‘Budget Boxmas’: Christmas gift-buying for thrifty times

christmas-gifts

Image from Morguefile

About ten years ago my two daughters and I started a tradition which has persisted to this day. We feel it has introduced more fun into our Christmasses; and we like it so much that we talk about it to anyone who’s interested. And quite a few who aren’t. We call it ‘Budget Boxmas’.

Alvin Hall and Christmas presents

Do you remember Alvin Hall, the American financial guru and author? He presented several popular money advice series on BBC2, from 1999 and 2003, and he first opened my eyes to the insanity of the Christmas gift-buying frenzy.

One of the programmes featured a couple who had a combined income of around £70,000 but had got into serious debt. Alvin established that one of the reasons was an addiction with buying expensive Christmas presents, and not just for friends and family but also for neighbours, neighbours’ children, etc etc. They started Christmas gift buying every September, sometimes even earlier, and I think they spent around £10,000 every year.

So Alvin Hall did a little experiment: he asked the couple’s two sons what they thought was the best thing about Christmas Day. The Christmas dinner with the family was top of both lists; the decorations; singing carols; seeing friends, etc.

“What about the gifts from your folks?” prompted Hall, because neither of them had included the gifts in their lists of favourite things. “Oh yes, they’re nice too.”

Then Alvin talked to the neighbours. Only a week after Christmas, he asked a few neighbours, who’d received quite extravagant presents from this generous couple, if they could remember what they’d been given. Sadly, the answer was no.

That little experiment, harsh though it might have seemed, made the case for me that spending lots of money on Christmas presents was not necessary, despite the blandishments of the advertisers.

Our family’s response

I moved to Bristol twelve years ago. My daughters used always to spend Boxing Day with me and Christmas Day with their mother, as she and I had divorced a few years before that. My cooking wasn’t in the same class as their mum’s; but the girls and I had lots of fun, with plenty of booze and plenty of songs, as they both love singing.

By the time they arrived at my place in Bristol on 26 December, the girls had already had lots of presents from their generous mother, their stepdad, grandparents and friends. They and I soon realised that what we all needed from Boxing Day (or Boxmas, as they started calling it) did not need to involve more expensive presents, some of which might be duplicated.

So we came up with an idea – actually it wasn’t mine, it came from a friend of mine. She and her kids had set a spending limit of £10, so we decided to do the same. However the details were not clearly agreed in advance, so I took it to mean you mustn’t spend more than £10 per item. The girls thought it meant £10 per person, which of course was far more logical.

So from the second year onwards we got our act together and the £10 per person limit applied. The result was an increase in creative thought around the gift buying process. Instead of simply throwing money at the problem, we became patrons of Poundland and of charity shops; also we would recycle gifts and we would make stuff. The girls became particularly good at making what they still call mix-tapes, although they are of course CDs nowadays.

Our thinking behind this ‘Budget Boxmas’, as we call it, was this: so often one receives gifts that one didn’t really want and certainly didn’t need. We are not on the edge of poverty but we don’t believe in wasting money. Good food and drink and each other’s company (and maybe singing) are the essentials of the festive season for us. Our musical hero Loudon Wainwright calls Christmas a “Retail Eternity” and this is our small rebellion against that. Of course our presents are in monetary terms trivial but we know that thought has gone into them.

Did you get anything that you didn’t want or need? You just give it to a charity shop … perfect!

 

Want to know more?

Alvin Hall TV series: http://alvinhall.com/television/television-your-money-or-your-life/

… and book: Your Money Or Your Life http://amzn.to/2gRRJ0L

My book Back to the Black … how to become debt-free and stay that way: http://amzn.to/2gHQzlc

ARE YOU WORRIED ABOUT CREDIT CARD DEBT? PUT IT IN WRITING

DX6516_2905414b[1]“The amount UK consumers owe on loans and credit cards grew by £1.9bn in March 2016, the highest figure in 11 years, driven by a sharp rise in spending on plastic.”    (The Guardian)

If personal debt really is increasing again at a worrying rate, then a growing number of people could soon be facing the stress of a debt crisis.

