Make 2014 Your Year

opinions4u · 24 December 2013 at 11:08PM

I typed the words below on the morning of Christmas Day 2009. I know that I sometimes upset people with my "style" of response on these forums, but I think this gives a true insight in to what I believe people can do for themselves.

Merry Christmas everybody. Take care of yourselves.

There's going to be a sad moment in my life in the next hour or so. My youngest is likely to tell his Mum and Dad that he has sussed something out about Christmas. He's probably known for a couple of years, but I feel he's going to tell us the truth. The fact that I'm awake after 8am on Christmas Morning and he isn't supports my fears.

There may be many that read this post over the next few days. There are probably 3 groups of users on this site (we can argue over various sub-divisions within those groups, but that's not why I'm posting):

- the financially competent
- those in genuine hardship
- those who have the income to support their lives but don't manage it well

This message is aimed at the latter group. People who typically earn a wage but then don't manage their money as closely as they could and end up paying fees, interest and other charges to their banks as a result.

Once you've enjoyed your Christmas, spend a little time thinking about how much you pay your bank for their services.

You are in a strange group of people. You CHOOSE to pay banks for something when you have the means to avoid such fees.

Was it necessary to pay them a penny in interest? Did you really have to get confused by the timing of the Easter holidays and pay £35 for a bounced direct debit? Was it really good value to pay £22 to go £50 in to your Barclays Reserve? Do you really need to be £40 overdrawn at a cost £1 a day on your Halifax account for a week each month? Was it really a shock that Christmas fell on the 25th December so you had to go overdrawn to buy a turkey and some pressies (and that nice little black dress that is similar to 8 others in your wardrobe)?

Take a look at yourself in the mirror and vow to take action. Make your money work for you instead of making your bank wealthier.

1) Get yourself in to a position where you never have to go overdrawn again. If this means not going to the sales, making your own lunch to take to work instead of paying £4 a day in the local patisserie, skipping a couple of nights out, selling the old video cassettes on Ebay or whatever, getting yourself in credit on your bank account is a fantastic starting point. Use the Debt-free Wannabe board to help with other ideas if needed.

2) Change your mindset with regards to your current account. Whatever your highest bill is, add £25 to the amount and make that a level that you never fall below in your current account. If your mortgage is £975 a month, make it a hard and fast rule that you never fall below £1k. It may take some time of home made lunches etc to get there, but once you are there you will never, ever be at risk of unexpected bank charges again. Too many people take the view that they should spend every penny that they are paid. That is opening you up to the risk of doing your sums wrong and being clobbered with massive charges.

3) Certain events are known to happen every year. Your car insurance renews, you go on holiday, Christmas arrives. Certain unexpected events happen too. You might not know what they are going to be, but you can anticipate the bills. One puncutre - £100 for a tyre. One plumber, one electrician, one washing machine repairman: £50 each? One electrical item (TV, laptop, hi-fi etc) will need replacing - £500 perhaps? Make a list of all known and unknown events and save money each pay day to cover them. Then you will always have money there for these bills and never have to choose to overdraw or build up a balance on a credit card.

4) Build up a contingency fund. This one may take more than a few months to achieve. There will be temptations along the way. But, ultimately, if you lost your incomes in their entirity, how would you cope? Get yourself to a position where you have at least 3 months net income (preferably 6 months net income) sat in a savings account that you will only ever touch in a genuine crisis. And make sure that your definition of crisis is clear - "oh, Christmas cost a bit more" isn't a crisis that justifies dipping in to this fund. Breaking a leg and seeing your income reduce to statutory sick pay is.

None of these steps requires you to change your current account to a new provider or to seek out a savings account that does anything more exciting that allow you to pay money in and take money out. Although seeking out the best value possible for your circumstances is no bad thing.

It is all about teaching yourself a couple of financial disciplines that mean you live your life in a way that make the banks earn nothing from your pocket.

There will be those who don't necessarily agree that my suggestions are exactly the right way to go about things. And that's fine, there are different ways of doing this that will achieve the same result - more money for you and less money for the bank.

But, for a period of time, get your bank accounts ahead of your spending patterns. Anticipate what demands there will be on your money in the future. Don't just react to the demands of the bills you got yesterday. Once you are ahead, keeping a minimium balance in your current account at all times, setting money aside for holiday, car insurance, the next TV etc you will find life so much easier.

Best of luck. My youngest will tell me about his Christmas lightbulb moment in a few minutes. It will actually be quite a sad moment, but it is also a key part of him maturing and gradually beginning to see the world for what it really is. Make the next few days the time to have your genuine financial lightbulb moment. It might be a little sad that you have to change a couple of spending habits that have been a part of your old life. But you new life becomes so much more straight forward afterwards as you mature in to a world where you never get a charge letter from your bank again.

Good luck - make it happen!