Every Friday I publish “Frugal Friday!“, an open-ended series with some of the simple and best ways to really save you money both now and in the future.

I was suffering from a small degree of writer’s block today. When I first came up with the idea of ‘Frugal Friday’, I had millions of post ideas zinging around in my brain, and it took much restraint not to write one huge article there and then with my ideas.

Now I have come to actually write another one, and my mind has gone blank. Every writer’s worst nightmare.

So I sat back and analysed myself for a moment. “What do I do that is frugal?”. I have written recently about saving money on your cooking and food shopping which are two of my passions, and something that everyone else has to do as well. I wrote about making good savings on the running cost of your car. Again, most people have a car and so that was a worthwhile article.

Then it suddenly dawned on me: haggling.

I have saved countless hundreds if not thousands of pounds over the years by haggling: with car dealers; shop assistants; telesales folks; a real varied range of different scenarios and people that more often than not, resulted in a saving.

Some examples from just this year include getting half-priced multiroom (for 2 rooms) for 12 months and a free Sky+ box for my satellite viewing pleasure. I got a 15% discount on my mobile phone bill without entering into a new contract. I even saved £150 off of a new set of tyres for my car.

So how do I did I do it, and how can you do the same?

Ask For a Discount

One of the simplest and most obvious ways is simply to ask for a discount. I once got 10% off in Curry’s just for asking if they could do me a discount! Front-line sales folks often have small discretionary powers when it comes to knocking value off of a product, but they won’t unless you ask.

Go Armed

I needed a new tyre earlier on this year on my car due to a slow-puncture in a non-repairable place. Two others were coming up for probably being illegal, so I decided I’d get them all replaced at the same time.

Unfortunately the ’slow’ had suddenly gone from slow to not so slow, and I found myself in the nearest Kwik-Fit. While they are not exactly my first port of call for maintenance, it was a case of “needs must” as I would not have made it home.  After choosing my brand, I sat down in reception.

I didn’t read the free magazines or drink instant plastic coffee, however. I dug my mobile phone out of my pocket and began price hunting for the brand and model of tyre I had just been cajoled by circumstance into purchasing. Unsurprisingly, the price I was paying was well over the odds of what I could have paid if I had ordered online.

When the chap called me over to pay, I asked for a discount. When he replied that the “price was good” already, I showed him my findings. Even my Ford dealer was coming out cheaper than what they were charging, and that was saying something. I walked out after a few more minutes of discussion with over £150 discount applied.

A Warning Shot

This works really well for services provided on a monthly basis such as satellite TV or cable, mobile phones, insurances, credit cards and so on. Mention that you are “considering leaving for another provider” and many customer service agents will launch into retention mode. How far you get depends on who you get, and what the company is, but sometimes this is all you need do.

I did this to Sky earlier in the year, and got offered Sky+ for free instead of the usual £60 installation. A good result. You can do the same with your credit card if you don’t like the interest rate, or your cell phone package, or your gym membership or any number of regularly paid for services.

Make The Explicit Threat

Sometimes though merely thinking aloud to a customer service agent is not sufficient. Sometimes you must explicitly state “I wish to cancel my account” before they will pass you through to the Retention Team. These folks have enormous power, and can make the world move if they like you enough and you are otherwise profitable.

I escalated my Warning Shot to Sky to an Explicit Threat and the tone of the conversation changed. It was no longer a cheerful discussion, it was pure business: They wanted mine, and they would clearly work to get it. In the end I settled for a free Sky+ box, free installation, and half-priced multiroom x2 for 12 months.

Don’t Be Afraid to Back Down

Sometimes, despite escalating through the stages of Asking, Arming, Warning and Threatening, you get met with the grim response of “very well. Your account will be cancelled.”

Ack! They have called your bluff.

You now have two options. You can back-pedal if you wish. “I should really discuss this with my partner first. I will get back to you on this” is a good back-down method. Sometimes, despite fighting the good fight, you lose. If you are ultimately happy with the service you are being provided with then there is no shame in backing down from the haggling fight.

Or Follow Through

If however you don’t mind switching (remember, new customers generally get some cracking deals), keep going. You may well find you get a call back about 5 days before your contract expires pleading with you to reconsider. This worked very well for me with my mobile contract with Three. I had built up a 6 year relationship with the company, but I was not really happy. I am still not, but that is another post altogether. I went through the stages, and eventually asked for my PAC code to transfer my number and close down my account. I had not expected them to let it get to that stage, though.

To my utter surprise, they gave it to me. Without argument.

I rolled with it and followed through. I was not actually all that concerned about losing the service, in reality. Except, 4 days before my contract was due to be shut off, I received a call from their retentions team pleading with me to renew my contract. I spent a good 20 minutes on the phone with them explaining that I did not wish to renew, but would remain if they could reduce my monthly payments.

I received a 15% discount without having to renew my contract. They will apply a 15% discount to my monthly bill on a month-by-month basis until I decide to re-cancel, upgrade or renew. That suits me perfectly!