For anyone facing this kind of problem, debt advisers might say things like this:

  • Don’t ignore the situation. Open the demand letters, make a list of the balances.
  • Always respond to every communication from a creditor. That shows you’re serious about dealing with the situation.
  • Make an offer. Explain if you can’t offer more.

To those basic steps, I’d add another:

  • Always communicate in writing. You’ll have a record of what was said and agreed; and it’s less stressful than dealing with creditors on the phone.

Avoid the phone

Many years ago I was in that situation, when my small business failed and I owed money to 26 creditors. Negotiating with all of them took a long time but eventually I came through it without permanent scars on my sanity (as far as I know).

I always negotiated in writing, never on the phone.

Dealing with a creditor on the telephone is stressful. My voicemail took a lot of the strain (what a great invention, whether you have an actual machine or a service from your phone provider) but if a creditor left a message I always responded … in writing.

Intermediaries

One of the complications that I occasionally encountered was the involvement of intermediaries. Some were bogus law firms which were actually departments of the creditor company, with stationery designed to give the impression of being a genuine law firm, in order to intimidate.

When dealing with intermediaries of any kind, I was always extra-polite, working on the assumption that they hadn’t been fully informed, so I would write things like: “maybe you don’t know, but in the letter of so-and-so from your client …” and I’d enclose or attach a copy of the previous correspondence.

Not keen on writing letters? Help is available!

You might say that writing letters (or emails) is not your strong point. That’s no problem, because lots of debt management organisations can help you. For example, here in the UK, Citizens Advice Bureaux are all over the country and their advice is free and impartial. They helped me greatly. The other major nationwide debt advice charities are StepChange and National Debtline. There are also many local not-for-profit advice providers: for example in Bristol, where I live, there’s Talking Money. There’ll be one near you.

Buying time: it helps your negotiation

The other benefit of working with one of the debt advice charities, or any adviser, is that it creates a little distance between you and the creditor and it buys you some time. So, if a creditor calls you rejecting your offer and gives you a counter-proposal, you can say (politely, of course!) “thank you; but could you put that in writing, please, because I have to refer it to my advisers.”

Letter templates

Templates for standard letters / emails are available from some of the organisations I mentioned above. You can also find templates in my book Back to the Black.

Want to know more?

This article is an extract from my book Back to the Black … how to become debt-free and stay that way. http://amzn.to/2e9KOfG

 

Are you a Scrooge or a splurger … or both?

champagneWhen I launched the second edition of my book Back to the Black … how to become debt-free and stay that way, we had a party. The subject of debt is serious, of course, so we felt a little frivolity would be good. The party – sorry, launch event – was chaired by my good friend, the author and journalist Debbie Young, and she came up with a great idea to get everyone involved.

It seems that many of us save money by making small economies on necessities – ‘Scrooging’ – but then immediately blow much larger amounts on luxuries – ‘Splurging’.

So we invited our audience members to give examples of how they’d done exactly that. Nearly all of them were happy to accept the challenge.

THE CHALLENGE

 Our question was this: “please share your best money-saving tip … and then confess your worst extravagance.”

Here are the answers we got:

  • “Looking for the double-points deals at Tesco … but then using a store card (with an APR of over 30%) to buy clothes.”
  • “Buying at charity shops or getting stuff from Freecycle … but then buying a piano when I didn’t have anywhere to put it.”
  • “Buying most of our food (and all of our drink) at Aldi … but then buying a BMW for my business.”
  • “Using a ‘My Waitrose’ loyalty card to claim a free coffee and newspaper if spending more than £10 at the weekend … but then spending far more than that £10 minimum.”
  • “Going to the M&S bakery after 6pm to stock up on reduced bread and cakes to freeze for later … but then staying overnight at the Waldorf Astoria to attend a wedding, when I could have stayed at the Travelodge.”
  • “Refusing to pay £1 for a bus-fare, even in the rain … but owning several pairs of shoes that cost more than £150 each.”
  • “Calculating the total cost of credit before buying anything on a card … … but then buying a new motorbike.”

These were all good; but the winning entry on the night of the launch combined a Scrooge and a Splurge in one short and elegant phrase:

“Champagne with out-of-date food.”

