Awww Yeeaaahhh!

Thursday 28th August, 2008 - £7,977.79 in debt…

I was reading this post today - Dan’s take on a recent YouGov poll about the luxuries we’re denying ourselves during the credit crunch - and it got me thinking. What have I been denying myself since I started repaying my debt? And what could I still cut back on?

The top five luxuries I no longer enjoy:

1. Sky Sports and Movies

These were among the first things to go, saving me about £10 a month. I regretted it as soon as the tennis season started to get busy, but haven’t re-subscribed. Yet.

2. New music

Number three on the YouGov list was CDs, but this is a bit more specific. When I was spending with reckless abandon, I would buy albums I’d only heard snippets of by artists I wasn’t quite sure about. That’s what most people do, right? Now I’m only buying music I know I’ll like, or nothing at all. Or getting free CDs with right-wing publications.

3. Biscuits

Not only has the Viennese Whirl addiction been knocked on the head, but I’m cutting out biscuits and cakes almost entirely. Luckily, the boyfriend’s parents normally have a reasonable stash. Not that that’s the reason we visit so often. Honest.

4. Heating

Yes, I’m one of those people that are always moaning about being too cold. Sorry, but it’s chilly in here. My switch to E.ON’s capped tariff won’t save me any money yet, so I’ve been piling the jumpers on. I might have to buy more jumpers.

5. Free time

Every spare minute is time I could be using to earn money, so free time has become a luxury I can’t afford. But I’m lucky to have the kind of job and lifestyle that allows me to earn a lot when I need to, so I suppose I can’t complain. Although I already have complained, quite a lot.

According to the aforementioned survey, I could also save money on:

1. Branded food

I’m already cutting down on this and getting more own-brand stuff, but it’s something of a lottery: Tesco Value chocolate digestives are amazing. Tesco Value pasta sauce can be made at home with a can of chopped tomatoes, a scoop of aspartame and an unshakeable sense of foreboding.

2. Uncut bread

I only get this as a treat, and I know it’s wrong, but it smells so nice.

3. Nail polish

I probably have enough nail polish to be getting on with. Next time I’m after a new look I’ll try pink and orange stripes.

4. Fabric conditioner

This also smells nice, but I suppose I can do without it.

5. Wine

Not in a million years.

 Goldenballs

Q: What do footballers and bankers have in common?

A: Win, lose or draw, they both get remunerated.

Anton Ferdinand, younger (and distinctly more average) sibling of England vice-captain Rio Ferdinand, recently moved from West Ham to Sunderland for a fee of £8 million. The widely claimed reason for the move was Ferdinand junior’s wage demands of £50,000 a week not being met by his current employers.

So what does he do? He joins another club that are prepared to pay him the desired £3 million a year in wages. In his defence, Sunderland was not the only suitor, and this type of practice is commonplace in the modern game.

Equally as recurring are squad players who feature in ten games a season still being paid a yearly wage of multiple millions, and players who’re consistently underperforming and underachieving being remunerated at the same level had they been successful.

The point is, name me another line of business where these kinds of practices are so frequent?

Well, how about the banking sector?

In the words of Mohammad Yunus, 2006 Nobel Prize winner and globally renowned micro-financier/ethical investor talking about the role of banks in the sub-prime crisis:

“The banks gave the impression that they were almost perfect, and then we find there is a fundamental flaw in the structure of the system. The regulators allowed them to bundle the risk so that nobody could see what was inside, and then pass it around the world to people who had nothing to do with it”

Ok, so the Banking/Premier League analogy doesn’t apply here, but delve deeper into the philosophies of Mr Yunus and the parallels become clearer. He continues:

“We don’t seem to be accusing anybody over this whole debacle. It is as if nobody is responsible. We can all go off and play golf: the taxpayer will take care of the problem. When things go well the bankers take the profit, and when it goes wrong they are compensated. This is not symmetrical.”

Paying footballers £3 million a year to (occasionally) compete in a medium-sized business pool (Manchester United turned over £245 million last year, HMV turned over £1895 million) is not symmetrical. Rewarding bankers to offload their own bad investments and walk away from them without recompense (a key driving force behind the credit crunch) is not symmetrical.

Win lose or draw, bankers and footballers get remunerated.

 Handwash - Liquid Gold

In previous posts, I’ve alluded to both fancy coffee and good quality organic food as being two prominent examples of expendable commodities that’ll be benched in the midst of the current economic downturn. I steadfastly refuse to cast aside these essentials though.

