Thursday, 30 June 2011

Be brave,take control of your finances -DIY

The last time I felt personal concern over the nations' and my own finances was the summer of 2008, when the current depressed economic cycle began.
As I noted in my first post on this blog, in the UK all families will struggle as disposable income falls. A further quoted article seems to back this up.


If market forces are shaping and controlling my spending power, then have a go at stepping to one side and looking at what it is that you can do to affect this situation.
I have posted on the following subjects:

  •  Water consumption;
  • Managing household inventory;
  • Managing your food intake;
  • Managing unnecessary expenditure;
  • Managing motoring costs.
  • Checking tax codes/entitlements.
If you take on board some of my (not new) ideas, then hopefully you will save some money, without too much alteration to your lifestyle. Thus, releasing cash and potentially nullifying the effects of the disposable income crisis.
So, this post is about reviewing your financial status.
I regularly review my families' nett worth. This may not be simple for every body, but if you learn to manage every expenditure then it is easier each time you do it.
My methods are simple, pen and paper, not a convoluted spread sheet. I look at every document with the latest valuation and write it down. e.g.
  • All,outgoings, from any bank statements;
  • Larger spend not on direct debit, i.e. car insurance, car tax etc.;
  • Assumed monthly spend;
  • Assumed household spend on clothes,shopping,schooling,travel and any other expense.
It pays to be absolutely realistic as under estimating gives a false sense of money going out. Even though it may be a shock, write it down.
(This list should give you your outgoings, which is a great time to clear out any unnecessary elements such as 'dead' direct debits or standing orders - gym membership not used, breakdown insurance duplicated, other non-essentials)
Then look at your income:
  • Income, from bank statements:
  • Salary or wages;
  • Tax benefits/child benefits;
  • Other sources.
If then you annualise your spend and take it to a monthly figure then you should easily know your status, outgoings versus income. This gives you and your family the residual disposable income.
It is quite a surprise when the figures are calculated, and more satisfying when you work it out yourself.
I believe if this figure is shared with those directly affected, i.e. partner,family members etc, then every one shares the burden of managing the household finances.
I have a simplistic view on finances, borne out of my early years experiences, thus if I can't afford it, I don't buy it..
Thanks for reading
http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-22997
http://www.telegraph.co.uk/finance/economics/8604128/Bank-of-England-split-on-interest-rate-policy-as-consumers-struggle.html'Office for National Statistics (ONS) revealed that families are under greater pressure than at any time in the past 34 years. Real disposable incomes in the first quarter of the year fell 2.7pc compared with 2010, the ONS said, as inflation outstripped wage growth. '
This sort of report spurs me on to challenge the policy makers and the way in which we are enslaved to the salary model. (see ERE)

Tuesday, 28 June 2011

tax is an issue, check it out for a potential windfall.

I recently had a small surprise, as I had a reasonable tax rebate. I did not initiate the rebate, thus was surprised when it came through.

I am still in employment, i.e. not early retired, so my tax affairs are simple. But, as I have moved from a reasonably paid job to a lower income, my tax codes did not keep pace with the change in circumstances.

I believe there are 'paid for' tax checking services but I would recommend the following link.
http://www.moneysavingexpert.com/family/check-tax-code

This give simple advice on how to check your tax code.

Another tax issue if you have children is tax credits.

I urge everyone to check their annual statement as mine was wrong and I had to call to have it amended, or lose any benefit

http://www.hmrc.gov.uk/taxcredits/

Similarly, for a child in higher education, child benefit is still payable until the child reaches 18.

So,I have had to fight to retain these benefits but have not missed a beat since my first child was born.

If you are entitled to it, then claim it. If you don't ask, you don't get.

Keep on Saving.

Monday, 27 June 2011

calorific intake - manage your lifestyle and gain £250 p.a.

I have recently calculated my BMI = 25.65

I have always thought of myself as fairly lean, but not so on the above calculation.

This is/was calculated as a spur to try and stem the swell of my burgeoning waist-line...

The recommended calorific intake is 2550 for a man. I am going for 2000 a day and see what happens.

I guess the theme of this blog is money-saving and I believe it is proven that a leaner, healthier lifestyle is better for you, and I wager, cheaper.I am estimating, £250 p.a. cheaper.