We thought that deserved a prize.

THE BOOK LAUNCH

The launch event at which this fun idea was kicked around was for the second edition of Back to the Black. It was held at the Bristol branch of Foyles’ bookstore.

We offered a prize for the best Scrooge & Splurge idea. In keeping with the theme, it was a toy car … a Bentley, of course. Also in keeping, the drinks and nibbles  were all sourced from the aforementioned Aldi. (For readers who are not UK-based, that’s a German-owned budget supermarket.)

THE MORAL OF THE STORY … AND A NEW BOOK

Scrooging and Splurging, even within minutes of each other, is very understandable. I do it myself. But I know that there would have been no point in extricating myself from a debt crisis (which I did in the late ‘90s, as I relate in Back to the Black) would have been pointless if I’d then got back into debt. So I have to be sure that my Scrooge incidents outnumber the Splurge incidents.

“Scrooging and Splurging” could also be expressed as “enjoying life, while keeping the finances in order”. This and many related topics will be featured in my next personal finance book.

Its working title is Staying in the Black and I plan to launch it by the end of the year.

WANT TO KNOW MORE?

Back to the Black … how to become debt-free and stay that way is available to order at all good bookshops.

Both Kindle and paperback editions are also available on Amazon: http://amzn.to/1aILhD6

 

 

 

 

Wonga to Announce Huge Losses … Could Credit Unions Fill the Gap?

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A report from the Institute for Public Policy Research (IPPR) said the UK’s credit unions should be expanded as a major source of affordable ethical lending; and the expansion should be financed by a levy on the consumer credit industry. The report received wide support from religious leaders. Continue reading

“SHOCKING NEW LOW FOR THE PAYDAY LOAN INDUSTRY?”

pound_coins_stackedup_resizedWonga, the UK’s largest payday loan company, has been ordered to pay £2.6m in compensation, after sending letters from non-existent law firms to customers in arrears.

The letters threatened legal action, but the law firms were false. In some cases Wonga added fees for the letters to customers’ accounts, according to the BBC.

The customers affected (45,000 of them) will each receive £50 for distress (a piddling amount, surely?) plus any legal fees they have encountered. The regulator in this case is the Financial Conduct Authority (FCA); they cannot however fine Wonga because the offences happened before they started regulating payday loans companies.

Richard Lloyd, executive director of consumer group Which?, said: “It is right the FCA is taking a tougher line on irresponsible lending and it does not get much more irresponsible than this.

“It is a shocking new low for the payday industry that is already dogged by bad practice and Wonga deserves to have the book thrown at it.”

Tougher line? £50 each? I imagine the people at Wonga are laughing.

Wonga is not the only lender to do this. Back in my debt-crisis days, I received a letter from a non-existent firm of solicitors. I was only alerted to the fact when I noticed that the initials of the firm were identical to those of the bank that was chasing me for the debt. It’s sharp practice and could cause considerable distress, because most people have a healthy respect for the law. And that’s how it should be. So to use that fact in this way is pretty despicable. £50 each, eh?

There is an existing Code of Practice from the Office of Fair Trading (OFT) regarding harassment of debtors, although it is often ignored. I’ve blogged about it more than once; for details click HERE.

 

WANT TO KNOW MORE?

For the BBC News item, click HERE.

For the OFT Code of Practice regarding harassment of debtors, click HERE.

 

DEBT: SELF-EMPLOYED PEOPLE AFFECTED MORE?

A recent report by the debt advice charity StepChange points up two main issues:

  • Regional variations in debt burden
  • The special risks for self-employed people.

There are bound to be regional variations in almost anything. What was notable, though, is that the region where people are spending the highest proportion (30%) of their disposable income on debt interest payments, is the South East.

However, the section in the summary that hit me in the face was this:

“Self-employed struggling: partly because of high levels of secured borrowing – possibly taken out to keep businesses afloat – self-employed people advised by the charity owed on average £300,000.

“Clients in part-time or full-time employment had an average debt load of 4.1 times their income. For self-employed people this rises to 18.6 times their income.”

