Eddie's 30 tips for a financial fix in 2006
If you're a typical Irish person, you overspend and are in debt. Want to sort yourself out?
Personal finance guru Eddie Hobbs offers John Byrne
30 top tips to help you make the
most of your money and make it work for you
Eddie Hobbs gives it straight on personal
I don't know about you, but for me
January has been its usual self: financial
alarm bells ringing loudly, New Year resolutions
already turned to dust, and only 11 months left to
clear some debts to make room for next
It's a by now familiar cycle. There's never been as
much money around and, as a result, we're
spending it like there's no tomorrow. And there
could be loads of them.
The temptations are certainly plenty: new cars,
holidays, HD-ready TVs, DVD box sets, kitchens,
extensions, holiday homes, or maybe even a
helicopter. Sure, why not? You can get three
choppers for the price of two if you go to the right
Or maybe it's time for a reality check. Time to call
Eddie Hobbs, to see if the man behind Show Me
The Money and Rip-off Republic can offer a few
practical tips for the months ahead.
The consumer's champion insists: "The ESRI
report was issued just before Christmas and
people would want to start changing their outlook
- the good times aren't going to continue forever.
"You can't just assume that you're going to ride
out your lifestyle debt on the basis of increasing
your income. People have had sustained increases
on their incomes for the last number of years
through a combination of rising income on the one
hand and declining tax rates on the other. That
can't go on indefinitely."
Eddie isn't the only one who knows this
economic hayride has to stop at some point. We all
know it. But only those of us who start planning
for that day will be the ones who can survive the
inevitable downturn. 2006 may be the year that the
SSIA scheme kicks a zillion more euro into the
economy, but it shouldn't offer an excuse to spend
So if you want to get your financial
circumstances sorted, here are 30 tips from Eddie
that will certainly put you on the right path:
Keep Sunday nights between half-eight and nine
o'clock free on RTÉ One . . . so that you can
actually watch people like yourself cope. You might
find it helpful.
- Let 2006 be the year that you eliminate
lifestyle debt completely, because we could
be in for a very bumpy ride. Set a target that,
by the end of the year it's gone, and that you
will cease forever using lifestyle debt.
- On a piece of paper, list
out all of your debt,
starting at the top of the
page with the most
expensive: not the biggest
debt; the most expensive
(i.e. how much it's costing
you to service). If you're
not sure what that is, find
out. Start with the interest rate you're
paying for each debt, then how much it's
costing you every month, then what the
balance outstanding is, and that's your
lifestyle debt portfolio.
- You'll probably find that the most expensive
debt you're paying is to catalogue companies.
Generally speaking, when you pay on an
instalment basis for goods that you have bought
from a catalogue, you will probably find that the
interest rate is somewhere between 25 and 40%.
Look at the fine print in the catalogue and you
will find the rate. And stop using catalogue
companies to buy things!
- Keep a cash diary for the month. Carry
around a little notebook - it doesn't have
to be anything expensive, just an
ordinary jotter - and take a note of what
cash you spend every day, and that will
give you a fair graph of where you're
- If you find that you need DIY help, and you're fairly handy on the computer, then buy, for E9.99 - in fact you can get it cheaper on the Eason's website - a copy of Short Hands, Long Pockets. All royalties from the sale of this book go directly to the Jack and Jill Children's Foundation. It will come with a piece of software called The Wonga Wizard, which will help you record all of your spending and debt electronically.
- Look at your monthly electronic spending:
your mortgage, your rent, your utility bills -
ESB, telephone, all of that kind of stuff.
- Add your cash spending to
your electronic spending.
That's now your total
- Multiply your answer by
12, which will give you
your total spending for
the year, and then
compare that against
your after-tax income for
the year. You will probably
find that you're on target
to spend more than
you're earning, and the
gap that's there is how
much you're adding to
your personal lifestyle
debt mountain for the
- Now split your spending into two
boxes: one is your must-spend box,
your necessaries: household food,
heating, lighting, mortgage. You
have to meet those bills. Then - and
you have to be ruthless about this -
you put into your optional spending
box all the unnecessary spending.
For example: gyms, holidays, booze,
entertainment, books, magazines,
non-essential shoes, clothes,
gadgets, makeup, hair and beauty.
- Now compare your necessary spending
box with your net income for the year,
and you should find that there's a positive
gap. In other words, your net income
should be more than your necessary
spending. That's the gap that you have to
work with, and that you use to attack
your debt mountain as well as some form
of optional spending, because you have
- Go back to your page and consider what
kind of debt that is at the top of the page,
you can drop to the bottom. In other words,
bring them into the areas of finance that
have the cheapest interest rates.
