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Christmas is over .... but there's another one next year!
opinions4u
Posts: 19,411 Forumite
Right, you've eaten the turkey. Well, other than the two thirds that's left in the fridge.
You've opened the presents. You're wearing the dodgy sweater your Gran bought you. You might even be off to a local sporting event or the sales today.
But if you needed to borrow for Christmas, it really is time to have a major rethink of your finances. Find the lightbulb moment that can turn your financial life from a real struggle in to an opportunity to generate wealth.
Typical signs that you're struggling at this time of year:
- your overdraft balance increased compared to a month ago.
- you got paid early in December, but have no idea how you're going to get through to the end of January for the next payday.
- you took out a payday loan.
- your credit card balance has inreased.
- you renegotiated a personal loan to free up a little cash for the festive season (and will now pay several years' interest on the lot).
There are other signs too. But 2012 is your chance to put things right.
I'm going to make some major predictions for the new year:
1) There will be another Christmas in it.
2) Loved ones will have birthdays.
3) Something expensive will break down and need repairing / replacing.
4) You will have a desire to go on holiday at some point.
5) You will want to buy something expensive.
5) Car insurance will need renewing and an MOT will be needed.
For those of you attending the sales today, the idea of picking up a bargain will be the first challenge to your spending between now and next Christmas. Set yourself a clear rule while you're out and about - before making any purchase, however many per cent discount the retailer claims, ask yourself "Do I really need this?". If the answer is anything other than an absolute certain yes, don't buy it. We all know the reality of the sales, so don't kid yourself. The item that's an extraordinary amount lower is going to be something you don't need, didn't know you wanted when you woke up, is in the sale because nobody else would touch it with a bargepole, has actually been exactly the same price as the sale tag for the last 9 months, except for a period last October when the Shetland Islands branch was offering it for double the price etc. etc. It is rare that these bargains are genuine.
But beyond the sales, please take the time to think about how you plan your finances.
My radical suggestion for those in the habit of borrowing for the predictable list of events above is pure genius. A savings account.
In a perfect world, I'd list off the best buys etc or say "make sure you're getting at least 2.75% on an easy access account". But this thread is more about getting in to the habit of saving ahead of known events. Let's worry about the value when you've cracked that.
So, my challenge for the year for those who accept borrowing for Christmas and the like is silly, is to open a savings account. Even if it's only with £1. Do it online now.
Then, stop all pointless day to day spending. It's not a bargain. You could make your lunch at home and take it to work. You don't need to pay £3 for morning coffee when you could have filled a hot flask for less than 10p. You could walk to work / car share / park for free and walk the last 500 yards etc.
Review the big spending. Could you register with a site like TopCashback and then change your energy provider to save money? Do you really need Sky Movies when you've got 400 DVDs sat in a box somewhere? Do you really need Sky at all? As your mobile phone already has the ability to do anyting and everything, get it on a SIM only deal and keep the handset for another couple of years. Or stop using a phone and just have a cheap PAYG for incoming calls and emergencies!
Next, when you get your next pay packet, hammer your debts. Get rid of PDLs, reduce / repay overdraft and / or credit card. Do not do anything this year that rolls over or increases debt. All actions related to debt repay it.
Then, move some money over to that savings account you opened. How much depends on a little bit of budgeting, but it may look a bit like this, using the list above.
1) Christmas 2012: How much extra will you spend on food and drink? What's the cost of the party frock going to be? How much do you have to contribute to the Christmas party? Is the frock essential, or would that lovely black number from 2006 be worth bringing out again cos you looked good in it (well I looked hot in mine, anyway ...)? Do the sums. £200 for food. £120 for frock if needed. £30 for the party. £350. Bet you could do December for less as well.
2) Birthdays: How much do you spend on birthdays through the year? How many people for? Let's say £20 x 5. Plus £100 for a slighty specialler loved one. So £200.
3) Breakdown / repair: Living / renting your own place: £500. Living with parents £200. If your boiler's over 10 years old add £750 to this amount for a few years!
4) Holiday: How much you spend on yourself depends on what you expect. Caravan in Devon or all inclusive on the Costa Packet. But a quick sum for me says £1,000 for holiday including spending money per person.
5) Something expensive: I'm not letting you do this in 2012. It's time to take control of the debts and pay them off. If, a year down the line, you have no card debts, no overdraft, no PDL and no other debts, then add this one in. But cut out the luxuries for the next 12 months.
6) Car insurance: £600 plus £400 for repairs, service, MOT.
Add the numbers above together: £350 + £200 + £500 + £1000 +£1000 = £3,050. Your numbers may be different to mine. Whatever answer you've got add on 10%.
I now have £3,355. Now divide it by 10.
I make it £335.50. If you're paid weekly, divide by 4 (£83.88).
So each and every month, pay £335.50, or the amount you came up with, in to your savings account. You can withdraw for birthdays. You can pay for holiday out of it. You can replace the breakdown (but if nothing breaks down, leave the money there because sure as night follows day 2 things will break down next year). And you can withdraw for Christmas and pay your car expenses.
