Excuses Excuses

Donna Freedman recently wrote an article on Get Rich Slowly exploring how people come up with a variety of external problems to excuse themselves from taking responsibility for their own actions (or lack thereof). She says that we need to call BS on our excuses because usually we are the victims of our own decisions.

I have been guilty of this many times in my life. When I was an undergraduate I had to have some expensive dental work that ate into the depths of my student overdraft. But that's the BS talking; it was ME who neglected my teeth and ME who didn't have any money saved for emergencies!

More recently, I've found when tracking my spending that I often overspend on fuel. In the past I would estimate the cost of getting to work and back, then add on another few miles' worth of fuel per week and budget that amount. Every month when I went over budget I would say, “Ah, but last month I had that trip to Redruth / worked more often / had to go to town a few times” etc. Every month there was an “unexpected“ reason why I had spent too much! I learned that while I do try to limit my driving I cannot stick to as tight a budget as I believed I should, so I have had to adjust my budget accordingly.

I can foresee similar BS justifications in our new place. It's very easy to get carried away when hunting for house stuff like kitchenware. It has been useful for us to go as a couple, with one pointing out to the other that no, a huge meat cleaver is a want, not a need (especially when one of us is a vegetarian!). Better to save that money for next month's rent!

Protecting Yourself

It really doesn't matter what mistakes you've made in the past. The best thing to do is try and learn from them, rather than burying your head in the sand telling yourself it wasn't your fault. Got an unreliable car? Make sure you have money set aside for the inevitable repairs and eventual replacement to avoid taking out a loan. Got a bad credit rating? Save up a couple of months' worth of payments on your debt so you'll always be able to pay at least the minimums.

Don't be afraid to say yeah, I screwed up, but here's why it won't happen again.

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!

What Would You Do With a £1000 Windfall?

Say you won £1000 in a contest. What would you do with the money? It's not an absolutely huge life-changing sum, but it's a still a nice windfall of extra money to fall into your bank account.

So what would you do with the unassigned money?

I had to make this decision recently. I knew I was in for a tax refund because I'd been on the wrong tax code for six months of the past year! I was very pleasantly surprised to see that I was due a refund of just over £1000!

Now, the thing about my tax refund is that it isn't “free money”, although it is VERY easy to think of it as an excuse to spend! It's money that I had to give up valuable hours of my life to attain. Then again, even if I won £1000 it would be hard to forget that it is worth nearly 165 hours of my life (at minimum wage). Ouch, that is painful to write! I think my time should be worth a lot more than that! 

Here's what I did with my hard-earned yet unassigned money:

• Bristol fund - £410. I completed my Moving-to-Bristol fund. This was the main thing I was saving for, so it was important to me to sort it out long before I might need it at the end of the summer!
• Travel fund - £60. I save a little money every month for future travel and I thought it would be great to use some tax refund for something that I will really enjoy. I love seeing the rest of the world! :)
• Gift fund - £50. May and June are particularly expensive months for birthdays in my world, so it was good to re-build my depleted gift fund!
• Family meal - £30. My family rarely go out to eat because it can be quite expensive. I treated us all to breakfast on my sister's birthday with a little of the cash.
• Emergency fund - £200. After meeting my main savings goal (Bristol fund) I have started bulking up my emergency fund because you never know when you'll need some cash.
• Concert ticket - £24. If I am going to spend money, I would rather buy an experience than an object. When I heard one of my favourite bands was coming to Cornwall and putting on a concert on a local beach, I had to go!
• Bike repairs - £26. I had a blow-out the other day. I don't know what I ran over but the puncture ripped straight through the tyre and into the inner tube, leaving a big tear in both of them. I bought a new tyre and upgraded my inner-tube to a puncture-proof variety. So far so good!
• Current account buffer - £200. I tend to transfer any “spare” money into my ISA, so occasionally my current account goes into my interest-free overdraft. This doesn't cost me anything so isn't really a problem, but since I got out of debt I really don't like seeing the number go below £0. I put a £200 buffer in this account and think of it as £0, so now I should never actually go into the red.

What would you do with a windfall? Save it all or blow it on a holiday or the latest iGadget? :) Did you get a tax refund? Click here to find out if you are entitled to a refund and how to get it!

P.S. That 58 minutes on hold to HMRC was the best-paid hour I've ever spent!

I'm Debt Free

That's right, I'm debt free! :) (Excluding student debts – more on that later!)

I've been hovering around 89% debt paid off for the past couple of months now. The reason is that I've been putting away any “spare” money to pay for what I thought would be expensive dental work (I get paranoid about my teeth as I neglected them as a teen). Fortunately I didn't need any treatment at all, so I now have an extra £750 of saved cash!

The first thing I did was top up my Emergency Fund. I've now got a £500 buffer to fall back on, which is around two months rent, car and living costs for me while living at home (not including saving for annual expenses), or the cost of a particularly expensive car repair (I'm looking at you, Jools!).

