

Let me get on with the last point on my list - the one about the balance between increasing one's earning and reducing one's spending. Even if I, as a 'debt free wannabe' manage to crack the regular and variable spending, the scoffing, the impulse buying and the rest, this is a real challenge. Why, you may ask?

How important, and how difficult to achieve, this balance is can be read in the sayings that most people around the world have. Cut your coat according to your cloth. Spread yourself according to the length of your blanket. Sound familiar?

From very early age we are given this ‘wisdom’, in fact it is likely we are weaned on it. Now, sayings or not, there are different kinds of people. Some cut their coat to large for their cloth – and these people are in debt, loads of it, and very likely will not get out of debt until they start thinking differently. But is cutting your coat according to your cloth the solution? Obvious as this might seem it is not – people who cut their coat to match their cloth, or even smaller than their cloth, can live within their means but are vulnerable. What if the boiler breaks and the coat suddenly ought to be bigger? What if the roof collapses? In short there are a number of ways in which demands can be made on the coat and if the cloth stays the same the outcome is no different from cutting your coat big to begin with – you are still in debt. It is only that the people with the big coat had some fun while getting in debt and the people with the small(ish) coat didn’t.

And there are people who while watching the coat try all the time to increase their cloth. My gut feeling is that this is the way to go. In other words this means that expenditure ought to be watched and income should be grown.

It is time for rest now. Will write more tomorrow – probably.

Firewalker

Firewalker

Very proud of myself – a NSD today. Well done to me, although this is my first one in April and have set my sight at 15 or over. But being mostly an optimist, it still can be done, I say. Now it is time to sit, listen to Piaf (well, my taste in music spans Piaf and Eminem) and think about the big D and plan how to get out of trouble.

Reading my previous posts, I can see that we have made some progress towards getting out of trouble. OH and I are still together, and together in the full sense of the word. I didn’t think that I will be ever able to forgive him. But then one day, before Christmas, we were playing in the snow, building a Snowman. Little boy was laughing as OH was spinning him around. They rolled in the snow, their merriness enveloping me and I heard myself saying ‘I forgive you.’ ‘I don’t know whether I will be able to forgive myself’ – he said. And I felt my anger draining away – all that was left was fear. Forgiveness is much easier than learning to trust again.

Dealing with the fear for me is about knowing and doing. I know exactly how much is our monthly income and how much is our monthly expenditure. In fact, we are rather fortunate because, for the time being at least, our income is higher than our expenditure. We have also made a number of changes to minimise expenditure and increase our income. As a result between January and today we have paid over £17,000 of our debt – most of it CC and overdraft.

But there are several things that worry me.
1) Contrary to appearances I do not actually have a budget – what I do is more like a record of expenditure than budget. Goal: do a budget and stick to it.
2) Develop conscious spending. Goal: minimise ‘accidental’ spending.
3) Developing a money obsession. Goal: learn to control money not be obsessed about it.

Firewalker

Firewalker

Last night we made a start on the budget. And OH has noticed that I am the one who is very worried about the situation, who keeps thinking and talking about it but at the same time, I am probably also the one who still spends on non-essential things. Probably this is because I have always been ‘an increase your cloth’ person – in fact when I was young this saying made me furious with its obvious drabness. Oh well, back to the coat...

We are starting with a weekly budget for food – and this is being set at £60 per week. For the last three months (December does not count, I suppose) we have been spending on average £80 or over per week. And I have been:

1) Planning weekly menus (trying for a balanced diet);
2) Cooking and freezing meals (also freezing small boxes and taking these to work);
3) Making shopping lists (linked to the menu)

Right, as approach this does not sounds too bad. Problem is that I (because mainly I do the shopping for food) hardly ever keep to the list. I am like Oscar Wilde – ‘can resist anything but temptation’; and there are always temptations and not always in the form of food. What sneaks in the shopping trolley?

1) Treats of different description – chocolate, biscuits and sweets. Good news is that I have stopped eating them. Bad news is I am still buying them and my men eat them. Is this sublimation of some kind?
2) Gadgets - any, really. Including numerous cooking utensils. Which apart from bad for the budget is cluttering the house. Do I really need three computers? Two iPods? Do I have to lust after gadgets all the time?

To keep to budget, I have decided to try the approach of the wise people on MSE – some of them already DF after a long, heroic and successful struggle. Pay by cash – when cash finishes, buying for the week stops.

Firewalker

Firewalker

Have been thinking some more about the balance between one’s income and one’s expenditure. This balance is precarious and finding it is a matter of trial and error. As a general principle, I suppose, this balance is beneficial – and might lead to financial health – when two conditions are met. First, when the difference between income and expenditure increases on the income side. In other words, the mistake made by many – including probably me – is that every increases of income is more than matched by an increase of expenditure. But if one doubles one’s income and doubles one’s expenditure there has been no change in situation whatsoever. On the other hand, if one doubles one’s income and keeps one’s expenditure level, or even very slightly increase it, then things are moving on.

Next, and this I learned from a book entitles ‘Rich Dad, Poor Dad’, the aim should become for higher proportion of the income to come from assets – or not to have to work for it. This is the next step, and a step change, to financial security and health.

This is a slight deviation but another important thing I learned from ‘Rich Dad, Poor Dad’ is how important it is to distinguish between ‘assets’ and ‘liabilities’. A very common mistake people make, particularly in the UK, is to think of their houses as assets. A house, if you live in it, always takes money out of your pocket – and is therefore a liability. A necessary one but still...

On a personal note, today was a mixed day. Did not spend anything on rubish but in the evening went to a poetry reading. Did cost a bit but was well worth it.

Firewalker

bridget81

I have been reading your diary with interest and shall continue to do so, you explain things so well and write beautifully. I wish you all the best on your journey.

Bridget