With the credit crunch times are tough, but there are some things you can do to sort your money worrie.
From the supermarket to the petrol pump soaring costs mean that everyone is feeling the pinch. And while you know you should be taking better care of your money, chances are you’ve relegated this task to the bottom of your to-do list – putting it off for that magical day when you’ve got more time. Yet with headlines screaming about the housing crisis and skyrocketing fuel and food costs – the chances are your money problems feel more urgent than ever. And the earlier you take some action, the more chance you have of steering clear of serious difficulties.
So whether your problem is overspending or under-budgeting, at home’s simple, low-stress action plan will help you solve all of your money worries.
Remember, the time that you spend on your finances today will be money in your pocket tomorrow.
Money worry: I spend too much
Overspending has become a deep-rooted problem. The easy availability of credit cards is partly to blame. But it also seems that you really were born to shop. Scientists have found that when you anticipate buying something fabulous like a gorgeous new pair of shoes, your brain releases dopamine, a chemical that helps you produce feelings of well-being. ‘It’s the same chemical that floods your brain when you have sex or eat a big, gooey, slice of chocolate cake,’ says Jason Zweig, author of Your Money And Your Brain (£12.99, Simon & Shuster). Sadly, for most people, saving money doesn’t trigger the same rush.
Do it now
- Make spending harder. First, delete all bookmarked shopping websites from your computer. Then gather up all your catalogues, call each one and ask to be removed from the company’s mailing list.
- Cut the credit. Remove all of the store/credit cards in your purse and put them away in a drawer, cut them up or cancel them. If you don’t see those store cards winking at you whenever you open your purse, you will be less tempted to spend more than you can afford.
- Create new habits. Map out the most temptation-free route to and from work, and on your daily errands. If, say, a morning latte is your weakness, reorganise your journey to avoid expensive coffee shops. A medium cappuccino costs around £2. Five days a week, 48 weeks a year that’s £480 a year. And that’s if you stick to just one a day.
- Ditch convenience foods. Have a rummage through your fridge, take out some baby carrots and grapes. Put a handful of each into five small plastic bags. Go to the cupboard and throw some nuts in five more plastic bags. Voila – your snacks for the work, none of which involve expensive packaged foods. Want to save even more? Start taking your lunch to work each day and planning (and shopping) for the entire week.
The long view
- Switch to cash. If you don’t use your credit cards it’s impossible to spend more than you earn. Embark on a week in which you use only cash or a debit card. Then try another week, then another, until this behaviour becomes second nature.
- Only buy what you can return. Always leave the tags on for at least two weeks. That gives plenty of time for that buying thrill to wear off. You can then logically weigh up with a clear eye whether you really do need those Jimmy Choos.
- Fight the impulse. When you shop, it’s buying the things you don’t need but just have to have that are the problem, says Martin Lewis, the money-saving expert and author of The Money Diet (£7.99, Vermilion). Martin offers some sensible advice to help you successfully resist making frivolous purchases: ‘The next time the urge arises to buy something, stop and ask yourself three questions: Do I need it? CanI afford it? Can I get it cheaper anywhere else? If the answer to any of these questions is no, don’t buy it. But if it’s yes, yes, don’t know, then go and check. Now if you do go ahead and make the purchase you’ll know that you are doing the right thing.’
Money worry: I need a budget
Always short of money? Never got enough in the bank for a holiday? Then drawing up a budget – a plan for how to spend your money – can help. It doesn’t need to be fancy. In fact, the key to sticking to any budget is to make sure it’s both simple and realistic.
Do it now
- Get a notebook and pen. Write down everything you spent money on today, from your electric bill to your bus ticket to work. Repeat this exercise for a month. This is the only way you’ll know where your money is going, says Alvin Hall, financial expert, psychologist, author and presenter of the BBC TV programme, Your Money Or Your Life.
The long view
- Review the situation. At the end of the month, draw up a list of categories – like food, clothing, household bills, and savings, then allocate your expenses accordingly.