[Note: The figures apply to debtors who are or were clients of the charity. They are not necessarily typical of the population as a whole.]

The difference between 4.1 and 18.6 is remarkable; and I can empathise, because I was in the same situation fifteen years ago. I had a business that had done well for five or more years but then “fell on hard times”, to put it euphemistically. Like the clients of StepChange, I increased my borrowings (secured or unsecured, they were still debts) in an attempt to keep the business afloat. By the time I decided that would not work, closed the business and concentrated 100% on solving the debt problem, my total borrowings were several times my income. Not eighteen times, but a lot.

How I solved the problem is told in my book “Back the Black: how to become debt-free and stay that way.” (Amazon: paperback and Kindle eBook)

WANT TO KNOW MORE?

For a copy of the report by StepChange:

http://www.stepchange.org/Portals/0/Documents/media/reports/cebr%20q3%202012.pdf

 

THE BEST RISK-FREE, TAX-FREE INVESTMENT IN TOWN?

Want to know the answer? It’s paying down debt.

In the current issue of “Moneywise” there’s one of their regular “Money Makeover” features. Wendy Edwards from Surrey and her partner Marc were being advised by Ian Anderson of G C Stevens Financial Services in Weybridge.

Apart from their mortgage, they had loan and credit card debts totalling over £21,000, to be serviced from a combined net income of £2300 / month. However they also had £9000-odd in various savings accounts “earning them little interest.”

One of the first tips from the adviser – which “Moneywise” highlighted in a text-box – was to use the savings to pay down part of the card and loan debt.  By doing that he calculated they’d save £790 / year, which amounts to about 3% of their net income.

This reminds me of something I wrote in my book “Back to the Black”. Here’s an extract:

***

Don’t keep rainy day money

Do you have any savings? You might answer: “are you crazy? I’ve used them up long ago.” However, many people who are facing severe debt problems, and are “maxed out” on their credit cards, turn out to have money squirreled away in another account, “for a rainy day”. (I was one of them) Well, as this is a rainy day, (and right now you are earning very little interest on those savings) it makes no sense to hold on to savings at the same time as you have unsustainable debts.

That statement is not original. In 2007, an article in the money pages of the “Daily Telegraph” concluded with the simple phrase, which I found it hard to argue with but hadn’t realised before:

“Paying down debt remains the best risk-free, tax-free investment in town.”

I suspect this is always true.

***

 

 

DEBT AND THE IMPORTANCE OF MINDSET: CONCLUSION

AND FINALLY

A summary of the last six (what, six?) posts on this topic .

  •       Our thoughts influence our behaviour, which influences our results.
  •       It’s vitally important to stay positive when facing a debt crisis.
  •       Act as if you’ll be able to work your way out of this – and act this way consistently and persistently – and your behaviour will influence your creditors.
  •       Henry Ford: “If you think you can, or you think you can’t, you’re probably right.”
  •        “The Harvard Experiment”: the students were chosen at random, so were the teachers. The improved results were achieved because the teachers believed the children were more gifted than average.
  •        The traveller at the gate: “I think you’ll find they are the same here.”
  •        To minimise stress: create a clear positive picture of the result you want. Then keep it in the forefront of your mind.
  •        Create your own space: Seve Ballesteros and the bubble. Eliminate the negative influences of other people’s thoughts.
  •        Conduct all negotiations in writing. Avoid discussing on the phone: if you must answer it, simply note what is said, refer to previous correspondence, if any, and then respond … but in writing, not on the phone.
  •        Beware: letters apparently from “solicitors” and “debt collection companies” are sometimes really from the creditor. A neat tactic to put extra pressure on you without their going to the trouble and cost of involving third parties.
  •        Harassing debtors is illegal. If it happens to you, get help immediately. You can make a complaint to Trading Standards (via Consumer Direct, 08454 04 05 06), to the police if the harassment is severe or, if it is your landlord demanding money, your local council.
  •        Rules for correspondence: Prompt (replying). Polite, Professional & Persistent. (“If at first you don’t succeed, try, try and try again”)

 

***

The above is the concluding extract from Chapter 2 (“Mind Over Matter”) of “Back to the Black: how to become debt-free and stay that way”. [LINK]

 

DEBT AND THE IMPORTANCE OF MINDSET, #6

Previously, on this blog …

I urge you not to conduct a negotiation on the phone. Simply take in what is said and offer to think it over and reply – but in writing.

