Spend, spend, spend...

I read an article the other day which spoke about the way in which we are so willing to spend on technology and it really rang true with me (although I don't go to the extremes with spending in this particular area). The writer was an IT professional, but was writing about his personal spend rather than work-related, and this is the gist of what he was saying, but from my own perspective:

The basic requirements of a home PC are email, word processing, spreadsheets and internet browsing and like many people, my adventures into full-blown PC ownership started between ten and fifteen years ago. My PC configuration of approx 13 years ago was something like this: An 8GB hard-drive partitioned into 4 x 2GB (!!!this was the factory settings!!!), 300MHz PII with 64MB RAM and Windows 95 with a dial-up 56k modem. This mighty machine cost £1200 ($2000).
Actually, I still have this PC (in bits) though nothing of the original is retained in the casing. I recently started a project to renew every part of the old machine just to see if I could do it. It now has a motherboard which cost £10 from eBay which has a CPU that runs at a mighty 500MHz, has 384MB RAM and a 20GB drive complemented by a 120GB drive (all bought from eBay) - the only thing still in use is the casing...

This ancient machine is my 'backup' in case of catastrophe, my main machine is a more respectable 1.6GHz, 2GB RAM with a 160GB drive and a 320GB drive with a 250GB external drive - To be fair this one was given to me, but without drives and with 512MB RAM. The point of all this is that once I am settled with a new PC, I start to look at how I can make it better. The reason for this is that PC's are expandable in all sorts of ways, and there is this desire to have the best spec available even though it may not be totally crucial. After all the main things that I use the PC for are email, word processing, spreadsheets and internet browsing IE. exactly what they were thirteen years ago. We seem happy to spend a LOT of money even though we have not really improved things a great deal. Admittedly money spent on broadband has seen some significant returns in the way the PC is now used, and hard drive size allows us to store huge amounts of data, our PC's run faster, but the bang-per-buck is very difficult to justify when you look at how much people (blokes in particular) actually spend on their PC's.

Now I am a skinflint, a meanie and a user of second-hand technology so to be fair I have probably spent less than most, and if I'm totally honest, I only really spend money that I have generated from internet earnings, so I feel justified... but the fact remains that we can pour money into these bottomless pits and feel that we are getting good value. This 'value' is distorted by the comparisons that we make.
Yesterday you may have had a total of 160GB hard-drive space, today you spent £80 and have a total of 66oGB hard-drive space. If you had waited for 6 months, you could have had the same thing for £30 probably... yet you still feel a sense of value because you can remember when a 500GB hard drive would have cost £500. I'm starting to think that maybe that is the crux of the matter, the fact that we place a value on something, then can see it get cheaper almost daily until we can resist no more and end up buying it, regardless of it's real value in terms of what it can offer us.

Of course, one of the reasons that you can get such a cheap hard-drive is that someone else has felt the call of a 1TB hard-drive (even though they don't need it..) and is prepared to sell off their 'previously enjoyed' 500GB drive to make room for the new shiny 1TB drive. Ebay is the driver behind this culture of replacing old with new and passing on the old so that it becomes new for the 'followers', the 'early adopters' are forging the way whether it be for components or for a complete PC. The idea that I can go out today and buy something for £300 that is far more powerful that the equivalent thing I bought for £1200 thirteen years ago is a compelling argument on it's own.. Do I need it? Well no, but it's ONLY £300...!

PayDay loans

I have been fighting my own battle against the credit bubble for a little while now, first of all by cutting out all extraneous spending that was not essential, and then by trying to raise a little income from the internet. Alongside these tactics, it is vital to find a way to reduce the cost of credit card debts and missing a payment through having a pay-check come in late will cost you dear…

If you have a cash-flow problem, one way to make sure you can pay on the due date is to get a short-term loan from payday loans.

The advantages of this system is the speed of response: if you fill in the on-line application, you can find out almost immediately if you have been approved (within a minute), you then enter your bank details and the funds will be transferred on the same day in many cases. You can borrow from £80 to £750 depending on your circumstances, the interest rates are fairly high, but clearly indicated and simple to understand (still not as expensive as missing a payment on your credit card or going overdrawn)

Please note that this is not a recommended tactic for reducing debt per se, but a way to avoid paying more for your credit than is necessary. I have always maintained that the quickest way to make money is to save money….