- You avoid, obviously, pouring your lifestyle debt
into your mortgage. That's a bad idea.
- The cheapest form of finance for lifestyle
debt that you have on credit card is
available by moving your credit card
balance and becoming a 'rate tart'. This
is where you shift your credit card
balance to credit card companies that are
offering 0% rates for six months. So now
you've eliminated the cost of servicing
interest on your credit card balances.
- Take your credit card and disable it. Take
a scissors and cut horizontally just
under the magnetic strip, so that you
have a credit card that you can't use
while you're out shopping, but can use,
for example, if you're booking a cheap
flight on Ryanair or Aer Lingus. You'll
still have the account number, the
expiry date and all the rest of the
necessary information, it's just so you
won't be able to use the credit card
while you're out shopping.
- Don't get off the bus at the shopping centre.
You should remove yourself from the source
of temptation. It's a bit like an alcoholic: you
don't go into the pub and start sipping Coca
- Change your high. If your high had been spending, then you need to
replace it with something else. For example: why don't you go out for
a walk with your best friend for three or four hours and have a good,
long chat? Or go jogging, or read, or do an education course. Do
something that's not going to cost you money, or very much money,
and actually replaces your shopping frenzy with something else. You
can't get rid of a bad habit without replacing it with a good one. It's a
bit like people who are overweight and overeating and over-drinking,
and then they suddenly start getting fit. They replace what they had
been doing with something positive.
- Advise all mature members of
the family that you're in a kindof
'slim-down' mode. In other
words, you share the problem. If
you've got teenage children who
are constantly demanding
money for this and that, they
should be told 'Sorry, the game's
up', and that you're tightening
your belt. You can't carry this on
your own, you need the help of
the family, because they are also
a source of spending.
- Look at the cost of your loans, and I would
say talk to your local credit union or bank, to
see if you could consolidate your loans into
one, low-cost, short-term loan. And you
should be looking at net interest rates of not
more than 9%.
- Consider talking a lot less on the phone
in 2006, and texting a lot more.
- Stop thinking that your new car is
losing value and that you have to
replace it. That's poppycock! This idea
of changing your car every couple of
years is just nonsense. When you buy
a new car, the immediate loss in value
is in government tax. Cars are being
built these days to last 10 to 15 years,
and they can look very well after four
or five years, so stop the habit of a new
car change every two years.
- Start getting smart about your annual
holiday. If you feel a holiday is a must, start
seriously looking at cheap deals. This idea of
leaving it till the last minute and paying
premium prices is no longer for you, because
you're over-borrowed and overspending. Plan
now. Immediately! Try and get the best deal
for your summer hols.
- Generally speaking, between 10% and 15% of
people's incomes in Ireland is being spent on
booze. It's a combination of the alcohol you
buy for home with what you spend going out
to the pub. So consider that carefully. Consider
cutting back on
alcohol: it's a huge
area in Ireland.
- Sell all liquid assets. That
means, if you're carrying a
debt of ¤30,000 between
credit cards and high
interest loans on one side
of your balance sheet, it
makes no sense to be
holding money in deposit
accounts, or putting
money into underperforming
policies on the other side
of your balance sheet,
because it means that
you're borrowing money
at a higher rate than
- Smoking. If you're on 20 fags a day, that's
around ¤3,000 a year. Look at cutting back or
giving up the fags because it's costing you a
huge amount of money.
- Look very carefully at how much you're
spending on insurance, particularly life and
health insurance, and check the market to see if
you could get the same cover at cheaper prices
- Look at your communication costs - your
telephone costs. That's another very substantial
area of expenditure: particularly mobile phones.
You can check the best deals on the market by
going on to www.callcosts.ie and look too see if you can get cheaper rates.
- If you're over-borrowed and overspending,
then your SSIA maturity
should be used to reduce your lifestyle
debt, in the first instance. That's another
one of your liquid assets.
- Be very careful about how
much your adult/teenage
children are spending on
phone calls. If you feel a
phone is a must for a child
for security reasons, then
get them into a good habit.
Give them a limited budget.
Don't cash-in your SSIA until it matures.
- Finally, if you're
because it's just
so big, get down
to your local
Budgeting Service) office. There are over 40 of
them, and they'll even negotiate with lenders
where necessary. If you don't know where it
is, go on to their website (www.mabs.ie) and
there's a map of Ireland which will show you
where they are located. You can also find links
to the mabs website on my own website,
which is at www.eddiehobbs.com.