The Show Me the Money Lesson
By Hannah Ricci
It often feels impossible to leave the house without spending money. We waste over £80 billion a year on food, travel, entertainment, gadgets, hobbies and clothes, according to research from Prudential - that's £1,725 each. We throw out uneaten food from the back of the fridge, impulse buy clothes that we never wear and take out gym memberships that we rarely use - we might as well be throwing our hard-earned money down the drain.
Spending is at the heart of the UK's consumer culture. Advertising sucks us into buying things we neither need nor want, and our personal spending habits are often reckless.
You don't need to become a miser and forgo that new pair of shoes or latest boy-toy. Let's face it; life would be very dull without the occasional treat. However, by addressing your spending behaviour to find out where you waste the most money, you can learn to become a better spender and free up more cash to save or buy the things that matter.
Everyone has their weaknesses when it comes to spending, and recognising yours can help you control your spending. Start by digging out your bank statements.
Every six months or so, you should look carefully at your income and expenditure. Expenditure breaks down into fixed costs, such as mortgage repayments and bills, and whatever is left over and spent throughout the month. Work through the transactions and ask yourself if each one was necessary.
A common feature of bank statements is credit and debit card purchases in small amounts and frequent cash machine withdrawals of £10 and £20 here and there. Can you remember what you spent them on? Chances are you can't so your next step is to keep a spending diary for a week or two. Writing down everything you spend may make you more careful. However, the idea is to try and spend normally, so you can pinpoint where your money is going. This will also identify times and situations when you overspend or spend unnecessarily.
Saran Allott-Davey, managing director at Heron House Financial Management generally warns against using credit or debit cards for day-to-day spending, because it's difficult to keep track of outgoings. "The best way to budget is to withdraw a fixed amount of cash at the beginning of the week," she explains. "As you spend, you see the amount going down in your purse, so you are less likely to fritter it away on magazines, coffees and takeaways."
Many people buy things and then worry about how they will pay for them. This habit needs to be broken. Decide what you want and how much you intend to spend, and stick to that limit. When you plan to travel, always book in advance if you can, because long-haul flights and train tickets are significantly cheaper the earlier you book.
The most common mistake is shopping when you are not looking for anything in particular. "Never use shopping as a pastime or entertainment," warns Jane Furnival from BBC3's Spendaholics. It's easy to see things you think you need. However, if you really did need these things, you would either own them already or intend to buy them anyway. Ask yourself: Did I want this before I saw it? If the answer is no, walk away.
If we don't find what we are looking for, we tend to feel a shopping trip is unsuccessful. However, Furnival says this isn't the case: "If you return empty-handed, congratulations. It means you are fully in control of your money."
In a study by Alliance & Leicester, over two-thirds of us admitted we can't resist a bargain. However, buying something because it's cheap does not mean you are getting a good deal, especially if you don't really need it.
Research from Churchill Insurance found that the majority of British women have an average of 14 unworn items in their wardrobe - a waste of around £305 over a year. A suit reduced by 50% is a great deal, but a bad buy if it's never worn. Of course, in some instances, bargains should be snapped up. A good test is to ask yourself if you would buy an item at its full price - this will give you an indication of whether you are getting a good deal on something you actually want.
Discounts and haggling
The British stiff upper lip means we are often too embarrassed to haggle on prices. However a bit of cheek can often secure a better deal. It is frequently assumed that retail prices are non-negotiable, but this is rarely the case. There are many instances when you are almost guaranteed a discount - as when the product or packaging is damaged, if you buy something that has been on display or if a product line is ending.
If you are spending a lot of money with a retailer, perhaps for several items, ask if they will do a deal or throw something in for free. Shops want your custom. A shop would rather sell you something at a discount than have you spend your money with the competition. Even if you feel like you don't stand a chance, it's worth asking - the worst they can say is no.
Clever marketing strategies make us link price with quality, but this connection doesn't always stand close inspection. Assuming a £150 stereo is necessarily better than one priced at £50 is retail snobbery. The same goes for supermarkets and department stores. Waitrose and Sainsbury's have developed a higher-class image, but it's all to do with packaging and marketing. Their products are essentially the same as Asda's.
A survey by The Grocer magazine found Waitrose to be the country's most expensive supermarket, with a basket of groceries costing £25 more than the equivalent at cheaper stores. So, start paying attention to where, how and why you spend and it's likely that you will start feeling a bit more flush. And the chances are you won't feel like you have made any major sacrifices to get there.
How to shop around
Shopping around for the best price is incredibly easy, especially using the internet, which is a shopper's dream. A quick search will find you the best deals in minutes. Some people still have reservations about buying over the internet. However, there are huge savings to be made. And if you are worried about paying for something you haven't seen, do some research on the high street before finding a cheaper deal online.
While it's easy to shop around online yourself, price comparison sites can do it all for you. Simply type in what you want and they scour the market to bring you a list of retailers selling the product, along with the prices they charge.
Kelkoo.co.uk and pricerunner.co.uk are good for sourcing virtually anything from DVDs to flights. A Canon DC10 digital camcorder costs £499.89 in high street branches of Dixons; a search on Kelkoo found exactly the same model for £339 from prcdirect.co.uk, a saving of £160.89.
For financial services such as credit cards, insurance and mortgages check the respective pages on Interactive Investor. You can also shop around for the best deals on utility suppliers on Interactive Investor.
With thanks to Interactive Investors.
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