Direct debits, friend or foe?

Direct debits, friend or foe?

money personal finance utilities

Hello. I like to time my lunch with a listen to the BBC Radio 4 consumer programme, You and Yours at 12.15pm. In the introduction today it said there would be a topic on how to save money on your utility bills. I need to know about this I thought. 

It started with an interview where someone was talking about how they pay their quarterly paper bills into the bank with cash. It makes them more careful about how they use their gas and electric because it makes them mentally connect their usage to the actual cost of it. 

They said what I have been saying for years. They like a paper bill, and they feel more in control rather than having direct debits taken from their bank account. 

The advice given that to pay by a monthly direct debit will be cheaper, is true in one sense, but it doesn't give any incentive to cut down on usage to save money. The mindset is they are going to take the money straight out of the bank anyway, so we might as well use it. Because you are paying upfront and the money is moved from your account automatically, you tend to forget about it. Paying cash over the counter, (a cheque in my case), makes you more mindful of how much it is costing you.

By paying for what you use after you have used it makes sense to me. I don't want the hassle of them taking too much money from me, and me trying to get it back. My supplier does not impose penalties on anyone paying quarterly. They charge the same flat rate for everyone, and there is no standing charge.

I shall continue to stick to my guns and not sign up for any more direct debits, I will not do internet banking or phone banking, I will keep on withdrawing the cash I need from the machine inside the bank and use that to pay for most of what I buy. I use my credit card for petrol and food shopping, and any larger amounts which might crop up from time to time. I clear that every month.

Have a listen to the paying for utilities item on Radio 4 today. Move the slider across to 25 minutes. See what you think.

Thanks for popping in, we'll catch up soon.
Toodle pip

Spend less, save more

Spend less, save more

budgeting shopping money personal finance

Hello. While we are on the subject of money and budgeting, I'll continue along these lines. A question from one of our readers on yesterdays post.......

Sorry if this question is being nosey but I will be going into retirement with just the basic state pension and I was wondering how you have managed to build up savings to replace large items such as your car. I would like to have some savings as back up in case anything major needs replacing.

Hi, not nosey at all, it's a question everyone will be asking at some point in their lives. What happens when the wages stop and the pension starts? How will I manage? What I can't do is to advise on pensions. I happen to have a small private pension because the company I worked for at the time, around the mid 1980's, advised us all to pay into the company pension. I did so along with everyone else. I worked there for five years, and promptly forgot about it after I left, until about twenty odd years later. Luckily It was a large national transport company which was still in business, albeit under a different name. I must say, it was a nice surprise to find that out. 

It's inevitable that a persons income will be reduced on retirement, except for the very rich of course, but I am talking about ordinary working folk here. I don't know how far off your retirement is, but something you can do is to find out exactly how much pension you are likely to receive, and use that figure as a base line, and start living on that amount before you retire. Anything left over can be put away into a separate account to start your emergency fund. This will give you a head start and be a good challenge to prepare yourself for any changes you need to make. 

It would be a good idea to go through all your wants and needs, and to weed out anything that is in the wrong category. As I said before, wants and needs are subjective and exclusive to you. It stands to reason that you might have to modify your needs and shift some of them over to wants, because you will not be getting as much money coming into your bank account. 

Some of the things you have been used to buying might have to be dropped. Your lifestyle expectations, may have to be modified, you might have to lower your sights. Getting into a routine where you unconsciously open your purse, or click on an item that you want to buy from a web site, will be a hard habit to break. What you can do is delay buying something that you want, for 24 hours, then think again, and ask yourself do I really need it. 

I have collected a lot of stuff throughout my life, and I now find I don't need any more. What I already have will hopefully last me. There may be an instant where something packs up and will need replacing, but if it only looks a bit dated and it aint broke, I don't need a new one. 

Anyone who is coming up to retirement age needs to take stock of their lives. There will have to be some tightening of the belt, some deliberation on what they can do without. It's a bit like de cluttering, sorting out a cupboard or drawer. 

