surviving the recession

The Court of Appeal today ruled against the banks over bank charges. At the heart of the ruling is legislation going back almost a century which states that if you go overdrawn, the banks are allowed to charge interest, and they can also make a charge to cover the costs of informing you that you were overdrawn - but they can’t charge more than their costs (i.e. they can’t make punitive charges). Most bank’s were  charging about £30 to send the letter out, in addition to the interest charged, when the letter cost at most £2 (they are automatically generated and even if sent first class, the cost of postage and paper won’t come to £2).

Last year, the Office of Fair Trading took the banks to court to challenge the way they were levying high charges for sending out letters. They won, but the banks appealed. Now the appeal court has ruled in favour of the Office of Fair Trading.

What does this mean? It means that banks can no longer charge over the odds for sending out letters (though the banks are pondering another appeal). It also means that you should be able to reclaim charges levied on your current account over the last six years.

The Guardian newspaper has helpfully drawn up template letters that  you can use to reclaim your charges. I would advise people to go ahead and reclaim - but before you send off your letter, open another current account with another provider just in case your bank pays you back your charges but decides to shut your current account in revenge. 

So many people who try to budget start off with their income and then work backwards to see what they can spend. You really need to work the other way around.

Go through all your expenditure, from rent to clothes to entertainment. Don’t leave anything out, and always include annual items such as the yearly car service (with the annual items, simply divide by 12 and then add to the monthly budget). Once you have got your figure, this is the Big Number - what it takes to live reasonably comfortably. The key thing to note is that it has nothing whatsoever to do with what you earn. Don’t increase spending when you get a payrise, and don’t live paycheque to paycheque. Instead, if you earn more than your Big Number, save it (set up a standing order so the money is transferred automatically to a savings account).

If you earn less than your Big Number, then you will obviously have to cut back on expenditure and deal with the discomfort. But it should be an eyeopener that you need to somehow earn a bit more.  So head to the categories in the sidebar labelled earning money and earning money online, to pick up tips on how to raise extra cash.

Even with petrol prices dropping, cars are expensive to maintain (and there is always the possibility that oil prices will rise again). However, you can save costs by sharing journeys. This is particularly recommended for those who are on a tight budget and have to cut back on travelling expenses.

Liftshare.com is a UK website that allows you to find people to share journeys with - they have 85% of the UK car-sharing market. The journey can be something like a one-off cross-country trip, or regular journeys to and from work or school.

They recommend that those sharing journeys share the costs of petrol (doing more than cost sharing and trying to make a profit could invalidate your insurance).  The website itself is free to join and free to search for other travellers.  They charge businesses who set up car-pooling schemes on their site, and businesses who use the scheme can make their pools private instead of public. They have no referral schemes.

If you are shopping online this Christmas, you might wish to check out Vouchercodes.co.uk.  They list vouchers for most of the UK online stores and you simply enter the voucher code when you make your purchase to get your discount. Discounts range from 5% to 50%.

You don’t actually have to join the site to get the codes (though if you join they send you email alerts on the latest offers).  They also have a section on “free stuff” which is all about freebies retailers are giving away to promote their products.

Note that I am not connected in anyway with Voucher codes (am not a member and they don’t have a referral program).

There may be a recession on, and you may have lost your job (or be worried about losing), but you still have to heat your house and light it to cope with the winter. So what to do?

Heating is important - those who try to do without tend to get gravely ill. Allocate part of your budget to heating and mark this as a priority expense, along with the mortgage, to make sure you always have something to pay the electricty and heating bills.

That said, there are various strategies to cut the bills down by switching your electricty supplier to one with lower tariffs and by removing waste. See this list of energy tips for small things you can do immediately to reduce your energy usage.