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#1 Don't spend more than you earn!

Jane Baker
by Lovemoney Staff Jane Baker on 28 May 2009  |  Comments 4 comments

So, welcome to the first instalment of my new 'what not to do with money' blog...

So, welcome to the first instalment of my new 'what not to do with money' blog.

I like to think it will do for personal finance, what Trinny & Susannah once did for fashion!

OK, all delusions of grandeur aside, here's my very first nugget of 'what not to do' advice:

#1 Don't spend more than you earn!

Spending within your means is arguably the first and most basic financial lesson. Did your parents ever tell you not to spend your pocket money all at once? Did you ever heed the warning?

As we grew up, we found it was a lesson that wasn't always so easy to follow, especially in a hard-to-resist 'buy now, pay later' culture.

But, like it or not, our culture has changed. The endless stream from the credit tap has been abruptly turned off. And recessionary pay freezes are spreading far and wide. No doubt, some of us will have to learn this lesson the hard way.

To that end, I won't be having a foreign holiday this year. Instead, I'll be a somewhat reluctant summer staycationer.  I suspect I'll be one of many.

Deep down I know it makes good financial sense.

Once upon a time I might have chucked a long haul trip on plastic, and worried about it later. But I can no longer bring myself to do it. And I don't want to drain my savings on what now seems like decidedly frivolous spending.

But, do I really relish a July fortnight of day trips, long walks and family visits? Err...hardly. Give me the beautiful Caribbean any day!

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Comments (4)

  • rosina
    Love rating 0
    rosina said

    Great Advice....normally BUT after 24 years my employer has removed sick pay payments, any form of pay rises and now after 1 week's notice dropped our pay by 20% to a 4 day week. After months of this employees here are in real problems. Many were living to their salaries and for one reason or another didn't have savings to take them through this time. Despite the sales going back to onwards and upwards there hasn't been any mention of returning to a 5 day week and its pay never mind cost of living pay rises or sick pay. General advice is great and welcomed but should be 'labelled' as general maybe?

    Report on 01 June 2009  |  Love thisLove  0 loves
  • Ginnymay
    Love rating 36
    Ginnymay said

    Even more reason to not nspend more than you earn, I would have thought. Wasn't that exactly the point Jane was making? Many of us have seen our incomes plummet, the ones who haven't aren't immune and could see their jobs vanish any day; the big Focus DIY store near us has just announced it's closing, who'd have thought it when people are having to do their own maintenance.

    If you're still in a job, good luck to you, but watch the pennies while you can. If you've lost your job already, have a break by all means but spending more than you earn will only leave you with problems come the Autumn, especially if you're barely making ends meet as it is. Most of us have relatives in other parts of the country who'd be happy to have us stay, and there are bound to be attractions in most areas. Look at offers to get into attractions cheaper; Tesco clubcard points, Walkers crisps promotions, 2 for 1 meal deals. Walking is free, if you're fit enough; look at the long distance paths, eg Pembrokeshire coastal path, Offa's Dyke path, Owain Glyndwr , unsurpassed countryside, and that's just the ones in Wales. Consider camping if you can't run to B&B. Otherwise, look at out of season offers for places like Butlins or other camps. And if you really, really want to go abroad, look at last minute offers from all the travel companies; if you have lost your job, the one advantage you have is that you can go anytime, at the drop of a hat; some of the offers are probably cheaper than staying at home, just avoid school hols if at all possible

    Report on 01 June 2009  |  Love thisLove  0 loves
  • drillernic
    Love rating 1
    drillernic said

    Hmmm.. spend less than you earn.

    I'm in a pretty good position- mainly because I was saving and budgeting in the good times, not just now... (last year I had my first foreign holiday for 5 years; my car is 20 years old) but then, although my current job is secure, I work in the oil industry which has always been pretty precarious, so I'd always budgeted on "What if"- what if I didn't get a bonus this year? what if the next well was cancelled? What if the dollar exchange rate halved? And I had built up a savings level of 6 months salary.

    To me, this is all common sense and part of being a grown up....

    Report on 01 June 2009  |  Love thisLove  0 loves
  • Derekjc
    Love rating 0
    Derekjc said

    I'd go one further, don't live beyond your means and always have a bit to spare, to save for a rainy day.

    Last year I spent my spare money paying off loans to increase my disposable income. Good job I did because my employer also reduced my pay by 20% (still on a 5-day week though). The extra disposable income was wiped out overnight, but at least I still have enough to pay the bills and cope with inflation.

    So my advice is this, don't live within your means, live way below it. Save £100 to £200 per month - more if you can. Save up 3 to 6 months of wages (after tax), just as drillernic did, and use the good times to pay debts, not to collect them thinking tomorrow will also get better than today, because it will certainly not be.

    I've live through three recessions and one industry downturn, roughly one in each decade, and the cycle seems to be 7 years good, 3 years bad. So much for "no more boom and bust!" People are too greedy in the good times that their brains and consciences go out the window. So, borrow if you must but remember to pay it back because the next bust is just round the corner. Well, hopefully 10 years after this one finishes...

    Report on 03 June 2009  |  Love thisLove  0 loves

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