False Economies

With turmoil apparently back in the stock market (although I think more of a minor blip, let's see).

After reading an article over at bbc news they proposed that this was simply a correction and that the American stock market was simply correcting the over valued entities within it.

This got me thinking about valuations, people are always talking about buying quality products that will last you a long time.

However like with these recent stock corrections how do we know when we're buying something that's not going to blow up in our face.

With stocks we can do research digging through reports on individual companies at the companies house website. This can be incredibly tedious as there are various filing reports that have different levels of helpfulness from the annual report through to when the company was opened.

If you want to download any of this information it costs you £1 a pop, Not a cheap business. It may be wiser to use an aggregation site such as www.duedil.com this pay for service I've been using professionally for many years. Just to let you know I've never paid for it's services as they used to give them all away for free as long as you were registered. More recently they have restricted access to more and more of the information and put it behind the pay wall. Disappointing for me as I don't like paying for things when I don't have to!

I've also heard good things about iii's and morningstar's investor tools although I've not used them myself.

When buying products we can always read reviews. This however will only get you so far. Buying bin bags that don't break can be useful. But reducing the amount of waste you produce by buying less things that you have to throw away (this includes packaging! the bane of my life).

Then there's the designer problem, there seems to be brand power at work everywhere I go at the moment. From getting petrol at BP to doing the weekly shop at tesco, we're being pushed into staying with a particular shop because it makes us feel like we are getting a better experience.

Now I can agree that picking up a can of beans from the pallet in aldi isn't as nice as picking it from a shelf in Sainsbury's but I'm still picking a bleeding can of beans off a shelf. Surely this is what it all boils down to whether a company can make you so comfortable that you couldn't think it possible to go to one of it's cheaper competitors.

Until of course they push it a little too far and either increase the price so much that you then it becomes uncomfortable for you to shop, or external circumstances do this for them, (see Tesco in the recent recession). This could also happen as instead of increasing prices to create a better profit the company decides to reduce the quality of experience they are giving. This has the same affect as once the consumer realises the experience is no longer worth the premium price tag they then look for alternatives.

Don't even get me started on designer clothing.

Distractions from saving: Parenting

They come in all shapes and sizes. I've often thought of myself as somewhat lazy, especially in my teens and early twenties.

But a lot of that has changed, it's had to.

I've surprised myself what can be done in an hour, from tidying the house to researching and buying a new kitchen white good online. All when the pressure is on. The clock is ticking. The pressure of a toddlers nap time, with him possibly waking at any second.

When this first started it was a struggle. The first ten weeks of being a dad were the hardest I've ever lived through. Little to no sleep every night, when I did sleep it was broken between bottle feeds and nappy changes or both.

Then after the 3-4 hour at best sleep I still had to continue normal life, at the time this was a 40 hour week at a job that although I enjoyed was not particularly fulfilling or paid what I'm worth.

However it did keep money flowing in, which unfortunately I wasn't able to save a lot of. Going from 2 full-time salaries to one plus maternity leave salary was a bit of a shock. If we hadn't planned in advance, this could have led to a lot more stress.

Luckily I had thought this far ahead, we had a plan. But I no longer had any time to track how well this plan was going. You see I usually track my financial progress diligently, down to the pound. So what could I do.

I had to let my child take over my life. Family must always come first. So I tried to survive. My wife was a rock throughout all this time. I really don't know how single parents manage. We only have one and this was tough.

Although tough isn't the proper word, it was torture. Relative to my life beforehand life now is torture. However I've got Stockholm syndrome baaad!

