Saving Money and Having Fun

 Read more Oily Rag articles by Frank and Muriel Newman

This week we have great pleasure launching the inaugural Oily Rag Master Chef competition. We are now taking entries from oily rag cooks across the nation to find out the best oily rag dish. There are of course conditions. The recipe must be a family favourite, and it must be cheap to make. Other than that, pretty much anything goes. The winner will be declared the Top Oily Rag Master Chef 2012, and will no doubt gain immediate celebrity status, to be pursued by the paparazzi, appear on TV commercials, and feature on the cover of women’s magazines besides the like of Camilla Duchess of Cornwall and Angelina Jolie.

So don’t be shy. Contact us via our website, www.oilyrag.co.nz, and send in your favourite frugal recipes.

With that important announcement out of the way, let’s turn to another important topic which gets talked about a lot in government circles: D-E-B-T, and how to get out of the debt trap. The best way of course is to not get into the debt trap in the first place by having good money habits. But since good money habits can’t be bought at your local convenience store, here are a few oily rag home truths that we need to be reminded of from time to time.

• Avoid the temptation to buy on tick. This applies especially to motor vehicles, furniture, clothes, holidays and hobbies. It’s bad enough that things like cars and household items lose value. Don’t add to your problems by paying interest as well.

• If you have a mortgage, and other debt like hire-purchase finance or credit-card debts, look at combining all of the debt into a single mortgage. Because mortgage money costs less than other debt, you may be able to cut heaps from your interest bill.

• Don’t guarantee someone else’s debts. Acting as a guarantor has nothing to do with being a character witness. It means you take on all of the risks of the debt without receiving any of the benefits! If the person you are guaranteeing defaults on their obligations (either because they can’t afford to make the repayments or choose not to!) then the other party has every right to claim repayment of the debt from YOU, without even first pursuing the borrower!

• Beware of hire purchase. A hire-purchase agreement is where the customer makes a down payment on a purchase and agrees to repay the balance over a period of time (usually 24 or 36 months). Some retailers offer an interest-free purchase incentive, but even these deals will cost you more. Most hire-purchase or credit-sale deals involve establishment fees and insurance costs. The establishment fees cover the costs of setting up your account, checking your credit record and sending out regular bills. Most retailers will require hire-purchase contracts to include “risk” and “credit” insurance, and require you to pay the premium. Risk insurance covers the goods for theft, loss, or damage (for goods that remain the property of the finance company until the last repayment). If you already have household insurance that would cover the new purchase you will not need to take out additional cover. Credit insurance covers the repayments if you are unable to do so due to illness, accident, death or redundancy. All of these things have a cost that would not be necessary if you paid for the goods upfront, so that cheap HP deal may not be cheap after all. Always ask the retailer to tell you what the total all-up cost of the goods will be, including all of the fees.

If you are finding it impossible to keep your head above an ever-rising tide of debt there are really only two things you can do: sell assets to repay the debt, or spend less. Selling assets or downsizing the home will be a hard decision to make, but it’s what you may need to do if you are caught in a debt vice. Those in a less desperate situation will simply need to be more creative about how they save money.

Frank and Muriel Newman are the authors of Living off the Smell of an Oily Rag in NZ. If you have a favourite tip then share it with others via www.oilyrag.co.nz or post it to Living off the Smell of an Oily Rag, PO Box 984, Whangarei 0140.

* Frank and Muriel Newman are the authors of Living Off the Smell of an Oily Rag in NZ. Readers can submit their oily rag tips on-line at www.oilyrag.co.nz. The book is available from bookstores and online at www.oilyrag.co.nz.