Tuesday, 4 January 2011

A New Start to Juggling Payments, Paying Bills and Making Savings.

Here in Scotland, we're supposed to have the extra bank holiday, which means there's no post. But plenty of people work it and just as many others ignore it. Fortunately, our local village shop is home to the post office counter and the shop part was open. Latest orders have gone, albeit nowhere before tomorrow, but it's always good to stay ahead of things.

Online banking is working just fine, so there wasn't a problem checking the finances. This is something you'll either love or hate, depending on your bank balance, but it's also something that needs to be done on a very regular basis. Free online banking is an essential in Frugaldom. You should seriously consider it if you've afforded yourself the luxury of having an Internet connection.

A single missed direct debit or standing order is all it takes to trip you up or drag you down in this moneyspinning game of snakes and ladders. Finding your bottom line on the year's expenditure is one thing, but juggling all those payments to fit in with the availability of your cash at any given time is another. Timing is paramount to your success in achieving a debt free status. It's also never a good sign to be starting the year in the red, so why plan it that way?

Christmas falls but once a year and it's always on the exact same date, so why do so many people get caught short and panic buy?  It's much easier and far less stressful if you can stay one step ahead of the festive financial splurge, as well as everything else. So here is my Frugaldom suggestion for an exercise in number-crunching:

Count up what Christmas 2010 has cost you - the whole lot, every gift, every roll of wrapping paper, the turkey, the extra stocking fillers, every single ribbon, cracker, chipolata, right down to the last brussels sprout - and then look at that number. It's a real figure, it's how much money you spent.
  • What percentage of that overall cost went straight into the bin?
  • Was there any food wasted?
  • How much packaging, how many cards, labels, bows, advent calendars and festive plastic stockings were cast aside as rubbish?
  • What percentage of your entire year's disposable income got spent on the last week of 2010?
You may not even have stayed home, you might have dined out, but it all costs extra. You have your number...

I'd like you to divide that number by 365 then multiply it by 7...

This is how much you need to put away from this week until the end of 2011 just to cover the cost of Christmas at last year's prices.

Inflation is around 3% but the retail industries look closer to 10% from where I'm sitting, so safest to add on at least another 10% to help cushion the blow. Straight off the top of your head, can you afford to easily save this amount of money every week on top of everything else you pay? Now add on the cost of birthdays, anniversaries and any other commercially driven celebratory days. You can easily see how the costs mount up, so why take it in one big hit?

Don't fall into the trap of being a year in arrears, get ahead of the game for 2011. We all know that we won't leave our nearest and dearest without during special occasions, so plan them very carefully. Only by knowing how much you spend can you spread the costs with your own money rather than risk covering them with someone else's. And that's without even considering the exorbitant rates of interest that a loan or credit card could cost you.

Make it your New Year's resolution to skip ahead of the spenfing game and avoid all hidden debt traps.

Personally, I find I need to save about £20 per week just to cover what it costs to have friends, family, colleagues and acquaintances throughout the year. Gifts, travel costs, extra coffee, cakes, biscuits, something to wear when going visiting or to a big occasion, cards, shoes to match the 'posh' outfit... the list is endless. It's like lassoing a wild mustang without first confining it to the corral - it can bolt and drag you everywhich way but loose, with the noose of debt eventually hanging around your own neck. Next time someone says, "wild horses couldn't drag me away," just remind them that it only takes the one to do it once and they're down!  :)

OK, so we've added in everything relating to what we spend on others over the space of a year and established that it's a whopping great percentage of our disposable income. What do we do? Firstly, DON'T PANIC and secondly, COMMUNICATE! Believe it or not, most people are in the same boat and just haven't realised it, yet.

Communication is the most important tool you can use and, best of all, it is absolutely free. If you have debt, call a halt to all your non-essential spending until you have a semblance of control. Explain to everyone who may be affected by it, even if it's just to tell relatives that all they're getting for birthdays is a homemade card and a papier mache animal bank if they're lucky. Tackle your budget head on - deduct the utmost essentials to keep your household warm, clothed, fed and watered, afford the breadwinners enough to enable them to work and budget to within the last penny to keep debt collectors at bay. Seek help if you cannot see a way of covering all your costs by contacting an organisation such as the Consumer Credit Counselling Service (CCCS) for free debt help or contact your local Citizens Advice office. You can join us free online in the Frugaldom Forums, where the name of the game is debt free living, and share experiences with many others who are or have been in similar situations.

Assuming your budget isn't in a critical state and that you have done everything possible to minimise and clear any debts, it should be safe enough to start saving for next Christmas. If you can't be trusted to leave the money in the bank, buy some Premium Bonds each time you reach £100 rather than leaving the cash in a non-interest paying piggy bank or, worse still, a hamper or voucher club that could easily go bust! With Premium Bonds, the worst that will happen is your money will be safe, at best you could win a £million and solve your money worries.

NB: Nothing contained within the Frugaldom Blog posts should be construed as financial advice. This is simply a blog by a frugal living, debt free individual who is now in the very fortunate situation of being able to save for a rainy day. Once bitten, twice shy, shall we say?

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  1. Absolutely brilliant sound advice, from a regular lurker. Most of what you do just fascinates me, as a city dweller, but this is something we can all relate to.

  2. Thanks, Gill, I appreciate your comment.


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