Why you've already spent £1,365 this year!
Spending is easy. But can you really afford what you buy? Harvey Jones reveals his top tips for reducing how much you spend each month.
So how much have you spent this year? 2011 is barely three weeks old, but I bet you’ve already worked your way through a frightening amount of cash.
I know I have, and I don’t like it.
The average Brit spent nearly £800 in the first 12 days of 2011, according to Quidco.com. Or £780, to be precise. I am writing this on 21 January, so extrapolating wildly, the average person has forked out £1,365 by now.
That seems quite an astonishing amount. How can you afford it? Where do you get the money from?
And where does it go?
The financial chills
This research has touched a nerve in me, because I’ve suffered a blisteringly expensive start to the year. So far, I have spent around £3,000, which is way above the national average (and mine!).
If I keep spending at this rate, I will have spent £52,143 by the end of the year, which simply isn’t sustainable. And for a man who hates spending money, it’s agony.
The figure was bolstered by some big one-off bills. My monthly mortgage repayment cost me £450. Our pipes froze during the cold snap, and sorting that out cost £750. We had a £500 gas and electricity bill (I work at home, so the heating is on all day). So that’s £1,700.
I also made the mistake of letting my girlfriend out of the house with a credit card (bang goes my biggest New Year resolution). That accounts for much of the rest.
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Spend, spend, spend
One-off bills aside, such as that frozen drain, it’s the little things that do most of the damage. Here are some things that cropped up on our credit card after a recent one-woman shopping trip (and her excuse for buying): Tulips for £5 (“It was two-for-the-price-of-one”). Thermal underwear £14.99 (“In case of another cold snap.”). A new rucksack for our daughter £35 (“The old one was a bit small.”). A cutlery set £18 (“It was 50% off.”). Croissants and muffins from the local bakery £6.99 (“Don’t moan, you guzzled most of them!”).
If you throw in £6 parking, £40 on petrol, £50 in Sainsbury’s (“We have to eat!”), her total spend was £175.98 in two hours. Extrapolated across the year: £770,792.
As my girlfriend was quick to point out, there was nothing truly extravagant there, and plenty of things that were technically a bargain. But it all adds up.
£455 a week!
If you did the sums, you might be surprised to see how money just slips away. A takeaway here and a new school satchel there, a cinema trip today and a burst pipe tomorrow, and soon we’re talking serious money.
The average family spent £455 a week in 2009, according to government figures too. That’s nearly £65 a day, which seems a lot to me. The good news is that this should offer some scope for cut-backs.
And people are cutting back. Britain spent £16 a week less in 2009 than in 2008, the first spending drop for 10 years. But slashing your spending isn’t easy. Like following a diet, it only takes a moment of weakness to destroy your regime.
So here’s my eight-step program to slimming your spending.
Step one. Find out where the money goes
Draw up a daily spending diary. Consider dividing it up into essentials (petrol, food, parking), and non-essentials (thermals, cutlery, muffins). How much is going on non-essentials? How much could you have saved by cutting back? It should only take five or 10 minutes a day, but should yield some interesting results.
An easy way to do this is by using the free online banking tool at lovemoney.com. If you register your accounts, every time you make a purchase – no matter which bank account or credit card you use – the tool will record it for you, and then allow you to categorise all your transactions so you know exactly what you're spending your money on every month.
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Step two. Rally the troops
There’s little point slashing your spending if your partner splurges regardless. This isn’t easy, especially if you have different attitudes to consumerism. Dig out your old bank statements or credit card bills, and show them where the money went. It might shock at least one of you into action.
Step three. Work out why you spend
Is it a means to an end (food, drink, clothes) or an end in itself (retail therapy)?
Step four. Was it money well spent?
Once you’ve totted up your non-essential spending for a week or two, take a look at what you bought. Did the tulips cheer you up? Have you actually worn those thermal undies? Or has the money effectively gone in the bin, when it could still have been in your bank account?
Step five. Use the stuff you buy
Like all children, my daughter is always being distracted by the bright, shiny things she sees in the shops. But we have boxes of toys, books and games that have hardly ever been used.
Step six. Change your lifestyle
If you meet friends for a coffee or down the pub, could you have just as much fun visiting each other’s homes, but without the bill? Read 10 lifestyle changes that will make you richer for some top tips.
Step seven. De-clutter your life
There’s just too much to buy out there. Collecting stuff that doesn’t add anything to your life can quickly become a habit. Break it.
Step eight. Don’t be too tough on yourself
As every slimmer knows, if you diet too hard, too fast, it won’t last, and one evening your partner will find you weeping into an empty tub of Ben & Jerry’s Cheesecake Brownie flavour ice cream.
2011 is just three weeks old. You have another 49 weeks to take control of your spending.
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