So, what are the things I need to avoid.
Chocolate,crisps,pastries,fried food.This won't be easy.
However, my speciality of eating left-overs or making meals out of 'passed sell-by date' food are almost legendary. It is a criminal waste that food just over the best-by date is thrown. The best-by date is to protect litigation on the part of the supermarket (IMHO), so i wager that if you pass the deadline fr eating by 1 or 2 days, as long as the food is thoroughly cooked then it should be OK. I have had no ill-effects yet.

Also, my waste bin is almost all dry-packaging as almost no food waste goes in, if it does it goes with the organic recycling, so making a more hygenic waste bin.

So, my aim is to limit the amount of hard dairy product, to eat leaner meat and lower fatty carbohydrates. 
I have always eaten home-cooked meals so this will be an easy test, certainly in reducing ready-made or processed food, of which I am to eat zero for a week.

Let's get started.

No crisps/snacks = £2 per week
No chocolate = £2 per week
No fast food meals = £5 per month

Thus, easily making a saving of £268

Sunday, 26 June 2011

cars - rent or buy it's a no brainer - gain £13k

I have often wondered why the cost of motoring is so high and that it is our second biggest capital expenditure after our houses/rent.

I have always bought cars as opposed to renting/lease.This, I think, makes economic sense??
My view on the transportation of humans has changed over the years as I become more aware of the impact of our gas-guzzling on the Earths' natural resource (no global warming argument, just common sense)
I see cars as lumps of recyclable material conveying their passengers to wherever.They are always just junk, some more luxurious than others. But what does a car have to do? Move/convey/start/stop/steer. after this, it is the aesthetics and individual needs, even if they are not really needs.What is worse than moving through a 50 mile commute with all the other rat-racers, jockeying for position. Leave all of this to the heavy haulage truckers, who are actually conveying goods rather than just fresh air.

The sums are fairly easy when considering rent v buy.

So, the maths are:

Buy a new car = £12420assumed on a loan at 7.6% = charge for credit = £1390asset remaining = £5975
loan repayments of £382 per month
true cost =  after 3 years  repayments and interest on loan £13752
The car is the yours and the remaining capital is £5975
So the outlay is high(ish) at £382 per month, but you have an asset at the end.The true cost is the £13752 - £5975/36= £216 p.m.



Lease a new car at £150 per month = £1680 p.a.
3 years = £5850
If you were able to afford to save the difference between loan repayments and lease you would have 36 x £66 = £2376 but with a compound interest of 3% it would equal £2488

3 year total cost example of a purchase at £13752 versus 3 year lease of £5850

If you change vehicle every 3 years then over a 60 year period, without inflation would equal £275040 with £119950 assets over the 60 years when buying. total = 275-119 = -ve loss of £156k
£117000 for lease plus investing the difference would give you £130k  total 117-130= +ve gain of £13k


It seems, after all, that leasing a car is cheaper over a 3 year period.
So, don't buy new... wow! what a difference. You don't get the debt and you have a new (albeit small) car to drive around in.

I'll stick with my purchased car and run it into the ground, then lease.

Bon voyage.

Saturday, 25 June 2011

buy not rent, generate £295000 capital

I have been looking at the sums involved in the equation of rent or buy for the homemaker.

I have been fortunate enough to have lived through the property price boom and seen a £90000 property increase in value to a whopping £450000 in 25 years. by the way, this is not a personal example, just a hypothetical, nominal value. It is actually a good starting point if you were a first time buyer in 2011.

Assuming that you had purchased the property via a mortgage, then it would have cost £90k x 3% interest on the mortgage, i.e.£154,500 over the term of 25 years.

Thus the capital in the property would be £295k at the end of the 25 year period, with the assumption above. Critically, inflation would devalue the capital but it would still be your money.

If, on the other hand I had taken a rental property, then the rental cost would have been £194264 assuming a rent of £500 per month with a 2% annual increase in rental prices, with no capital at the end of it.

So, to buy, even in a depressed market as per 2011, makes sense. If we use the model above, then the £154,500 in mortgage costs could be considered as rental payments, the debt is gone and the capital is yours.

Looking at the worst case scenario, of house prices only went up by 1% each year, then in 25 years the property would be worth £188440 with an investment return of £98440.

I have to find a model that will allow me to purchase property and then rent without having masses of capital.

Anyhow, I have shown that it is possible to generate £295k capital, but it takes a while.....