The quickest way to make money - part 5

The quickest way to make money is to SAVE money - this has been the theme here for the last 5 days, you can see the previous posts here or by selecting the quick search term 'debt' in the sidebar:

Part 1, Part 2, Part 3 and Part 4

the final offering in this series will talk about other ways of saving money other than the major theme of the previous 4 days (abandoning the credit card).

My starting point for money-saving has been the Money Saving Expert website - this is geared towards UK money savers, but the content here is priceless to anyone. Martin has all sorts of advice to offer, and for the UK market, comparisons of all utility services (gas, electric, phone) to give you some pointers as to whether you should think about changing service providers.

You don't need to do too much research because Martin has teams of researchers doing it all for you. If you are not based in the UK, then you should take steps to investigate how much you can save on your current outgoings for these type of services (where there are alternatives). In the last 6 months I have changed my Gas and Electric provider, my telephone and internet services provider. I have continued to search for bargains and have found how I can cut in half my already very low website hosting bill.

The message of this series has been:

1) by all means seek out new income (from paid to blog or whatever scheme you choose) but

2) don't forget to make sure that you are not spending money that you don't need to as this could easily wipe out your extra income.

I may make $100 in May by blogging, but by changing four of my service providers I will also SAVE $100 in May, and by transferring my debt to a 0% credit card I will actually saved another $100 in just one month. there is no reason why you too, if you employ some of the priciples in these 5 articles cannot be $200 better off each month, and if you start blogging like me, you will easily be able to make it $300 a month.

The quickest way to make money - part 4

This post follows on from Part 1 , Part 2 and Part 3

(See all 5 posts by clicking on the 'debt' quick-search link in the sidebar)
The truth is this, there are a very significant proportion of people in the Western world who are simply overspending. When you sit down and calculate realistic income versus outgoings, too many households will discover they are literally spending more than they are making.
So how does this happen? Credit cards and loans are the simple answer, the solution is not to consolidate with more loans – the solution is to STOP SPENDING…. However, there is another closely related truth, the Western economies would be dealt a huge blow if everybody did actually stop overspending. This is not hyperbole, a downturn in spending on ‘gadgets’ and non-essentials would bring some industries to their knees. However, as long as controlling ones spending does not become a major trend, we can probably rely on the debt-ridden population to prop up the economy.
If you are seriously considering taking control of your spending, then I applaud you – you don’t need to take the exact steps that I have, just employ some resolve, take control of your outgoings and watch the debt fall. I was inspired to write this whilst reviewing another blog, and would like to suggest that you check out the tips and advice at http://financial-independence.net/

I also found some very revealing facts whilst researching this subject which I have copied here:

Total UK personal debt

-Total UK personal debt at the end of March 2007 stood at £1,318bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £116bn.
-Total secured lending on homes at the end of March 2007 stood at £1,104bn. This has increased 11.5% in the last 12 months.
-Total consumer credit lending to individuals in March 2007 was £214bn. This has increased 5.9% in the last 12 months.
-Total lending in March 2007 grew by £10.8bn. Secured lending grew by £9.9bn in the month. Consumer credit lending grew by £0.9bn.
-Average household debt in the UK is £8,833 (excluding mortgages) and £54,452 including mortgages.
-Average owed by every UK adult is £28,024 (including mortgages). This grew by £168 last month.
-Average outstanding mortgage for the 11.6m households who currently have mortgages is £95,170
-Average interest paid by each household on their total debt is approximately £3,525 each year.
-Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,550 per average UK adult at the end of March 2007.
-Britain's personal debt is increasing by £1 million every 4 minutes.

