As we cool down

The mini heatwave is all over bar the shouting. And as we cool down, it’s an opportunity to look back at the ridiculous decisions we made in the hot weather. For some reason rational thought goes out of the window when the temperatures soar, and we suddenly thinks shorts to work are a good idea, or drinking at lunchtime.

However, it’s also bad for our finances, as we spend money we don’t have on things we don’t need. Even worse we put it on plastic. Some £100 million will go on credit cards this summer, according to Moneyfacts. So how do we avoid getting burned?

If you find yourself in a financial mess, with holiday costs creating a short term cash flow issue, you can turn to a credit card. If you can find one with a 0% deal on purchases you can stagger repayments over this period. There are a few more on the market than there have been in recent months. Virgin and Sainsbury’s both offer cards which have 0% on balance transfers and purchases for 12 months – if you qualify.

However, prevention is far better than cure. The better approach by far is to avoid overspending. This mini heatwave gives us a great opportunity to revisit our summer spending.

It’s worth sitting down (ideally with a glass of something cold) and working out your spending commitments this summer. Add in your holiday, any clothes you desperately need, and your usual living costs. A good rule of thumb is to add 10% to your total, as most people underestimate how much they are going to spend. Then look at what you have in your account, what you have coming in over this period, and work out whether you have enough.

Then before you rush off to apply for a credit card to close the gap, think long and hard about whether you really do need to spend all this money. Are there big costs you can cut without trying, like shopping around for better utilities deals, or downgrading to a cheaper supermarket?

If the fixed costs are as low as they can go, how about your summer discretionary spending. Do you really need a new wardrobe? Get into the dusty corners of your cupboards and see what you have from previous summers. Given the poor summers we’ve had recently, there’s bound to be plenty of wear in them yet. Even if you’re very keen to keep up with fashion, one or two items will update the look for a fraction of the cost.

Then look at your entertainment budget and consider whether you need to make sacrifices or better choices. Just swapping drinks standing in the street outside a pub for sharing a bottle of wine in the garden will slash the cost and be far more pleasant too.

If you’re still struggling to make ends meet, think about whether you can earn some extra cash over the summer. Consider offering some babysitting, either in the evenings or over the weekend. For a full day you could make up to £60, or £30 for an evening, which will make a good dent in potential overspending. In addition, you’ll have to work so hard to earn it that you’ll think twice about spending it!

It’s not always nice making cuts, and it’s not always easy when all around you are throwing caution to the wind in the heat, but it’s worth making a few cool rational decisions before you get burned.

Source – http://www.walletpop.co.uk/2010/05/27/summer-spending-disaster-looms/