Always respond both to written correspondence and to phone messages and do so Promptly, Politely, Professionally – and Persistently (i.e. sticking to your guns). In the resources section at the end of my book (see below for link) there are some examples of letter formats you could customise to your situation.

NOW READ ON …

Harassment

It is illegal for creditors to harass debtors. The following official definitions of harassment are taken from the website of the UK’s Office of Fair Trading.

 Physical/psychological harassment: putting pressure on debtors or third parties is considered to be oppressive. Examples of unfair practices are as follows:

  • contacting debtors at unreasonable times and at unreasonable intervals
  • pressurising debtors to sell property, to raise funds by further borrowing or to extend their borrowing
  • using more than one debt collection business at the same time resulting in repetitive and/or frequent contact by different parties
  • not ensuring that an adequate history of the debt is passed on as appropriate resulting in repetitive and/or frequent contact by different parties
  • not informing the debtor when their case has been passed on to a different debt collector
  • pressurising debtors to pay in full, in unreasonably large instalments, or to increase payments when they are unable to do so
  • making threatening statements or gestures or taking actions which suggest harm to debtors
  • ignoring and/or disregarding claims that debts have been settled or are disputed and continuing to make unjustified demands for payment
  • disclosing or threatening to disclose debt details to third parties unless legally entitled to do so
  • acting in a way likely to be publicly embarrassing to the debtor either deliberately or through lack of care, for example, by not putting correspondence in a sealed envelope and putting it through a letterbox, thereby running the risk that it could be read by third parties.

 Source: OFT (Office of Fair Trading, UK) website, “Debt collection guidance: final guidance on unfair business practices.”

 

(However, I know from my own experience that many of the practices referred to above are used by many creditors.)

***

To be concluded in my next post …

The above is an extract from Chapter 2 (“Mind Over Matter”) of “Back to the Black: how to become debt-free and stay that way”. [LINK]

 

DEBT AND THE IMPORTANCE OF MINDSET, #5

Previously, on this blog …

“Let the answering machine take the strain”.

Follow this strategy (negotiating only in writing), summon up your reserves of patience and persistence, and the huge benefit is that you avoid verbal discussions. They are just too stressful right now and, thanks to that wonderful invention the telephone answering machine, you need never speak to a creditor in person.

NOW READ ON …

When I say this, I am not advocating that you ignore telephone calls. No, you should respond if a creditor leaves a message but you do it in writing, referring to any previous correspondence and repeating your previous offer, if you have made one, or perhaps making an offer, if you have not done so. Alternatively you could simply state your position and ask for their understanding and for more time.

One slight disadvantage of the telephone “bubble” concept (Seve Ballesteros again – see my last post on this subject) could be that your friends might notice that you are never in, even when they expected you to be so. Is that a major problem? Probably not. If you have an actual answering machine, rather than the service from your telephone provider, then you can use it to filter your calls, by listening to the machine before deciding whether to pick up. If you have “caller display” on your home phone, or you are being called on a mobile, problem solved: you can be 100% selective about which calls you accept and which you allow to go through to voicemail.

Now I do recognise that there are some people who simply cannot resist answering a ringing phone. If you are one of those people and you can’t break the habit, then all I can say is that I hope you are someone who is not stressed out by this kind of situation, in which case you are in the lucky minority. In such a case, carry on following your instincts and answer the phone, but I would still urge you not to conduct a negotiation on the phone. Simply take in what is said and offer to think it over and reply – but in writing.

Always respond both to written correspondence and to phone messages and do so Promptly, Politely, Professionally – and Persistently (i.e. sticking to your guns). In the resources section at the end of my book (see link below) there are some examples of letter formats you could customise to your situation.

***

To be continued …

The above is an extract from Chapter 2 (“Mind Over Matter”) of “Back to the Black: how to become debt-free and stay that way”. [LINK]