Is Money really that tight?

November 21, 2008 – 3:47 pm

Everyone is talking at the moment about how money is tighter and everyone has less to spend on everything. Is it really true?

Overall in the last few months we’ve seen an increase in the cost of fuel for the home – gas and electricity prices have increased across the board in a fairly noticeable way, however petrol has been coming down recently, and even diesel has started to drop in price again too.

Food prices have apparently gone up, but I can’t say I’ve personally seen a noticeable change in how much my shopping is costing me, and I’m not really any different to most people, I buy mostly from the supermarkets and shop across the ranges, buying some of the value end products and some own brand and a few brand name items. I’ve also noticed that supermarkets seem to be offering some really excellent deals on things at the moment and have on occasion taken advantage of them myself – one of the most recent being the Morrisons offer of buy one get two free on the Pepsi range of 2 litre bottled drinks.

Interest rates are lower than they’ve been in years, so we’re not earning as much on our savings, but we’re also paying lower interest rates on our debts too. Statistics seem to show that certain white goods like washing machines have dropped in price as well, so why are we struggling?

Could it be that the biggest struggle is that we’ve all got used to a lifestyle where we live above out means? So many of us are used to waving that credit card around or borrowing from the bank, that now the banks are starting to be more controlled in how much they let people have we don’t quite know how to cope with it.

A rule of thumb that I was taught when very young was first take the amount of your income and remove from it the amount you NEED to live on. - that’s food, household bills, rent, mortgage etc. but NOT loans, credit cards and things. Next you look at the remaining amount and divide it into three pots. Pot one is for Debt – this is what you use to pay back any money you owe. Pot two is for Savings – This is so that you can put a few £’s aside so if you need money for something like the washing machine breaking down, you have it. Pot three is for living. This is the money you can use to buy presents, spend on going out or on new things that you don’t actually NEED. It’s a concept that’s worked well for me over the years, and one I’ve suggested to others who have gone on to successfully use it to get themselves out of debt and back on an even keel.