Money Saving Challenge - Money Saving Ideas

Books that have Inspired this Blog

I’ve always been a fan of a good ol’ self-help book and will often call into my local bookshop to browse through the non-fiction titles.  My interest has always been to find ways of improving my financial situation, which really boils down to having some decent spending money in my pocket and leading a life free of financial pressures and constraints.

Out of the dozens of finance books that I have bought, received as Christmas presents, borrowed from friends and family, etc, there are some that really stand out:

• Rich Dad's Guide to Investing: What the Rich Invest in That the Poor Do Not!
• The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich

Rich Dad's Guide to Investing: What the Rich Invest in That the Poor Do Not!

Rich Dad’s Guide to Investing is written by a guy called Robert T. Kiyosaki – a man who has probably made more money from writing his books on how to become wealthy, than he ever made when he ran his own business!

Kiyosaki has his critics, who consider his books heavy on theory, but very light on practical implementation and I would agree that this is no blue print for making money.  However what this book does do is change your way of thinking towards money and the way you live your life.

The main principle advocated is that you should stop seeing yourself as a regular employee, working long hours and having little or nothing to retire on.  Instead you should take control of your life, quit spending on junk and start investing in assets that will one day provide you with financial freedom.

The book revolves around two central characters:

• Poor Dad – this is Kiyosaki’s father who worked as a college professor, but never really earned an income sufficient to justify the long hours and effort he committed to his work
• & Rich Dad – this was the father of Kiyosaki’s best friend, who as an entrepreneur built up a huge empire with property, hotels and other businesses

Using these two characters, Kiyosaki is able to provide his financial lessons in an autobiographic-like story, which is both entertaining and highly motivational.  It really makes you want to pick yourself up and make something of your life.

Rich Dad’s Guide to Investing is part of the Rich Dad, Poor Dad series of books and in my opinion the best off the lot.  It covers off much of the content from the original Rich Dad, Poor Dad book, whilst taking you further on your journey towards an investment mentality.

Buy now from Amazon - just click on the image below

The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich

Another book that really stands out for me is The Automatic Millionaire and is written by David Bach.

Compared to Rich Dad’s Guide to Investing, The Automatic Millionaire provides much more practical detail on how ordinary people living on ordinary incomes can slowly, but surely save and invest their way to becoming millionaires.

The background to this book comes from when Bach was working as a financial adviser and met a seemingly ordinary looking couple (Jim and Sue McIntyre), who between them earned a fairly modest annual income, but were actually incredibly wealthy and getting ready to take early retirement.  This un-supposing couple owned both their own home plus a rental property outright.  They had a large pension fund and had built up substantial savings, whilst paying for their children to go to college.

Unlike the client he had just met previously - a Porsche driving businessman with a gold Rolex, an $800,000 mortgage and huge credit card debts – the McIntyre’s had amassed a small fortune and gained their financial freedom.  The secret to their success was to follow a few simple rules:

• Spend less than you earn and look for ways cut your spending further
• Start saving and investing your money as early as you can
• Automate your savings, so that the money is taken out of your account before you are tempted to spend it

Bach uses this story to demonstrate how anyone can build their wealth and become financially free, with the following chapters providing more detail on the steps you need to take to achieve your own financial freedom.

The Automatic Millionaire simple & straightforward and can easily be read in a couple of hours, ready for you to start implementing the ideas discussed.  It is especially good for those with a new interest in personal finance and wealth building.

Buy now from Amazon - just click on the image below

The Born Survivors Guide on how to Survive in the Financial Jungle

Ray Mears and Bear Grylls have brought outdoor survival skills to the masses with their fascinating television documentaries on techniques for staying alive in the harshest environments and some of those key survival principles that keep Ray and Bear safe, can also be used to help you survive and thrive in the financial jungle.

Rule 1 – Preparation

The best survivors always ensure they are well prepared for any situation before setting out on their journeys.  This means packing plenty of supplies, medical equipment, navigational aids, clothing and consulting with local experts for advice on dangerous conditions, so that they can avoid putting themselves at risk in the first place.

