Saturday, 2 March 2013

Why I need a financial safety net, and why you should have one too

Wow. Well the beginning of 2013 has been a rollercoaster and a half. Life has, in general been good. I am happy, excited about moving house, and despite being properly ill for the first time in years for half of January, feel like things have been quite good here.

But. Oh you knew there was a but didn't you? 2013 has been expensive. Mr PTC and I both kept on saying that our good luck just could not continue (I don't really believe in such things, but well, we seemed to be riding high at the end of 2012). We were aiming to be frugal and cheap and mean for the first three months of 2013 to make sure we were in the best financial shape possible at the beginning of our new life as home-owners. Most of our savings are going straight into the house as a deposit, so we wanted to make sure we had a financial security belt, and the bigger the better.

Then 2013 came along. I broke my glasses and ended up buying two new really quite expensive pairs (its an investment). I needed some new work clothes, Mr PTC needed new shoes. Small items, but they add up. I also broke my laptop - thankfully it is my work laptop and therefore that was paid by work. I need a new phone - did I mention the camera stopped working (again this is on hold). Then when I didn't think I could break anything else (I'm now officially a bad penny round here), the car went in for a service. 

Oh yes. The car…. its always cars that break the bank isn't it?

Today was our dear little car's third birthday, which means by UK law it needs it first MOT. It also happens to be the end of the warranty period and because of that we decided to take it to a Volvo dealer to make sure that anything that could be done under warranty is done under warranty. Dealers are never the cheap option, but sometimes a short-term sacrifice is worth a big gain. Well the service came back as a fairly expensive one. Totally justifiable £480 - ouch! We thought we did well out of it thought because sure enough the crank shaft (what the?) and something else had oil leaks. 

So back to the garage the car went, under warranty to fix oil leaks. It was awkward (we only have one car and live in the middle of nowhere so can't go anywhere without a car), but we survived. Until that is the garage f'd-up (excuse my language, but really they did!). I won't tell you details because we are still fighting for money  back, but amongst other things they broke the windscreen (they at least are paying for that), but we ended up paying another £1300 on top of the service.

I should point out we were sort of held to ransom. If we didn't cough up the car would remain in pieces and we needed our car back. Yes, we probably shouldn't have paid, but what can you do when you need your car urgently?

We bought the car last summer, and were so excited, despite the cost, to buy a car that should last us 8 years or so. We are therefore in this for the long-haul. We love having an estate, and in general it drives perfectly. It is an eco-car which isn't just good for the environment (and makes me feel less guilty about being car-dependent), but good for our wallets too. To then be faced with nearly £2000 in service bills only 8 months later is far from what we expected. We also had to pay for our AA renewal and car insurance this month - so in total the car cost us a whole lot of money this month.

To say I'm annoyed is an under-statement. But now I come to the reason I wrote this post. Understandably (at least I hope) I was (maybe am still a little) angry about this situation. However, what is done is done. We are able to cope though because we keep a financial security belt. We never have 'zero money'. The amount we decided to put down as a deposit for our house was our savings minus our security belt. A while back we decided we should keep 3 months worth of income in a savings account for bad situations. In general we save each month, so if the worst came to the worst and we both were out of work we would be able to live for 4 months, possibly 6 at a stretch off our savings. We would ideally have 6 months worth of income, but because we wanted to get into the 75% LTV bracket for our mortgage we won't have that come March 28th.

Many people do not understand why our 'zero-point' when we say 'we are broke and can't go on holiday' still allows us money in the bank. We work hard to get to that safety net - it isn't always easy to get to that level of saving, and I can see why many people feel that they can't do it. But by putting away a little each month, we can deal with these bad times where everything goes wrong without feeling like we will loose something very important to us or fall behind on our rent/mortgage payments. Even as a student with no income I set aside money for emergencies. It wasn't much, but whenever I had some money come in, be it from parents, a loan or whatever, a small percentage was set aside. Now we set aside a larger percentage because our expenses are larger. We never touch this money, except in bad months like February this year. Now we will focus on putting that safety net back to where it was asap to give us financial security once again.

If I have one piece of advice out of this whole affair, it isn't about garages, or being careful, or not spending more than you think you should on an item like new glasses, it is to put a safety net in place. I spent money on new glasses, thinking it was an investment, and at the time we did it, we were financially doing quite well. If I knew we were going to have to spend so much on the car, I would have been more restrained on the glasses. However, you don't know what might happen tomorrow. So put a financial safety net in place.

If you feel that you have nothing left in your budget to put way, start small, heck, start tiny. Take the tiniest bit of money and put it in a savings pot. Do that each month, and soon you'll forget you had that money to spend in the first place. It may be tough if you had to sacrifice something else to do that, but I can promise you, in the event of needing emergency cash you will be grateful. I realise this approach will not work for everything. I have friends who just don't understand our approach to finances and spend every penny each month and are happy. They deal with financial emergencies by using credit cards and loans. I just can't do that. I was brought up to spend only what I have, not on credit. I don't even like taking out interest free credit, knowing that if I leave the money in the bank earning interest I will be better off. It just seems wrong to me to take out a loan (I say this but I am taking out a mortgage!). 

N.B. I am not a financial adviser, so if in doubt, talk to a professional when making big financial decisions. This is just my approach to money and my attempt at a frugal lifestyle.

Thanks for stopping by,
Let me know what you think... leave a comment or send an email to passthecaffeine {at} gmail {dot} com

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