My goodness it sounds like a lot of doom and gloom, doesn't it. Can't afford this, can't afford that, have to stop going to dancing or gym, have to give up the weekly meal out, no more shopping trips to town. If you are in the mindset that you get pleasure out of spending money, you will struggle. You will be miserable, you will sit at home and feel sorry for yourself, skint, no money to spend. 

When you retire you will have less money, but you will be gaining a lot more time. Time is more precious, more valuable than money. Time lost will never be replaced. Look at this new chapter in your life as the time you start living, and a good life is not about how much money you have. You will have to modify your lifestyle choices, but you will have more time to enjoy life. 

Ooops, going away from the question here. How have I managed to build up savings to replace large items like a car? I keep a car for about 3 - 4 years. I will need to have around  £6,000 saved to buy the car I want. Over 3 - 4 years, that's doable. 

My thrifty and frugal living ensures that money builds up in the bank, because I don't spend it. Simple as that, I DON'T SPEND IT. I work out what I absolutely must pay for, then I work out if I can afford some treats, and what is left only gets spent when something needs replacing. I don't call it savings, it's an emergency fund. I don't have any long term savings. A year ago I needed a fridge freezer, I had the cash to pay for it. Coming up I have my car road tax and insurance to pay, the money is there waiting. 

Someone asked a question once on MSE, what do you do with any spare money? The answer is, no money is spare, it is all earmarked for something. 

I am disciplined enough to NOT SPEND any money left over. Another way of doing it would be to put aside money for emergencies as soon as it has been paid into your account. Squirrel it away somewhere, it is not for spending, save it for emergencies. 

I hope that has given you food for thought. Thanks for asking. Don't worry, you will manage. 

Thanks for popping in. We'll catch up soon.
Toodle pip

Life is good on a pension

Life is good on a pension

money personal finance

Hello. Something someone said about not knowing all of my story which got me thinking. There must be newer readers who haven't read from the beginning, so will not know the background to my frugal journey. I've had a look through my bank statements and found some scribbled notes which will shed a bit of light about how skint I actually was. I can't put actual dates to some of the reasons why my income dropped very low, but it was round about my early to mid fifties when I started reducing my driving hours which reduced my paid income. I was not enjoying the job so I chose to work less hours. 

 Before that I was also running a small businesses, I bought in stock and sold at shows and events. It was a lot of work, making a little bit of money, but it didn't last very long. The recession kicked in and people stopped buying non essential items. I had to close it after three years, because I was starting to lose money.

After that, I started another business, an Introduction Agency/Singles Club. That was also a lot of work while still driving part time. Over three years it just about covered the expenses so I closed it, having made nothing.

A while later I took a short break from driving and bought a new catering trailer, got a pitch for it and started work on an industrial estate. I didn't last long. It was the wrong time to start, middle of winter, business was slow, and I hated the smell of the cooking. I sold the trailer and lost £1000 on it. My bank balance took a hit and was very low, so I had to go back to driving to earn some money. 

When I was 59 I had an operation and took 12 weeks off to recover. I wanted to go back to work, but they announced they were closing the depot so I didn't have a job to go back to. I was a job seeker for the last seven months until I could fully retire at 60. 

I have always meticulously checked my bank statements, keeping a beady eye on that bottom line. Sometimes it plunged perilously low so I had to do some calculations to make sure there was going to be enough to cover the standing orders, and pay the mortgage. If it dropped too low, there was only one thing to do, earn more money. 

Here are some of my scribbles. Note to myself  DON'T SPEND.

Only £547 left in the bank on this statement. I think that was two mortgage payments. There was a lot of juggling going on.

Here the balance didn't look too bad, but when I calculated everything that was going to come out during the month, it dropped dramatically.

This is low but not too bad. Got to get that money in money out balance a bit better though.

Going down again. all my business transactions were going through my current account. I cancelled the business bank account when they started making charges. My accountant advised it was ok to do this as long as the paperwork was all in order.

Oh my gawd, I think that was the lowest.

I was sailing a bit close to the wind at times, but strangely enough I wasn't too bothered. I never dropped below the bottom line, even though it was a challenge to stay afloat. My first state pension payment of £136 was paid on May 18th, I had a balance of £1,400. I felt safe then knowing that this amount would be arriving every week and would never stop. I was also receiving a small amount from a private pension which was £33 every four weeks. Both of these have increased over the years, and are my only income.

So there you are then. I've been down in the basement, now I'm on the way back up again. My mortgage is paid off and I have an emergency fund, so life is good on a pension.

Thanks for popping in. We'll catch up soon.
Toodle pip

Do not despair, make it a challenge.

Do not despair, make it a challenge.

budgeting shopping money money saving

Hello. We wake up this morning to more doom and gloom in the press, inflation is rising and we are all going to have to pay more for the things we need to give us the life that we aspire to. But wait a minute, not everyone will suffer, those of us who understand the difference between a need and a want, will still be able to adjust our finances to get the best possible deals. We know it's all down to juggling, and from the comments I get from my readers, most of us have got it about right, so this post is not aimed at you. 

What do you do when you can't afford to buy new clothes from a High Street shop? Answer, you go to a charity shop, a car boot sale, a rummage sale, a garage sale, accept hand me downs, swap clothes with friends, look on ebay and the free sites. 

What do you do when you can't afford expensive brand name foods? Answer, you try the shop's own brand, you buy the Value and Basics labels, you shop around in different places, you get to know the prices of everything you buy on a regular basis, you look for reductions, offers, and out of date reductions. 

What do you do when you can't afford your utilities? Answer, you check how many kw's you are using per annum and go on the comparison sites and look for a better deal. You contact your present provider and ask them for a cheaper tariff. You use less gas, electricity, and water by not switching things on until it is absolutely necessary. Flick a switch, turn a tap on, it will cost you.

Petrol is going up, how can you spend less? By driving correctly, not rushing about, no harsh braking or fast acceleration. Plan your driving by what you can see ahead of you. There's been many times when I have seen a bend or a junction up ahead and have slowed down by just taking my foot off the gas, when the car in front has approached it at speed, then slammed their brakes on. Remove all the clutter from your car, more weight uses more petrol. 

Shop around for literally everything. Think about what you need, then look in different places to get the best price. Give yourself time before you sign a cheque, open your purse, or put your card in a machine. Be very aware of what you are spending your money on. Absolutely no impulse spending, go home and think about it. 

Put a little money aside every week or month, into a savings account. Doesn't have to be much. One day you will need a new washer or fridge. Your car will eventually conk out, if you have planned and saved it won't be so painful when you come to change it. I've had my car almost two years, I started saving as soon as I got it, there will be enough in the pot when I come to change it. 

If you enjoy a few extras at Christmas, start saving on January the 1st. If you like a summer holiday, have a pot for that. Write a plan on a piece of paper, you don't need fancy electronic gadgets to keep track of your money, a notebook does the same job. The miles I do for my walking challenge are recorded on a calendar, I don't need a gadget for that. Pen and paper is all you need. Keep a spending diary, record every penny you spend, look back on it often. 

All this is common sense, and a lot of you who are a similar age to myself will know what I am talking about. It's the younger people who are struggling, those that don't get the benefit of savvy parents to teach them, which I feel for. 

Right, so what do you do when you are really struggling to make ends meet? All of the above, but what you don't do is BORROW. Loan companies know people will be struggling once inflation rises and gets a grip,  they will be increasing their advertising to reel in all those who don't know which way to turn next. The sharks are waiting for the kill.