Friday, 24 June 2011

reduce inventory, generate £1250 cash

There is a school of thought, especially in the manufacturing world, where inventory is a bad thing. That is, money tied up in product or capital asset inventory is dead money and restricts cash flow.

This got me thinking.... how much cash is tied up in an average family home, if you are a homeowner?

A hypothetical example, with all figures estimated shows the value of assets as:

The house itself - £250k
Cars - £20k
Other capital assets- £10k (white goods/garden equipment)
Clothes - £5k
Food - £500
Furniture - £5k
Electricals - £5k (TV/PC/Laptop/Smart phone)
Beds - £2k
Toiletries - £500
Other consumables - £500

Thus a balance sheet of physical assets in the example above is:
£302,500

This model does not take into account expenditure such as mortgage payments, which are outgoings as opposed to assets.

So, if you can reduce your inventory by 10% on the 'consumables/disposables/durables (lasting > 3 years) ' which equate to £29500 then you could generate £2950 x .5= £1475 assuming you get 50% of the nominal value of the goods.

I know how to generate modest amounts of cash by selling consumables as I have sold >250 items.These were made up of clothing, electrical goods and music/books.  If each item is an average price of £5 then I have generated £1250, which is close to my assumed target above.

So, looking at the items within your house as disposable assets, as an area of financial management, can reap benefits, as you reduce your home inventory and 'goods in hand'.This has benefits inasmuch that the exercise would free up more living space for you/your family/partner.

An additional spin off from this is if you can sell it and somebody else have use of it then it supports the recycling/reusing of articles.I know this would reduce the amount of spend by consumers, but as I have previously mentioned, we are slaves to consumerism and recycling goods benefits more than just the giant retailers.

On a slightly separate note, it got me thinking... the largest slice of inventory is your house... 82.5 % in the example above. I will look into this as part of my new economic model.

Thanks for reading.

Thursday, 23 June 2011

swap shop - increase your pension by £500

Another day, another deal.

I have managed to procure a larger bed for my daughter by trading with a relative. He has got a single, lounge bed, I got a double divan.

Thus, no money has passed to the corporate giants to whom we slavishly consume .
There is value in the lounge bed, but I believe the zero cost transaction is best as the money I put aside for the purchase of said bed, £500, minus the value in the lounge bed, £100 I can now put into my pension.
The idea behind trading rather than using cash obviously appeals as you keep your hard-earned money on your own pocket.

A flip-side to this is the environmental impact of extending the life of goods. i.e. reduced raw material consumption,less energy as nothing new is being made and a reduction in the amount of waste going to landfill/incineartion.

I have decided to look at a new economic model for my families finances as I do not trust the government, of any political persuasion, and the financiers that run the global economy.I am sure that a big default is coming and this will rock the worlds' finances again and we, the minnows will have to shoulder the burden. there has to be an alternative to the systemic avarice and risk on which our hard-earned money is gambled.

I am goingto look at a hybrid model that combines rock-solid guarantess and a partial exposure to markets.

So, £400 goes into the pension and by completing the zero-cost transaction the compound figure would accrue £528
The running total is now £2631 plus the meagre contribution above  = £2632.85

Sunday, 19 June 2011

increase your pension pot by £355 instantly

'Tis a world of temptation and attraction. Want this want that etc... bombarded with advertising we are the age of consumerism. As much as I dislike being in the world of 'spend, spend, spend', I am not tempted by the wish to hock myself to the hilt and then be forever indebted (literally) to somebody else.
However, a trade is a trade. 1p, or $1 or £1 million. all transactions moves things. unfortunately, money oils the cogs of society right now, and as much as I believe in a fair society, money is the driver. I believe in the world economy and in my lifetime have seen the global market place come to fruition and its a wondrous thing.

However, I have asked myself, can this/these transaction be moved in the consumers favour? and save to fund a retirement/other? My interest was initiated by http://earlyretirementextreme.com. This is a good blog and has been thoughtfully laid out. I believe that you can live like this and retire early, but I have a less attractive starting position for three reasons. First, my age, which is mid 40's. Second my net worth. Third, my outlook to risk, which is average/moderate when assessed.

My age and familial responsibilities mean I have to be cautious and not lose all that has been accrued;
My net worth is predominantly in bricks and mortar, thus would need to free this capital up if I wanted to invest heavily in, say stocks and shares;
My outlook is cautious, thus would need to guarantee return, which I guess would reduce returns....