But now my old friends at the Co-operative bank (eco-friendly, ethical investors lest we forget) have provided a definitive list of the top twenty items UK consumers have been forced to forgo due to belt tightening and budgeting exercises. The data was accumulated from a YouGov survey of 4000 shoppers.

Here are the top 20 items that the economic slowdown is preventing you from buying.

Cue Jimmy Carr:

(1) Flowers

(2) Magazines

(3) CDs

(4) Bottled water

(5) Posh handwash

(6) Quilted toilet paper

(7) Candles

(8) Branded washing up liquid

(9) Organic produce

(10) Branded food

(11) Fresh coffee

(12) Uncut bread

(13) Nail polish

(14) Fake tan

(15) Multi vitamins

(16) Fabric conditioner

(17) Teeth whitening toothpaste

(18) Wine

(19) Desserts

(20) Napkins

So, my two suggestions made it onto the list at 9 and 11, not as high as I would have anticipated.

Ditching flowers, magazines, CDs and bottled water makes perfect sense to me. Flowers schmowers, magazines come free with the Saturday and Sunday papers, CDs can always be found cheaper online than in shops (ridiculously cheap on Amazon marketplace) and bottled water is just plain silly.

But handwash? Posh handwash? Who even decided to prefix ‘handwash’ with ‘posh’? Handwash isn’t posh, it’s a necessity. Without handwash, your hands get covered in germs and smell bad. Are we, as a nation, shunning handwash en masse? If so, I didn’t get the memo, and handwash is still an integral part of my ablutions.

Casting an eye over the rest, candles I can live without (not just during an economical slump, but forever), don’t need fake tan, Bold Ultra has a built in fabric conditioner and if you’ve got a good knife and fork technique then the need for napkins can be circumnavigated.

Take away my nail polish however and I’ll make you wish you were never born.

 All you need is loans

Narrowing credit acceptance critera, a stagnant housing market and rising food/energy costs are making us all spend frugally this late summer.

Cutting back on your weekly grocery spend and turning the thermostat down by a degree or two will help to alleviate the financial pressure, but unfortunately for Liverpool Football Club there may be no such quick fix when their request for a £350 million loan is rejected by RBS.

The troubled north west side, already rocked by a sluggish start to the season and internal wrangles between manager Rafael Benitez and co-owners George Gillett and Tom Hicks, desperately require the £350 million loan in order to complete existing debt restructuring plans. The loan is needed to cover the collapse of Hicks and Gillett’s original loan deal (£298 million) that financed their purchase of Liverpool FC, the collateral against which was business assets in America and Canada which have since been considerably devalued by the US sub-prime crisis.

RBS reported a pre-tax loss of £691 million in the first six months of 2008 and are therefore expected to veto Liverpool’s request.

So, as we turn into a nation of spendthrifts, has Liverpool FC followed suit and curbed its spending in anticipation of the seemingly inevitable RBS rejection? Not a jot.

Over £30 million has been spent by Liverpool this summer on French teenagers and Italian journeymen. £20 million alone of that budget was blown on a diminutive Irishman with no proven Premiership scoring record.

The spending doesn’t appear to have stopped either, with Benitez adamant he will land another £18 million transfer target, a midfielder who is essentially a facsimile of a player Liverpool already own. 

Should the RBS loan deal fail, the only remaining option open to Liverpool FC is to borrow from elsewhere at a much higher rate. As a result of these short-term financing strategies, the club would tumble headfirst into fiscal meltdown and administration, possibly within 18 months.

On a positive note, the club could be bought by Dubai based investment firm DIC, although the new owners would still be required to manage the old debt.

 This is the good stuff

Ok, so that’s a blunt title, but should you choose to circumnavigate food cost inflation by taking the cheap and unhealthy route then a shortened life is the likely outcome.

The NHS is already likely to become unaffordable within decades due to rising diet related illnesses such as heart disease and diabetes. It was widely reported last week that the NHS spends £750 million a year on drugs to combat the symptoms of these diet related illnesses.

Everyone’s noticed how low cost, convenience food is always cheaper than its organic counterparts, and taking the energy dense/low cost/high carb food route during a period of recession will be a trap many will fall into, either by choice, accident or necessity.

Before you go reaching in the freezer cabinet or hot foot over to Burger King, consider the following:

Sainsbury’s ‘Taste the Difference’ Shepherds Pie

This fine example of a frozen ready meal contains a roll call of 69 ingredients, featuring artificial flavourings, preservatives, hardened fats and test tube additions such as wheat gluten and dextrin. The closest chemical relation to dextrin is wood glue; effectively you’re eating a ball of starch coated in Copydex, or a ‘non-food’ food.