If you reach month end and still have money in your current account, pay off any outstanding debts with it. If the debts are all gone, sweep it in to your savings account anyway. Even if it's only £3.28.
But the strict rules are that you can withdraw for nothing else than the list above. And you are not, for any reason, allowed a month off.
See how it goes for a year. I promise you that if you stick to the rules your year will be financially happier.
The following year you might make change the rules a little bit. Have a second savings account to put money for a new car, house deposit etc in. Your amounts might change. Your priorities may be different. We might be talking about cash ISAs and other places to keep your money.
But getting the savings habit first. And remember, just becasue you've saved it doesn't mean you have to spend it. That hot 2006 frock can mean you start 2013 with some money left over in the account as a result of a cheaper Christmas.
Give it a go. Come up with your own list, your own expenses and your own amounts. If in doubt round them up.
Then add them together, add on 10% and divide by 10. Then save that amount every month. If you get a payrise, increase the saving amount by the same percentage.
Get it right, and you will never need to take out a loan again. Ever.
You've opened the presents. You're wearing the dodgy sweater your Gran bought you. You might even be off to a local sporting event or the sales today.
But if you needed to borrow for Christmas, it really is time to have a major rethink of your finances. Find the lightbulb moment that can turn your financial life from a real struggle in to an opportunity to generate wealth.
Typical signs that you're struggling at this time of year:
- your overdraft balance increased compared to a month ago.
- you got paid early in December, but have no idea how you're going to get through to the end of January for the next payday.
- you took out a payday loan.
- your credit card balance has inreased.
- you renegotiated a personal loan to free up a little cash for the festive season (and will now pay several years' interest on the lot).
There are other signs too. But 2012 is your chance to put things right.
I'm going to make some major predictions for the new year:
1) There will be another Christmas in it.
2) Loved ones will have birthdays.
3) Something expensive will break down and need repairing / replacing.
4) You will have a desire to go on holiday at some point.
5) You will want to buy something expensive.
5) Car insurance will need renewing and an MOT will be needed.
For those of you attending the sales today, the idea of picking up a bargain will be the first challenge to your spending between now and next Christmas. Set yourself a clear rule while you're out and about - before making any purchase, however many per cent discount the retailer claims, ask yourself "Do I really need this?". If the answer is anything other than an absolute certain yes, don't buy it. We all know the reality of the sales, so don't kid yourself. The item that's an extraordinary amount lower is going to be something you don't need, didn't know you wanted when you woke up, is in the sale because nobody else would touch it with a bargepole, has actually been exactly the same price as the sale tag for the last 9 months, except for a period last October when the Shetland Islands branch was offering it for double the price etc. etc. It is rare that these bargains are genuine.
But beyond the sales, please take the time to think about how you plan your finances.
My radical suggestion for those in the habit of borrowing for the predictable list of events above is pure genius. A savings account.
In a perfect world, I'd list off the best buys etc or say "make sure you're getting at least 2.75% on an easy access account". But this thread is more about getting in to the habit of saving ahead of known events. Let's worry about the value when you've cracked that.
So, my challenge for the year for those who accept borrowing for Christmas and the like is silly, is to open a savings account. Even if it's only with £1. Do it online now.
Then, stop all pointless day to day spending. It's not a bargain. You could make your lunch at home and take it to work. You don't need to pay £3 for morning coffee when you could have filled a hot flask for less than 10p. You could walk to work / car share / park for free and walk the last 500 yards etc.
Review the big spending. Could you register with a site like TopCashback and then change your energy provider to save money? Do you really need Sky Movies when you've got 400 DVDs sat in a box somewhere? Do you really need Sky at all? As your mobile phone already has the ability to do anyting and everything, get it on a SIM only deal and keep the handset for another couple of years. Or stop using a phone and just have a cheap PAYG for incoming calls and emergencies!
Next, when you get your next pay packet, hammer your debts. Get rid of PDLs, reduce / repay overdraft and / or credit card. Do not do anything this year that rolls over or increases debt. All actions related to debt repay it.
Then, move some money over to that savings account you opened. How much depends on a little bit of budgeting, but it may look a bit like this, using the list above.
1) Christmas 2012: How much extra will you spend on food and drink? What's the cost of the party frock going to be? How much do you have to contribute to the Christmas party? Is the frock essential, or would that lovely black number from 2006 be worth bringing out again cos you looked good in it (well I looked hot in mine, anyway ...)? Do the sums. £200 for food. £120 for frock if needed. £30 for the party. £350. Bet you could do December for less as well.
2) Birthdays: How much do you spend on birthdays through the year? How many people for? Let's say £20 x 5. Plus £100 for a slighty specialler loved one. So £200.
3) Breakdown / repair: Living / renting your own place: £500. Living with parents £200. If your boiler's over 10 years old add £750 to this amount for a few years!
4) Holiday: How much you spend on yourself depends on what you expect. Caravan in Devon or all inclusive on the Costa Packet. But a quick sum for me says £1,000 for holiday including spending money per person.
5) Something expensive: I'm not letting you do this in 2012. It's time to take control of the debts and pay them off. If, a year down the line, you have no card debts, no overdraft, no PDL and no other debts, then add this one in. But cut out the luxuries for the next 12 months.
