Hobbs' choice

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 finance 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 Christmas.
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 place.
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 some more.

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:

1. 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.
2. 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.
3. 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!
4. 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 haemorrhaging cash.
5. 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.
6. Look at your monthly electronic spending: your mortgage, your rent, your utility bills - ESB, telephone, all of that kind of stuff.
7. Add your cash spending to your electronic spending. That's now your total spending.
8. 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 year.
9. 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.
10. 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 to live!
11. 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.
12. You avoid, obviously, pouring your lifestyle debt into your mortgage. That's a bad idea.
13. 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.
14. 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.
15. 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 Cola.
16. 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.
17. 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.
18. 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%.
19. Consider talking a lot less on the phone in 2006, and texting a lot more.
20. 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.
21. 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.
22. 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 money haemorrhage area in Ireland.
23. 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 life insurance policies on the other side of your balance sheet, because it means that you're borrowing money at a higher rate than you're investing.
24. 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.
25. 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 elsewhere.
26. 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.
27. 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.
28. 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.
29. Don't cash-in your SSIA until it matures.
30. Finally, if you're overwhelmed by the problem because it's just so big, get down to your local mabs (Money Advice and 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.