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To some people, £375 may not seem a lot of money. They've obviously got too much for their own good. I hope they are giving some of their excess cash to charity. Think of it this way. If you lost your wallet or purse and it had £375 in it, would you be upset? I sure as hell would be.
Stop Saving
Before you even think about saving money, get out of debt. And by debt I primarily mean credit card debt. If you are living in your own house, mortgage debt is fine, presuming you haven't overstretched yourself. Mortgage debt is an essential living expense, and the rates of interest are comparatively low. Cheap student debt is arguably OK too, providing it really is cheap, and that's usually the Government type of student debt, which is pegged at the rate of inflation. But that's about it. All other debt is BAD.
You obviously need cash for essential day to day expenses, but if you have a credit card balance you do not need a savings account. What you need is a high interest current account, of which there are plenty available these days. After essential living expenses, and a small pot for those unexpected emergencies, every excess penny in your current account should be used to pay off that credit card balance.
Yet, many people have both credit card balances and savings accounts. They are kidding themselves. THEY ARE NOT SAVING MONEY. These people should get realistic, and fast. They are using their savings account to save up for a holiday or a car or meal out THAT THEY CAN'T AFFORD.
Killjoy
Call me Mr Scrooge. Why shouldn't people enjoy themselves? You only live once, and besides, you can't take the money with you. Whilst I have some sympathy with these views, it doesn't stop the fact that in general people with credit card debt are being unrealistic.
As Christmas fast approaches, Britons are about to go on their annual spending spree. Credit cards will be hammered as the country spends spends spends. Most people will take the attitude that "December is an excess month -- drinking, eating and presents -- and I'm going to enjoy it and worry about paying it off in the new year."
But in most cases it's a vicious circle. Inevitably that credit card balance never disappears. And before you know it, it's December again. Oops. Maybe next year.
And so it goes on.
What Can You Do?
Enjoy Christmas, but enjoy it within your budget. Family and friends will still enjoy your company, even if you spend just a little less on their presents. Consider a "no presents for the adults pact" or having a £10 limit on presents for the kids. In December (or any month), rather than going out to the pub or for a meal out, invite people round to your place. They can supply the booze, you the food. It will be cheaper all round, and by some considerable margin.
You are being realistic. You are putting the stepping stones in place so that you can have a credit card debt free future. The cash you're NOT spending will eventually have the effect of reducing your credit card balance.
How To Pay It Off
You need to get completely on top of your financial affairs. Put simply...
• How much do you earn, after tax?
• What are your essential outgoings?
• What's left?
If the "what's left?" is negative, you're being UNREALISTIC. Rein in your expenses. You are living above your means. Many of us would like to own second home in Spain or the south of France. But most of us are realistic enough to realise that will never happen, so we don't borrow a massive amount of money in order to make that dream come true.
Why then do so many people borrow money in order to go out for a meal, buy some expensive Christmas presents or to go on an exotic holiday to Barbados? Like the villa in Spain, they can't afford it. But they still do it. Madness!
By following the simple "what's left?" formula above, you'll know exactly where you stand financially. You can then start chipping away at your credit card bill. At the same time, if you rein in your expenses, you will find that outstanding credit card balance quickly diminishing. In no time, it will be zero, and you'll have regained your financial independence, and be ready to SAVE.
Now Save!
The you'll be in a position to save for that holiday, to save for that meal out. And ultimately to save for your retirement. And by God you need to -- the state pension of £67.50 per week isn't going to get you very far.
Most people should be able to save 10% of their monthly salary. That's a good starting point. Open that savings account. On payday, have a standing order transfer 10% of your salary directly into that savings account. After a couple of months, you'll never know the cash is missing. Of course it's not actually missing -- you're SAVING money.
That is just the first step. But it is a HUGE first step. And then you'll be on your way to living a realistic and enjoyable debt-free life. Now that would be the best Christmas present you could ever get.
Foolish Help
We have a range of Fool books which should help you get your financial affairs in order. They could make great Christmas presents.
• Motley Fool UK Investment Workbook -- includes a chapter on setting up your own income statement and balance sheet.
• How To Invest When You Don't Have Any Money -- sounds impossible, doesn't it? Find out how.
Other Fool Resources
In December, the Fool will be launching a comprehensive Get Out Of Debt centre. It will be the definitive place to come to help you pay off those credit card debts, and the other types of debt too. If you wish to be alerted to the launch of that area, please sign up for our weekly email newsletter, called The Weekly Digest. It's completely FREE, and you can do it here.
In the meantime, we already have a junior Get Out Of Debt section, complete with plenty of handy hints. In part 2, there's plenty of links to our relevant discussion boards, where you can swap thoughts with fellow readers.