Money comes and money goes... but for some of us, money seems to be going out a lot faster than it's coming in! For many of us, news of the latest economic crisis is nothing new. In fact we've even come to expect it! We wonder if it will ever get better. More people over thirty-five in the UK are living with their parents or doing houseshares than ever before; many people are finding it hard to get on the property ladder; jobs are in short supply, and we can all safely say that the cost of living is going up at an alarming rate. And it's a horrible thought but with the state pension age steadily going up, it appears that now more than ever we need to take serious care of our finances.
And with the spread of the recent pandemic which has seen many businesses suffer, and thousands out of work, many more people are sadly experiencing financial hardship. Some of us have even discovered that that rainy day fund hasn't been as much of a back-up plan as we thought because we had been saving up for a rainy day. Not a tsunami!
Some of us are naturals when it comes to taking care of our money and have been since we were given our very first piggy bank. We know how to save; how much we need saved; when to spend; where to get great deals; how to budget; the differences between various banks and bank accounts; what to invest in... these people really need to start giving lessons!
But then there are the rest of us. Oh dear!
There is however, great news on the horizon. First of all we can all apply that 'never too late' mantra to ourselves. Even if we've been totally rubbish with money in the past, it's not too late to learn - especially from our past (or even current) mistakes: understand where we went wrong, know how to do things differently and try not to repeat those mistakes.
And the even better news is that the beginner's course in looking after your money doesn't require you to have the skills of a financial expert. With a few simple tweaks, you can really make a difference in your spending habits, and as you watch your savings grow every month, this will spur you on to take your money-saving habits to the next level. That's not to say that things will change overnight. Good habits take a while to develop, especially if you've been used to doing things a certain way for a long time now. But it can get better.
Here's a story from Beth* in which she describes the hard lessons she learned regarding money. Beth thought she was fully in control of her spending and saving habits until things started to go wrong...
CASE STUDY: BETH'S STORY
When I graduated from university fifteen years ago I was very fortunate to have found a job almost immediately in retail management. I was with the company for five years and worked my way up to area manager. During that time, I learned to manage my money. I lived within my means and didn't go on mad spending sprees - which could so easily have happened! I set up three bank accounts: one for outgoings and two for savings. I thought I was being very sensible and grown up. I was still living at home so all I was paying for were my phone bills and the internet. All in all, I was quite pleased with myself.
But then things went wrong. The company I worked for were going through a very bad period and staff cuts had to be made. I ended up losing my job. I wasn't overly worried at that point as I believed that I'd be able to find another job as quickly as I had found that one. I was wrong. Lots of people were out of work and there weren't enough jobs available. I was out of work for six months before I was able to find work as a receptionist at a hotel. I was obviously grateful to have found a job but it paid a lot less than what I had been earning before so it meant that I still had to dip into my savings which were, by now, not as healthy as they once were. I was also furious to discover that the accounts that I'd set up weren't as brilliant as I'd been led to believe and I earned hardly anything in terms of interest (yes my advice did come from the bank!) Which goes to show that you should always read the small print and make sure you fully understand it; keep up to date so you know if any changes are being made, and don't be afraid to ask questions until you get a definite answer.
Compared to a lot of people, I was definitely one of the lucky ones: I had no children and I still lived at home, so those were two less things for me to worry about. It took a good few years to get myself back on my feet financially. I was then able to move out of home - though I wasn't able to move into a place of my own immediately. I had to do a house share, which wasn't as bad as house shares go and the rent was pretty low, so once again, I was quite fortunate.
There's a part of me that bitterly regrets not getting my foot on the property ladder when I had the chance to do so - when it was far more easier to get a mortgage than it is now. I suppose living at home with my parents, being a homeowner was not really something I gave much thought to. Plus I was too busy having a good time rather than seriously thinking about the future. I always thought I'd have time to do so when I was ready, not knowing what lay ahead. But that said, I know that losing my job when I did would have meant that I had the added burden of a mortgage and difficulty making the repayments. Perhaps I would have found a way around that - help from my parents maybe. We'll never know now but the sensible side of me knows that the time was wrong to be a property owner so it's probably just as well.
I'm also sorry that I didn't take care of my finances better. There were things I could have done: shopped around to get better deals; asked people for advice; saved more etc. I'm thankful that I'm now able to start renting a flat which I will move into soon. Of course I do wish that I was able to own my own home but... maybe one day...
