Doing the maths

I had a casual attitude to borrowing growing up.  I remember my youngest sister looking at me one day and saying ‘How can you sleep well at night knowing you have borrowed so much?’  She just could not live like that.  That is inter-sibling borrowing never mind going outside the family.  Occurs to me now that people have different leanings naturally.  To be fair, she is still like that.  I remember begging her to collect a credit card about 1 year ago.  I was encouraging her to seize the opportunity of being offered one to do shopping after which she could give herself years to pay off gradually.  She refused – wants to be able to lie down at night knowing that she doesn’t owe anyone anything.

I don’t mind a bit of borrowing and my sleep remains unaffected as long as it doesn’t get out of hand.  What are the chances that I can pay it back?  That is my main criteria.  Whilst I don’t mind borrowing, paying back is very important to me.  Not paying back a debt shows a lack of regard for the person that goes out of their way to help and I feel like nothing demonstrates that you don’t really give two hoots about a person than collecting and not returning.  Not only do some people refuse to pay for ages, they get angry when you ask!!!  Most of the time close friends and family fall foul of this one.

When my husband and I married, we decided who would do what moneywise and we have stuck to our agreement.  Sometimes we overlap and pick up a few bits but generally, we don’t even borrow from each other and when it happens, we always return what we have collected J yep, mostly.  Even when we are going on holiday, we agree who pays for what and when he says ‘I am not planning to shop’, he actually doesn’t while I am like ‘how can I be in Newcastle and not buy coal?’

I own several credit cards whilst he only got one because they offered him a good instore discount after which he paid it off quickly.  When we go on holiday, I put all expenses on my credit cards and struggle to pay back afterward but I always pay back.  I don’t mind that kind of lifestyle.

So, I discovered one time that I was going into my credit card every month without fail for things like food.  I couldn’t deal.  I felt very uncomfortable and realized that I was living beyond my means.  Whilst my credit cards are important to me as a fallback, I didn’t want my borrowing to get out of control so I decided to do the maths.  I got an excel sheet and started with my salary, took off my tithe, savings, allocated money for all reoccurring expenses (fuel, direct debits that were an absolute must) then I looked at what was left and thought wow!; this will have to do for food!  I gave myself a food budget and worked with it.  It wasn’t easy but I realized I couldn’t be spontaneous about things anymore and that every little helps or adds up.  I decided to shop in a different shop and do things differently.

Now that I know what I can actually do, my attitude has changed.  I still give myself a treat occasionally but have realized that in order to live according to my means, I have to get real with what I have.  When my husband asks the ‘what do you do with your money?’ question, I sit him down and go ‘look’….  He has genuinely stopped asking me now.  He knows everything that comes in and where it goes and he is as transparent with me.

At a point recently, I was changing jobs and panicked about the ability to pay back my debt so I decided to pay all credit cards in full from my savings.  Savings went down but now I wasn’t afraid of missing out on payments.  It feels good to be debt-free and I am glad I have stopped using my cards so much.

A real risk when borrowing is not being able to pay back.  We need to consider this all the time and make sure don’t borrow more than we save.  I now plan ahead so I pay with real money when my road tax, mot and car insurance is due, I know when there is a birthday to pay for, etc so I have to save less some months to be able to meet up with some commitments.  I save for year-end shopping and have moved jobs to  increase earning power and be able to do more.

I know it’s not a one size fits all but if you can just take some time to do your maths, you will understand the changes you need to make.  I think borrowing from the banks or societies is perfectly fine for Mortgages, a car, sometimes furniture if you are moving house but it is certainly not the best if you can help it for food and normal day to day bills

Now whilst all these plans are good and fine, sometimes we are challenged to give.  We can plan our giving and where we are challenged to give spontaneously, we are able to because we have something put away.  It can be very painful because sometimes the recipient doesn’t understand the sacrifice when you have to part with 2 months’ worth of savings but it is also always rewarding once done and you actually find that you have not put yourself at a disadvantage for it.

I think borrowing from people should be avoided if possible. Lending to people especially close friends or relatives can be tough to do. It is very difficult watching people close to you make the wrong financial decisions like over-investing in things which will depreciate especially when you are their fall back plan Meanwhile, the advantage of borrowers who won’t pay back is that they know they can’t come back asking for more – not anytime soon anyway. But not all of them operate like that and we really need to be firm about not lending more to default borrowers.

I pray that we will all find a financial plan that works for us but also think we need to do the maths so we are not caught in the borrowing cycle.