A few tips I've picked up to help through this tough time:

• Realising this isn't forever, yes it's going to be a long time, but if you're not ready for a long term commitment, parenting probably isn't for you
• SLEEP - you need to sleep, whenever and for any amount of time. Seriously, this is very important, this ticking time bomb of a crying machine is going to wake up any second. If you don't sleep now, you never will. Ever tried going a day without sleep, how about two days? How about a week of only 4-5 hours a night, how about 10 weeks of broken sleep.
• Eat well, even if you're sleeping all you can, you're still going to be knackered, if you add poor nutrition this will only make things worse. Home cooking is the key, over cook every time you have time, freeze the leftovers to eat when there's no time (which will be most of the time), doing this before the baby arrives gives you a stock pile. As I said early the first 3 months are the toughest. Be good to future you and stock that freezer hard!
• Ask for help. This is one thing I've always struggled with, I always feel I should be the strong one, this is my default setting, so I don't realise when I need to ask for help. Don't make the same mistake I did, accept all offers of help. If family and friends want to come over and let you sleep LET THEM, if they don't offer, ask them to come over!!
• Don't worry. All your priorities are going to change, remember those cool holidays you used to go on? Yeah they're gone now. Remember how your house used to be tidy all the time? Not any more! Don't worry about it. It's cool, yes you could spend that hour between your child going to sleep and waking for a feed to tidy up, or you could grab some sleep or have a bit of time for yourself. I know which I'd rather do.
• Look after your partner. Being male I've greatly had the easier part of the deal. It's still a rough ride though. Look after them as they will for you. Without my partner I couldn't have done this, without me she would have struggled too.
• Get a dishwasher, as I said time is of the essence. Washing up for me has always felt a waste of time. Getting the dishwasher was although a mild one off cost (along with ongoing electric and water bills) such a great time saving. For extra frugal points live minimally and only have a few items to clean, this will mean you have to clean after every meal, but it should only take two minutes if you can do it straight away (hint: I never can).
• To go with the don't worry. If you're currently frugal you may be upset to see that your savings rate either reduces or worse your savings get plundered. If you've planned ahead this isn't necessarily going to be a long term thing, you will probably be able to get back on the savings horse when you're a bit more of a normal human again (when the kids about 18 months old)

There are plenty of others but I think, this will cover the first time parent. I'm sure there are plenty I've missed / forgotten, what are your favourite tips? Please drop me a line in the comments :)

How to spend £2000 a month

Hi,


So it's been all about saving money on this blog so far, why don't we take a step back and have a look through what really happens in life.

So let's have a look at Average Joe, he's a pretty cool guy. 10 years out of university and he's got himself a great job that pays the average wage for the UK (currently £447 per week), this gives him a lot of freedom. It's not like the old days of minimum wage jobs that let you barely scrape by, oh no. He's got money to burn!

In fact it's burning a hoe in his pocket right now. Let's have a look what he's spending it on over his average month.

That £447 a week turns into:

£1937 monthly gross - sounds pretty impressive, over a year that's £23,244. Not bad when you think we have only just got ourselves out of this double dip recession.

To make things easier let's look at a typical month.

So let's knock the tax off - £385.03 (I'm counting National insurance as a tax - because it is), this is 19.9% of his total, gone before it hit's his bank. Oh well, we do get loads of free stuff like the NHS to make up for this and schools and stuff too!

Woops, forgot about his student loans (he's 10 years out of University remember), which he technically had to pay for, although not as high as his cousins over the atlantic it's nonetheless a cost. It's not even taken out of gross earnings, oh well - there goes £51 - 2.6% of the gross.


So what kind of job has he got? Oh he definitely works in some kind of marketing/sales/HR/finance role probably in an average growth sector, that is approximately 10.2 miles for this man (6.7 miles if he was a she).

How does he get there? Well 10 miles is a bit of a pain you see, too far to walk/cycle safely (he assumes) and getting the bus is just lame right? So car it is. He obviously bought it with a loan, what 28 year old has £14,000 in spare change? So that's costing him £270.66 (I know it's not technically a loan calculator, but it works for my illustrative purposes), he also needs road tax and some insurance for this vehicle, £175 tax and £814 insurance (obviously he lives in the mid(dle)lands).

The last two are yearly figures so let's divide by twelve to be all good about it - £82.42 (rounded) per month for both.

Then some fuel for those 10.2 miles x2 per day - £3.47 (35MPG) so he goes to work mon-fri for 4 weeks a month (20 days), that's £60.94.

Then while he's at work he gets hungry so he has a nice lunch time sandwich, drink and crisps coming to a deal price of only £3.50 - so that's £70 a month, one of the lunches he goes with a few mates to his local nando's (or other chicken restaurant), because it's a Friday and  that's what everyone else is doing - this adds (probably more than this!) £6.50 to his normal £3.50 so a nice round tenner. So lunch total comes to £76.50 per month.