So, what am I doing about it?
first, I am earning. Second I am trying to reduce spending, as wages at the moment are not keeping pace with inflation and thus standards of living/disposable income are falling -
According to Deloitte, one of the leading financial services firms, the average UK household faces a £780 dip in disposable income each year. - https://www.uia-blog.co.uk/2011/05/16/ways-to-account-for-the-disposable-income-dip/

The term - 'disposable income' - suggests to me that the money you have left once all of your financial obligation's are met, is disposable?? disposable being able to be disposed of? I think this term in itself allows us to think of spare money as worthless?

I am a frugal person and wish to save more and invest more of this 'disposable income.
I have no clear plan and/or goal as I am pragmatic and grounded with an aversion to risk.

So, what do I do?
look to reduce on anything and everything whilst still living well? (raises more questions than answers)

Here goes;
Water -  a valuable commodity right now. I save on water usage and consumption by extracting one bucket of bath water to flush a toilet (restroom). May not sound a lot but..
flush toilets with bath water.... saving   1.52p per flush.... 5 per week  = 5 x 1.52 x 52 = £19.76 p.a.
So, I can put £19.76 in a bank account paying 3% and with compound interest would get £471
No. I'll put it in my pension. Seriously, this means that £19.76 multiplied by xx years to retirement = £355 and fingers crossed it would achieve at least 3% growth.

So the real story today is that I have generated an income/saving to put into my pension of £355.

This sum would mean nothing to some people but.. if offered the sum of £355 would anybody, however wealthy, turn it down?

Don't know how but will put in an accumulative total when I can for each of the nuggets I share.

Cheerio.

reduce motoring costs, retire wealthier by £334 per year

Tony Hayward rocks... just to show the eccentric Brits can make gold out of a messy sandwich. The ex-boss of BP (Britich Petroleum), has constructed an oil and gas installation procurement/asset purchase enterprise that will make him£14m richer if he secures £8bn of aforementioned. great to see someone that was ridiculed and harangued having the gumption and wherewithal to bounce back from a very difficult period.

Which brings me to the next extreme money saving. Driving a vehicle is a necessary evil in this age, although many would argue this point, I am sure. I am forced to use my car to travel to and from work, thus one of the biggest items of expenditure  for me is fuel. There is a very simple method of saving some money which is to look at the petrol prices whilst driving. I have seen a difference of up to 6p per litre in my local area. I think that if you want to save yourself a few pounds then it is worth putting in the effort to find the best value at the pumps.

I will realise a cost saving of £334 p.a. if i save 2p per litre on my annual consumption.

There are many other factors in this equation i.e., purchase a smaller, more economical car? a hybrid, which are expensive or as mentioned, switch to public transport.

Another thing that bothers me is the cost of servicing.
An average service on my car would cost at least £180.
If I price up the spares required (oil filter,air filter,fuel filter - £30, £14 spark plugs, £17 for oil) for a service then they equate to £61 which means i am paying £ 120 for labour
The manufacturers recommended service is 60 points check and as I read it the only technical job is diagnostic testing.

So, i will ring my local servicing mobile technician and ask if I can do part of the service and he stamps the book?
This means I get a service and he gets business.

I save approx £50 on servicing. thus, I save an extra £50 p.a.

Thus, £384 to add to pension pot.

Compound interest and years to retirement would give me £6912 cash or  £9137 at 3%.

Happy motoring....

Saturday, 18 June 2011

save water, top up your pension by £377

A pension, who needs one when I/we are saving so much money to put into our own personal pension plan ha ha... The government can do what they want, we are immune from their meddling.

Here is another EMS to help the needy (me)

If, like I, you are a habitual tea/coffee drinker, then you probably spend a lot of money on take out or vending machine hot beverages.Now I do not buy the expensive coffee house Latte/Cappuccino etc.. but I do like a decent beverage.

