A hypothetical spending career

Written 3rd January 2025

So, you've just left college or uni and have secured your first job.

You're living at home and paying some rent to your folks for your living expenses and you make the most of the rest of your hard earned cash by treating yourself to whatever you want,  whenever you want it. Outings with friends, clothes, phones, tv, games, holidays, festivals, fast food.  You're young and free. Every month you're having the time of your life.

Then you want to get a car, so you buy driving lessons, followed by buying a car and all its associated costs. You've also got fuel and running costs to cover. You start using an overdraft to cover all your expenditure and get yourself a credit card. You keep buying whatever you feel like and never save anything. To be able to afford it all you pay your car tax monthly and your insurance.  Then you start not paying off your full credit card bill every month and that debt gets bigger due to charges and interest. After a while, you want to go on a nice holiday and pay for that on your credit card too. The credit card company keeps upping your credit card limit so you use it. Then you realise the interest you're paying on the credit card debt so you decide to take out a loan to pay that off because it's a cheaper interest rate. So you pay off the credit card and start paying off the loan. But you still spend on the credit card, buying whatever you need or want and over the years you accrue another large credit card debt, plus your loan still has some months to go before being paid off.

You want to move out of home and set up your own home. You've had some pay increases at work and some new home builders offer very attractive rates for new buyers so you are able to get yourself a new home. You want a holiday because you work hard and deserve one so you book a trip to wherever and make the most of the holiday companies 0% deposit schemes and book a nice trip somewhere so that spreads the cost of that over several months.  Then you need furniture etc to furnish your new home so you pop to Ikea and buy a load of items. You take full advantage of their interest free finance and spend £5k on beds, linen, storage, kitchenware etc etc. Its only £105pm over 48 months. You've furnished your new home and love it. You feel like a proper grown up.

Now your car is a few years old and you want to get a newer one. You're now paying back a credit card, loan, mortgage, Ikea, car tax, home and car insurance all on monthly repayments. You have hardly anything left to spare at the end of each month. Then you want to get married and have a fairy-tale wedding, then you want to start a family...

And so it continues, month to month paying back what you've borrowed.

I'm not going to add in a financial crash, change in government or war that affects interest rates or anything like that, but those are still potential U.K. or world issues that could have a knock on effect.  What if you get ill but haven't got sickness cover because you couldn't afford to take it out? The washing machine breaks? Or your partner loses their job?

But lets just break things down here for a minute.

You spent every penny you earned when you had no overheads right back in the beginning of your spending career. You didn’t want to save to buy a car and to cover its associated costs so you started effectively borrowing to pay for things. Car tax is 5% interest and car insurance between 10% and 30% if you pay for it monthly rather than in one payment. You were already paying more than the thing you were buying actually cost so you had less money left. Your credit card was costing you more than you actually spent on it. Your loan the same again. Mortgage too, only Ikea interest free didn’t actually cost you more but the likelihood of the things you bought still being usable by the end of the 4 years you were paying for it is questionable. The holiday was interest free too but you struggled to find the money each month to pay for it so you probably were greatly relieved to actually have it when the time came.

Every month you spend everything you earn and don't save anything, when you need a bigger expense item, you'll need to find funding from somewhere. Companies want to make their items affordable to you so you'll spend more with them. All you get is a whole load of debt that you're paying for years to clear and go to work for practically very little. You'll be working until you're 67 to pay it all off.

If you'd have forgone a costa or McDonald's a few times a month, not bought big brand trainers or phones and saved enough to pay for your car insurance and tax in one go, you'd have saved that interest you had to pay. If you'd have saved up for a deposit while still living at home, for 3 years or whatever, you'd have had a bigger deposit and likely gotten a lower mortgage interest rate.  If you'd have bought a second hand car, you'd have paid much less for it than a new one and will lose less money on it when you want to sell it.

All I'm trying to demonstrate here is if you can reduce the amount you spend on food or clothes or going out (the non essential things), you'd start to be able to just buy things that are actually adding value to your life (like having a car to be able to get to work, see friends, social activities) when you need them with money that you've actually got.

You can live on less!! The media and all companies, whether big or small, want you to spend your money on their product. Why else do they have such huge marketing budgets? When was the last time your McDonald's looked like the pictures you see of it? Or tasted as good as you imagined it would? Or kept you feeling full longer than a sandwich or piece of fruit? But you still bought it! That's good marketing!!!