The same can be said for the best financial survivors.  By availing yourself of the right tools (such as a budget), decent financial advisers to guide you and taking the time to research and understand the best ways to save and spend your money, you can significantly reduce the likelihood of running into financial difficulties.

Rule 2 – Ensure you fully understand your problems

Unfortunately, even the best made plans can sometimes go wrong and a change in circumstances could see you plunging into financial disaster. 

When dropped into a survival situation, the first thing that Ray Mears and Bear Grylls do is climb a tall tree or reach higher ground, so that they can survey the situation and work out a plan for escaping.

Often financial problems whirl round & round in our heads and with each revolution they seem to increase in size and appear more and more difficult to deal with.

The best way to begin dealing with your financial problems is to get them written down on to a piece of paper.  Ideally you should try and produce a budget to show how much you earn, how much you spend and how much you owe. 

You can download our free budget template from here.  It is really easy to use and helps you to fully understand your financial situation.

Creating a budget is the financial equivalent to reaching higher ground or climbing a tall tree.  You can now clearly see your complete financial picture and begin looking at ways to resolve the problems.

Rule 3 – Create a simple plan and stick to it

Using your budget to assess your situation might reveal that you are spending more than you earn and by reviewing each of your regular outgoings you can identify areas to cut back on to save money.  If this is the case, then set the plan and check your budget monthly or weekly to ensure that you are sticking to it.

Maybe you have a large credit card debt that you have been unable to clear with the minimum repayments.  Again set a plan to increase the monthly repayments and a deadline for when the debt needs to be repaid.  Monitor your progress monthly and provided you are not still spending on your credit card and continue to make the repayments, the debt should soon reduce.

Some people may be in more serious doo-doo and have such large debts or financial problems that they need professional assistance.  Fortunately, unlike Ray Mears or Bear Grylls stuck out in the desert, help is available, either from a financial adviser or the Citizens Advice Bureau.  Preparing your budget before meeting with your financial advisers will give them a massive head-start in understanding your situation and being able to help you out. 

Rule 4 – Don’t get caught out by the unknown

In the wild, eating the wrong types of berries or drinking bad water can poison and potentially kill you.  A born survivor will only eat and drink what they are confident will help and not hinder them.

In the financial jungle, poisonous dangers lurk in the form credit card balance transfers, payday loans and dubious packages for consolidating your debt into a single payment.  From the outside they look like delicious quick fixes to your money woes, but in reality they could make things much worse.

Very often people are attracted to credit card details by 0% interest deals, but don’t realise that 0% is only on the balance transferred and does not apply to any new credit card expenditure, which could be charged at 20% or above, very likely higher than their previous card.

I’ve seen payday loans advertised on the television with APRs over 1000%, an absolutely shocking figure that will instantly plunge families into greater poverty and have heard stories about people who have lost their homes after securing a consolidated loan against them.

Whilst I appreciate that in certain situations some people have no choice but to use these poison products, they should at least be fully aware of the risks they are taking on and the potential alternative routes that they could take.

This rule relates back to Rule 1 on preparation and getting expert advice.  Even if you are getting a ‘standard’ financial product, like a mortgage or a credit card, you should do your research so that you fully understand what you are getting yourself into.

Rule 5 – Learn how to thrive, not just survive in the financial jungle

For thousands and thousands of years, humans have been surviving in the toughest conditions, such as the Amazon rainforest, the Arctic wastelands and the sandy deserts.  In each of these environments, people have not only survived, but also learned to thrive.

The same should be said for a born survivor in the financial jungle.  Whether there is a tough recession or economic boom, people still need to fight to survive financially, but they can also use those survival skills of analysis, planning, saving and financial knowledge to begin building up their wealth. 

Once you have cleared your debts, consider starting to save and invest in order to build your wealth.  For more advice and tips on thriving in the financial jungle, take a look at this article on wealth creation.