I decided that this is a waste of money as it is just a habit rather than a necessity, as we could all live off just water.Why do we drink tea, I guess it is a social norm knitted into the fabric of British life. So when did it start? I look to the UK tea council for inspiration..
http://www.tea.co.uk/page.php?id=94
'There are various legends surrounding the origins of tea. Perhaps the most famous is the Chinese story of Shen Nung, the emperor and renowned herbalist, who was boiling his drinking water when leaves from a nearby tea shrub blew into the cauldron. He tasted the resulting brew, and the beverage of tea was born. An alternative story claims that links tea drinking to the Indian prince Bodhidharma, who converted to Buddhism and in the sixth century and went to China to spread the word. He believed that it was necessary to stay awake constantly for meditation and prayer, and took to chewing leaves from the tea shrub, which acted as stimulant, helping him stay awake. (An alternative, more macabre version has Bodhidharma accidentally falling asleep, and upon waking cutting off his own eyelids in disgust at himself. He threw the eyelids away, and from them sprouted the first tea shrub.)'

Amazingly the British Tea Council have an online rolling estimate of the number of cups of tea drunk per day and they put it at a staggering 8.1 million.

 It seems that we have been fed advertising and are attached to social norms that mean we are obliged to drink tea/coffee. I am sure there is research that identifies the link between advertising and behaviour. Although your own experiences and up-bringing play a large part in your choices as an adult.

I have roughly calculated my own spend on vending, spend on soft drinks, to calculate a saving.
I decided that to assist in my own cost-reduction quest, I would stop drinking from vending machines, take squash as an alternative to soft drinks and re-use tea bags. The re-use of tea bags comes from the fact that I drink a cheaper tea, others drink higher quality tea. By chance, I made a cup from two 'used' tea bags and it was a good strength, possibly 80% of the original strength of virgin bags.Perfectly acceptable.

Reducing spend on vending is easy, take your own if you have access to boiling water and make it at work or wherever you are.Alternatively, take the ready made Latte etc...
Soft drink reduction is also easy, this comes from life experience.. drinking water from the tap has to be good for you, no? we have paid for the cleaning and processing of our water, why should we not drink it from our household source, the tap? I have read that exposure to tap water lessens the risk of contraction water borne diseases such as cryptosporodiosis as tap water is not pure (read) http://dwi.defra.gov.uk/research/completed-research/reports/DWI70-2-255-exsum.pdf and builds our own immune system. So to take a bottle of made-up squash from concentrate is not such a hardship.

saving p.a.on tea bags would be £13.61
saving on vending would be £208
saving on soft drinks purchase £156
Combined reduction by reverting to cheaper alternative would be £377.61

as normal if this was compounded it would equate to £6795.36 without interest and £8983 with.

So, I can add £6795 to my pension pot straight away....

if all the tea drinkers in the UK did the same... £4580000 into the coffers of pension providers or £108 million with compound interest.

My own personal running total to add to pension coffers is...£1890 & £377 = £2267

Thursday, 16 June 2011

reduce consumption, increase your pension by £1555

Has anybody else been subjected to the downtrodden/sombre/listless customer service department of the big two supermarkets? Whatever happened to the customer being king?? These guys and girls could do with a few lessons in how to win the hearts and minds of customers by being friendly and attentive.  That is my gripe for the day....
Now for the money saving bit....
As the headlines have shown,
consumer spending has slowed on food recently as we all tighten our belts.
This, of course, makes the need to spend less and preserve cash paramount in the daily grind of balancing finances.

Having observed my wife slave over the washing basket each week, I have consciously tried to produce less washing. This has added benefits, such as reduced water and power consumption, reduced wear and tear on the washing machine, longer clothes life and ultimately a saving in monetary terms.
If I reduce the number of pairs of jeans going into the linen basket by 7 pairs, I have calculated that this would save me £7.2 per month on water consumption and electricity costs.If we extrapolate that amount it becomes £7.2 x 12 = £86.4 p.a.
If I calculate that as a saving between now and when i retire then it becomes with an assumed rate of interest on the money of 3% it becomes £2056
Thus I could add to my pension pot a sum of £1555


The way in which I have reduced consumption is by wearing clothes 1~2 more days than normal, in some cases up to a week more. Lets face it, if you are not doing athletic activity then why should your clothes smell if you wear them for a week? Again, I draw back to the suggestion that consumption is the driving force in our society, but I believe the same consumerism forces will re-draw the societal model and we will have a more frugal and sustainable lifestyle.

As a running total now this would mean a figure of £1890.

And on a final note for today, the downturn in sales at the supermarket tills can only be good for us... the big boys will have to reduce their prices to generate more volume. This may mean less money for the supermarket worker or supplier, but hey, we are in a frugal world now..