Home

The Money Principle Brain Teasers

I am following several blogs on money and related matters; these are mainly American so not everything discussed is relevant to our British, or for that matter European, situation. Sometimes when I read on matters of personal finance, finance generally and finance management interesting questions pop out. So, I decided that these deserve a discussion here – they are brain teasers because answering or deciding on a side may involve some research, knowledge and certainly thinking. These do not go beyond what we usually do when faced with important and potentially life transforming choices.

The Money Principle brain teaser for this weekend is the following:

“Only the poorest and the richest can easily increase their income.”

Four ways to reduce spending on food

Over the last eighteen months we have managed to reduce our monthly expenditure on food by between one third and a half. It is anybody’s guess how much we used to spend before my records began. But in December 2009, the first month of records, we spent on food £548.98. Yes I know December is not exactly a usual month and that is why I am not going to be comparing it with any odd one, but with December 2010 – our spending on food was £353.40. All else was the same – four adults and one growing up lad (all sons back home for Christmas); Christmas dinner that if anything was nicer in 2010; and our customary New Year’s Eve party for our friends. During a normal month now we spend about £280 on three adults and a growing up lad. This was achieved by applying the following four rules.

Money Principle wealth chat: wealth in the UK

 

A couple of days ago I, for my shame, realised that my knowledge about the wealth situation in the UK still leaves much to be desired. Acting on this is rather important for the Money Principle since it builds on the realisation that there is not much personal in ‘personal finance’.

So today I set out to educate myself. This is what I found.

According to a report of the Office for National Statistics, Wealth in Great Britain: main results from the wealth and assets survey 2006/2008 the average wealth picture by age group looked approximately like this:

Budgeting that works: The Balanced Money Formula

The Balanced Money Formula was suggested by Elizabeth Warren and Amelia Tyagi in their book All Your Worth: The Ultimate Lifetime Money Plan . I have already mentioned that budgets don’t do much for me – this is not a budget. The Balanced Money Formula is a guideline for exactly ‘what it says on the tin’ – for achieving financial balance that will allow you to live a life of abundance and also ensure that you save towards your dreams and your future.  Applying the Formula assumes that you know your net income (income after tax) and have detailed, itemised knowledge of your expenditure.

Warren and Tyagi’s Balanced Money Formula consists of three elements: needs, wants and savings. ‘Need’ is everything that you absolutely have to pay and will include shelter, facilities, cars and insurance, food and basic clothing. ‘Want’ is everything above the basic needs that we have in our lives like eating out, going out, holidays etc. This category can include the things that you can cut out but this will cause temporary discomfort. Savings includes also ‘negative wealth’ repayment till it is gone.

Where did my money go? On shoes, for one!

“Do not keep anything in your houses that you do not know to be useful or believe to be beautiful.”

William Morris

It is Sunday evening and I thought this is the time for a lighter, more frivolous post. What is lighter and more frivolous than shoes? This is handy because yesterday, after weeks of procrastination, I finally tackled my shoes… and followed a familiar pattern from stern determination, through reflective consideration, to protective organisation. What do I mean?

I have already mentioned that I have forty two pairs of shoes and tend to live in three pairs – well now two because I threw away one – of basketball shoes. This could not continue! My shoes were everywhere – in the hall, in my wardrobe, in front of the house and at the back entrance. Pairs of shoes, sad and neglected! To top it all something vaguely resembling summer has arrived on the British Isles. My shoes had to be sorted and I am the one to do it – there is no buy out on this one.

Three things I’ll not give up

Awareness of matters financial, particularly if there is the realisation of trouble as well, often comes with a drive to reduce expenditure.  What people normally cancel are what they consider to be ‘luxuries’ – keeping fit, attending courses and doing things that are not for utility but only pleasure fit…

Ferriss, Timothy (2007) The-4 Hour Work Week: Escape the 9-5, Live Anywhere and Join the New Rich

This review was written by Jan Armitage from Renovation and DIY: the green path . Thank you, Jan, for being my first guest contributor. I hope you are the first of many.

I read this book a few months ago from cover to cover.  And last month I re-read it, pen in hand, underlining things and writing exclamation points in the margin.  Just so you know.

Timothy Ferriss is a thirty something American – this is important, because the culture he’s writing for, and most definitely the sub-culture he comes from, is very different from mine.  And yet here we are, meshing happily away….  His assumption, which I think is correct, is that everyone who’s interested in reading his book in the first place will be able to benefit from some of the ideas in it, whether self employed or not, traveller or not.  It covers four sections, with the handy little acronym of DEAL.