Estimated reading time: 6 mins
This is one of the worst things to happen – or so it feels at the time.
One of the things you will no doubt be worrying about is what to do to keep the bills paid and food on the table. Getting control of your finances will bring a lot more comfort to you. There will be certain things you have finances committed to that, quite frankly, you don’t really need.
I’ve been here twice myself. I know how crap it feels to worry about feeding your family and keeping them warm. It’s these things that are the most important. Now is the time to look at everything you spend and challenge it.
Reducing your outgoings will give you headroom and make any severance/redundancy payment go further, and you’ll more likely to be able to sleep at night. In fact you may feel, like I did, a feeling of emancipation and be ready for a fresh start.
Where do you start?
The first thing to do is to take your bank statements and all credit card statements for the last 12 months and to go through all of them, line by line, and identify the outgoing payments. Take a magic-marker and highlight them now. Then inspect each one and assess what it is. You’ll find that they fall into the categories below. I’ve estimated a typical expense for each item, to total up a potential saving per month:
- Mortgage: possibly one of your largest outgoing expenses, but now is the time to assess your mortgage deal and look to reduce your monthly payment on a better deal. Talk to your loan provider and explain your situation. They should be sympathetic and could offer you a workable plan to ensure you don’t get into painful arrears or default. Also, look at the wider market – maybe there are better deals elsewhere? Look at comparison portals and talk to a broker – you have no obligation to take a mortgage product they advise. Saving: 200
- Energy: seek out good deals on energy now and switch. Some suppliers might be offering fixed-price deals. Look at reducing your usage, too. Can you turn your fridge down a notch? Or the heating or air-conditioning? Saving: 30
- Insurance: we can all pick up insurance on the ‘fringe’ matters in our lives, like insuring our TiVo box. Cancel policies that cover you for the non-essential things. Saving: 30
- Food bills: pre-prepared dinners are far more expensive than if you were to cook from scratch. You will potentially save a packet if you shopped for base ingredients and assembled them yourself. Also, how much food do you throw out because it’s gone out of date? Is it really useless just because you’ve rolled over on the date? Don’t forget about your pets, too. Saving: 300 [a couple of years back I decided to cook meals, and have saved more than this in a month, and the amazing thing is that I have never eaten better, tastier food in my life!]
- Travel: do you need to keep filling the tank of a high-powered gas-guzzler? Trade-in your car for a more economical model, or if you have multiple cars in your household, sell one off. And, dare I say it, could you use public transport, a bicycle or even walk? Saving: 120
- Credit cards: if you can, pay off the balance on cards that you are paying interest on. Even if it reduces your pot of money, as this is cash just flying out of the window. Or, switch to a deal where you pay no interest for as long as you can, even if it’s for a small fee. Saving: 50
- Online ‘premium’ services: you might be racking up cost in services you don’t need, such as Amazon Prime or dating services. Look at your credit card or bank statements to see what small cost items are leaving your account and challenge yourself if you really, really need them. Saving: 30
- Cell-phone: re-assess the tariffs you and your family are on. Look at your allowance on calls, data and text messaging and challenge yourself to reduce what you get as part of your package. But, don’t reduce it below what is ‘reasonable’ use as you could end up paying more. Saving: 15
- Fixed line and broadband: look now for a better combined package. Saving: 15
- Gardeners, pool-cleaners and housemaids: until you’re back at work, you can do these jobs around the home yourself. Saving: 150
- Magazine subscriptions: cancel these now if you can. Saving: 10
- Movie channels: call your provider and ask to cancel. They will, almost inevitably, offer you some great discount to stay on board, or tell you that if you cancel now that your subscription will increase if you re-subscribe. Emphatically say NO. Don’t waiver. Saving: 30
- Eating out: do I really need to suggest that you cut this right back? At lunchtimes, take in made sandwiches instead of buying the pre-made which cost a comparative fortune. Saving: 250
- Beauty/hair-dressing: do you need to go to the salon every 2 weeks? Can you cut this down? Try missing every other visit and go monthly. Saving: 150
Potential saving: 1380/month – see how it mounts up?
Other ways to stem the outflow of cash
Cash withdrawals: it won’t be easy to reconcile where this cash went, but you can get a handle on how much you have withdrawn. Some of this cash will have been spent on the above items, and then some will be irreconcilable. Note how much this is and carefully re-consider what you use cash for from now on.
- Call in debts: do it!
- Chattels: these are the things lying about in drawers and cupboards that you don’t use. Dump them on eBay now and get some of their value back into your coffers.
- Cancel vacation: drastic, I know, but it’s an opportunity to save some cash. Remember, it’s not just the cost of the flights and hotel, you’ll spend about the same or more whilst on your vacation on ice-cream, park tickets and eating out.
- Subscribe to a ‘scrimpers’ website: some money-saving experts have websites that show you all sorts of tricks and tips to saving cash on bills, groceries and tickets.
- Use coupons: when money is flowing, I don’t always scour for coupons. I know I should. But when the income stream gets cut, a coupons can save a little bit of cash many times over.
What NOT to do
- Don’t panic. You can get through this. Although your situation is entirely personal to you, remember that countless people go through this all the time and there is a multitude of resources available online and other sources.
- Avoid Payday Lenders. They’re not loan-sharks, but the interest rate could make you think to the contrary. Some of these lenders can charge 3000% annual interest!
Don’t do anything you will regret. You WILL do something you don’t like, but once you have made your decision to align your outgoings to your new situation, do so knowing this is the right thing to do at this time. You WILL, at some point in the future, be in the position to spend more on luxuries, a bigger car and vacations.