Monday, December 29, 2008

Routine

In my third and last post of the day here, I want to explain my routine financial checks, because I'm not sure if I have before - very remiss of me, if not! A regular checking system is vital to good financial health.

It takes me about 10-15 minutes to establish my current financial position, to reconcile transactions since my last check and to make reliable financial plans for the upcoming days and weeks. By doing this every few days, I can make sure there will be enough money in my account to pay bills (mostly by monthly Direct Debit), keep an eye on any overspending and check that my financial identity hasn't been compromised.

I use telephone banking to get my balance and recent transactions, noting all this info on a dated page in my A4 diary. Then I check the outgoing payments against the receipts in my purse and make notes of all spending. The direct debit payments and regular incomings are scheduled on a wall calendar that I keep specifically for the job, and I tick off planned payments on there as they come and go. Then it's a simple sum to subtract planned payments from the balance plus expected income: the remaining amount is what I know can safely spend when shopping. I usually divide this amount into weeks and keep the weekly figure in my mind to try to avoid overspending. If I do overspend one week, I know I must compensate the next week.

I've been able to lend money in emergencies to friends who were on ten times my income (with less than half the number of children!) in the past, by keeping track of my finances in this way. It's something that people on very low incomes have to do in order to make ends meet and I think this necessity is an advantage, because it's good to spend carefully and to know how much money you've got.

This kind of financial management isn't taught in schools, is it? But it should be - it's one of the most vital lessons a young person can learn, I think.

Reaction

Making the decision to live prudently - even, shock horror, to not make the getting and spending of money my main priority in life - was a refreshingly easy one to make and it's been a gloriously relaxed and enjoyable way to live. I've had time for my children, to be here for them and to cherish their early years which, let's face it, is an experience that money can't buy. Stepping off the money-go-round isn't difficult but the thing that surprises me even now, many years later, is other people's reaction to such a decision.

I've never cared what passing strangers thought, and friends come and go. The only friendships worth having come about from connections far deeper than money, position and convenience anyway and I make more than enough of those to keep me happy. The only reactions that have caused me problems have been those of some extended family members and neighbours.

One (affluent) neighbour in particular suddenly started talking to us again when he thought we'd got a new car - and stopped when it turned out to be a courtesy car! My mother was so worried that we'd inevitably become a drain on her (much more ample) resources that our relationship was often extremely strained. There were some other reasons for that, but I think money was a main one. Even my old dad, who lives almost as happily in relative poverty as we do, keeps wishing that we'd "win the lottery" - a difficult feat, since we don't buy tickets!

In general, it's a bit like the elephant in the room. It seems to make people feel uncomfortable, though it's taken me many years to empathise with the other person's point of view and realise to some extent why my decision might have caused so much general discomfort. I think people might have felt primarily bewildered by our refusal to follow the herd, which is similar to the reaction we get to our our off-grid plans and home education. There's a kind of glazing over of the eyes, and you can see them trying not to think about it until they've had enough time to process it. (Another neighbour, who'd blanked me for five years after I deregistered the children, excitedly knocked on my door one day to inform me that she'd just heard about home ed on Radio 4, "So it must be ok!")

I think, unhappily, that we invoke feelings of guilt in some relatives though, and possibly shame in others. I'm sorry about that, but I can't help it. We don't go about pushing ourselves in their faces though, so if they want to forget about us then they can - with impunity, as far as I'm concerned. It's been many years since I stopped hoping or even wishing for anything else. I still want to be part of a big, mutually supporting tribe but I think my best hope for that will come from the younger generation now, and/or from those deeper connections that always withstand the test of time.

In distress

I’ve received a lot of good feedback about this blog lately – more than is perhaps justified by the frequency of my posts to it! But it seems that some people are finding much-needed comfort and reassurance in the concept of living prudently, at this time of general financial troubles.

I can sympathise. I do know that quiet feeling of deep terror that wells in the pit of the stomach when opening bills you can’t pay, demands you can’t meet. I have been there. It’s horrible. But there is light at the end of the tunnel. In the hope that it's not too patronising, I’ll list a few things I’ve learned along the way that might help someone to find it. (Please note that the points below stem from my business and personal experiences of nearly 20 years ago, here in the UK. Some of the detailed advice and assumptions therein may no longer be correct, relevant, or applicable to your own situation, though I think the main principles are sound. But I think it’s always best to check out laws and systems for yourself before acting on someone else’s advice.)

  • The sooner you face up to the situation, the sooner you can find a happy solution to it. You can wake up and end the nightmare now, if you want to – you just need to clear a space on your table, in your mind, in your schedule, and lay everything out on the table. Absolutely everything. You can get a pen and paper and list it all: incomings and outgoings, debts and demands, so that they stop being looming, threatening shadows in your mind and start being just numbers on a balance sheet, because that’s all they really are.

  • You don’t have to be bullied into accepting anyone else’s schedule for repayment. The law demands that you act reasonably and fairly, and don’t give preference to any one creditor over another (except the tax man, who always gets paid first.) Just because someone is hassling you over the phone or by post, doesn’t mean you should pay them to keep them quiet. In fact, I wouldn’t ever speak to a creditor or their representative on the phone. (I changed my number.) Your most valuable asset is your peace of mind: it’s the only way you can sort things out properly, and those kinds of phone calls are deliberately engineered to destroy your peace of mind. Remember that if someone has lent you money, they knowingly took a risk on you in return for the interest they charged. This means they share some of the responsibility for your situation, so they can be made to wait a little while longer while you sort it all out properly.