Thankfully Beth's story wasn't disastrous, and there's a lot to be learned from her experience. Unfortunately there are people who have ended up in far worse situations. Unless your name is Mystic Meg, it's very difficult to predict what is around the corner. And as we've recently discovered, there are some circumstances which are totally, completely and utterly beyond our control. But there are ways in which we can lessen the impact. So a financial detox - not to mention a little common sense - is a must. It's not going to sort your finances out overnight but it's a start and with perseverance you should find yourself in a more stable financial position.
GUIDE TO FINANCIAL DETOXING
1. DECIDE WHAT'S IMPORTANT:
You won't be able to get back the money you've lost, spent or frittered away. But it's not too late to make changes in order to manage and improve your financial health. Make a list of all your outgoings - all the things you spend your hard earned cash on! Looking at the list, think of the things you:
need (e.g.- phone, rent, utilities, travel)
can go without completely (e.g.- grabbing a coffee on your way to work; buying things you know you won't use!)
can cut down on (e.g. - eating out, sales shopping etc.)
2. TAKE ACTION:
Think about at least three simple things that you can do now that will help you to save money.
These might include:
Reading online magazines and newspapers rather than buying them everyday (yes, some people do still buy them!)
Drinking coffee at home before you get to work.
Cancelling old direct debits.
Making a weekly food planner to reduce food wastage.
Only shopping for clothes during sales... or avoiding the sales if you're likely to buy things you don't need and won't use.
Borrowing books from your local library rather than buying them.
Taking a different route to avoid stores, coffee shops etc.
3. SORT OUT PAPERWORK:
Find the past 12 months of bank statements, credit card statements, pay slips etc. Organize them: if you have paper copies, put them in order with the most recent on top. Save online copies to your desktop.
4. CHECK OUTGOINGS:
Write down - preferably on an Excel spreadsheet - your monthly outgoings. Divide it into key categories:
rent/mortgage
bills
food
travel
motor vehicles
household items
health
clothing
leisure etc.
Don't forget yearly costs such as TV licence, MOT, holiday expenses etc.
5. SNEAKY CASH TACTICS:
Bank statements don't tell you everything about your outgoings. Think about all the things that you might pay for in cash: travel fare; fast food; cigarettes; alcohol; coffee; chocolates etc. Add these outgoings onto your spreadsheet.
6. ANALYSE OUTGOINGS:
Pay attention to your outgoings in terms of energy, phone, car insurance etc. - can you get better deals elsewhere? Once your phone contract has expired, don't immediately upgrade. Instead opt for a 'SIM only' deal. You can absolutely get some great deals - you won't even miss having a phone contract, and some of you may even breathe a sigh of relief as you're released from the shackles of a phone contract. So you won't get the latest flashy handset but you could make massive savings.
7. THE RAINY DAY FUND
Speak to someone at the bank about setting up a savings account that can be linked to your current account. When you make savings, either on your weekly shopping or travel etc. it can be put into your savings account. Some of us may think we're doing pretty well with our savings, but according to experts we should ideally have three to six months income stashed away 'just in case' - so get saving people!
8. SET A REALISTIC WEEKLY/MONTHLY BUDGET
Once you have a better idea of your incomings and outgoings, you'll be able to set a realistic weekly/monthly budget and keep a closer eye on your money.
9. PAY WITH CASH
OK, OK... we're hear shouts of "Who on earth pays with cash these days!" There's a lot of talk about us moving towards a cashless society, and most people opt to pay with plastic for just about everything, no matter how small the purchase. But many who choose to pay with their flexible friend - whether it's a debit or credit card - often say that they forget that they're actually paying for things. They just feel like they're handing over a bit of plastic! It's only when they check statements, the shock of how much they've actually spent hits them. Hard!
Try to get into the habit of paying for cash wherever possible. We're not a cashless society yet so why not? Because you're handing over actual money, it makes you more conscious of what you're spending, and may even encourage you to budget throughout the day. And if you're someone who doesn't like carrying much cash - and you can't be expected to pay for your fortnight to the Bahamas in fives and tens - then keep a written note of your spending throughout the day which you check regularly to ensure no nasty surprises later on.
10. GET A JAR FOR YOUR LOOSE CHANGE!
Admittedly you're not going to become a multi-millionaire by filling a jam jar with coins you find lying around the house but you will be amazed by what it all adds up to. Some have said they've found enough to treat themselves to something almost every month whether that's a meal in a restaurant or a new pair of shoes. Or a decent top up for their savings account. So start searching down the back of the sofa now!
Images: Pixabay
Banner: Angel Noire using Pixabay images
Word Cloud: Angel Noire
* Of course that's not her real name!
Why do they not teach money saving or money management ideas at school? That's the best time to learn and might save a lot of financial hardships and heartache later on in life.