The Burger King Whopper with Cheese

Let’s get down to brass tacks here. This sandwich contains around 1800 calories. The adult calorie GDA is 2000, so almost all of your daily calorie allowance is exhausted by this sandwich. Did I mention the 1500 milligrams of sodium in the cheese? The 64 grammes of fat? The 30 grammes of saturated fat? There are 45 grammes of carbohydrate in the bun for Pete’s sake.

Pot Noodle

My favorite subject, and I expect some comeback from Becca Talbot on this, but Pot Noodle represents an absolute health nadir. Looking beyond the known traces of Sudan 1 (a carcinogenic colourent commonly added to waxes and petrol), a Chicken and Mushroom Pot Noodle is made up of 62% carbohydrate, 28% fat and 10% protein. Frankly, it’s angina waiting to happen. Moreover, the salt content has been halved since 2005, so any Pot Noodles consumed before this date would certainly have done your blood pressure no favours whatsoever.

The alternative? Aldi, Asda, Somerfield or Waitrose, it makes little difference. Buy some nice Maris Piper potatoes, some low-fat margerine and cheese, a tomato or two, some onions, garlic, black pepper, a stock cube, some organic minced lamb and make that Shepherd’s Pie yourself. Take the leftovers to work the next day, and use any spare ingredients in a different dish further down the week.

It’s so easy, and if you don’t believe me, check this recipe.

Feeling the squeeze…

So it seems the time has come when we all must decide what is more important to us - saving the environment or saving money?

Only a year ago, the enthusiasm for green policies and practices appeared to be growing exponentially, with everyone wanting a slice of green action. But those days are gone. With the rate of inflation rising and the cost of living sky-rocketing, for most people it is simply unfeasible to be spending money on “greener” exploits.

Recent statistics from MORI have highlighted this change in view. Only a year ago, 15% of those polled placed the environment in their top three concerns, but this month that figure has dropped by a third to just 10%.

Now, people are putting the economy, rising prices and crime issues at the top of the list. People are feeling forced to fight for their own survival rather than that of their grandchildren and the organic and earth-friendly lifestyle is increasingly being seen as a middle class luxury that the majority of us simply cannot afford. Eco-warriors have lost their appeal and in the midst of a recession, we resent paying more to be “green”…

Ironically however, in this period of environmental rejection, Britain seems, almost by accident, to be becoming more environmentally friendly. The credit crunch, by proxy, is aiding the environment! Let me illustrate:

• Due to rising food prices, for the first time in a decade people are actually throwing away less food and planning their weekly shop more effectively, so as not to waste food.
• Fewer people are moving house, so there are fewer people buying new white goods (such as fridges and dishwashers), and thus fewer old appliances being sent to landfill.
• Bottled water sales have fallen as the population cut back on unnecessary indulgences (which are coincidentally highly damaging to the environment).
• People are growing their own vegetables in order to save money (there has been a 10% rise in vegetable seed sales in the last year).
• With energy companies hiking up their prices, consumers are choosing to keep their heating off for longer, saving fuel and cutting emissions.
• Increasing petrol prices are leading more people to avoid driving wherever possible
• In order to save on travel costs, many people are choosing to holiday in Britain this year, which will massively reduce their carbon footprint.

So, while our current economic situation is causing us to neglect our concerns about the environment, it is also causing us to do more to protect it. Indeed, as the examples above show, it seems we don’t necessarily have to choose between saving money and saving the environment, these actions are compatible!

In light of the recent energy price hikes, one of the most effective ways you can save money and the environment is to improve your home energy efficiency.

A recent study by British Gas claimed that energy saving measures could cut our domestic gas bill, as a nation, by £4.6 billion a year. It showed that by installing energy efficient technology such as solar panels, loft and cavity wall insulation, energy efficient light bulbs and modern boilers as well as making simple energy saving behavioural changes, families could knock up to 50% off their gas bill (as well as significantly reducing their emissions).

Rising fuel costs have shortened the pay-back time of energy saving devices, so as well as ensuring you are on a capped tariff and making your payments by direct debit, now is the time to sort out your energy efficiency if you want to save money (with the added bonus of protecting the environment!).

For more information on how to improve your energy efficiency, read our complete guide to reducing your energy bills.

A Cuddly Toy

Tuesday 12th August, 2008 - £8,228.83 in debt…

I know I’m only three months into paying off my debt, but I can’t help thinking about things I’d like to spend my money on. It’s getting increasingly difficult to stop myself from getting more credit and buying a new car, a house, a holiday, maybe a nice 42″ TV… a cuddly toy?