If you know you have certain areas of weakness, like eating out, break those down into more detail (restaurant meals, breakfast at coffee shop, etc). You also need to include the odds and sods like newspapers and magazines and regular charity donations, as they all add up. When calculating a one-off spend like Christmas, birthdays or your summer holiday, spread the amount over the year advises expert Martin Lewis.
If you can put all the deails on an Excel spreadsheet, it will make this process even easier. Websites such as www.moneymadeclear.fsa.gov.uk have budget calculators that can help you organise your finances. Or download Martin’s budget plan from www.moneysavingexpert.com
- Play the numbers. Now you’ve got a handle on how much money you spend (and on what) each month, you can divvy it up in ways that are more satisfying. ‘Your budget should reflect your personality, priorities, interests and dreams. So if you need to make spending cuts, trim the things that don’t matter to you, while preserving as much as possible for the things that you really care about,’ says expert Alvin Hall. ‘Don’t try to live by a budget that that allows you no room for self-indulgence. A little ‘luxury’ makes all the difference between happiness and depression.’
- You should end up with a list of all your expenses and how much money you would like to spend on each of them every month. Use this list as a guideline for your future spending.
Money worry: I’m overloaded with credit card debts
If you’re holding a balance on one or more cards – and just paying back the minimum each month – the chances are that you’ll be paying an interest rate as high as 19% APR. But it is possible to dig yourself out of this financial red hole.
Do it now
- Take a 0% balance transfer deal. Although the credit crunch means it’s harder to get new loans and credit cards than it was a year ago, there are still many 0% balance transfer credit cards on the market.
- Pay less interest. If you can’t get a new card, because of low income or a poor credit rating, call all your credit- and store-card providers and ask if they’ll trim your interest rate. ‘Some providers have automatic interest matching policies, so if you have other cards at cheaper rates, they will match,’ says Martin. ‘Simply asking can work, and intimating that you’re thinking of shifting to another card works even better.’
- Limit the cards you use to two, it’s easier to keep track of your spending.
The long view
- Move your debts to existing cards. The interest rates are not as good as new-customer deals, but are much better than most cards’ standard rates says Martin. For the best deals go to www.moneysavingexpert.com/ creditcardshuffle. Then call your provider and ask what rate you’ll be charged if you transfer the balance from another card, double check your credit limit and ask if it can be increased. Now you’ve minimised all of your current interest rates, and discovered what rates transfers are available at, ‘shuffle’ your debts using balance transfers. ‘The aim is to fill up the credit limits on the cards charging the least interest,’ says Martin. ‘If no special rates are offered you should still be able to shift money to the cheapest-rate card.’
- Focus on paying off the most expensive card first. Pay the minimum on all your debts except the most expensive. Throw any spare cash you can at this one. As soon as it’s paid off, shift your focus to the next highest. ‘Every six months transfer your balances to move debt from the most expensive card to fill up the credit limit on the cheapest,’ adds Martin.
Five great money-saving websites
These websites will not only help to save you money – but your valuable time, too
You’ll find plenty of help and advice on this site – including what to do if you have a problem with debt, want to know
how to start saving or your consumer rights. In addition to finance, it also covers cheap flights and holidays and how to take make free calls from your PC.
Don’t have time to queue at the bank for your holiday money? Order it online and get a better deal at this site. Then pick up the cash at the airport or seaport.
This is one of many websites that can give you instant savings on household bills, including broadband, fixed-line telephone, gas, electricity and even digital TV, loans credit cards and heating cover. And it’s approved by the telecoms operator Ofcom.
You’ll find information on this site about best buy savings, credit cards, savings ISAs (tax-free savings accounts), overdrafts, mortgages and loans.
This site will help you to find the best mortgage to meet your needs (including buy-to-let) and the online calculator will help you work out how much you can borrow. If you’ve got a mortgage, you can use it to work out how much you could save by offsetting savings against your mortgage and/or upping your monthly payments.
‘Don’t ignore money issues or they’ll get worse. It’s a good idea to write down your expenditure. List your outgoings: rent or mortgage, fuel, bills, food, travel and treats. Now write down your income. When it’s down in black and white, you’re forced to consider cutting back a little.’
words: Marie farquharson | photographs: getty, istock