Corny But True; Look After The Pennies & The Pounds Will Look After Themselves (Financial advice - birth to death)

Member Name: splodgethecat

Product:	Financial advice - birth to death
Date:	18/08/01 (55 review reads)
Rating:

Advantages: If you're clever you can live virtually debt free

Disadvantages: Have now - pay later is too tempting

I simply had to write something for this category when I found it because I have a very personal slant on finance, debt and savings. My beliefs and advice might not be deemed useful to everyone - I perfectly understand that we all have our own financial styles, but I am going to write about it anyway.

You have heard the old saying “Look after the pennies and the pounds will look after themselves”? Well, there couldn’t be a truer statement! I think that many people would be amazed at how much they fritter away every week, month and year on ’nothing’. One cigar a day adds up to £204 over a year. A couple of bottles of wine (say £4 each) a week adds up to £416 over a year. Lunch at a coffee bar or Marks and Spencer sandwiches and a drink, three times a week can mount up to £702. One packet of 20 cigarettes a day adds up to a staggering £1,274 over the course of a year!

Add onto this chocolate bars, newspapers, a can of drink here and there, magazines (a killer) and other bits and bobs and you will find that you are literally using up thousands of pounds on things of absolutely no consequence. I will expand on this later on.

~~~~~~~~~~

Call me old fashioned, but I have always believe that it is preferable to live within your means. I know that one *has* to take out a mortgage to buy property, unless you are very fortunate, and often it is necessary to borrow money for large items, such as cars, but people get into debt for the most stupid things; clothes, household accessories, holidays, Christmas presents. Honestly, the amount of money you are simply throwing away by getting into debt and paying interest! To me, interest is completely taboo. I cannot understand people who run up credit card bills or take out loans (which means interest) for items such as televisions, fridges, furniture and the like when there are so many interest free options available these days. So many stores now have 6 or 9 month in
terest free periods. I would guess that not seeking these offers out is just laziness. Sling it on the plastic - it’s much easier ...... but far more expensive in the long run.

Mail order catalogues are also a good interest free option and now you can purchase goods over £200 from Argos which can be paid for over a six month interest free period. Of course the very best way to purchase anything is by using cash - yes, that old fashioned stuff. Wherever possible, always use cash; there’s no interest to pay and no big bills later on to catch you out.

~~~~~~~~~~

Going back to the first paragraph and how we fritter so much away we don‘t even realise it. A good exercise is to decide to write down everything - EVERYTHING - you spend for a whole month. When bills, food, utilities etc are taken off you might think you have quite a nice chunk of disposable income to play about with. Maybe so, but that’s before glasses of wine, chewing gum, chocolate bars, bus fares, lunches out, magazines etc are taken into account. We simply don’t *realise* how much these little oddments add up to over time. When you write everything down like this, it is much easier to pinpoint where reductions can be made. Some people simply ‘can’t manage’ on their wages. Look closer and often they are throwing away a large proportion of their money on items I have mentioned. Just imagine if you cut down on all the little peripherals and invested the money in a high interest account. A simple deposit of say only £60 a month will add up to a very useful £3,600 in five years .... and that’s before adding interest on. It certainly makes you think.

~~~~~~~~~~

Which brings me on to savings. Have you ever heard the expression “Pay yourself first”? This means, that you should always put your savings away every time you get your wage *before* you start looking at other stuff. By doing this, many pe
ople have managed to accumulate extraordinary wealth. These are ordinary people, just like you and I; teachers, librarians, office workers etc. On the other hand, you have people from ’comfortable’ backgrounds with very large salaries, even celebrities, who fritter away every last penny they own, which I cannot understand at all. I have no sympathy for folks like these. They’ve had things too easy.

However, back to ordinary people. It’s never too late to start saving.

Some people might think they have ’missed the boat’ if they get to forty and they have no savings to speak of and a wage which they might think is far too low to use effectively to build for the future. Well, I have to disagree. Granted, it’s much better to start saving early, but unfortunately, this is not always possible. However, someone putting a fixed sum away every month, say a modest £80, at forty, will have £24,000 at age 65, before taking interest into account! Hopefully by this time any mortgage should be paid off too, so there are saleable assets available should they be required.

Which brings me to my last point - property. Never rent if you can afford to buy. If you rent you are simply throwing money down the drain. Paying out money on rent gets you nothing long-term. With a mortgage, you end up owning your property.

~~~~~~~~~~

As I am on a fixed income, I very much live to a strict regime. I know where every penny is, I know exactly how much I have at any particular time and I have a nice little cushion should unforeseen circumstances arise. I‘ve never been one to take out loans, preferring to do that old fashioned thing - save up until I could afford items. I’ve never had a credit card - I have never been able to work out their usefulness ... oh apart from making the credit card company rich and if I do need something larger I take out savings and pay it back monthly rather than paying
that *plus* interest monthly.

I realise that my idea of money management may be seen as somewhat old fashioned these days. Many youngsters *have to* have the Redrow home, the four wheel drive, the latest home entertainment system, designer labels and so on. But frankly, I wouldn’t be able to sleep at night being in the situation some of them must be in; up to their eyeballs in debt and paying out interest upon interest which will take them years to pay off, and that‘s if they don‘t add any more debt to what they already have ... which is unlikely.

I hate this ‘have now - pay later’ mentality which seems to be the norm these days. I don’t have an answer to it and as I say, I know that my ideas may be seen as frumpy or old fashioned, but at least I can afford to pay my own way and am free from the burden of a millstone of debt round my neck.

Summary: