Published in on Tuesday, May 05 2009 by Ideal Debt Solutions
If you’re struggling with large debts running into many thousands of pounds, it’s difficult to seriously see how saving relatively small amounts of money can make any kind of difference whatsoever.
But it’s exactly this sort of thinking that gets people into difficulty in the first place. Let’s take coffee as a small example. After all, over the last decade or more, the number of trendy coffee shops on the high street seems to have quadrupled. And it’s not surprising – their coffee is excellent compared to what we used to get. But let’s be honest, it’s not all about taste. It’s also a lot to do with its trendy status. A big coffee cup is the accessory no self-respecting twenty-something year-old can be seen without these days.
But two large coffees each working day amounts to around £136 a month. And when you subtract the average young person’s likely spend on Council Tax, rent or mortgage, food, clothes, utilities etcetera, this is a staggering percentage of true disposable income.
As an illustration, let’s presume someone gave up coffee for good – and invested that money, making 6% a year in dividends from shares, for example. After five years, the investment would be worth almost £10,000 - even if the shares were at the same price. Take that forward for another five and now we’re really talking at £22,600 and after 20 years, you’ve managed to amass over £63,000, simply by refusing to buy into the trendy brand mentality in one small area of day-to-day living, even in the unlikely event that the shares had never improved at all.
In other words, prudence with the little things in life can pay off handsomely in the long run if you save and invest. Unfortunately, when you’re in debt, the exact opposite scenario is true – which is why people find their debts spiralling out of control. If you’re one of them, do everything you can to make even a small difference each month – and always seek expert personal debt advice expert personal debt advice.