Anyway, I’m not going to do that - I’m going to pay off my debts before I make any major purchases. Yes I am. But what happens if I pay everything off and my credit rating is still inexplicably poor? The credit crunch could make it very difficult for me to grab a mortgage, so I’d best get working on my credit score now.

The Money Saving Expert site has just launched a new credit scoring tool. This will tell you, at no cost, how much of a risk you are to credit companies. It will ask you ten easy questions, and you won’t even have to have any paperwork handy.

Neither borrowers nor credit reference agencies just have a ‘credit rating’ that applies for you across the board. The term is ‘credit score’ and it simply compares you against a mythical ideal borrower. It depends on factors that can be worked on or changed, and there is no such thing as ‘credit blacklisting’. There’s more information on credit scoring in this article.

Using the Money Saving Expert tool is quick and easy, and it allows you to consider how your score could be improved. For instance, it asked me how long I’d been living in my current house for - less than a year, one to three years, or over three years - suggesting that, once I’ve been here another year (it’s currently two years), my score will magically improve.

It also asked me how many credit cards I have, regardless of whether I use them. It emphasised that lenders get nervous about my access to credit - not just the credit I actually use - so I must remember to cancel all my credit cards as I pay them off. That was very useful to know.

Even though I’ve had no CCJs, never been bankrupt, and am on the electoral roll at my current address, a mixture of missed payments and loads of credit have made my credit score, in Martin’s eyes, “weak”. But, if I can make it to my 30th birthday according to the debt-paying-off plan, my credit score will change to “excellent”.

But that won’t happen if I forget to cancel any of my cards (as soon as I’ve paid them off), fall behind in my minimum payments (according to Martin, this could set me back years), or have a weak moment and apply for a loan on that coveted 207CC. Fingers crossed…

 Drage Loves You

Consumer Choices Blog stalwarts will already be fully acquainted with my view on Starbucks coffee (in short, I’m a fan. Believe me, I’m no Morgan Spurlock). That little shot of vanilla is my smell of freshly cut grass; I can’t get enough, which is why I did a forward somersault with tuck and half pike upon reading the following headline:

Starbucks offers free refills to beat credit crunch

Yeaahhh! Am I all over that or what?

It’s the bourgeois treats that get benched first in the midst of a financial crisis, and fancy coffee is possibly the most bourgeois treat of them all (aside from Louis Vuitton sacs chien, or dog carriers to you and me).

Starbucks are experiencing a sharp decline in customer numbers, and plan to counter this trend by offering free refills. Effectively, Starbucks is about to take on the persona of your local Carhop or ‘Big Boy’ diner (provided you live in Arkansas that is).

Good news for me then, as I’ll be able to extend my annual visits to Starbucks by a good 45 minutes, but bad news for the 700 employees who’re being made jobless by the closure of 61 stores across Australia.

I could say something along the lines of ‘it depends whether your cup is half full or half empty’, but that would be crass.

I’ve said it though.

 We are not amused by the lack of £5 notes.

You approach the till nervously, trying subtly to assess the mood of the checkout assistant. You need your daily dose of gossip but you don’t want a fight today. You place your magazine on the counter and wait for the moment you have been dreading.

“That’ll be 70p then” she chirps.

*Awkward Silence*

“Sorry I’ve only got a tenner” you mumble.

You hold your breath, waiting for the mood to change… and here it comes. With an almighty sigh and a rolling of the eyes she takes your note, noisily slams the till and hands you back a mountain of change.

As you dash quickly from the confrontation you curse yourself for not thinking ahead, bemoaning your lack of preparation - why didn’t you think ahead at save one of those five pound notes to pay with?

Well, you will be lucky if you can find a fiver these days. These mysterious, allusive notes are becoming a very rare breed indeed!

Last year Mervyn King, the Governor of the Bank of England criticised high-street banks for not doing enough to ensure there are sufficient £5 notes in circulation. He noted that whilst over the last decade the total value of Bank of England notes in circulation has doubled, to £40 billion, the total value of £5 notes has remained at a steady £1 billion.

Indeed, the condition of these £5 notes that are in circulation is deteriorating rapidly, many notes are dog-eared and tatty and the average lifetime of each note is now twice what it was ten years ago.

The high-street banks hit back at this criticism, claiming that consumers didn’t really want £5 notes and that it would be too much effort and too costly to fill their cash machines with this contentious green denomination.

A battle of words, nothing really came from this debate… that is, until now!

Last week, cash point operators Bank Machine launched their “Fight for Fivers” campaign to get five pound notes back into circulation. They are hoping to install their own £5 dispensing cash machines in high-profile locations and are calling on owners of suitable sites to come forward.

