The first thing you need to do is have a close look at your spending and decide how much of it is necessary and how much of it you could do without. Even small things can mount up: for example, did you realise that if you buy a £1.20 coffee on the way to work each morning, it will actually cost you at least £24 a month? You could » be using that £24 a month to help clear your debts. What about catching a bus for a short trip to and from the station every day?
Let’s say it costs 50p each way: a 15-minute walk each way instead could save you at least £20 a month, and will help you get some exercise too. A 50p fare doesn’t sound much, and neither does £1.00 a day, but working out how much it adds up to a month soon exposes the real cost.
Try doing this simple exercise with all the small items you pay for regularly. Newspapers, magazines, drinks, sweets and snacks, buses and taxis for short trips – these things really mount up when you count their cost over a month. If you buy these items daily, or even once a week, add up what they will cost you over a month. Then if you really want to shock yourself, work out how much they will cost you over a year. That innocent little coffee on the way to work each morning, for example, could cost you about £300 a year! If you cut out that coffee, the money you save could be used for something else. Just think how much you could save in interest if you used that money to pay off a credit card: interest on a balance of £300 can soon mount up – after five years that debt could have turned into thousands of pounds. This shows that even something as small as a daily coffee can have a really big impact on your finances. So identify the things you don’t need, work out what they are really costing you, and cut them out.
The replacement technique
When you are identifying items to cut out of your expenditure, you may come across something that is not essential to life and limb, but without it you feel you would be unhappy or inconvenienced. So what do you do? For example, let’s imagine you buy a newspaper every day. You may use it to help you keep track of the job market or your investments, or to follow the news for your business. On the other hand, you may buy it simply to enjoy reading it and you don’t want to give up that pleasure. If it really would make you unhappy to go without it, then of course you should keep it. However, before you continue buying it at full price every day, why not try getting it
much cheaper, or even for free? This is where my ‘replacement technique’ comes in.
The idea behind the replacement technique is simple: instead of cutting out the things you enjoy or would prefer not to be without, simply replace them with cheaper alternatives. In fact, you may find in many cases that you can replace an item with something that costs nothing at all.
Let’s go back to the daily newspaper as an example. If you need your newspaper for your business, you may be able to get it supplied by your employer. If you are self-employed, you could ask your accountant about claiming an allowance against tax for it. If you need the newspaper for other reasons, such as to keep track of investments, help is still at hand. For example, if you need it solely to keep track of shares, you can check these for free using the Teletext or Ceefax pages on your television. These pages, and the regular television channels, are also an excellent source of all the latest news. Alternatively, if you have access to a computer, you can check the stock market via a number of websites, such as the Moneyexrra website on www.moneyextra.com/stocks or the Financial Times website http://news.ft.com/yourmoney.
However, if you simply want to read a newspaper from cover to cover, you can do it for free on the internet. The Guardian, for example, is online: just click on www.guardian.co.uk to access its pages. The Independent is on www.independent.co.uk and The Times is on www.thetimes.co.uk. Remember, however, that the internet option works out cheaper only if you have free access to it, or if you have arranged to pay a set fee that gives you unlimited access so you do not increase your telephone bill every time you log on.
If you do not have access to the internet, try visiting your local library. Many libraries carry a set of daily newspapers, and reading a newspaper in the peace and quiet of a library can be a relaxing way to spend a lunchtime. Many libraries also give access to the internet, and some will let you log on for free, so it is certainly worth Paying them a visit.
And what about that coffee in the mornings? If you feel that you really can’t do without your morning dose of hot caffeine on the way to work, why not invest a few pounds in a vacuum flask and make your own coffee at home to take with you? The money you save will ensure that your flask pays for itself in around a week. Depending on the flask size, you could even get two or three coffees out of it, or tea if you prefer.
The same applies to snacks and lunches. Do you regularly fork out money for sweets and expensive sandwiches and cakes? This can amount to hundreds of pounds in a very short time. Try this tactic instead: go to a supermarket and buy what you would need for a week’s worth of lunches and sweets. A loaf of bread and two or three different sandwich fillings, plus a bulk pack of assorted crisps or sweets, will cost a fraction of what you would pay in a cafe or sandwich shop over a week. If you incorporate buying your lunches into your weekly shopping, you could well find that most of the cost is absorbed into your weekly bill, and it will feel as if you are getting your lunches for free. If you have access to a microwave oven or toaster at work, so much the better. You will be able to eat more inventive meals, and save money into the bargain.
If you are tempted to say at this point, ‘I never have time to make lunch in the mornings before I go to work’, remember that you don’t have to make it before you leave in the morning. You could make it the night before or, if necessary, just grab the bread and other ingredients, and make them up later, at lunchtime. You can save thousands of pounds doing this, and you will have the added benefit of knowing exactly what is going into your lunch – ideal if you are a vegetarian, on a calorie-controlled or low-fat diet, or need to watch the ingredients for some other reason.
The point of this exercise is to show you that you don’t necessarily have to do without the things you enjoy: you just need to be inventive and find a cheaper way of getting them. So whenever you identify an expense like this, get into the habit of asking yourself, ‘How can I cut the cost of this, or get it for free?’
