Managing Money

Some practical tips on keeping your finances in order:

1. Know how much you spend each month on regular bills and know how much you have left. It is obvious but you can't budget if you don't know how much spare you have!
2. If you have significant amounts of money in high interest loans or credit cards, take advice on moving them elsewhere to save hundreds.
3. If it works for you, if you work out that you can afford e.g. £100 per month on luxuries, take that out in cash after you get paid and don't use the cash machine until next pay day. It is a nice way of monitoring your spending money.
4. Try and keep at least 10% below your credit card limits so that you don't get pushed over by interest charges or emergencies.
5. Try and have at least £100 in savings to use for emergency times when you risk going over your overdraft limit.
6. Never miss a payment, even paying the minimum avoids a black mark on your credit history.
7. Have a plan to pay back debts which doesn't include waiting for someone to die or hoping for a payrise! If you can only afford the interest payments and have no more income on the horizon, you might need to cut back on something (get rid of Sky or Cable for instance) or take a part-time job on top of your normal workload.
8. Understand that paying off more debt money makes a difference in the long-term. Paying another £20 a month might not seem a big deal but can save hundreds over time on lower interest. This might not be obvious since your next interest payment might not seem much lower but you will pay off the balance more quickly as well as reducing the interest. Do this as soon as possible, it might be easier now to sacrifice some lifestyle for the additional payments but not when you get married/have kids/lose your job etc.
9. Do not pay for regular bills on your credit card unless you pay it off each month to get points etc. Doing this implies you cannot afford your outgoings which should be affordable from your current account. Credit cards are for emergencies or for paying for things abroad etc unless you have a definite repayment plan and understand your commitment.
10. It is MUCH cheaper to save up for something and buy it later than to get credit and buy it now. Even a 1 year loan at 10% will cost you £100 for every £1000. Lots of borrowing is much larger than this and at higher interest rates.
11. If you have multiple or large debts, take financial advice from an advice group, Citizens Advice Bureau etc even if you do not feel particularly burdened. You could save large amounts of money by switching providers, consolidating loans etc which will give you more money to pay them back sooner!
12. If you consolidate loans etc. to free up income, do not just go out and start spending it. If your debts will take you longer than a year to pay back, use the extra income to pay off the highest interest rate credit first. Again, over time this can save hundreds or thousands.
13. Buying things from a mortgage extension allows you to buy things you couldn't normally afford like cars and home improvements. Realise that although this seems cheap at mortgage interest rates, the rate is PER YEAR which means if you have a 5% mortgage with another 10 years to run (and the rate doesn't change!) and you borrow £5000, you might be paying back £7,500 over all (and the car might not even last 10 years!) This would be the same as a 1 year loan at 50% interest!
14. Get debt free while you are single, marriage and kids can be expensive!
15. If you are buying a house and your mortgage is a large part of your income, plan to get a lodger(s) which for the extra hassle is better financially, you don't have to keep them forever and it can make your first few years of mortgage easier. You can also use any 'spare' money to overpay the mortgage which will make the overall payback amount MUCH less (i.e. save tens of thousands over 25 years by overpaying early in the mortgage).

The wasted money is sickening

Right, another rant I'm afraid, this one courtesy of no-one in particular, just general incompetence and the government's love affair with wasting money at a staggering level. First let me ask a question. If you were to suggest spending money improving school buildings for economical and aesthetic reasons. What would you do and how much would it cost? I would probably spend up to about a million quid getting a national team together putting together some computer models and working out some industry standard costings for things like double-glazing and room re-fits etc and then let councils use these to work out whether certain work is value for money or not.
Now, what would the government permit? Look here. They would tell councils to look into it and assume they will spend about 3% of the money on 'consultants' which they have done to the tune of £170M. Now, I don't mind big numbers to achieve big things. Investment and all that is good for long-term situations but honestly £170M? You pay people who know how to charge large sums for knowledge that to be honest exists outside of this exclusive club of thieves. To be honest, you could pay a local experienced builder even some quantity surveyors some money or better still, provide a contract job for someone in the industry which will cost, let's say £100,000 each county council and which will not add up to anything like the money spent. But oh no, because we are the government and we can promise ludicrous amounts of money to be magic'd up from nowhere we don't care about value-for-money. God help the next government have to deal with all the debt we have accrued from the happy-go-spending Labour party.

Money Advice in Hard Times

Lots of people I know say they have money problems and lots of these have never done the most basic thing - working out how much you spend on the essentials. Here is a simple exercise (use a spreadsheet or a piece of paper).
Write down how much money goes into your bank when you get paid (figure 1). Now make a list of all the items you pay out every month: rent, mortgage, bills on direct debit, petrol if it is fairly consistent, food, TV, Phone bill, council tax etc. Look at your statement to make sure you have everything. Include amounts for credit card/loan repayments a good amount over the minimum to make sure they get paid off. Add these together (figure 2). Now make a list of all expensive things you have to pay for less regularly: car tax, mot, insurances/bills that don't get paid every month. Add these all together and divide by twelve (figure 3) you might be surprised how high this is. Everything on your bank statements apart from random spending (going out, holidays, alcohol) should be in one of these lists.
Right, now subtract figures 2 and 3 from figure 1:
£1,500 - £800 - £300 = £400. This is your expendable income but don't get too happy yet. I then recommend you do the following:
1) Set up a standing order to pay the figure 3 amount into a savings account every month, this means all your big once per year bills are covered (after some time anyway).
2) Save at least something else into a separate savings account for holidays/unforeseen expenses etc, even £50 per month is better than nothing.
3) Decide how much spending money is reasonable for EVERYTHING else i.e. treats, eating out, going drinking etc. and withdraw this money in cash after you get paid. This is then the only money you will spend in the month, make sure it is not the remainder of your money or when you get a slightly higher food bill etc you might end up spending more than you earn at which point you will have problems again. After time, see how your finances go and you might either have some more money to put into savings for a treat/house deposit/new car etc or you might adjust your calculations if you get an insurance discount, lower rent etc.

It's real simple so spend 30 minutes and you could avoid the hassle of always having no money. Knowledge is power!