How to Reduce Credit Card Use

Love them or hate them, credit cards are an essential part of modern life.  In fact not having a credit card can make some things very difficult, especially if you are buying online, booking flights or hotels or renting a car.

But because credit cards make borrowing money so ridiculously easy, it is very simple to quickly run up big debts that become more and more difficult to pay-off.  Many of us have been there (myself included) and many are still there, using easy money to fund gadgets, holidays and the latest additions to their wardrobes.

Although my credit card debts never spiralled too badly out of control, I still developed a sort of psychological acceptance of the debt – if I am already £3,000 in debt, then another £200 won’t make much difference – which prevented me from getting too worried about paying the money back and I am sure that people with similar or larger debts just look at the problem and prefer to just live with it rather than doing anything about it.

The Credit Card Debt Blackhole

Banks and credit card companies make a lot of money – in fact they make serious profits and they do this by taking advantage of our desire to spend.

When a person spends money on their credit card, they are charged interest on the amount of money they borrow, often at a rate of 15 to 20 percent, until that money and interest is paid back.

• A credit card debt of £2,000, with a 15% interest rate will incur a charge of £300
• A credit card debt of £20,000 with a 15% interest rate will incur a charge of £3,000

Often people decide to only make the minimum repayment amounts required by their credit card company, however these repayments only cover the interest created by the debt and do little to pay back the original debt.  Potentially people can easily spend the rest of their lives in debt, therefore to all intents and purposes they are slaves to the credit card company!

Say ‘No’ to Credit Card Slavery

The first issue to address is our attitude towards credit cards and borrowing in general. My 91 year old Grandmother loves using her credit card as convenient way to pay for her household bills, such as gas, electricity and water, but at the end of the month she always pays off the balance and is far too proud and thrifty to run up a debt. 

The message is clear - Take advantage of the credit card company, rather than letting them take advantage of you.
When you make purchases on your credit card, you have a set number of days (20 or 30 depending on provider) before you will be charged interest.  Provided you have paid back all the money you borrowed within that timeframe, you will not have been charged interest.

However you will have been able to benefit from the levels of consumer protection on faulty goods or fraudulent transactions that credit card companies provide and have taken advantage of any reward programmes (such as Nectar Points or Airmiles) that the card company offers.

The key point here is that you need to have the money in your bank account to pay back the credit card debt within the interest-free time period.  My Grandmother will not make a purchase that she cannot actually afford to pay back.  When she does need to make a big purchase, she plans and saves up her money first, so that she can afford to make the repayment straightaway.

Other tips for reducing credit card use are:

• Leave your credit card at home – you should only use your credit card for planned purchases, so rather than carrying it in your wallet, why not just leave it at home and avoid the temptation of using it for frivolous purchases?
• Build up an emergency cash fund – open a savings fund, that you can access in emergencies, rather than relying on your credit card for paying a plumber to fix a leak
• Stop trying to keep up with Joneses next door – letting go of the desire to have the latest and greatest takes a huge amount of weight of your shoulders and reduces your need to stretch your cash.

Climbing Out of the Credit Card Debt Blackhole

If you are in the position where you have a huge credit card debt and don’t know where to start, then help is at hand. 

There is plenty of advice on the internet, our Three Step Guide to Clearing Your Debt is a good place to start and you can always contact the Citizens Advice Bureau for some face-to-face support.

The first thing to do is stop spending on your credit card or cards straight away.  Lock them away so that you cannot easily access them. 

Assess how much debt you are in and get this written down on a piece of paper.  Is the debt all on one credit card or is it with a range of credit and store cards?  Which debt is charging you the highest interest payment and can you concentrate your repayments on that card first?

Create a debt repayment plan, with monthly repayment targets.  Can you raise additional funds by selling unwanted goods, trading down to a cheaper car or taking on part-time work.

Identify areas of non-credit card spending to cut back on and use the extra savings to concentrate on your debt repayments.  Visit this page for money saving ideas.

Remember, with the right attitude, help, support and a good plan, it is possible to cut down on your spending and clear your credit card debt.