Wednesday, 8 October 2014

First list your priorities

Good morning, I'm going to rattle this one off quick, have plans for the day. It always intrigues me how people prioritize their spending, what influences their choices, and how they decide what is important to them. We are all different and have different needs, but I can't help thinking that poor choices are at the root of many a problem debt. It's the psychology of what's behind spending which I find fascinating, but unfortunately I haven't time to write a whole book about it, so a blog post will have to suffice.

I'll start with what's at the top of my priority list, which I am sure many of you financial savvy people will agree with. First off is to pay for a roof over my head. I used to pay rent from the age of 16 to 27. Board and lodgings to my mum from the very first wage packet, then rent to a landlord for a bedsit or flat. At 27 I bought my first house which came with a mortgage. I never once defaulted on rent or mortgage because I didn't want to find myself without a home.

Second priority was to pay for any services to the accommodation. Council Tax which used to be called Poll Tax, and before that Rates, had to be paid. Heating and lighting had to be paid. I used it, I paid for it. So, that's a roof over my head covered.

My next priority was to eat, I always made sure I had enough money for food, even if it meant having to cut down a bit when things were tight. Now the edges start getting a bit blurred, things are not clear cut any more, there are choices to be made. Now the questions start. What are your priorities where food is concerned? What would you never give up no matter how much it costs? I still like to think I can adapt my eating habits according to how much money I have to spend on it. Squeeze my finances to the bone and I will find something to eat within my budget. I can't think of one thing that I would still buy if I had no money and had to go into debt for it.

Now comes the juggling bit, do you know how to juggle, because if you don't you need to learn. The term robbing Peter to pay Paul is imperative these days, though I wouldn't call it robbing, No need to go without if you prioritize before it gets to crisis point. And there is the crux of the matter. Good old fashioned sitting down and making a plan, thinking about what is important in your life.

I will never understand people who say they wouldn't give up this and give up that, and are perpetually in debt. So what they are saying is, plastic isn't real money and I will have whatever I fancy. I will have a latte every day, I will have the latest mobile phone gadgety thing, and I will change my car every year, because those are my priorities. I say, sunshine, you have got it all back to front, arse about face, and there will come a time when you will be drowning up to your eyeballs in debt because your priorities are all wrong.

But you can't tell folks that. Eventually they have a light bulb moment when the penny suddenly drops and they realize that something has to give. But the changes they need to make are like climbing a mountain, their habits are so ingrained in their lifestyle that they fight against change. They want to carry on with their current lifestyle and still get out of debt. Their juggling becomes more intense as they search out a remedy which will not impede their comfortable life.

The remedy is simple and staring them in the face, I'm stating the bleeding obvious here, where's Nellie when I need her, ha ha. If you spend more money than you have coming into the house you will go into debt. Spending someone else's money is not a good idea, it will come back to bite you on the bum eventually.

This is where the psychology comes into it. How do you decide what to spend your available income on? How do you divide it up and prioritize? Say you were down to your last couple of £'s would you spend it on a pint down the pub or a loaf of bread, a tin of baked beans, and six eggs?

Let's imagine we are all down to our last couple of £'s, no let's make it £5, I'm being generous. Imagine this scenario, we have paid the rent, and we have heating, what would you spend your last £5 on when you have a week to go till the next payday. I know what a lot of you are going to say, eat out of the freezer and cupboards, good for you. But there will be those who say I have nothing in my cupboards. Hang on a minute, what's that packet of pasta then, and what's that onion, and I see you have a stock cube. Isn't that food? Oh, I see, you don't fancy it so you are going out to spend your £5 on a pizza. Why not add a fizzy drink and a pancake to that and put it on the credit card!

Can you see what I mean, I'm sure you can, this is like teaching my grandma to suck eggs, but if there is one person out there who is desperately searching for that light bulb moment, then writing this post will have been worth it.

There is a lot more I could say but I don't want to appear sanctimonious, I don't know everything, I'm just drawing on my experiences and adding my thoughts. Questions you can ask yourself and only you can answer them. Do you have any debt? If not, you are swimming, if you have then you are sinking. What would it take to throw a life belt to you? You can do it the hard way, carry on sinking until you are eventually totally submerged, or you could sit down and work through your priorities. Divide up your income into pots according to what has to be paid, and when it has to be paid, but make sure you don't prioritize a new dress over slashing £50 off your debt. Never ever leave your debt languishing at the bottom of the list, promising to pay what ever you have left into it. It should be somewhere near the top. You have to pay your rent or mortgage, you have to pay Council Tax, you have to pay utilities, but you have control over how much you use, as I highlighted in yesterdays post.

