The Latte Factor

Do you know how much you spend on little whims? A fiver here, maybe a couple of pounds there. The problem is that it all adds up!

David Bach, author of many personal finance books such as The Automatic Millionaire, discusses the concept of the “Latte Factor”. This phrase describes small but regular spending, for example a daily latte on the way to work, which slowly adds up into a huge annual expenditure.

Is a daily latte really the end of the world?

Will small, regular expenses really break the bank? Maybe you buy lunch at the shop around the corner from work every day, at a cost of £4. That's £20 a week, which is £1000 a year, and over the course of a working lifetime that's a significant amount of money that you could have spent in other ways. It also works out as 7 weeks' worth of work a year at minimum wage.

It's important to keep your life balanced though. If you can't spend a planned amount on things you want but really don't need then you might spend all your life waiting to be allowed small luxuries.

Xin Lu made a good point in her article on WiseBread; “I believe that saving money should not be a punishment, so when you deprive yourself of a tiny expense that makes you happy, the whole exercise of saving money will become a negative experience ”.

If you add a small Latte Factor to your budget and use it as motivation to save money in other areas, it might actually be saving you money in the long run. You may well be less likely to rebel against an oppressively-tight budget and go on a mad spending spree!

Conclusions

I believe as long as you have the money to do so (not a credit card!) a small weekly budget of “fun money” can be a worthwhile use of your cash. You can use it to go for dinner with your friends, or save it for a trip somewhere, or just spend it on a latte, whatever you fancy. It's your money to spend as you like, so you don't have to wait until retirement to enjoy what you have!

Who Cares About the Joneses? Be Yourself!

Frugal people tend to save their money for the things they find the most important. They usually don't give a monkeys whether everyone else has a swanky smartphone or a brand new car. 

That's why I was so surprised to read an infuriating article on the frugal living site Wise Bread called "Passing for Middle Class". Writer Philip Brewer gives people tips on how to keep up with the Joneses on a budget, which sounds fine in principal but ends up listing ways to get things you don't need whilst avoiding paying top whack for the privilege.

One of the options Brewer suggests is to choose the cheapest “lifestyle cluster” (suburban house plus two cars vs. urban apartment closer to work) which will allow you to pass yourself off as middle class whilst avoiding the items you are not “required to have (to count as middle class)”.

The other alternative is to get all the things you are “required to have” at the cheapest possible price. The most ridiculous of these for me was a university degree. In the US, University education leaves a lot of people struggling with huge student debts that can really harm their financial future. If you need a degree for your chosen career then fine, but Brewer states that a Bachelors is a required “middle class marker” and seems to suggest that you should just get any old degree from your local state's school. To me, it sounds like if it's not allowing you to get a better job, you're just paying thousands of dollars for bragging rights and entry into the middle class status!

Why does this matter? Who actually cares??

People can feel criticised for the choices they make. Why do you live in such a small house? Why save for tomorrow when you could get hit by a bus today? Why do you drive an old banger when everyone else is paying off car loans for the next four years? Why do you not follow the crowd?

The thing is, frugal people decided long ago not to bother trying to keep up with pointless class status symbols. As financial guru Dave Ramsey says, the Joneses don't want you to know they're actually broke!

Possibly the most infuriating line in the whole article is the following: “Sometimes, even when your values aren't middle-class values, it's worth making some small adjustments to pass for middle class”. No no NO! Stand up for what you believe in! Live well within your means and spend your money on what's important to you!

Please don't try and “pass for middle class”. Be who you are!

Coupons Don't Save Me Money!

I've heard a lot about that Extreme Couponing programme in America. It sounds like these people save themselves a fortune by spending a lot of time searching out the best deals, but what about the average person?

I don't buy newspapers and no-one delivers circulars to this neck of the woods, but I do get sent the occasional coupon stash from the supermarkets. I like to think that I would not be tricked into buying something I didn't need just because I had a voucher for 50p off, but recent events have suggested I am prone to it!

I was walking through Tesco the other day and had a nose to see if my favourite cider was on offer - no such luck and it's £2.20 for a pint bottle. Then I remembered that I had a Clubcard voucher for 30p off a bottle, so I went back and got one! Now it's not the end of the world but that's £1.80 that I didn't need to spend (I only usually buy it when it's buy-one-get-one-free!), just because a coupon promised me free money!

Coupons are almost always for branded items. They're a form of advertising, designed to promote brand loyalty. They can save you money, of course, but do they work out cheaper in the long run? People spend longer in the shops looking for the right item and are more likely to buy more luxury items with the money they've "saved"!

I have also been carrying around a 50p off voucher for a bottle of Starbucks Frappuccino. This coupon is designed specifically to make you try their new product, decide you like it and then continue to buy it at full price! I wouldn't have bought it before, so why do I want to fall victim to their evil schemes? I need to act more like Ilona (aka the MeanQueen) and beat the shops at their own game – get in, get what you need, get out!

Do you "coupon"? Why is that a verb? I'd be interested to hear if any fellow Brits hunt coupons in a US-style way!

I'm Back!

I'm back from my week in Bristol. I learned a lot of great techniques that will help me in my studies and I'm really excited to get started!

Living away from home for a week was EXPENSIVE! Eating out all the time really does add up; I'm glad I don't do it all the time.

We also managed to find somewhere to live! It was very daunting trying to find a place of our own, but we knew when we walked into a nice 1-bed flat on a long residential street that we'd found the right place. We can afford it, it's big enough, I really like the kitchen and a bonus was that it has a nice pebbled garden (I will fill it with tubs full of vegetables and flowers!). We can move at the start of September, which is scarily not that far from now!

