Wednesday, 17 December 2014

Crazy Idea 28 - Cut up your credit cards

 Christmas... The time when, along with New Year and the summer, far too many of us borrow to buy what we don’t need and can’t really afford.

If we have to use our credit cards, for many of us, the question should be asked – do I really need this?

If you’re placing a deposit on a holiday in the sun then your initial answer may well be: If I didn’t need this then I wouldn’t have paid!

Yet you didn’t pay, you borrowed. You promised to pay in the future. With interest.

It’s not just our government that has a debt problem. We, the people of Broken Britain, have borrowed too much for too long. We’ve bought into the marketers dream world that we deserve new every year, the latest model, the plushest sofa.

Why repair when you can replace?

Why save when you can get interest free credit that grows and grows until suddenly you are paying far more each month than you can really afford. But did you really think you weren’t paying interest? They are taking their fee from you one way or the other.

And then there are the kids...

I’m no better than anyone else. I’ve allowed myself to be bullied by peer pressure, by the message that goes out from the high priests of consumerism that each and every one of us must ensure our children have the perfect Christmas.

But would it really damage them, or us, if we went without? Are we so distrustful of our children and spouses and partners and friends that we believe they would not understand when we can’t afford to keep up the act?

What lesson are we teaching? That the ostrich is the creature to aspire to? Burying our heads in a quicksand of debt.

Last year my wife and I admitted that we were not in control of our money. We’d become lazy. Our incomes had increased and so had our spending yet we hadn’t taken stock to see whether our income was still greater than our expenses.

When we looked at our spending I was ashamed. Our income had gone up but we had frittered that increase away. Our savings had not increased in line. Our debts were far higher than we liked.

My wife went on a CAP Money course and we started to follow the advice they gave out. (CI028A)
It was tough going. We set up our budget. Managed to balance it only by cutting out all the non essentials.  We even managed to fit in savings goals. For several months we stuck rigidly to the plan. No unplanned luxuries. Nothing that wasn’t on the budget.

CAP recommend documenting all income and spending. Breaking that down into weekly and monthly and annual amounts as required. CAP advise setting savings goals and if you've been on the course, they provide a handy website where you can enter all your income lines and expense lines and see each week or month whether you are in the red or the black.

And it all helped. Our finances started to turn around. Each week we spent an evening going over our spending and updating the budget as necessary. We allocated a strict amount to spend each week on groceries and petrol and clothes. We also managed to carve out some money to spend on us as a family. Trips to the cinema, ice-creams, cake... At £20 a week between five of us it didn’t go far and we’d avoid spending money some weeks to enable us to afford some of the more expensive family treats.

We didn’t cut up our credit cards but we did stop using them unless we had transferred money to a savings account to pay off the bill.

Following the CAP plan helped us turn our own personal economy around. Can you imagine the effect on Britain if we all took control back of our spending?

It's never a favourite topic of conversation but there are too many of us worried about money, worried about our debts.

Check out this headline from The Telegraph in May 2014: "Household debt is Britain’s hidden timebomb" (CI028B)

In August 2014, This Is Money wrote: "household debt more than quadruples since 1990... by 314% to £1,437bn" (CI028C)

A couple of months later and The Money Charity are writing: "People in the UK owed £1.459 trillion at the end of September 2014. This is up from £1.430 trillion at the end of September 2013 – an extra £572 per UK adult." (CI028D)

Our personal debt as a country equals our National Debt. If we want to fix the economy we need to start with our own debt problems. The CAP Money course is a great place to start.

Do post your own crazy ideas or feedback on mine in the comments below and sign up to my mailing list below to be notified of future posts.

Why should my crazy ideas have any relevance to the economy? I'm the author of The Great Scottish Land Grab, a novel that imagines a fairer future for Scotland where the poor are empowered to change their destiny. I'm director of my own limited company: Goal 31 Ltd and I've over seven years experience working for government and financial organisations. Also, just like you, I'm a taxpayer and for some crazy reason I think that entitles us to have an opinion and for that opinion to be acted on by the government.

As I wrote at the start, I am making my 100 crazy ideas freely available. It seems unjust to propose ideas to fix the economy and then prevent people from freely reading those ideas. 100 Crazy Ideas to Fix the Economy will be published once the craziness is complete.

I can be found on Twitter: @my100goals or on Facebook: There's a short bio here.

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(CI028A; CAP Money;

(CI028B; The Telegraph;

(CI028C; This Is Money;

(CI028D; The Money Charity;

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