It is November 1st in a few days. So here is something to try for one month
Take a bit of paper (or a spreadsheet)
Write down at the top, your net household income. (Salary, pension, etc). If your tax is not taken off before you get it, estimate your tax, and take it off the income. Let’s say £1,600
Leave a few lines
Write down below that, the money that is withdrawn from your account directly, every month
- mortgage (£300)
- council tax (household, city tax?) (£200)
- car insurance (£30)
- house insurance (£30)
- Heating / light (£100)
- subscriptions (gym, charity, etc) (£100)
- pension contributions (£100)
- regular investments (£150)
- Total say £1,100
Then subtract the outgoings (£1100) from your income (£1,600), and you are left with a total (£500).
Your challenge is now to spend cash for EVERYTHING, you have to go to the cash machine, withdraw money, use it to pay your groceries, petrol, clothes. No exceptions.
My theory is that when you spend cash, you have to really think about it. I have tried this myself, and I find it a real challenge.
If you use your card, you don’t watch what you put in your shopping trolley, how much petrol goes in your car, how much that outfit costs. It’s easy – you just use your card. With contactless purchases, you don’t even get a receipt to remind you what you spent. But when it comes to cash, you have to go prepared to the shop. You need to think how much you are going to spend, and make sure you have enough money with you. If you don’t have enough money, then you have to put something back.
I certainly find myself considering what items get put in the basket. I restrict the ‘special offers’, even on basics that I will use in the future.
At the end of the month, see how much money you have left. Compare that to the amount of money left over last month. Did you surprise yourself with what you chose not to buy? Now use that left over money, and put it toward any debt you have. Otherwise, put it in your savings account.
Now is the time to look at all those regular monthly outgoings that come out of your bank account without you even noticing.
- can you get a better deal from your energy supplier / can you switch supplier
- When is your house or car insurance due for renewal? It is well worth ringing round and getting some more estimates, or checking online. It might take you an hour or two, but it could save you more than £100
- Gym membership – be honest – how often do you go. What does the years membership cost, divided by the amount of times you go? Research gyms run by your local council. Many charge for a single visit.
- Are there any regular deductions, you don’t even remember what they are for, or you don’t use the service any more – cancel them!
- If you have a balance on your creid card, check around to see what deals are available, particularly balance transfers. Sometimes you can get these at a 0% introductory rate. Then when that deal ends
It’s all really simple, but if you are like me and a tad lazy, it’s so easy to not bother.
This one is a bit heavy duty, but if you are willing to do it, you will be amazed at what you discover about your spending. Write down all your purchases for the month, including those that come out of your account automatically. Allocate each to one of three columns
A – I must pay this (heat, light, mortgage)
B – I want this, I use it, and I get the benefit from it (gym membership, hobbies)
C – I really shouldn’t have bought this. It felt great at the time, but I know it wasn’t good for me (cake, chocolate), clothes I didn’t need etc. A club I dont go to any more, A magazine I didn’t read, A taxi ride instead of the bus….
Get rid of the C’s immediately, consider your B’s. Were they really necessary? If so, are they as cost effective as they could be
You get the idea.
I did this exercise a few years ago, when I took a career break from work, and had no income for 6 months. I was surprised what I didn’t need, or even really want. I saved more than £200 in insurance renewals. I walked more instead of taking the car (I lost weight!). I gave up the gym and went walking outside instead… I found several £10 a month subscriptions I didn’t need to be paying. I s
I did it again a few months ago. Again, there were a few things I no longer needed. It also acted as a prompter to check that I was getting a good deal for energy etc. Even if you choose not to change / cancel something, you are doing it positively rather than passively. You have made a conscious decision to keep it, so you may make more use of it etc.
It isn’t about frugal. It is just about being sensible with your money. If you’ve debt, these steps will help you free up money to start making inroads on that debt, and should certainly help you not to make it worse… If you really are in debt, then you need to concentrate on just spending money on A’s. No B’s or C’s. You can start reintroducing the odd B when your debt is under control. For every A, you need to make sure they are as cost effective as possible
If you have serious debt problems. Seek help as soon as you can. Go and talk to Citizens Advice. They will be able to help you work out what is best for you.
I’m not suggesting I am the first one to have thought about this – there are lots of different versions, but the ideas themselves are well worth thinking about