I put the rest of this “spare” money into my current account. It wiped out my remaining overdraft! I am finally debt free! (Click here to read my original entry about my debt). I won't say that I'll never have debt because I'll probably want to buy a house one day, but I hope that I'll never have consumer debt again.

As I mentioned before, I still have my student debts, but these are not consumer debt, don't affect your credit rating, and are at such a low interest rate that it is better to hold onto any extra money in a savings account. I'm also not eligible to start repayments until the next tax year.

What's next for the Frugal Graduate? Time to go out and splash the cash? Well, the advice on frugal living I have received and learning to waste-not-want-not have not been wasted. I'm still growing my own veg (a tomato seedling came up today!! :D), cycling, re-using and thrifting. My new target is to save £800 to pay for a deposit, first month's rent and moving to Bristol in September.

:)

Are YOU at Risk of Bank Set-Off?

I was shocked to learn that banks have a legal right to take your savings to repay your debt. Here's why and how you can avoid it.

Bank Setting Off

Your bank is legally entitled to take money from your current accounts/savings accounts and use it to repay any debt you have with them, for example credit cards and loans. This is known as “setting off”. Banks will normally not exercise this right unless you start missing payments, but it is worth bearing in mind. They can only do this if both your savings and debts are held by the same bank.

New rules from the Financial Services Authority mean that banks have to leave you enough for you to be able to pay priority debts and cover essential living expenses. They also have to try and contact you to discuss your options before taking your money.

The Solution is Simple

Transfer your saved money to a different bank. Remember that many banks are actually part of large groups, and may have the right to set off from an account held at another bank in that group.

If You Are Really Struggling

If you are really having trouble keeping up with debt repayments, you might want to consider using your savings to pay off some of the balance. It's not a pleasant thought but it is a lifeline that you could use in a time of need. Don't forget that the small amount of interest you earn on savings is by far outweighed by the interest charged on most debt.

A Quick Update

I managed to find a job! It's part time at McDonalds, which actually seems to be a good place to work. There are a lot of staff benefits like money off online shopping at Amazon and Play (and some high-street places too). It's not what I was expecting to be doing six months ago when I got a letter back from a company researching plants offering me an interview (and later a job!), but still, it's money and it's flexible. I can fit it around my job at the Chinese and also any upcoming interviews I will hopefully have for my PhD!

In other news, I noticed today that I haven't used my credit card in over a month! (And it's all paid back!) The last time I used it was because I wasn't sure if I was near my overdraft limit, so in five weeks I've managed to pay off over £600! :) Not bad going for someone on minimum wage!

The best news is that with my new job I should be debt free by the time I go back to Uni! I will hopefully even have some savings! (I can't work it out yet because the hours aren't fixed, but even minimum hours gets me back up to £0!!)


I can do this!

Debt

An economist on the news the other day described the UK as a nation of borrowers. The average Brit has £4264 of debt (EXCLUDING mortgages and student loans) (source: the national money education charity Charity Action) and the average household debt including mortgages is a whopping £55,814! Whilst it's almost impossible to avoid getting a mortgage (unless you're rolling in it!), the other debt is potentially unavoidable. Why do we do it?

Luckily I don't owe £4264. (Well, if we're counting student loans then I'm waaayyy over. I think my four year course gave me a debt of ~£24,000, but that's another blog entry!) Now that I've paid off my £500 credit card I'm also lucky that my debt is interest free. My graduate account overdraft is 0%, as is the money I borrowed money from someone to help buy a car a couple weeks ago (apart from the guilty feeling knowing that I haven't repaid them yet).

My problem was partly frittering money away whilst living in London, partly a once-in-a-lifetime two week tropical ecology field course to Kenya (followed by two weeks travelling), and partly just not having an emergency fund. When I needed some expensive dental work I had nothing to fall back on except credit.

I have been at the point where you only have £10 to last the month. Now I'm trying to turn it around. I'm taking some responsibility.

I don't want to be a statistic.

An Introduction to the Frugal Graduate

University is over and I've joined the real world. My student bank account has been converted to a graduate account, but unfortunately they remembered to transfer my overdraft too. I'm slowly digging my way out of the hole and back up to £0...

I studied Biology at Cardiff University and my good grade can attest to the fact that I did not waste my money on too many nights out or all day shopping trips. I didn't even enter my overdraft until the second year of Uni, but then it was engulfed by a month in Kenya with the University studying tropical ecosystems (fantastic, but I'm still paying the price!) Since then I lived in London for a year on a work placement, which was far more expensive than I'd anticipated even with the salary I received!

So here I am, two months after graduating, working as a chamber maid in a hotel and living with my parents to save money! I've managed to pay off my small credit card debt and buy a car to get me to work (although I was lent some money to help with this that I want to repay as soon as possible). Luckily a research job is in the pipeline for the autumn and beyond (for which I'll be moving out) but money will definitely still be an issue.

A frugal lifestyle will enable me to save money and hopefully benefit the environment by reducing wastage and recycling items for new uses where possible. I will use this blog to document the ways I've been cutting back and reducing my deficit!

Bryallen