MONEY COMMENT
Change Your Relationship With Money

By Cliff D'Arcy
December 2, 2003

Money's a funny thing. Sometimes we have it, other times we don't. Sometimes it's a pleasure, at other times it's a burden. Once a month, we get paid, the rest of the time, we're watching our dosh disappear.

Nevertheless, have you ever stopped to reflect on how your relationship with money developed? If it's all got a bit out of hand, do you know why, and when this started to happen? Just as with any relationship, it's important to stop and ask yourself a few important questions along the way. Here are some examples:

1. Why do I always spend more than I earn? (If you don't, give yourself a pat on the back!)

I'm always banging on about how budgeting is the cornerstone of good financial planning. I know I'm a saddo, but it's true. It doesn't matter if you're on benefits or the Beckhams, if you keep spending more than you earn, you're going to have a long-term problem!

It's important to understand why you live beyond your means. Do you have a Champagne lifestyle and a beer income? Did you learn bad habits from your parents? Or, like me, did you have sensible parents, but ended up rebelling against their good advice?

2. Will I be an eternal borrower?

One of the worst routes you can take in your financial life is heading down the plastic road to Hell! Being reckless with credit cards, store cards and consolidation loans is a guaranteed route to poverty, unless you're incredibly affluent - or will be, and soon.

Okay, so it's fine to buy your home with a mortgage, but over-spending on credit will make you a pauper in the long term. What's stopping you from tackling your debts? If you want to get to grips with your plastic, switch to 0% cards, or kill your credit with a well-aimed snowball.

3. Am I saving as much as I should?

These days, it seems that saving is going out of fashion. Ads bombard us with offers of easy credit, with far too many people being sucked in. However, it's far more attractive to earn 4% interest on your money than to pay 18% on your debts!

If you're not saving every month, ask yourself why. Is it because you didn't learn the habit from your parents, or are you so over-stretched that there's nothing left in the kitty at the end of the month? In any case, building up a pot for a rainy day is always a good idea.

4. Why don't I buy insurance?

If not, why not? Is it because you've been told that all insurance policies are 'dead money'? Having worked for several of the UK's leading insurers, I beg to differ. UK insurers pay out tens of billions of pounds a year - and not just to the reckless or unwise.

Motor insurance is compulsory for all UK drivers, and home insurance is a must if you value your home and its contents. Life insurance is essential if you have a partner, dependants or anyone who will suffer financially from your death. Health insurance is worthwhile if you want to avoid any financial problems from a serious illness, accident or injury.

5. Why don't I invest in the stock market?

If you do, congratulations - you've found the asset that beats almost others over the long term. If you don't, why not - perhaps you've got the property bug? Why, when property has returned around 9% over the last thirty years, compared to 12.5% from the UK stock market? (To put these returns into context, £1,000 in property thirty years ago would have grown to £13,268, compared to £34,243 in shares - over 2 1/2 times as much.)

Of course, the questions you need to answer are as unique as you are - but it's worth asking them if you want to put your money in its place.

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