Do not fall for it. MSE is full of posts from people who are in such a mess with their finances. They know they have been living beyond their means, and know they will never have a life if they don't try and do something about it. Borrowing is too easy. Spending someone else's money is too easy. If people can't afford to pay for something, how are they going to afford the repayments? Look at the figures below, found on a random web site. Borrow £3,000 to buy a car. It takes three years to pay it back. You will have paid £5,143 to this company if you borrow from them, and you will be left with a scrap heap of a car worth nothing.   

What did I do when I started driving? I bought a battered old Bedford van for cash saved. Changed it for another slightly better van, then worked my way up with more old vehicles. I went to car maintenance classes at the college to learn how to do the basics. And at long last after years of driving around in a vehicle which I could never be sure of it getting me there, I now have a decent car. 

So, don't despair if the cost of living is going up, try and keep one step ahead. Appreciate what you already have. Find ways of staying in control, make it a challenge, don't let the buggers beat you. There is Life after Money. 

Thanks for popping in, we'll catch up soon.

Toodle pip

Ten good reasons why I don't have contents insurance.

Ten good reasons why I don't have contents insurance.

money personal finance

Hello. While pondering over a few topics for blog posts, I came up with the idea of  delving a little deeper into the whys and wherefores of  how I organize my life. My quirky ways of doing things or not doing things, and the reasons behind my way of thinking might not suit everybody. I tend not to go with the flow, I like to explore and find out what works for me, even if it goes against the grain and people might question my sanity. I might make a one sentence statement which does not give the whole picture, so I am going to do a series of posts called Ten Good Reasons Why.........and fill in the gaps. 

So the first statement is 

Ten good reasons why I don't have house contents insurance.  

Picture source The Story of Stuff.

1. There is very little stuff of value in my house. I could happily give it all away and start again. Most of it was acquired cheaply second hand or given to me free. The things I have bought from a shop are old and not worth very much. 

2. I have no jewelry, no collectors items worth a lot of money. My electrical gadgets are ancient. 

3. I have enough money in my emergency fund to replace anything broken, damaged, or stolen. 

4. I have no feelings for my stuff, I am not married to my stuff, I am not in love with it. It is just stuff. It doesn't belong to me, I am borrowing it while I am alive, I can't take it with me. 

5. I don't need a lot of stuff. I can manage with the basics. A bed, a chair, something to cook my food on, clothes to wear, bedding to keep warm. 

6. If I had to start again I would be happy to purchase second hand, ask for items I find in a skip, buy at a car boot sale or charity shop, accept donations from friends.  

7. I don't want to pay for contents insurance. The money I have saved over the years by not paying, more than covers the cost if I had to buy something. 

8. Insurance is all about risk, do I want to take the risk by not having it, or do I want parts of my  life to be cushioned against risks, and pay for the cost of it.  Peace of mind doesn't come cheap. I am happy to take the risk and not pay for contents insurance.  

9. I am not a worrier, I will not lose sleep thinking about what if all my stuff is lost.. I take each day as it comes, living for the now, and not worrying about how long my stuff will last, or if it will be stolen, or lost in a fire or broken in an accident. What will be will be. I prefer to live with the thought that it might never happen, rather than, oh dear, what if. 

10. Looking for the right policy can be very time consuming, playing one company off against another, trying to get the best deal. Small print baffles me, big numbers baffle me, the wording of policies baffles me. I don't want to be bothered with it. 

Everyone must assess their own needs for insurance, dependent on how much they value their possessions, the value of their possessions, and what it would cost to replace them. Personality comes into play as well, whether they are risk takers or risk averse. Whether losing their possessions would have a detrimental affect on their quality of life, or whether they are confident to move on and start again.   

No painting today, it's been raining. The Walking Group mileages are rolling in, the page is slowly filling up, and it's looking good. It's great that you are making a real effort. Thanks for popping in. We'll catch up later.

Toodle pip. 

