Wednesday, 30 September 2009

Clothes shopping - clippings file

I love clothes shopping, and find it easy to spend money on clothes. I am making a conscious effort to do so less, partly to save money, and partly to reduce waste; it is so easy to find oneself accumulating excess possessions, and does not feel particularly healthy or environmentally friendly to do so. I find planning ahead a bit does help, and this is a topic which I will address in future posts.

When I receive mail-order clothes catalogues in the post, I have adopted the habit of quickly skimming through them, and tearing out pages showing any looks I like, and putting them in a clippings file. When I have time, and feel inclined to do so, I review the torn-out pages, analyse what about the pictures appeals to me, whether the outfit is one that would suit my shape and colouring, and then try and work out how to create a simliar effect with my existing wardrobe. I generally find that I have most of the components for a similar ensemble already, or I may decide that the addition of one or two small items would make a difference. In that case, I write a note in the notebook I carry with me, for future reference. For instant, this week I admired an outfit which was essentially a smart shirt, tank-top, and trousers - a combination I wear often - but with a patent belt added. Rummaging through my wardrobe, I found a patent belt belonging to another dress, which I decided would work well for this.

I do something similar with online sites, looking at garments that appeal to me as part of a combination, where the website allow this function. I then bookmark the page concerned for future reference. I have, though, recently unsubscribed from the all clothes-shopping e-mails that I used to receive, so that I now make a conscious effort to visit websites of interest, rather than finding myself drawn into them unintentionally.

Book review "Anybody Can Do Anything" by Betty MacDonald

I don't buy many new books these days - I'll write more about that in another post - but on a recent trip to Hay-on-Wye spent many happy hours browsing through the secondhand bookshops there, and as many the books were £1 or less each, I picked up some interesting bargains.

One of them was "Anybody Can Do Anything" by Betty MacDonald. It was an old-fashioned red hardback, and I was drawn to it as I am susceptible to self-help books, and the idea of a 1940s self-help book was rather appealing. I randomly opened it, read a paragraph or two, laughed, and decided to invest 50p. Anyway, it is a marvellous book; not a self-help book but very topical, as it is an autobiography of a woman in depression-era America, with stories about the bizarre jobs her resourceful, if rather bossy, sister Mary finds for her and other members of the family, and the economical lifestyle her family adopts. I particularly liked the idea of her mother's Saturday evening chilli evenings to which a random assortment of friends are invited, and the clothes-sharing system operated between Betty and her sisters, under which whoever wakes up first gets the best outfit for the day.

It is a very heart-warming story, as the title suggests, and I did find myself believing that anybody really can do anything; Mary enlists her mother to write a radio play, which runs for years; their brother undertakes a series of swaps of his possessions which get him a car so beautiful that Betty's colleagues won't speak to her after they've seen her in it, and Betty herself, hilariously self-deprecating about her lack of office skills, eventually becomes a successful writer.

(Since reading the book, I have discovered that it is part of a popular series, beginning with "The Egg and I", which describes her experiences of marriage to a chicken farmer; I am looking forward to reading that, and the rest of the series.)

A bizarre coincidence: driving home one evening after discussing this book with my sister, who loved it, too, I heard it being read as Radio 4's "book at bedtime".

Savings - different purposes - saving to spend

Today, I'm tackling saving up to buy something in the future. For example, you may wish to save up to buy a car, or home improvements, or perhaps a wedding or holiday. I have also saved up for an occasional expensive item of clothing, and in one case a watch. I contend that these expensive purchases don't make me financially irresponsible; I didn't use credit to buy these items, but chose to save my personal spending money to buy them in place of a number of smaller, more forgettable, treats. (While saving up for the watch, I decided to forgo new clothes for several months in order to buy it; maybe a sign that my priorities are a little peculiar, but it worked for me.)

Anyway, my point is that if you want to buy something expensive, it is, in general, with some exceptions which I will tackle in future posts, more efficient to buy it with money you already have than to borrow the money to do so. And while you are assembling your cash, you may as well get some interest out of it.  You will probably want to keep the money somewhere accessible, although if you are planning fairly long-term for your purchase, you could sign up for an account with some notice attached, if that gets you a better rate.