Right, I'm off, done my bit, trying to help, need to go to town to pay some bills. I shall be looking for your comments, hope it all works out for you, whatever your situation.
Toodle pip

34 comments:

  1. A brilliant post. I really hope that for someone it switches on that light bulb.

    We all have that moment at some point in our lives and for many reasons. When the light bulb goes on you have that sudden clarity of thought and at last you can see your way out of the darkness and misery that is debt. For me it was knowing that I had to leave my first husband, his last £5 would have gone on a couple of pints down the pub, while mine would have filled a cupboard with cheap but nutritious food for the family.

    So while he's still paying off debts accumulated during his second marriage and divorce after having had his light bulb moment only in the last couple of years, I'm halfway through paying off a mortgage and developing a whole new future, paying as we go for anything we need.

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  2. Good post, our lightbulb moment came in September 2006 when we eventually got the letter saying our house was going to re-possessed, it was oh s*it, all the credit cards were up to the limit but not through fancy spending, six months beforehand hubby had an operation and was off work recovering, all we had was sick pay, no help with council tax/housing benefit as it was our own house( bought from council) so we used the cards to pay bills, not an ideal situation but what could we do. So we put the for sale sign up, sold the house at a loss before it was repossessed and moved into rented still paying off debts left over after selling the house and paying off the estate agents at a £1 month, we told them if they dropped the price they would not be enough to pay their bill, they didn't listen. There is no shame in living in rented it does not make you a bad/inferior/ worthless person if that is all you can afford, as for furniture most of it is second hand bought off ebay, we have value/cheap food and are slowly paying off debts. Still got a way to go but it can be done, there is a way out. Jo

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  3. I have been down to my last fiver many times in my life and bringing up a large family I would always apply it to the food bill. Nothing is worse than not having any money for food to feed your family, so I guess I would tuck it away for emergencies. If I did nt do that I would save it for when I saw any garage sales. I have my list with me always as to what I need to buy and almost always eventually find what I am looking for at a tiny fraction of the price I would pay in the stores.
    I dont think about people who overspend(or drink or gamble or take drugs) I can only be responsible for myself and others must do what they think best. Having money gives you more options but not having any does nt mean you have no options at all.
    Love you blog - you are definitely a "glass half full" kinda gal !

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  4. Thank you so much for this post. Our light bulb moment came some years ago when my husband's company closed and we were in another state. We then had another major move to our home state and job hunting. Our family gave us a roof over our heads til we could get one of our own. I found your blog a few years ago when I was looking for ideas and encouragement to live frugally and within our means. It isn't just ideas that your blog has given me but it has changed the way I think about spending and that has been the true lasting gift. I do not look at things the same way. And I find that I am very happy and content with these changes. These thought changes have also effected my family and so it has been passed along. We are still getting out of debt but by the end of next year we should be almost out so light at the end of the tunnel. This post is another boost for me along this journey that urges me to keep pressing in and encourages me greatly. Thank you Ilona :)
    Jennifer in Ohio, USA

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  5. Great post! Common sense seems to be in short supply these days, so it is good to read a blog that offers good advice.
    I think many people are spoiled thinking they have to have a fancy phone, new car, etc etc which only leads to more debt.
    Our only debt is our mortgage, and it should be paid off in 3 years. If we really buckle down, we can pay it off next year. It would be so wonderful to be debt free!

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  6. I married a violent man. He used to spend all his money on drink. I left him a decade ago. Doing my divorce papers, I note that he spends hundreds and sometimes a thousand pounds a week. He has a good personal pension but buys everything on credit. I have very little money but am not in debt at all.

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  7. Starting reading your blog when you were jumping in and out of skip, enjoyed reading about your holls,
    Did think you had got out of the wrong side of the bed this morning until I had finished reading, its common sence which some people don't have, if you can't afford it don't buy it. I had to save hard for things I wanted.
    Do enjoy reading your bog, off shopping tomorrow need new to me winter jumpers see what I can find in the charity shops.

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  8. I always life when you say arse about face. I haven't heard that expression before but like to drop it into conversation every now and then ;o). Having a close relative who has had his home repossessed and by his own admission because he is truly bad with money, I know what goes on and could tell you stories to make your hair stand on end. Pub is no 1 priority I'm afraid.

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    1. oh dear I mean laugh. I'm tired. Sorry.

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  9. You talk a lot of sense Ilona - we are the same age and I think our parents instilled in us to live within your means. I grew up in a council house, but when we married we bought a house after 2 years of renting and have never had debts. If I buy using a credit card - for insurance purposes - I pay up straight away, I don't even wait until the end of the month.
    The only debt my dad ever had was in between my mother dying when I was very young and when he remarried when I was 12. I passed the 11+ and originally my dad said I couldn't go as he couldn't afford the uniform ( it could only be bought at one shop) In the end he bought my winter uniform with a Provident Cheque and the summer one borrowing money from a Loan Club' in our town. He went without himself to do that - he had very little during his lifetime. But even when I was desperately hard up myself over the years I would still give him little treats as he made me understand valuable life lessons and he deserved so much more than he had. He's long gone; but not forgotten - but what he taught me about surviving on little money lives on!