Keeping track of where the money goes

Keeping track of where the money goes

money organising personal finance

Hello and good morning. It's Friday, and as Ready Steady Go used to say at the beginning of their Friday night music programme, the weekend starts here. Thank you all so much for your comments on the previous post, your words made very useful and enlightening contributions. It's great to get the views of others, adds meat to the bare bones if you like. It's a subject that needs to be aired on occasions, to highlight the good work of Women's Refuge, and to show that if anyone is suffering in silence there are places to get help. 

So, what's on the agenda today? My winter fuel bills, as expected were quite high, so this has prompted me to sort out my utility bill files, put them in order, and work out the figures for the past year. 

Most people prefer to pay monthly by direct debit which comes straight out of their bank account. I am a bit old fashioned, I like to use the utilities first, gas, electric, and water, then pay for them on a quarterly or half yearly bill. The direct debit system works ok for those who have multiple financial commitments and find it difficult to keep track. Not a good idea to miss paying essential bills, they need to be paid. My financial commitments are simple and I find it easy to budget on a monthly and yearly basis.

So what's the situation at Tightwad Towers. I have some figures in front of me.
Four gas bills from April 15 to April 16
£5.30  April to July. Cooking and baths.
£5.84  July to Sept. Cooking and baths.
£32.64  Sept to Dec. Also, bit chilly, some heating.
£98.13  Dec to April. Also, cold bit more heating.
Total £141.91 for the year. Average £11.82 per month.

Four electricity bills from April 15 to April 16.
£26.55  April to July. Longer days, spend time outside.
£38.41  July to Sept  Don't go out much in school holidays.
£23.40 Sept to Nov  Cutting down in readiness for winter.
£71.99  Nov to April  Lights on, staying in. Computer on.
Total £160.35. Average £13.36 per month.

I have two water bills a year from two companies. Water into the house and waste water out  from Anglian. I am on a meter. Surface water removal by Severn Trent.
Anglian
£35.67 Dec 14 to June 15
£32.55 June 15 to Dec 15
Total £68.22.
Severn Trent
£28.49 Oct 15
£28.49 April 16
Total £56.98
Total water charges for the year. £125.20.  Average £10.43 per month.

The other regular bill coming in is taken by direct debit, my broadband and land line is paid monthly. When I changed supplier this was the only option offered. I get an email every month from EE, which I don't bother reading because I know more or less what is in it. I can confirm the amounts when I get my bank statement. It is usually around £35 a month. I could probably get it cheaper if I shopped around, but I don't want to be tied into any contracts, and then after the one or two year period have to look for another deal. I count my computer as my hobby and entertainment. I don't go out hardly at all in the evenings, don't pay a TV licence, don't go to the pub, don't eat out. My unlimited broadband is as important to me as my gas and electric.

I won't go into detail on my other expenses, I have house insurance but not contents insurance. I have all the costs involved in running a nice car, road tax, insurance, MOT, recovery, and depreciation. For any new people who have started reading, I don't have a mortgage or pay rent.

So there you are. Financial review all done and dusted. Have you looked at your bills lately? Do you keep them in a file? Or are they all computerized? Maybe you do a spread sheet on the computer, I don't. Maybe you do internet banking, I don't. Do what's best for you.

Thanks for popping in. We'll catch up soon.
Toodle pip

Can we tempt you with more dosh?

Can we tempt you with more dosh?

money

Hello and Good Morning. It's Saturday and Sounds of the Sixties is just finishing, so I'll turn the radio off because it's a distraction. No point in leaving it on if I am not listening to it. 

This post has connections with the 'No Quick Fix' theme of yesterday. All will become clear if you read on. Below I have copied a letter I received from my bank, dated 6th June 2008, yes I keep all my banking correspondence filed away for future reference. If you want to read it you might have to magnify it, but the gist of it is that they are offering me a Personal Reserve fund, an amount of money that I can use if I have exhausted my balance and my overdraft. I have never had an overdraft, by the way. When there is no money left, this Reserve Fund kicks in. Well isn't that nice of them! 

