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Get Rich Or Direct Debit Trying. Buying Upfront For Financial Security

Direct Debits

Direct debits. We all have them. They sneak up on you from nowhere and become a permanent fixture in your monthly outgoings. They are a constant face palm moment. But in reality why do we rely on them? What wealth do we have if our prized assets are down to a monthly payment which we have to meet every single month?

As a Generation Y child I have grown up with financial uncertainties. Mass media is littered with comments on the economy, the state of the world we live in and how people are struggling financially across the globe.  Sure it doesn’t affect everyone but are we really doing enough long term to secure ourselves financially?

Buying upfront is nothing new it’s just rarely used. In some circumstances it’s impossible; nobody has the financial clout to buy their house in cash however in some situations should we look at buying upfront as opposed to conforming to the norm and having worries if ‘shit was to happen’.

What to buy up front?
When it comes to direct debits they are typically either things you cannot live without (Gas, electricity etc), things you’ve had a rush of blood on and are tied into (love film, memberships) or things which are necessary to your life which have an alternative which you can explore. Let’s just say we’ll focus on the final point.

What are these alternatives?
This depends entirely on the individual but for the sake of the post let’s take my own personal situation into account. I have personally leased a brand new car for the past three years, 18 months of which I have worked from home with minimal use of the vehicle.  Tied into a monthly payment on the basis of 10,000 miles a year (I’ve averaged 6 ,000 thus far) the lease and subsequent direct debit has been a huge financial loss for me. I just haven’t got the value out of the car.

Upfront Payment

My home gym set up

The total outlay for the car on lease alone is around £6,500 for the 3 year period. Suffice to say this is a considerable sum and let’s remember I don’t even own the car!

Since the realisation hit home I’ve been making monthly savings to afford to buy a car outright. Sure the car will be older than the one I have but will I mind when I have an extra £180 a month in my pocket and a saleable asset? Surely not.

Assess your needs vs desires:
A new car is great but are you in the financial position to afford it? Does that direct debit really make sense long term? A brand new mobile phone is a luxury and makes you look moderately cool for five minutes but do you really need it? Contracts and tie in’s are not cost effective, especially when you most probably already have a phone.

Calculate what you need and what you desire. In most cases the actual need for something is small and most of your buys are more desirable options which you more than likely don’t desperately require.

It’s not all sacrifice:
‘But wait a minute, all the things you have mentioned thus far are sacrifices to my lifestyle’.

You’re again absolutely right they are sacrifices but in terms of hard hitting cutbacks are they those? Not at all. The sacrifices are small. You are essentially cutting back on a shiny new phone or a car which you don’t really need.

But some changes can benefit you both financially and enhance your lifestyle. One clear example of this is my acquisition of home gym equipment. It’s the winter soon and venturing to the gym in the winter is NOT fun. Furthermore if you can train in the comfort of your own home then why wouldn’t you?

Not only have I removed completely a direct debit payment of £40 a month but I have also removed the restrictions of training in gym hours, busy equipment and so forth. By taking a look at what you pay out monthly and finding solutions you can also enhance your lifestyle.

 

My home gym cost approximately £450 which is under a year’s gym membership price which if used properly should last me a considerable amount of time. Investments like these matched to your lifestyle make sense. After all time is money and money is time.

Forever saving?:
The notion of paying for things up front is similar in theory to direct debits however you can usually find a better deal by doing this. Car insurance is significantly cheaper if you pay up front. If you haven’ t got the savings then look into interest free credit cards to make the payment and then pay the credit card off similar to a direct debit. Use common sense.

Money you then save by reducing direct debits should then be channelled back into making similar purchases further down the line. Without having tie in’s you are more reactive to the market and can make decisions based on what’s on offer and what matches your current position. Things happen fast and by signing up to specific deals now you are limiting yourself in the future.

Areas where this can be effectively utilised:
Of course this depends on your own specific lifestyle. There are many potential areas of savings which I have missed but here’s some which I have either looked at making changes or will continue to make changes in the future.

Gym membership
Car Insurance (Huge savings here)
Television Subscriptions (Most of what Sky offers can be watched for free)
Car purchase (assess your needs/requirements for the age of car)
Mobile phone contracts
Film subscriptions (Netflicks, Love films; why not just borrow off friends?)
Phone insurance (Most banks offer this as part of their banking policy)

The future is bright:
It’s very easy to take on a number of direct debits; it’s up front money and you can afford the payments so why wouldn’t you? In reality there’s no reason why you shouldn’t but what if? There’s always a chance that something could happen and if something doesn’t happen then you have more savings to use effectively elsewhere.

Spending £400+ on Gym equipment in September meant it’s been a relatively quiet month for me in terms of other purchases but what is one month’s sacrifice for a loss of £40 per month? It’s small indeed.

It can also be said that by removing these direct debits you are more cash rich to be able to make payments in other areas which will benefit you long term financially. Think house mortgage for example.

Wealth particularly self wealth should be about the long game and not the short game. A new iPhone might make you cool but do you realistically need it day to day? Plan for the long term and make short term decisions which facilitate this.

You may choose to live for the moment and ‘enjoy it while it’s young’ but i’m sure you’ll regret that in the future.

We roll a dice……Your turn…

About the author

Ryan Gibson

Hey! I'm a 28 year old digital marketing guy residing in Leeds, England. My skill is in search marketing and I have gathered over 6 years experience of working on large multilingual campaigns for a number of FTSE 250 Organisations. After accepting a role with a business based in Singapore I began questioning traditional business practice and employee retention. This blog GenerationY.com was therefore born with focus on Y in the workplace. A millennial child at heart I aim to provide a voice for the 'misunderstood' generation and my goal is simply to change perception and corporate mind set on work/life attitudes; inspiring companies and individuals to seek change.

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