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  10. You can talk till you are blue in the face....unfortunately people only hear what they want hear. Wants come before needs for some folks. It is common sense just as you say. I calculate how much my gas and electric will be and know what my rates will be . I still save for them with money in separate tins. Why should I let them take money out of my account for it to sit in their bank earning interest for these giant companys? Don't do direct debits. Just send me the bill and I will pay it. I've never been in debt but I can thank my Mum and Dad for putting me on the right road. I have the same priorities as you.

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  11. P.S we did have a mortgage - how could I forget! But it was always the first thing paid - in the 60's I watched Cathy Come Home - and it haunted me!

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    1. Yes treelover, this programme has stayed with me too.

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    2. I remember watching that film but can't remember much about it. I will look on yoootooob to see if it is there. Thanks for mentioning it.

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  12. There is being frugal and there is being obsessed with being frugal to the point that you daren't flush the loo or have more than a dim Christmas light in your room or turn the heating on. I'm all for buying yellow stickered produce and being careful how I spend money but I think you can go too far. Perhaps it's different if you live alone. I have an elderly relative to think of, the elderly feel the cold more and need heating on, not only in the room they're sitting in but the other rooms they go in too. The sitting room needs heating because that's used the most but the other rooms need to be warm too, even going into the cold kitchen to make a cup of tea can soon chill an elderly person and start off a coughing fit.

    It's all very well to preach about how we should do this and that, you live alone Illona and only have yourself to look after and keep warm. I can't expect my 85 year old relative to dress up in woolly hat etc to sit in our home as you do in yours. Nor can I expect her to wash in cold water as you do. Living alone is so much more economical than living with others.

    Some good points about debt but the frugal living advice is impractical for the elderly and therefore not doable for those who take care of them.

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    1. Good point. Also, some people have no debt and are still "sinking". Debt freedom does not always ensure happiness.

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    2. I think Ilona's points are about what works for her, and she shares so people can take and learn, if of value, or assess and determine not applicable if it is not. Your priority, and good for you, is the health and comfort of your family member. Heating your home to a comfortable level is the right choice for you, and so other money saving things might have better merit. No doubt there are families that scrimp and do without , and parents and caretakers may work long and sometimes extra hours, and still struggle financially. Those are bigger societal issues and need societal solutions, in my humble opinion.

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    3. I agree, Anne! I feel well and truly told off by ilona's post despite having zero debt except student debt, not very nice all this holier-than-thou.

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    4. I knew there would be a backlash to this post. Anne, I am not preaching, as SAM said, I write about what works for me. Your circumstances are different to mine and require a different approach. Take what you want from my post, if nothing is relevant, ignore it.

      Theresa, some people are programmed never to be happy, it's embedded in their personalities. My interest in psychology is nothing more than an inquisitive itch that comes to the surface now and again and needs scratching. I am not a professional, I just have a keen interest.

      Jessica, when you were a student did you label your teachers as 'holier-than- thou', just because they knew a bit more than you about the subject they were teaching? Did you feel 'told off', when the teacher corrected your work? I suggest that if you have these feelings your learning capacity is impeded by what you want to hear, rather than opening your mind to all possibilities. Your accusation is only to be expected I suppose, given that I have written over 2,000 posts on this blog. I can't please everyone all of the time.

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    5. Let's take a step back and really LOOK at the content of Ilona's post. Ilona is writing about her life and she is sharing her thoughts and opinions. I do not think for one moment that she is oblivious to the fact (or unsympathetic) that other people may lead very different lives and in many instances also bear heavy responsibilities that must be managed on a daily basis. No two people are the same and we must all try to find the right way forward whilst managing whatever life chooses to throw at us. Ilona has offered her opinions on the subject of finance. An opinion is neither right nor wrong - it is simply an opinion. I choose to take on board the very good advice that has been offered in this post and although some of Ilona's methods would not suit my lifestyle and circumstances I find that there is nothing offensive about her words. That is my choice.

      Julia

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    6. ..and you made it perfectly clear in your first paragraph that everyone's needs are different. You don't have to justify yourself. I went and switched a few things off yesterday. Thanks for the reminder.

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    7. Yes, everyone's needs differ, and each person's situation is her own. Some really do struggle in this economy. There are always steps and/or choices to make... occasionally tough ones. Ilona chooses to keep her heat off as much as possible, to use less water, etc. to keep her bills low so she can do the things she wants to do (take walking trips). I've never had the impression she's living high on the hog, and have always had the impression her frugal habits and routine are clear choices she has made. Not everyone can--or would want to--do as she does. But if you're struggling to put food on the table for your family, or just keep a roof over your head, then you're probably looking for solutions. I think some of the offense by some readers was about lattes, lunches out or a new dress. Some have been living bare bones for awhile, and maybe resent having NO money for little luxuries, so those words struck a chord? But they were just examples.

