I think the point has been reached, certainly from public sentiment, where we are seeing more negative news than positive news, the see-saw has well and truly tilted, good news seems to be brushed over to focus instead on the financial equivalents of four car pile-ups on the M50. The money market stops to stare and the slowdown of the on-lookers causes everything else to back up.
One thing I might ask, is in that case, then why stay on the proverbial M50? In today’s post we’ll look at some simple ways to beat a recession and reduce costs so that you can keep a good standard of living and even profit from a downturn. Some is simple common sense, some might be about things you haven’t considered.
1. Stop driving: Oil prices have risen and they don’t look likely to fall any time soon, I am a cyclist myself, and sometimes people look at me funny when as Operations Manager of a financial house I turn up to meetings in a high-vis jacket, and admittedly sometimes I feel out of place amongst the suits but as an environmentalist and capitalist I have my reasons.
Consider this – what is your time worth? I know for a fact that I get to work 30 minutes quicker (at a minimum) on a bicycle and I get home (Pearse street is in a state of perma-gridlock) quicker than cars too, that extra hour gives me time to do any number of things, I also get exercise and don’t burn oil (which we know is expensive). If I assume that my time is worth a tenner an hour then I get an extra €50 per week (granted its notional rather than actual but the point is made)
I saw a person on a bike today with a t-shirt that said ‘one less car’ and that struck me, that if I got rid of my car I could potentially save €1,000 (repayments, tax, insurance, petrol, maintenance) per month! That’s €12,000 a year which is €15,000 if you are on the 20% tax band and €20,300 if you are on the 41% band! It quickly makes sense to do one of two things, firstly opt out of a car, in my house there are two cars, we would be fine with just one, or if you could sell a car (if you are making payments) and buy a cheaper one, a four or five year old one and have smaller payments (although that can be a double edge sword if the 2nd hand one has problems!)
Of course, you could take public transport more often as well, and let kids walks to school. I think people would be amaze at the bottom line difference this can make. In fact, if you doubt me then I’ll gladly meet you or take a call and we can do your calculations to figure this out. Naturally there are lots of people who can’t do without a car or who drive as part/all of their living, so number 1 won’t apply to you, but if you are not in this category then its worth thinking about.
2. Look at your spending: By this I mean keeping a diary for a month, for most people its easier to save some money than it is to obtain extra money. If you take your current lifestyle and decide what you feel is worthwhile and what isn’t then you can change your budget accordingly, how much you spend and on what is something that everybody should consider and ideally master. It doesn’t require a degree in finance either, if you are splashing out €5 a day on coffee then buy a percolator and make your own, it will be paid off before the month is out. On that note consider that if you spent €5 a day on coffee that it adds up to over €1,200 a year! And the same applies for buying lunch etc. Using the methods discussed here I would wager that I could save the average Joe about €5,000 p.a.
3. Examine your finances: Do you have a mortgage, a loan, savings, or any debts? If so you should see what options are out there, if you have a credit card debt then service it asap, the rates on them tend to be upwards of 15%! You could also transfer the debt to an introductory offer on a different card, the cut up the old one and try to pay off the debt quicker, or at least eat into the principle faster via the lower rate, of course, there is an annual fee on plastic so if the debt isn’t significant enough to warrant that then don’t do it.
If you have savings equal to a debt and are not earning more interest than you are paying out on a debt you may want to pay off that loan. Of course its a good idea to have some money put away for a rainy day, if you dont’ have that already you should look at ways of doing it, living paycheck to paycheck is a very risky proposition, and one that many people are finding themselves in as the overall debt burden (doe to rising rates) is increased.
4. Plan expenditure: If you are a compulsive shopper, then find a way to stop, I don’t care if it requires voodoo or self-flagellation, money not going out is one way to keep money in. Simple things like grocery shopping with a list make all the difference, I normallly do this and the shopping roughly the same price every week, a while back I went with no list and blew an extra €50, suffice to say ‘lists’ are now back in fashion as far as I’m concerned!
5. Don’t pass the Government ATM: O.k…. there is no Government ATM, but there are tax breaks that many people qualify for and they never claim, a single visit to a good accountant will tell you whether or not you are passing by your legal allowances, and the single fact that there is over €1,000,000,000 (one billion!) in unclaimed taxes in the Exchequers bank account means that at least some of you readers have walked past the Government ATM on a few occasions!
6. Do a bit more: If you need extra cash to build up a war fund or to clear some debts then an option is to take on some extra work, part time perhaps, or to teach something that you know, most people could (with a little imagination and elbow grease) earn at least 10% more per annum with minimal effort. You can do this until you get the credit card cleared or a safety fund built up.
7. Shop around: This isn’t contrary to point 4, it does however, mean you should look at what bill plans you are on for gas, electricity, mobile phone tariffs, and broadband prices. By getting a better deal you can literally save hundreds, I had lunch last week with a Regional Manager of an insurance company and on this topic he was amazed at how much he was saving by going onto a new phone/broadband bundle with a new provider! This guy knows the topic of money back to front and it was kind of refreshing to see that no matter what you do or don’t know that there is room to learn something new and fetch a bargain.
8. Avoid Variables: Today’s Independent had a cover story (and yours truly was even mentioned!) about banks making huge margins on Variable Rate loans, naturally the banks feel it’s not their problem, its up to the customer to choose their products. Well, much like the ATM situation above, most of us are actually on variable rates, in fact the figure is somewhere between 50% and 70%! So call your bank, find out if you are on a variable rate and if so ask for tracker options, if you are not happy with the options or the banks answer then look around while there are still decent offers in the market (as they are quickly disappearing!).
Talk to your broker, advisor, accountant, mate who works in finance, whatever you do don’t sit still on this. If necessary find out the cost of a switch (if your bank will give you a better rate you should do this calculation anyways to compare whatever they offer versus another institution) and make your decision.
Next week we’ll do another blogpost with more money saving ideas, including ways to become more financially literate, after all knowledge is power! And we’ll also look at ways of how you can give yourself a financial make over, kind of the monetary equivalent of ‘The Swan’ so to speak. Any comments are welcome and if you can always get a feed using the RSS option.