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Financial sense and financial sensibility: repairing appliances

I like coffee; not any coffee that comes as a powder from a jar but proper, creamy, strong espresso. One of the few things I brought to England twenty years ago, apart from a suitcase of clothes, was a coffee percolator – only because I could not possibly carry a whole, big espresso machine. It is not only me – my husband and my oldest son like good espresso, albeit a bit less strong and with milk. Still rich and creamy! This is why we have Krups espresso coffee machine (the one on the picture) and all was well until last February its pump broke down.

To mend or not to mend, this was the question. Giving credence to our sensibilities (what about the environment, the landfills are filling too fast as it is, let’s save the resources of the planet, kind of thing) we decided to mend. We believed that mending our coffee machine also made financial sense: many personal finance management gurus will have us believe that mending our possessions and looking well after them saves money.

Five reasons why we shall not be parted with our bread-maker

We have had bread-makers for close to fifteen years now. Yes, oh yes, the first one was because of my gadget addiction – it was the very front of the adoption wave and this is where I was. Thinking about it, this is where I still am most of the time; I just have smartened up and find ways to satisfy my addiction only when someone else is paying for it. Otherwise, it is carefully controlled.

We have made bread for a very long time. In fact, there are places in Europe, particularly traditionally poor agrarian economies, where bread was the main food. My Bulgarian grandmother still used to ask not ‘shall we have lunch’ but ‘shall we eat bread’. Now this is basic, this is primal and this is very important. Of course I have a liking for bread – great smelling, substantial, tasty bread that gets hard and moulds. Not the white, fluffy plastic rubbish that lasts longer than my spectacles.

Cheap things that are very costly: who said camping is inexpensive?

When reducing our spending, it is very tempting to try options that are universally considered inexpensive; such as camping, for instance. Succumbing to temptation and in the spirit of experimentation we went camping for the weekend. You should understand that for me this was a big step: the last time I went camping was over thirty years ago and my mum and I lasted only one night. After that, we packed the tent and moved in my auntie’s mountain hut. Funny story, I know; but it also means that I know next to nothing about camping, how to organise it, what is needed and generally how to survive it. Enjoying it is in an entirely different league.

Budgeting that works: The Money Principle Way

When I needed a budgeting framework that is easy to apply and does not constrain me within a budget I used Arkad’s rules. This worked really well for two reasons. One, I could automate the negative wealth repayment and get on with my life instead of obsessing over it all the time. As a result my quality of life improved, my work improved and my work results improved. This will soon pay off, I believe, in career and financial terms. Two, we built an emergency fund and started building savings/investments. This made me feel less fearful about the future and, let us face it, less vulnerable to any adverse future developments. So, Arkad’s budgeting was good for quite some time.

Several months ago I noticed that we spend hardly anything on fun and on ourselves. This wasn’t because there was nothing left to spend but because of the way in which we budgeted: fun was not in our budgeting frame. Having realised this, and the detrimental effects it has on family life and individual feeling of worth, I started playing around with the budgeting frame. After all this is one of the advantages of budgeting: if it doesn’t work you look at it and re-work it rather than feeling as a complete failure.

The Money Principle Store Cupboard: three things we learnt

When I asked my friend Elaine to write the articles on store cupboards there had already been some talk about it and I knew that she had worked hard to create one for herself and her family. We, however, were still resisting. Thinking about it, I have another friend who has a store cupboard – and although her reasons for creating and maintaining it are probably different it follows very similar rules to the one that Elaine has.

Once Elaine’s articles were in, and true to my promise that on this blog I will publish only practical suggestion I have already experimented with, we decided to ‘jump in’ with the masters of organisation and create our own store cupboard. We had to deal with three issues which very likely some of you are puzzling over as well. These were the issues of space, of construction and of content.

How to create a store cupboard that works for you, your family and your lifestyle?

This post is the second article on store cupboards written by Elaine Colliar from Mortgagefreeinthree.com.

Well, start from first principles – what does your family like to eat? And from that what are the staple foods that can be safely stored?

In our case, we enjoy cooking and eating ethnic cuisines, so we knew that every week there was likely to be a “something” with rice, noodles or pasta.

Come up with a “rough” meal plans for the entire period you wish to create your stock cupboard for. If you plan for a month, you will create a plan 12 times per year. If you plan for a year, then you can just do this the once.

Why create a store cupboard?

This article was written by Elaine Colliar from Mortgagefreeinthree.com. Thank you Elaine!

I resisted the idea of menu planning and creating a store cupboard for a very long time.  In my head I thought that laying in stores of food was something done by WI ladies, grandmothers and those who ate bland, unimaginative and plain food.  It couldn’t be something that we “modern foodies” would dabble in.

When I actually accepted that some forward planning was going to have to happen (as I quickly had to become used to a credit crunch food budget) I was, frankly, amazed at the savings in both time and money that quickly mounted up.

I found I relaxed about food, and no longer fretted that we didn’t have enough.  I no longer had cupboards full of food “and nothing for dinner” and my weekly spending on food tumbled by 75%.

Budgeting that works: Arkad’s Simple Rules

This budgeting frame is particularly appropriate when paying off ‘negative wealth’. When people have debt negative wealth, the customary advice is ‘don’t save; throw everything to pay it off’. I happen to disagree with this and from the very first days of my financial awakening I set myself two goals: one pay negative wealth and pay it fast; and two build up an emergency fund and savings. As it turned out I am in good company and Arkad, the richest man in Babylon, also agrees with me. Arkad’s advice to people who have negative wealth and wish to become wealthy was the following:

Ten percent of all you earn should be saved and invested.

Twenty percent of all you earn should be used to pay debts negative wealth– if the amount is insufficient one should negotiate with their creditors firmly and convince them that this all that they can afford but that they will pay diligently.

Seventy percent of all you earn should be used to cover all living expenses.

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.

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.