Managing money is a bit of a struggle for most people - but when you're a gay man and obliged to spend a lot of cash in clubs, clothes shops and the Canaries, it's staggering how much you can get through every month.
This month find out what happened when Pinkfinance.com took on two self-confessed spendthrifts and offered them a money makeover. But they came clean about their bad habits, embarrassed though they were, and we got them sorted. Here's how our pair of gay gadabouts, Michael and David, hope they'll soon be getting standing ovations from the staff at their bank branches.
Age: 31
Profession: Advertising Manager
Salary: £24K
Michael admits he has always been disorganised with money, but would like to get himself together now, have some savings and ideally buy a property next year. He does already have a savings account, but he never uses it. Michael was blacklisted for credit several years ago and has not been able to borrow money from banks - which he says is 'probably a good thing' - though he often borrows money from friends at the end of the month and says he would like to stop doing this.
It's difficult to save, Michael says, because he spends most of his readies on nights out - and he tends to fund not only his own lifestyle but some of his friends' as well!
Michael's monthly outgoings break down like this:
| Rent | £475 |
| Council Tax | £40 |
| Telephone | £40 |
| Electricity | £30 |
| Mobile | £30 |
| Food | £100 |
| Travel | £60 |
| Cigarrettes | £100 |
| Total | £775 |
His basic monthly take-home pay is around £1,300, leaving him with a disposable income of £525.
Michael has taken the choice of limiting himself to £60 a week for clubbing - and we've advised him to withdraw the money on a Friday, so that if he spends it all that night then it's Blind Date, Stars in their Eyes and Family Fortunes on Saturday.
Michael needs targets for his savings. We suggest he will need from £3,500 - £4,000 to place a deposit and cover his legal fees on the purchase of a property, as it is unlikely he could raise a 100 per cent mortgage (even though Michael has had past credit problems, a mortgage can be arranged: his difficulties are not recent and there are now a number of 'restart' mortgages designed for people like him).
People start off saving with good intentions and normally fail to stick to them. Michael says he could save £150 per month, but we've set a target of £75, which is more realistic. After three months this can be increased to £100, resulting in a savings total of £525 after six months. Michael can then increase the amount as he gets closer to his target.
This savings system is designed to avoid resentment - The golden rule is that savings should not be at the expense of enjoying life a little. This way the individual's attitude to saving is changed gradually. We advise that a separate savings account is set up and savings are deducted via a standing order on the day after payday every month. And any money left in his current account at the end of the month should be transferred to savings, giving a fresh challenge.
Michael's spending plan leaves some money for incidentals, so it should mean that he doesn't have to borrow from friends at the end of the month. As Michael doesn't know exactly how his credit record stands, We recommended that he contact Equifax on 0990 143700 to find out. Finally, the problem of Michael's borrowing-happy friends should be solved when they read this makeover!
Age: 36
Profession: TV Producer
Salary: £37k
David is just about to start paying a mortgage so his budget needs restructuring right away. He has a personal loan of £7,100, repayable over 18 months, and an overdraft of £1,500. As David has a good income the bank has no problem lending him money, but he has developed a borrowing habit and needs to break it. He also realises that his big spending on clubbing has to stop. The £13 David spends on the gym is wasted as he doesn't even go!
David's £2,100 net monthly salary breaks down like this:
| Rent | £494 |
| Loan Repayments | £500 |
| Council Tax | £37 |
| Food | £200 |
| Travel | £70 |
| Electricity/gas | £60 |
| Savings | £50 |
| Cigarrettes | £100 |
| Canteen | £100 |
| Magazines | £15 |
| Gym Membership | £13 |
| Work Social | £80 |
| Clubbing | £500 |
| Clothing | £60 |
| Total | £2,279 |
First we recommend re-scheduling the loan repayments over 36 months so that the payments go down to £275 per month: and setting David a target of 'no more loans' for at least two years. David is told he's not to borrow money for holidays, something he's traditionally done - now he must have saving targets to work towards. He's also going to cut his after-work drinking bill in half to £40 a month: inviting friends to visit his new home should help in this. And David has decided for himself that he will only have two nights out clubbing every month, with a limit of £50 spending on each night.
We also advise David to save £50 a month in a separate 'rainy day' account - by making his own sandwiches for work he can save the £5 he's been spending every day in the work canteen.
David's new budget looks like this:
| Mortgage | £512 |
| Restructured Loan | £275 |
| Loan to repay friend | £85 |
| Home Assurance | £12 |
| Life Assurance | £21 |
| Council Tax | £37 |
| Food | £200 |
| Travel | £70 |
| Electricity/gas | £60 |
| Savings | £50 |
| Saving for Holiday | £100 |
| Gym (instead of clubs!) | £13 |
| Cigarrettes | £100 |
| Clothes | £30 |
| Magazines | £15 |
| Canteen | £50 |
| Socializing after work | £40 |
| Clubbing | £100 |
| Total | £1,170 |
The new budget even allows for £100-£200 every month to spend on the new house and leaves £75-£100 for emergencies. David has been told to imagine the feeling he'll get when he sees a credit balance on his current account at the end of every month - and he may have more left over besides, to be transferred to his savings account.
Now David should feel he has made some intelligent choices to accommodate his new responsibilities - but he still has a life!
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©2001-2002
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