Financial planning: in previous posts, we reminded that most of the population still expects the state pension scheme and does not have an emergency plan. Then we promised a long life, and we decided that there would be something to live acceptablely for a long time. Then, through two life-smelling examples, we began to recognize how financial traps work.
So let’s continue to see what happens to our heroes: for Judy a weekend was enough to realize that she was in a debt spiral and she didn’t even notice that. She also learned the term “debt spiral” on the internet after she realized that in the past year the bank deducted at least her half month salary on interest rates and searched the bank’s website to see if this was legitimate. She was shocked to see that only the total credit interest for her credit card was 33% a year.
She also realized that she had not changed car insurance in nine years, even though she could save money on it. She also pays three times as much for the internet and phone package as the service provider’s recent advertising.
Why didn’t the service providers tell you? Khm… Why would they tell you?
She needs to talk to her boss, because she’s running business with her own car. All that drive, its horrible. But how about talking to 2-3 mums about sharing the school-drive. She posted it on the Facebook group, and it was done in 10 minutes. She only has to leave her job every three weeks earlier on Tuesday and Thursday, so her boss will appreciate it when she talks about petrol money, which she’ll ask for 🙂
It’s a small drop in the glass, but the corner grocery store is so expensive. Maybe we could deliver a package every two weeks? A few clicks and she arranged it. What else can she “outsource”? But what’s the bonus going for? She started thinking, just like she was at work. Cost-cutting, resource optimization, that’s what you learned in college, Judy…
Mary and her husband were pleased to find that the current bank loan ads offer a much lower fixed rate than theirs. But they were not happy at all that the savings had brought in zero in recent years. They decided to go into all three banks in the small town to inquire, to check the possible bank accounts, credit cards, loans.
They also realized that they would be in big trouble if Mary’s husband’s wages fell out, it would not be good to touch the savings, because Mary’s parents are old, and money may be needed for health care at any time. Perhaps it’s worth paying for insurance? How much can it cost?
This realization can dislodge her husband from the view that Mary should not start producing dried flowers in the garden, even though she would be happy to try selling bouquets and wreaths. There was also a family dispute over the financial situation, but they eventually reconciled.
The problems discovered by two women in their 40s are common. You don’t need a financial education to fix the monthly and annual budget. Some of the problems can be remedied quite easily, e.g. it should only be noted in the calendar that when there is a past due date for the contracts, and let’s not to be restless and find the best solution.
Do not forget from time to time to sit down and preview your expenses and income: it is a good solution to find a budget planner application.
There are some awkward acquaintances here: Judy didn’t think that family dinners ordered online at the last minute, the coffees consumed on the go from trendy cafes and the needlessly bought travel pass she didn’t use, goes up to 19% of her total expenditure! This surprised her especially because she thought weekend family trips cost a lot.
Mary visited an insurance broker page and realized that the housing/car insurance were both outdated and are much more expensive than the market offer. All their assets were secured for a very low amount, and if there was a problem with computers and electronic devices, they would not get anything for it. She was sure that they were very frugal, but she still found some items that you could get cheaper elsewhere.
Most importantly, we are half way through this process and we cannot sit back satisfied yet. Previously, at the beginning of the planning process, we wrote down our short, medium and long-term goals and took the assets we have. However, before we think about pensions and long-term savings,
we need to fix the present.
We’ll pick up from here next time.