  • I think it's wise to draw a line at some point: to vow to act reasonably and responsibly from now on, towards yourself, your family and your creditors. What’s done is done. You can’t turn the clock back, but you can make things right from now on. The right thing to do, in a situation of financial distress, is to work out what you absolutely need to live on and to share the rest out amongst your creditors proportionately. You can do this for yourself: you don’t need to use a debt advisor unless you absolutely can’t get your head around it. But it’s junior school arithmetic, so I think most people can. All of your creditors legally need to be kept in the picture, and if they receive a list of all your incomings, outgoings and total debts, showing proportional repayments then they can’t really argue with it. If they still try to take you to court, as long as your maths was right and you made the repayment then I think the court would probably back you up, because you had acted reasonably and fairly.

  • To work out proportional repayments, I would divide my total outstanding debt by 100, then divide each individual debt by that figure to assign it a percentage of the whole. Then I’d use my total spare money, after allowing for absolute necessities, to repay my debts according to the percentage of the whole amount each one represented. I’d send the letters out and then start making payments immediately, monthly, by Standing Order, to my creditors’ bank accounts. If they accept a payment, you can take this as their acceptance of your repayment proposal: I think a court of law would. It should if you’ve got your sums right, communicated properly and made the payments you promised, but I suppose you never can tell nowadays. There are, of course, organisations like National Debtline to help with this process, though there was none of that in my day! People were expected to work such things out for themselves, which was perhaps reasonable, it being only common sense.

  • I learned - the hard way - not to trust anyone else with my finances, especially husbands. This can be difficult though, because you might be jointly and severally liable for some debts if you’re married or even co-habiting, which is one reason why I prefer to stay single. Sorry, that’s not a lot of help if you happen to be married to someone who doesn’t want to face up to their financial situation. All I can suggest is that you insist they let you do it for them, then.

  • Your children don’t need to be attending private schools, do they? If you can’t bear for them to attend a local state school, you could consider home education. This might mean reducing your working hours, but if I was weighing up the value of my children’s education against a need to repay my debts more quickly, the education would win every time. And home education is far superior to even private school provision. I know: I’ve had children in both. And some state schools are better than some private schools, so there’s no need to be snobby about it. Actually, what children need more than anything else is parental time. The more of that you can give them, the better they’ll learn and progress. Redundancy is great news from that point of view.

  • On housing: it can be a millstone around your neck, if your house has become too expensive. Is it the best house for you anyway? It’s hard to sell houses in this day and age, but if you price it cheaply enough you might be able to downgrade to something you can better afford to live in. Do you even need to stay in your current location, or can you move north and live somewhere cheaper? Any old outstanding mortgage debt then just gets added to the list of debts outstanding, and repaid proportionately, unless you’re in a negative equity situation in which case I’d probably be looking at bankruptcy as the most viable option. Renting is ok, for a few years. I’d live in a caravan – in fact I’d squat, if needs be. You can make any environment nice enough for a home if you put some time and effort into it. It doesn’t take a lot of money.

  • Don’t take on any more debt! The credit crunch has come to tell us that we all have to live within our means now, though there never was any other sensible way to live. And, as Karl Denninger masterfully said the other day: “How much crap do you really need?” We're still living quite happily here with 1990s TVs and computer gear. 1980s in some cases! If it does the job, we don't care what it looks like.

  • To sum up: peace of mind is more valuable than social position. Who cares what friends and extended family think? Compared to the horrible feeling of being in financial distress, their opinion doesn’t matter. What matters is that you can sleep peacefully at night, and look your children in the face in the knowledge that you’ve arranged your financial affairs properly. It’s the best lesson to teach them, anyway. And competing with other people is futile, because it doesn’t matter how rich/ beautiful/ clever/ successful you seem to be you can’t win, because there’s always someone doing better than you. I think it’s better to ignore them, and just be ourselves.

Monday, December 15, 2008

Christmas? Bah humbug














Actually, we do do Christmas. We're off to buy a tree today, I think. Not an artificial one - the children wouldn't stand for it. And not even one in a pot, because we've tried repeatedly and they always die, no matter how much trouble we go to. I don't know though, I'm always tempted to try again one more time..

And we do gifts, just not expensive ones. And special food, just nothing over the top. Since I my mother and I parted company, we've been doing Christmas dinner our way, and this year that apparently means.. pizza! I don't even like pizza and so I don't think to serve it very often, but apparently the children do and that's what they want to eat.

We just don't spend excessively. We might skip on the crackers, for example, and we're certainly not tempted by big nights out at the theatre. We like to spend our time in more relaxed, more affordable ways!

All in all, our Christmases now fit quite easily into our budget, though it wasn't always the case in the dark distant past when I thought I had something to prove, or outdated traditions to maintain, or someone else's standards to keep up. Nobody really appreciated those efforts anyway.

If anyone asks me what I want for Christmas though, I might drop some hints for this book, which seems to sum up my attitude towards money and life. I'd like to read it though, just to check.

Sunday, December 7, 2008

Alice Cook