Clothing - he's gotta look sharp at the office to woo customers/clients/the boss/that girl in the other department so he get's some nice suits from a well known high street retailer 2 suits will cost £128 each so over a year, because he'll have worn them out by next year he will spend £256 and say £15 a week dry cleaning (that's probably really cheap haven't been to a dry cleaners in years!), so for a month he's spending £81.33 all in.

Then after work drinks each Friday, maybe a round each with two other mates at £3 a pint, that's £9 a week and a taxi home afterwards another £10. Over the month this comes to £76.

Then it's Saturday, lad's night out. This means Xbox / Playstation at home with a few drinks - Xbox £300 + xbox live membership £32, then a few cheap beers for say 5 friends, on a rotating monthly cycle so only 15 beers a month, that's about £10 for a large pack. Then the night out, taxi in and out of town, 4 bars with a drink in each, and two drinks in the club with club entry of £5 (cheap one I know!), average drinks of £3.50 each so total of £21 on drinks. Taxi come to £20.

Then mutiply this by 4 so £21+ £20 +£5 + £10 = £56 x 4 = £224 per month.

Then on Sunday he treats himself to a greasy spoon/ Mcdonalds breakfast at £4 = £16 a month.

All this socialising has got him somewhere at least - in the bad books with his Girlfriend! For spending too much time with his lad mates, so he promises to take her out for a date night during the week, which is discussed further over a Sunday lunch at their local carvery restaurant £8 a head (on a Sunday), not including large Soft drinks (still nursing the hangover a little) at £2.50 each, total £21 x 4 weeks = £84.

Oh no the weekends over, back to the grindstone Monday morning, Joe will definitely need a coffee to get htis week started and he deserves it right, he's getting into the office early after all. £3 per coffee - twice a week as a treat = £24 a month.

The Tuesday night blues come along once more, maybe a takeaway will help alleviate the drudgery, £15 for a local Chinese = £60 per month.

He'll also need normal food shopping for the rest of the week - say £50 for the week including some hair products, shower gels etc. that's £200 a month.

Let's give a quick check as to where we are

Income: 1937

Taxes: (£436)
Car (£352)
Fuel (£61)
Work Clothes (£81)

Entertainment:
After work drinks (£76)
Saturday night (£224)

Dining/Food:
Sunday Breakfast (£16)
Sunday Lunch (£84)
Coffee (£24)
Takeaway (£60)
Supermarket Shop (£200)
Work Lunch (£76)


Now you think I've forgotten about housing haven't you, but look at the list of abundance above, it's terrifying. If this is what average Joe's life is like he has something like £245 a month left after all this. With heating and electricity prices at an average of £108 a month, water at £20, how the hell is he going to afford to even rent a shack? He would have £117 a month available for housing.

Yes there are many asssumptions in this but I know plenty of people this age who are doing exactly this and renting a house and living in London(!), or nearby or in any of the other major cities in Britain with their much higher than average cost of living.

No wonder the young can't afford to get on the property ladder!

Data:  Google docs

I've split this down to wants/ needs and it breaks down like this: 47% wants / 53% needs.

Again there are a few assumptions in here, so it's not 100% accurate - the data is on the google docs above if you want to have a look.

If Average Joe simply cut out his spending on the weekend he would save £324 a month, cutting out work related expenses (clothes, drinks and lunch) a further £234 a month.

These costs all seem to be terribly trivial and easily replaceable, yet time after time I see people overspending in these areas every month and then being surprised that they have no money left at the end of the month.

It's such a waste and can be quite dangerous, especially if an emergency comes along and you don't have the cash to cover it.

This road can take you into the languishing feeling of debt spirals eventually ending up with some kind of payday loan, where more and more of your paycheck each month goes to the interest rather than getting you anywhere near clearing your debt.

Hopefully me pointing this out is helpful, if not to you to someone close to you. Feel free to use the data provided or input your own to try and figure out where you may be overspending.

Take it easy.

Dom