My recommendation would be to consider the following: using your Cash ISA allowance if you are a taxpayer and have not already done so; using an offset facility on your mortgage if you have one; or, failing either of these, using an ordinary savings account with a good interest rate. Unless you are planning fifteen or twenty years ahead, I would not invest the money in anything stockmarket-related.

You might also consider buying some premium bonds with the money.  There are sites you can visit which show how to calculate the effective interest rate, and this may be worth considerable. I had quite a few bonds for a while, but wasn't lucky enough to win more than a very few small prizes, so I eventually decided to cash in all but a couple of them. (This was rather illogical of me as the more bonds you hold, the more likely you are to win, but after all I am not a computer!)

I suggest deciding to save a certain amount towards your goal each month, bearing in mind what you can afford and when you plan to buy the item, and setting up a direct debit to the designated account each month. If you have the chance to name the account to suit your goal, which is sometimes possible, that may help you.  As mentioned in a previous post, I use my mortgage offset account to save, and have recently set up a "car" jar, into which I will save a small monthly account towards the next car I expect to buy several years' from now. 

Finally, it may be that it is unrealistic to save the full amount you need for the purchase in question before the time you need the money, but even if you are able to send 20% or 30% of the money needed, that will reduce what you need to borrow, and therefore save interest, and will help you to get into the habit of planning ahead.

Monday, 28 September 2009

Savings for different purposes - the emergency fund

The next category of savings I'm looking at is the emergency fund.  Unlike the annual bills fund, this money is intended not to be spent, all being well, but instead to serve as a back-up fund for use if you lose your job, become ill, the roof falls in, or a similar emergency arises.
I would suggest putting your emergency fund in an account with the best interest rates you can manage, while still keeping the money accessible on either no, or very little, notice indeed.  (You may be confident enough to rely on credit cards or overdraft facilities to tide you over until you can access your fund, but I'd strongly suggest not tying up the fund for too long.) If you are a taxpayer then it is definitely worthwhile making use of your cash ISA allowance for this purpose.  Alternatively, if you have an offset facility on your mortgage, you can use that, as I do.
In terms of the amount, the sum of six to eight months' living expenses is often recommended by experts. Depending on your income and other commitments, that may be an ambitious target, but is I think a good one to aim for.

Savings - different purposes - annual bills

While I've long recognised that saving was a sensible and probably virtuous thing to do, and have been in the habit of saving money where possible, it has taken me quite a few years to work out that there are several different categories of saving, which it makes sense to treat separately.

In this post,  I'm looking at annually recurring bills: saving for these this is not really saving at all, just spreading the cost of household bills which need to be paid for irregularly.  I used to find that my savings account would get a severe beating in mid-summer every year, when several insurance policies, car servicing, not to mention holiday costs, all fell due around the same time. A few years' ago I read somewhere about the idea of an "annual bills" jar.  The way it works is very straightforward; you need to add up all the bills which you need to pay less often than monthly, estimate their amounts, ideally add a bit to allow for miscalculations or increased premiums, divide the total by twelve, and then set up a direct debit from current account to savings for that amount each month.  You can then transfer money back to the current account to pay the irregular bills, as they come up.

Another advantage of this approach is that it should avoid the temptation to sign up for any regular payment schemes which you may be offered with insurance and similar; they usually include a hefty amount of interest and are therefore best avoided.

If you like, as well as annual bills you could include a payment for Christmas and Summer holiday expenses, as they are also recurring and standard; I used to lump these categories into my annual bills budget though I have recently, possibly over-fussily, set up a separate jar for holidays.

Sunday, 27 September 2009

Why am I doing this?

I'm a mid-thirties British woman with a long-standing interest in personal finance, developed through reading and practice over the last ten years in particular, my working career so far. In this blog, I will attempt to record what I have learned about the larger issues of financial planning, as well as ideas for money-saving on a smaller scale.  I'm particularly interested in personal finance as a tool for individuals to build some security, and have the freedom to choose work, and a way of life, that suits and pleases them. I am an interested amateur rather than a professional, so please approach my comments in that spirit.  You are unlikely to find specific product recommendations here, but may find recipes, book reviews, and my thoughts and advice.

Aside from personal finance, my interests include literature, particularly classic detective fiction, as well as fashion and food.