The Boyfriend has caught frugal fever! We were walking through the bus station and he spotted a book he would like to read on the journey home. He said that he'd picked it up, but then realised that the £12.99 could go into the “lamp fund” (his description of a furniture fund because we need lots of things from a lamp to a sofa, haha!). So yeah, we're encouraging each other to save money even more now! 

 

There's so much to organise in the next few weeks!

How to Get the Smell Out of Shoes

This is a quick tip that many seasoned frugalists will know, but most people seem to use those chemical shoe deodorisers. This is a cheaper alternative!

My old hiking boots have been through a lot. I've had them since I first started the Duke of Edinburgh award, aged 13! Ten years later, and these things have endured A LOT of mileage. They are still going strong, although they have recently begun to smell.

I needed to save my beloved friends from their stinky fate. All you do is add one or two teaspoons of bicarbonate of soda into each shoe and give it a good shake around. Leave your shoes in a dry place overnight and the bicarbonate of soda should have worked its magic. Shake the powder back out of the shoes (outside!) and give them a good sniff. Hopefully they should be as good as new!

Wouldn't have dared to sniff them before!

Off to Bristol for a Week

I'm going to Bristol this week. I'm learning some of the new techniques developed by the PhD student I will be taking over from. (Our projects are different but involve similar barley plants and therefore similar methods). It will be great to start to get to know everyone in the lab, and of course to learn the skills I will need for my PhD!

Another exciting part of the week will be the weekend. I'm going flat hunting... with The Boyfriend! After six years we will finally be moving in together. He has a place on a Masters course in Bristol too, so we are hoping to rent somewhere halfway between our two campuses (which are about 4 miles apart).

The area I have in mind is out of the city centre but still walkable/cycleable, so I will be able to sell Jools the Peugeot. Driving in Bristol's a nightmare anyway, and the amount I'll save in fuel/tax/insurance/repairs will completely cover my increase in rent!

So excited! I'm away all week but I will schedule a couple of posts while I'm gone so you don't miss me too much! Haha! :)

Dha weles!

The Sign of a Good Bike Ride

Newly inspired by the Frugal Queen's resolve to lose weight and get healthy, I hopped on my bike and went for a quick spin down the lane to the village. I was quite happy that it wasn't raining for once!

What I failed to think about was that it HAD been raining. Oh yes! I passed three farms on my cycle. The cows had been out, digging up the verge and spreading mud for miles! The result was that the rain had turned most of the road into a big mud bath!

Can you tell I don't have mud-guards?

How did it get on top of my helmet??

Still, it was great fun and I got some exercise in! Mud is the sign of a good bike ride, don't you think? :D

Financial Tips for New Graduates

Congratulations on graduating university and entering life in the real world! :) I graduated a year ago, almost to the day, and I have some financial advice to share with you! It's strange going from student life to working to earn more money than you ever had before, so it's important you pay attention to what you're spending to live happily within your means.

Live at home if possible, rent a cheap room if not – It's not glamorous, but living with your parents for a year or so while you save some money will save you so much money! I pay my parents £40 a week in rent and bills, which is a lot cheaper than even lodging would be. If that's not an option for you, try lodging or getting a flatshare with some friends. 

Start an emergency fund – The first thing you should do when you start earning money is put at least 10% of your wage straight into a separate bank account, to provide a buffer in case of emergencies. You might need it for expensive car repairs or job loss or visiting a sick relative, but ONLY use it for emergencies! Save about £1000 before focussing on repaying your overdraft/credit card debts.

Look for the perfect job, but get ANY job to tide you over – First things first, apply for Jobseekers Allowance. That's what it's there for, so don't feel embarrassed! Spend most of your effort hunting for that perfect job, but apply for any high-turnover job you see too; earning minimum wage is better than getting just £56 a week on the dole. Over the past year I've worked as a chambermaid in a hotel, in McDonald's and as a waitress. It's lame but it pays the bills while you get something better!

Don't pay off your student loans early! - I encourage you to blatantly ignore your student loan! :) In April you will begin repayments of 9% of whatever you earn over £15,000 (which will be automatically deducted from your wages). If you have any spare money you should put it into a savings account (like an ISA) rather than paying down your loan, because you'll make more in interest than you save yourself by lowering the debt. This debt does NOT affect your credit rating. 

Do pay off other debts ASAP – Unlike your student loan, your overdraft and credit cards WILL affect your credit rating. You will also likely be charged interest on credit card debt, and while your overdraft might be interest-free now it will not remain so forever. After building your emergency fund, pay these debts off aggressively (as much as you can afford, not just the minimum payment!) and save yourself a LOT of money in interest!

Avoid having a car – If you can use public transport to get to your job, DON'T get a car. Including £300 of repairs, buying and running my old Peugeot Jools has cost me around £3000 this year! OUCH! Don't even THINK about buying a brand new car! Put what you would pay in car payments into a savings account and pay cash for a second hand one in a few months time!

Don't buy things you can't afford – Purchasing things using credit means you often pay through the nose in interest. Credit cards are great for building a credit rating IF you pay them off in full every month. If you can't trust yourself to do that, don't use them!

Keep a spending diary – Do you wonder where your money goes? Of course you remember the big things, but a few pounds here and there really does add up. Keep a record of your spending (it only takes a couple of minutes a day) and use it to stay in control of your budget!

So there you have it. Good luck out there in the real world! It's strange to finally leave education (maybe that's why I'm going back again, haha!) but it's a new chapter in your life. Make sure you start it right!