Ron Delnevo, Managing Director of Bank Machine, says:

“We believe getting fivers back into circulation will be of huge benefit to both consumers and retail businesses alike. No one likes having to pay for a low-cost product with a £10 or even £20 note and no one wants too many heavy £1 coins”

Indeed, consumers will benefit from added control over their money, and businesses will benefit because they will not have to shell out for quite so many bags of change.

Delnevo goes on:

“Our campaign is particularly timely given the current credit crunch, as many people feel more able to manage their finances by spending cash - £5 notes will allow them to be even more careful in keeping their spending down.”

People are less likely to spend more when they are paying with cash rather than a credit card. Credit cards offer the pleasure of purchasing without the immediate financial pain – you don’t feel like you’re spending real money. Many people feel they are more able to manage their finances and limit their spending when they pay by cash. Hooray for £5 cash dispensers!

Bank machine’s first “£5 note only” cash machine will be located in Tower Hamlets, East London, and the company hope to install many more machines around Key Locations in the UK.

Hassle free shopping ahoy…

Would you withdraw £5 from a cash machine? Join our forum and have your say.

That’s the spirit girl….

The third instalment of my alternative look at the credit crunch (effectively borne out of a fatigue for seeing the same stories published time and time again), looks at the potentially positive aspects of narrowing credit acceptance criteria.

So how could these stringent conditions possibly improve one’s financial and social vista?

(1)   Dodgy Mortgage Brokers Tackled by the FSA – With the mortgage market in a state of disrepair and under the microscope as a result, the Financial Services Authority (FSA) has been able to wheedle out mortgage brokers who perpetually recommend sub-prime loans. After all, it was the US sub-prime crisis that imposed the credit crunch on us in the first place, so any operation that removes sub-prime peddling brokers from the financial food chain has to be of benefit.

(2)   Savers Get a Better Deal – With banks haemorrhaging money from their lending, current account and trading divisions, they need a stable incentive with which to entice customers, look generous and claw profits back. Enter the savings account, with Halifax, Icesave and Abbey all doing their best to offer some of the most attractive savings account deals ever entertained in the marketplace.

(3)   Property Bargains Aplenty – For those that do have money to invest, the credit crunch is likely to upturn a number of canny bargains in the property market. What’s more, with the housing market quiet and estate agents kicking their heels, you’re likely to get a more tailored and personal service if you do venture out house hunting.

(4)   Improved Customer Service and Incentives – While consumers have less disposable income to throw around, industries will have to try that little bit harder to snare your business. Expect attractive incentives, especially in retail, utilities and communications sectors, to become commonplace, and good old-fashioned customer service to make a welcome return.

(5)   Bad Mood, Great Songs – According to music recommendation site TheFilter.com, the gloom of the credit crunch is making more if its users download depressing songs by the likes of The Smiths and Joy Division. The Smiths and Joy Division are cool bands, so when we’ve finally wriggled free of the credit crunch stranglehold, there will be more cool people and fewer squares.

(6)   Don’t Borrow What You Can’t Afford – Strict lending criteria means there’s a reduced chance of individuals borrowing more and more money only to find themselves stuck in deep financial mire. The credit crunch will force people to face up to their debts and try to do something constructive about wiping them out.

(7)   Less Air Travel, More Good Air – With the credit crunch biting hard this summer, a significant number of UK holiday makers are swapping planes for automobiles and motoring off to some retro seaside hotspots. The airmiles saved will reduce the carbon footprints of one and all.

(8)   Unprecedented Credit Card Deals – If your credit record is blemish free, you have a balance to transfer and you’re confident you can clear a credit card balance at the end of each month, then this is the perfect time to be switching credit cards. Capital One blew the credit card market wide open last month with a card that offers both 15 months 0% on balance transfers AND 15 months 0% on purchases. Sure, one cancels the other out if the account is miss-managed, but use the card wisely and you could save a tidy sum.

(9)   Asda Goes Nutty on Staple Food Prices – The credit crunch has prompted all out price war between the nation’s main supermarket chains, with Asda pushing the boat out especially far. Bread, lettuce, butter, eggs, sausages and melons have all been reduced to 50p for limited periods. Catch them while you can.

(10) Annuity Rates on the Rise – That’s correct, some financial products are still thriving. An annuity is a guaranteed income for life, which most members of defined contribution or money purchase pensions buy with the majority of their pension savings. Due to falling corporate bond prices, anyone looking to cash in their personal pension this summer will be significantly better off than before the credit crunch kicked in.