6) Car insurance: £600 plus £400 for repairs, service, MOT.
Add the numbers above together: £350 + £200 + £500 + £1000 +£1000 = £3,050. Your numbers may be different to mine. Whatever answer you've got add on 10%.
I now have £3,355. Now divide it by 10.
I make it £335.50. If you're paid weekly, divide by 4 (£83.88).
So each and every month, pay £335.50, or the amount you came up with, in to your savings account. You can withdraw for birthdays. You can pay for holiday out of it. You can replace the breakdown (but if nothing breaks down, leave the money there because sure as night follows day 2 things will break down next year). And you can withdraw for Christmas and pay your car expenses.
If you reach month end and still have money in your current account, pay off any outstanding debts with it. If the debts are all gone, sweep it in to your savings account anyway. Even if it's only £3.28.
But the strict rules are that you can withdraw for nothing else than the list above. And you are not, for any reason, allowed a month off.
See how it goes for a year. I promise you that if you stick to the rules your year will be financially happier.
The following year you might make change the rules a little bit. Have a second savings account to put money for a new car, house deposit etc in. Your amounts might change. Your priorities may be different. We might be talking about cash ISAs and other places to keep your money.
But getting the savings habit first. And remember, just becasue you've saved it doesn't mean you have to spend it. That hot 2006 frock can mean you start 2013 with some money left over in the account as a result of a cheaper Christmas.
Give it a go. Come up with your own list, your own expenses and your own amounts. If in doubt round them up.
Then add them together, add on 10% and divide by 10. Then save that amount every month. If you get a payrise, increase the saving amount by the same percentage.
Get it right, and you will never need to take out a loan again. Ever.
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Comments
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Fantastic post
x* Rainbow baby boy born 9th August 2016 *
* Slimming World follower (I breastfeed so get 6 hex's!) *
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Very good advice, but surely you should divide your total by 12 months not 10, and specify that if it's weekly pay divide by 52. Unless you're including a savings holiday... but the rest of the post indicates not. Unless I'm mistaken 2012 will still have 12 months and 52 weeks in it...
Rule 7: If you're not changing it, you're choosing it.
MFW 2020: 1 Jan £92903.90 ~ OP £536.80/£500
MFW 2021: 1 Jan £89281.21 ~ OP £404.62/£500
MFW 2022: 1 Jan £85579.20 ~ OPs on hold.0 -
Implicit in the post is that the January pay packet is going to be focused on repaying debt.coldcazzie wrote: »Very good advice, but surely you should divide your total by 12 months not 10, and specify that if it's weekly pay divide by 52. Unless you're including a savings holiday... but the rest of the post indicates not. Unless I'm mistaken 2012 will still have 12 months and 52 weeks in it...
And there are only 10 months between February and November (December pay is usually too late to plan your Christmas spend, where an employer pays it early, needs to be stretched out in to January).
So I stand by 10 months.
In future years I'd still suggest dividing by 10.
1) Because it's easy to calculate.
2) Because any financial projection is flawed, and life is so much easier if you overestimate the amount you need to save.0 -
What a brilliant post, thanks o4u for taking the time to type all that out - splendid advice.opinions4u wrote: »Get it right, and you will never need to take out a loan again. Ever.0 -
I fear that your good advice will be ignored by those most in need of taking it and acting on it. But, a thoughtful contribution nevertheless o4u.
If it helps just one or two to see the error of their ways, then it will have been worthwhile.I can afford anything that I want.
Just so long as I don't want much.0 -
Fantastic post Opinions..... lots of excellent advice - I'm going to print it off and stick on my noticeboard to remind myself throughout the year:D.
I did especially like this bit:opinions4u wrote: »The item that's an extraordinary amount lower is going to be something you don't need, didn't know you wanted when you woke up, is in the sale because nobody else would touch it with a bargepole, has actually been exactly the same price as the sale tag for the last 9 months, except for a period last October when the Shetland Islands branch was offering it for double the price etc. etc. It is rare that these bargains are genuine.
I am very tempted to "hit the sales" today
(really as I'm bored & don't have a lot else to do) ..... there is one thing that I do need (table & chairs) - however, I do have the money to pay for this (£52 saved from my cashback earnings this year;) and £100 I got for Christmas:)) - however, I'm worried if I go, I'll get loads of other stuff so ...... think I'll wait for another day when the heady rush of the 1st day has worn off! Grocery Challenge £211/£455 (01/01-31/03)
2016 Sell: £125/£250
£1,000 Emergency Fund Challenge #78 £3.96 / £1,000Vet Fund: £410.93 / £1,000
Debt free & determined to stay that way!0 -
so, I am due £3,355? is it possible to take a wonga loan for this much and repay over the year with cashback?Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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Do I copy and paste your signature or do I go Bryan Adams?Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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Cracking post.
You are preaching to the converted in my case, however if it makes the penny (pennies/pounds!) drop for at least one person, it's worth it!
ps for some reason Opinions I always assumed you were male! (not that males can't look good in a little black number!)
BiBDF
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