Today in the UK:

-Consumers will borrow an additional £318m today
-The average household debt will increase by over £13 today
-300 people today will be declared insolvent or bankrupt
-Bank and building societies will hand out £1bn in mortgages today
-Citizen Advice Bureaus will deal with 5,300 debt problems today
-The average car will cost £15 to run today
-The average home will cost £30 today to run
-Raising a child to the age of 21 will now set you back £23.50 daily
-The price of a typical house will increase by £46 today
-24.3m transactions worth £1.3bn will be spent on plastic cards today
-£82m will be spent online today
-1/3rd of all groceries we buy today will end up in the dustbin.

read the full article by Richard Talbot on www.creditaction.org.uk here

(extract used with permission of Credit Action)


I plan one last post in this series for other money-saving tips just to round off the subject.

The quickest way to make money - part 3

This post follows on from Part 1 and Part 2
This fundamental change in the way that we now view our finances (ie. get rid of credit cards and use a cash budget to control our weekly expenditure) has improved our financial status tremendously. When you consider that this change came about because our family annual income dropped by thousands (ie. my wife's wages), it is bizarre to find that our debt (well, to be honest MY debt) has more or less halved in less than a year. This is purely down to taking on board that all spending must be accounted for (a 'look after the pennies' philosophy) and controlling expenditure with cash. I have even walked the two miles to work on occasions to achieve 'non-spending' days and to exercise the discipline of only buying fuel when the cash is there to do it.
There is of course, a cost... My personal purchases have been severely curbed, I would like to have a nice new flat-screen for my PC at home, but for now, my ancient CRT will have to suffice. We have not been on a holiday for a long time, but I think we can live with that in the short-term. When you think of it, it is exactly this type of spending mentality that fuels debt: 'We must go on a foreign holiday...', 'I must have a flat-screen for my PC or wide screen HDTV' - these are the purchases which often end up living on our credit cards for far longer than a month...
In the next post, I will talk about the wider impact of this philosophy and provide some resources for those serious about saving money.

The quickest way to make money - part 2

This follows on from part 1 where I talk about reducing debt as the quickest way to make money.
Part 1 asked the question: How can we live without credit cards? For this you will need RESOLVE – ie. you need to recognise that you can no longer have the things that you don’t have the money for. This covers everything from a bar of chocolate to a new printer for your PC…if you don’t have the money for it in the bank, don’t have it! This is a tough lesson, but it’s also very logical and how everyone used to live before credit cards came along. Never do your food shopping on your credit card – use cash or a debit card instead (a debit card takes the money straight from your bank balance). In my quest to reduce debt, I devised a budget and put aside an amount every week for food and groceries. We take out this amount in cash every week and when it’s gone, it’s gone… we have halved our grocery expenditure by doing this (and we’re not starving either!). The amount we set aside is basically, the portion of my income that I can afford to allocate to our joint account less the monthly direct debits. All it takes to achieve this new manageable level of expenditure is RESOLVE (look it up…). If you don't employ reslove in large quantities, you will not escape the debt. In the next post I will talk about how this has changed our lives.

The quickest way to make money

In my experience, the quickest way to make money is to SAVE money. If you plan to collect water in a bucket, first you should stop up any holes in the bucket…Last year we decided that our little family would try to survive on just one income. I embarked on a plan firstly to stem the overspend and then to generate additional revenue streams where possible. So how do you stop the overspend that is endemic in our society? Two words: ‘credit cards’. The single most important factor fuelling our over spending and keeping us poor is what we have in our wallet. My primary aim has been to reduce credit card debt, and this is how I set about doing it. Firstly I tried to consolidate my debt onto one 0% offer card – failed because had too many accounts open but inactive. I then took steps to obtain my credit report and set about officially notifying companies that I was closing the accounts that were inactive. I successfully applied for another 0% card and transferred all my outstanding debt onto it. No interest means that 100% of my payments go to reducing my debt, but there is one more vital step…. ZERO credit card spending…. This is the hard part, but if you want to see immediate results, it is the only way. Extra income from investments and bonuses has been put to good use reducing this debt and in less than a year, the debt has halved. My strategy will be to pay off what I can and then transfer to another 0% deal when this one expires – watching the debt drop month by month is very encouraging and has given me quite a buzz. So how do you survive without using a credit card? That my friends, will be unfolded here in subsequent posts over the next few days….