The letter states that the Personal Reserve is help when I need it most, so nothing to worry about then. When I am absolutely skint there will be money in the pot to enable me to carry on spending. Such a comfort to know this. But hang on a minute, there has to be a catch, there usually is. If I go into the reserve I have to pay a fee of £22 for the first five consecutive working days, and if I am still using the reserve there will be a further fee to pay of £22 for each subsequent five working day period, regardless of the number of transactions in that period. Now for someone who sees the word 'interest' as a dirty word, that arrangement sounds horrific. 

This letter arrived at about the same time as I was reducing my working hours which reduced my pay. My bank balance was slowly shrinking, almost to the point of dropping below the bottom line. It never did though, I always pulled myself back up again. 

Of course there are a couple of other niggly charges that they can add on as well. Returned transaction fee £8 per transaction, and Guaranteed transaction fee, £8 per transaction. So if you take your eye off the ball and slip up it will cost more, which is what happens normally if you overspend or make a mistake with transaction dates.

Did I sign up for this fantastic offer? What do you think? Nope, I wrote and declined it. If you have been reading my blog long enough you will know that I don't spend more than what I have coming in. Below is a little snippet from the top of my monthly statement. Emergency Borrowing NIL. You can see that they have thrown a tempting morsel my way of a personal loan of £20,300. They don't give up do they.

Right, what you see here is how much credit I can have with my one credit card. I could have a nice treat with that, but, and here's the catch, the same rules apply to the reserve fund and the overdraft, IT ISN'T MY MONEY. A lot of people would look at that and think, let's spend it, I deserve a holiday. Not a good idea, because it has to be paid back with that dirty word, interest.

Every time I use my credit card, I have the funds in my bank account to pay it off. I use it for convenience, and for the consumer protection it gives me on larger purchases that might go wrong, and it gives me points. I put part of my car payment on this to help rack up the points. All of my small purchases I pay for with cash. It's very rare I use a card in the discount stores.
 

Now I need to make the connection with what I have written here, to 'No Quick Fix'  There are thousands of people with lots of small debts spread around lots of companies. Lots of bits of paper coming through the post, asking for payment. Lots of bits of paper getting lost, shoved in a drawer, and ignored. It's called burying the head in the sand, I'll sort it one day. Keeping track can make it very difficult to balance money coming in with money coming out.

Wouldn't it be much easier to have one payment going out to cover all the bills? Debt consolidation sounds like a good idea, get a loan and repay all the debts with it, then there is only the loan to pay off every month. Simple. Sounds like a good quick fix to me, or does it?

A loan does not get rid of the debts, it just moves them to a different place. Get the loan, pay off the cards, and bingo. The cards are cleared, the catalogues are cleared, the payday loans are cleared, the overdraft is cleared, giving you a fresh new start. But it isn't. What happens if an unexpected expense occurs, something breaks and has to be replaced, or the holiday of a lifetime opportunity is too good to turn down, or a wedding is planned, or even a night out on the town with your mates is on for next week? That's OK, you still have the cards to pay for it. And so the downward spiral starts again.

Moving debts onto a consolidation loan is a quick fix which is not going to work, if you haven't learnt any lessons. If your attitude to spending has not changed, you will find yourself back at square one, with even more debt. It is all over Money Saving Expert Forum that it is not a good idea to move debt around, with the one exception of moving some of it to a 0% interest card, and even then, that 0% is only going to last for a year or so. If you have not paid off that card before the time runs out you will find yourself with even more of that dirty word, interest, to pay.

Forget quick fixes for sorting out debt, the remedy needs to be long term. There is a Statement of Affairs calculator on MSE where you list all your incomings and outgoings. Fill that out to get a better picture of where you're at.

It's not rocket science, changing your mindset about how you spend over the long term is the key. You don't lose weight by a frenzied stopping eating over a couple of months because it will pile back on again, and you don't get out of debt by juggling it around and shifting it to different places, it's still there.

Grey skies today, I won't be going far.

Thank you for popping in. I hope you have a good weekend. Catch up soon.
Toodle pip