Ollie drives home the expense manager message
Fresh from giving his daughter her first lessons in money management, Ollie gets the bit between his teeth, and worries about some statistics he finds alarming about the way people use credit cards.
“Not understanding the maths of money is costing people a fortune,” lamented Ollie, checking the price of the new season’s Aston Villa shirt on the club web site.
His wife Lizzie looked over his shoulder. “Some of us don’t understand the value of it either, judging by the price of those shirts. What’s wrong with last season’s?; you haven’t worn it that much,” she said.
“What? Oh, no, not the shirts. I was looking at those because someone…” he raised his eyebrows and looked at her; “…someone wanted to know what I wanted for Christmas. “What I’m talking about is that people don’t understand money. They waste what they have, and then live a little too far beyond their means with the help of credit cards.”
Paying interest on interest
Now it was Lizzie’s turn to raise her eyebrows. “Isn’t that what they’re for?” she wanted to know. Ollie was forced to agree, if only a little. “Well, yes, but that only works if you pay off what’s owing before the interest gets slapped on. People get too used to not paying off their balances at once and end up paying interest on the interest on what they borrowed to buy stuff – and it can amount to a lot of money over a year. Some credit card companies charge more than 25%. Compared to what they pay out in interest at the moment, there’s a huge difference.”
“What if people can’t afford to do things any other way?,” Lizzie wondered. Ollie countered quickly. “Well, you might say that that they shouldn’t buy stuff, but that would be a bit hard,” he said. “Better to look at other ways of finding the money. For instance, if you want a new kitchen, it’s too easy to flash the plastic in the showroom and buy on the credit card – going to the bank for a loan is a little more of a chore, but likely to considerably less expensive. And drawing cash out on a credit card is a big no-no. At 25% interest on the whole year, if you don’t pay it off, that makes things cost a quarter more than the ticket price! That’s crazy, and it causes people a lot of worry as well.”
How to make loan payments affordable
“Right then, Mr Governor-of-the-Bank-of-England, how should people put things?” Lizzie’s tone was only slightly mocking.
Ollie barely paused for breath. “It’s really not hard. It’s about being a good expense manager, which anyone can do like us with an expense tracker app like Solo Expenses. Think of how much money we’ve saved by being diligent on recording what we spend, and what we’ve been able to do with the money.
“It’s about making the most of whatever you have, which a good expense management system will help to achieve. Having more money isn’t necessarily about having more income; it’s about using whatever income you have wisely, so that it feels as though you have more. Hasn’t using Solo Expenses’ expense manager app taught us that and made us feel richer? Crikey, we saved enough to pay for part of that holiday to Florida. What more proof could you need?”
“None at all, Banks, none at all,” said Lizzie. “But I suppose people will still get in over their heads on spending for Christmas using the credit cards…”
“They will. For a lot of people those will be cards still carrying debt from last year’s summer holiday too. But credit cards aren’t all bad. If you keep on top of payments, and don’t let them roll over, then there’s a window on interest-free credit and insurance on purchases. What’s more, shop around and there are interest-free deals to be had. But those things are only of any value if you use the card as part of a proper approach to finances, alongside some good cloud based expense management software like Solo Expenses.
“So if I buy you that Villa shirt for Christmas, I could return it in January if they have a bad run of results, could I? Or maybe our credit card people would expect Villa to have a bad run of results. Is that the kind of thing we’d be insured against?”
“No,” said Ollie, glumly. “It isn’t. There’d be nothing wrong with the shirt anyway – and it’s not much of a risk, either. Villa have only lost four times out of 16 games so far this season.”