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When Christmas is Over ... Think Ahead
opinions4u
Posts: 19,411 Forumite
in Loans
I submitted the post below a couple of years back. I think it's still valid. Merry Christmas!
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.
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.
0
Comments
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sound advice lets hope more and more people are taking it next year0
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The only way to stop getting into a financial mess is to live within your means. This does not mean that you cannot borrow. Borrow by all means, but be in a position to remain solvent and not hurt your credit score. If you borrow for unnecessary expenditure and are unable to pay it on the due date, you will have a bad credit history and will not be able to avail loans when really required for big ticket purchases.0
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Please everyone read and abide by the OPs advise. It will literally save you thousands of pounds in interest, give you less stress, and a sense of satisfaction that living debt free brings!!
Best thread ever on MSE if you follow the OPs advise!!!0 -
I have recently become debt free and want to stay that way. I intend spending this afternoon calculating my budget and opening an account for this purpose. Thank you for the post xSave £12k in 2014 #080 £0/£8,000.
£2 savers club #53
£365 in 365 days # 101 £1/£365
Sugar free days 0/3650 -
The only way to stop getting into a financial mess is to live within your means. This does not mean that you cannot borrow. Borrow by all means, but be in a position to remain solvent and not hurt your credit score. If you borrow for unnecessary expenditure and are unable to pay it on the due date, you will have a bad credit history and will not be able to avail loans when really required for big ticket purchases.
No, nearly all borrowing is a bad idea except of course for a mortgage on a property and in some rare special circumstances.0 -
No, nearly all borrowing is a bad idea except of course for a mortgage on a property and in some rare special circumstances.
Buying on credit cards is certainly advisable for the additional protection that s75 offers so "borrowing" temporarily - as long as you clear the balance before any interest is accrued - is perfectly fine.Thinking critically since 1996....0 -
No, nearly all borrowing is a bad idea except of course for a mortgage on a property and in some rare special circumstances.
Not all, consumer borrowing in the hands of those who have no discipline is where the problems lie,
Within business I am perpetually in debt, however its to aid cash flow on large purchases on equipment used to offset tax.
Even personal debt managed properly inst an issue, Per example using a couple of CCs in December with two different statement dates, could mean you pay for Christmas in Dec, Jan, Feb, and not incur a penny of interest.
At the merge rates of bank interest on savings I can see little point of having a contingency fund if you have a Mortgage, Far better to put every spare penny into the mortgage, and then if a problem does arise, the CC can always be used for that emergency.
The problems only occur when people see, a new pair of shoes, or a big plasma TV as that emergency.0 -
I have been in horrendous, terrifying debt in my life and found the snowball method plus a little extra to be amazing. I started with the smallest debt and paid off as much as I could. However, to help things along, I added all my creditors to my online banking payment list, and once I had paid all my bills each month, every day, and I do mean every day, I paid the pounds and pence on my current account balance to the creditor I was concentrating on. I didn't care that they may not want 32 payments in a 31 day month. They all got them and no-one complained. It forced me to cut back as I was paying something every day and obviously 31 times an average of say £3 was an extra £93 leaving my account each month. When I am debt free I intend to carry this on into a savings account.
It may not work for everyone, but it's working for me :rotfl:Sealed pot challenge member #325
£591.02 / £1500
£2 saver club member #83
Target £246 / £5000 -
Great advice,thanks for sharing0
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