Research from talkmobile shows that the people likely to be worst affected by the credit crunch are those who have done least to mitigate its effects on their finances.
According to talkmobile, 43% of those aged 35 to 44 say they are already being affected by the credit crunch. Yet nearly 30% of them only check their bank statements once a month, while over half don’t check their utility bills.
Compare this with the 60% of those aged over 55 who religiously check all their bills and say they have shopped around for the best deals. Can it really be that web-savvy youth is being outsmarted by silver surfers?
Boost your skillz, o gilded youth
Further evidence is that over 50% of those aged under 34 say they regularly use their credit card to buy small everyday items like milk and bread. 30% of those in this age group also claim they are too busy ever to be able to track down the best-value utility, mobile or broadband supplier. These findings also suggest poor money management skills.
If you’re among those feeling the pinch but not on top of your finances, here’s my 5 -point plan to restore order.
Step One: get the facts
It’s easy to rush to judgment. ‘I’m squandering money on Starbucks. If I cut out 3 coffees a week I’ll save a fortune.’ But until you have the facts you’re shooting in the dark. There are probably lots of other things it would be more worthwhile to focus on.
Start with the bank statements. Check them every week and be sure you know what each debit or credit represents. Match them with the actual bills to check what you are getting for what you are paying.
Step Two: One step at a time
Deal with the regular outgoings one sector a week at a time. Take utilities as one chunk, phone/broadband as another, TV/leisure as a third, food as a fourth. Get out all the recent bills and use our switching services to assess the deal you’ve got.
Switch to a better deal if there’s money to be saved. There probably is - I reckon most families can easily save hundreds of pounds a year. Think about switching to a cheaper supermarket or buying more at local shops.
Step Three: Dash for cash
Take out a week’s spending money from the cash machine and leave the plastic at home: vow not to use your debit or credit card all week. Everyone I know who has done this agrees that they end up spending less money. Why? Handing over real money makes you think a lot harder about whether you actually want to spend that money.
Make it even harder to spend by working out your net-of-tax hourly rate of pay and reminding yourself how many hours you’ve had to work to buy whatever item you’re considering.
Step Four: Where all the money goes
Now do a real monthly budgeting exercise. Divide your spending up into categories: council tax, utilities, mortgage/rent, food, car/travel, holidays, leisure. Estimate your monthly spend in each category. Buy a small notebook that will fit in your purse or pocket.
Carry it with you and record every single item of spending for the month. Now compare the result with your starting estimate. Almost certainly you’ve spent a lot more in at least one category than you originally estimated.
This is a demanding exercise, so add a competitive element. Do it with a partner or close friend for the same month and agree that the one whose spending estimates were most accurate will get a small gift or favour from the one who was less accurate.
Step Five: pay yourself a dividend
Saving money can seem dull and scrooge-like. And if you feel like that about it you won’t do it with the oomph that you need. So you need to motivate yourself to do it. Decide that for every £5 of savings, represented by real extra money in your bank account, you will spend £1 on treating yourself. That’s a dividend rate of 20%, and it should be enough to encourage you to keep looking for more real savings. But never spend the dividend before you have banked the saving.