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  13. Ilona and Sam are both basically right, everyone need to think about what is important to them and prioritise accordingly. We are very fortunate in having paid off our mortgage, having some savings, my husband's pension and no debt but I have no work at present, so we still have to be careful. I was rather more wasteful with money in the past when work was plentiful...so if you are in a great financial position now...save some for the future when times may not be so good! And Sam is right that there are people who work long hours and several jobs, are really careful and yet just cannot avoid debt...this can't be right in a so called 'developed' country.

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  14. Anne and Jessica, I think you are being defensive and missing the point rather. Ilona is saying we all prioritise and that our priorities are different. She is giving hers because they work for her. We are free to cherry pick the best of her observations that suit us and our life. One thing I will take issue with is Annes comment that " Living alone is so much more economical than living with others". Water rates, insurances, TV licence etc are the same how ever many people live in the home.
    We all have to make choices about the things we want and the things we need, mine will be different to yours. So long as the choices we make are within our means and suit us that's fine.

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  15. My priorities are the same. I think most people's are. I think people's problems come from not having enough money to cover the basics - many don't these days. I don't think they are making poor choices or wanting too much at all. I don't think they are prioritising badly. I think it is mostly out of their hands and they are in debt if they are, to buy food, pay the rent etc. because they have not got what they need just to survive for that week or month. They have pay day loans in order to pay the fare to get to work. They can't downsize as they are already at rock bottom.

    Frugality is a luxury that you choose in order to prioritise and save money in the bank or spend on non essentials. Poverty is what you don't choose or want. Enough is truly as good as a feast. But if you fall short it is soul destroying and breaks people's spirit after a while. Anyone can do without for a few weeks or even a couple of months, but long term, it's a degrading miserable existence that makes people into outcasts as everything costs money. Things break or wear out. Even a walk in the park costs you if you need to pay for the bus to get there.

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    1. Walk around the block

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    2. I learnt my frugal ways through necessity. We didn't have much as a family, father kept mum short of money and she had to make do the best way she could. I have her to thank for the position I am in now. Long term I never had much money, worked hard, and with sensible choices, and my priorities being not to spend more than I earn, I seem to have come through it ok. There were times when all the money I had went into the three houses that I bought, there wasn't much left for anything else. I never felt degraded or miserable, I was building my future.

      I didn't mention anything about how people found themselves in debt, it can happen for a number of reasons. Everyone should prioritize their spending from the very rich to the very poor, as The Saver of Suburbia says in the following comment.

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  16. At the end of the day the hard truth is that there is no other choice but to prioritise your spending. Whether your debt is down to being wasteful or sheer bad luck the choice is the same. Where am I going to spend my limited resources most effectively? I don't understand why Ilona's simple statement of fact has got some people in a fluster! I think that there is a simple misunderstanding about the nature of blogging.It's a community of like minded people sharing ideas and if it wasn't for the people who take the time to blog about their experiences it would be a pretty dull bloggosphere! I am 100% positive that Ilona wasn't suggesting that we put our elderly relatives in cold rooms to be tortured daily with cold flannels and cheap teabags. I get inspiration and interesting, thought provoking posts from Ilona and sometimes a bit of tough love is the best advice that you can receive! keep on saying it as it is Ilona : ))

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  17. Thank you to the people who post as Anonymous, and add their name in the text. I don't know why everyone can't do that.

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  18. I've done things pretty much the same way, keep a roof over our heads, pay the bills and put food on the table etc. After the essentials are paid everything else has to be prioritised.
    It used to be common for people to wait for the 'red bill' before paying which was a handy bit of credit.
    None of that now though, if you've not paid within two weeks the reminder comes attatched to a solicitors letter.
    Direct debits can cause you to incur bank charges if you have insufficient funds.
    Dave.

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  19. Due to hubby losing his job a few years ago and getting one that only paid half his original salary and my having to take a large pay cut at work to save jobs, we had to seriously tighten our belts four years ago to ensure we could pay the bills. The obvious thing for us to do was prioritise: mortgage and council tax, keeping warm and eating. Everything else is an 'extra'. It's amazing how this happening to us made us focus on what's really important and made it so much easier to enjoy the things in life that don't cost so much money.

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  20. I enjoy reading this and other frugal blogs, since they just resonate with me and the life I want to live. I never was in debt or had money problems, so you would say I don't need the pep-talk, but I still enjoy it all. Before my mum died she too needed a heated house and special food, but I did'nt feel offended by the very frugal suggestions. It's just great that by not flushing or buying toilet paper one can make a difference in their financial struggle.

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