The temptation to splurge on 'projects' - or spending money on home maintenance

I am struggling with the urge to buy things at the moment. It is all very well for me to get our day-to-day bills down to a minimum, which I've proudly done - and the process continues; yesterday J. negotiated a better deal for us for phone and internet for the next year - but that is of limited use if our one-off spending is high.  The problem for me comes in 'projects'.  Once a project is undertaken - and it can be anything, but is almost always something to do with the house - budgets and plans can go out of the window.  

Until a month or two ago, we had done very little to our house for some time.  Then, our fridge broke, and we decided to replace it with a beautiful, though expensive fridge which we will aim to keep forever. (I am very happy with this decision.)   

Next, we finally got around to getting a plumber to replace our dripping kitchen tap with one bought months' earlier.  Once that was done, we asked him to come back to fix our leaking bath, which he will do today.  He will also replace a cracked wash basin for us.   

We had to repair the fence between us and our neighbours - it is our responsibility - and while we were doing that, decided to get a quote to replace the garden gate which was rotting away. The price was reasonable, and so we went ahead.  

I am determined that we should stop here, having dealt with the main niggles, although the temptation is to carry on; we could add a sink to the washing machine area, we could build the bookshelves we have been talking about for years, we could get blackout blinds for our room to keep out the early morning sunshine which currently seeps through.  

And as I was hoovering this morning, I found myself casting a critical eye over some of our carpets, thinking that some of them could do with being replaced, and others with a professional clean.....

In my view, there are several problems.  One is the slippery slope; once a psychological barrier has been broken, it is only too easy to break it again.  Secondly, the imperfections that you get into the habit of ignoring daily - like being restricted to showers rather than baths for months at a time, or the fact that the kitchen tap drips - suddenly spring into focus when other work is done.   Finally, there's an illogical part of me which deep down feels that money spent on the house is acceptable because it is an 'investment'.  There's an element of truth in this, of course, but it is an argument to be used with caution.

Although I recognise it is bad housekeeping on my part, as well as wasteful of water, to leave dripping taps and cracked wash basins un-mended, there may be something to be said for an ability to live with less than perfect conditions.  I need to put my critical faculties away and be happy with what I have, while distinguishing between what needs to be done, and what it would be nice to do some time.  

Planning for a decreased, or decreasing, income

One of the reasons I started this blog was because I had decided to change jobs, and do something different. (More on that another time.) I have now left my full-time corporate job, and am working as part-time freelancer for my old employer. So far, the resultant drop in income has been manageable, but I am preparing for the fact that in a few months' time, I may well have no income at all for a time. And my husband works freelance, currently on a contract until mid-May. And when he finishes that, we would like to take advantage of some free time by going travelling for a few weeks.... Hence my heightened interest in saving money.

So far, we've made a few changes, which I've written about here:

-Trying to keep track of everything we spend, on excel. I think that we spend less as a result, and it is a useful exercise.

-Starting a weekly food jar. I mentioned this briefly, and will no doubt write about it more at some point, but allocating a set amount of cash, and using that to pay for all food, is something we've been doing for the past few weeks. So far, it is working well and we have stayed within budget each week, and quite enjoyed the process.

-Reviewing all our regular outgoings more stringently, and making another attempt to cut, or reduce, those that we think aren't really necessary. (Having read more about pet insurance, I cancelled that, as it is true that I cannot envisage a situation where we would be able to actually claim on it. However, the cat may now develop a rare disease needing expensive treatment....)

-Saving as much as possible, and in my case making full use of my ability to contribute to a pension, while I can.

I do think that having more time to spend on watching our outgoings and planning ahead, and so far being happier and less tired, means that we 'need' less to live on at the moment. Fewer meals out, less impulsive shopping to cheer me up, more time to plan meals and so on.

If we do end up living on one income for a while, then I'm determined that even if things are a bit tight in other areas, we a) keep allowances, even if they are small ones, for personal spending, and b) that we both keep paying into pension schemes. (His is automatic, and a much more valuable scheme than mine in terms of benefits, but I will keep up a contribution of some kind even if I am not earning.)

"Orchids on Your Budget, or Live Smartly on What You Have"

I mentioned that I had ordered this book a week or two ago; I have now read it, and been delighted by more than the title. The author wrote the 1930s bestseller "Live Alone and Like it" before writing "Orchids on Your Budget". This book is not aimed at those with serious financial problems, but at people interested in living well, responsibly and stylishly on moderate means.

It is filled with creative and inspiring ideas, some of which I will definitely revisit in future posts, but the main points I took from it were the following lessons:

-Don't feel you have to maintain a front of a fancy lifestyle to impress others, while scraping a miserable existence behind the scenes. Instead, forget others' expectations, take down the front and spend the money saved on things you care about.
-Work out what you want, and then work away of having that, whether by generating more money - and she offers many creative suggestions for doing so - or by making savings in other areas.
-Know the difference between real luxuries and habits. E.g don't buy a daily newspaper out of habit if you don't actually read it.
-Don't spend so much on housing, or food, that you don't have enough money for miscellaneous extras, whether those are orchids, holidays or theatre trips, or savings. The author is an advocate of getting a slightly smaller house or flat than you think you can afford; this will save not only on rent or mortgage, but also on the extra maintenance of a larger place.
-Plan ahead, whether in relation to your clothes - she suggests adopting a single colour for your wardrobe each year, and sticking to it fairly strictly - or entertaining.
-Play to your strengths, in terms of your assets and skills. My favourite example was that of a woman with a lovely silver tea service, whose preferred form of entertaining was therefore to have tea parties.
-Enjoy the challenge of doing a lot, and having fun, on a little money.
-Don't assume that you would be happier, better dressed and so on, if you were rich. The author considers that those who know about clothes will be well-dressed regardless of how much money they have; they spend time and effort instead of money.
-Do your social duty; return invitations, even if you can't afford a lavish party, and take responsibility for your problems if you do get into serious financial difficulty.
-Don't follow other people's rules on budgeting too slavishly; everyone is different, and you need to adopt a system that makes sense to you.

Using credit cards

I recently read an article on get rich slowly - www.getrichslowly.org - where the author suggested abandoning using credit cards and using cash instead. I thought this was an interesting suggestion, although one I might find it inconvenient to implement in practice, but I do agree that it is best to simplify one's credit card situation as much as possible. My thoughts on using credit cards are as follows:

1) Credit cards are a terrible way to borrow money; the interest rates are huge compared to any other type of loan.
2) Credit cards can be a useful way to pay for many purchases, but only if you already have the money for them.
3) It is worthwhile signing up for a credit card with reward points or airmiles. (Mine gives 2% cashback.) These benefits are only worthwhile if you pay off the full balance every month, however, as they would not come close to offsetting the interest payable.
4) Having used various cards in the past, I have now simplified my situation to the following; using one Mastercard for all household bills and most large items.
5) I have online billing, meaning a) you can check the state of your account at any point, and b) it is set up to pay the full balance every month, so you don't need to bother with a bill and worry about avoiding late fees. If you do not have this option, make sure that you have a way of keeping track of the due date of payments, so that you avoid running up charges for late payment.
6) If you need to have a back-up card, for instance for travelling or to pay for large one off items, keep it tucked away somewhere safe, and not in your wallet, when not needed.

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.