Haggling is at the end of the day, all about being brazen enough to ask. As someone far wiser than I once quipped: “If you don’t ask, you don’t get!”

Have you haggled, or does the thought of arguing over a price seem embarrassing to you? Share your views in the comments!

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As many of you will know, my journey to debt freedom began back in January 2009. I have been diligently working to pay off my debt  since then, and now that the end of the tunnel is in sight, surely it should be time for inward celebration? After all, in a maximum of two months time I will be entirely debt free.

In reality, I am more frustrated now than I have been at any point in the long, arduous road to a positive net worth. I sat down to try and work out just why that is.

In the beginning, it was fun finding places to make cuts in my budget. After 4 months I had pared down my outgoings to their absolute barest minimums. There is now not a realistic penny left to be shaved without going totally insane or malnourished along the way. I enjoyed seeing the balances come down. I enjoyed working overtime to make it happen faster. I enjoyed the mental challenge of not spending a single penny on myself unless it was absolutely necessary and budgeted for.

In my overtime quest, I have just spent 7 days away from home working 15 hour days and being accommodated at night for a few hours before getting up and doing it all over again and again and again. The days were long. I missed my family. I did nothing but work and sleep.

The money will be good when it comes in, but I am now completed exhausted, mentally and physically.

I have one day off before returning to my ‘normal’ work tomorrow.

I am frustrated because no matter how hard I work now,  I remain in debt until the numbers come together in one or two months time.  I am so close, yet so far away.

I find myself wishing for 2 months to just fly by so I can finally say “I am debt free!”.

In our lives we are constantly striving toward one or more goals. These vary from person to person and life-stage to life-stage. I strive to be debt free; others strive to buy their first home. You may be striving for some other target.

The one thing that remains the absolute same, regardless of what you are striving for, is that it is a future event. You require the passage of time for it to come to fruition. We are ultimately wishing our lives away to reach an arbitrary goal that constitutes only one portion of our ultimately very short lives.

I vow, here and now, to stop ’striving to be debt free’.

I am striving for one target, and one target alone.

To live every day to the maximum it can be.

Enjoy the sunrise if you are fortunate enough to be awake. Help others in your day as you would like to be helped. Treat others as you would like to be treated. Make the most of time with friends and family. Appreciate the sunset each day.

Do not desire the passing of time to achieve your goals. By all means celebrate it when the event arrives, but not to the detriment of everything and everyone around you. I will be debt free. I will be a home-owner. You will achieve whatever it is you are striving to achieve in time.

Live your life by its journey, not its final destination.

Why should you wish away 2 months or 2 years or 2 decades of your life to reach a goal? When one goal is out of the way, you will replace it with another and then another. All events that will occur in the future, and each requiring your patience to achieve it.

Patience is a virtue, and it is the journey that matters.

Others will not judge you on what you achieve, but who you were whilst getting there.

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Earlier on this month I questioned whether to start saving for the sole purpose of buying a house, or going back to renting and continuing with the freedom to both save and invest, once I’ve paid off my debts.

At the time I didn’t have an answer, but I think I have made up my mind.

I will return to renting. Here’s why.

House prices remain inflated. Despite the credit crunch, house prices have not fallen very much at all compared to their explosive growth over the previous 9 years. While the term doesn’t fit precisely, the fact that property prices are reportedly on the increase again after “slumping” in my view is merely a dead cat bounce.

A mortgage is expensive. My generation has all but been priced out of house-buying, and the current bubble house prices remain in keep this so.  Even an interest only mortgage works out more expensive than the equivalent rental cost, and that’s even before taking into account the maintenance costs of buying rather than renting and other sundry ownership-related expenses.

I want to invest. Virtually all sources I have researched agree that financial freedom cannot be achieved by saving alone. If my desire to retire early is to become a reality, my money will need to work very hard for me and I cannot do this while tied to paying an expensive mortgage for an overpriced property. This therefore means that realistically any purchase of a house needs to be entirely made with cash once the market finally relents and corrects (or Gordon Brown stops shoring up the bubble, whichever happens first).

My inheritance may enable this. I hope not to have to cross this particular bridge for a while yet, but my grandmother left me a sum when she died. This was invested further in property by my parents and now (even post-crash) stands at around three times its original value in today’s money.

My father has a reasonable property portfolio that will one day hopefully pass to me, along with a unique liftetime accumulation of rare collectibles that may fetch anywhere from £5 to £1 million at auction depending on the day.

On my mother’s side I also have a share of their existing property.

If the figures I have are even remotely correct, then I have quite a tidy sum of future wealth to be realised at some stage, although the worth of that will vary greatly depending on when it becomes cashable, thanks to inflation. While I hope for the higher estimate, even the lower will enable the purchase of a nice property, with probably 50% still unused. The more left over the better as it’d be an excellent headstart on my compounding goals and investment plans.

All said however, I’m not in the habit of counting money I don’t have so while these figures are comforting, they may as well be written in monopoly money for the moment. The existance of possible inheritance a decade or more down the road does not change the fact I am still almost £5,000 in debt now and have no cash in savings that isn’t already earmarked for debt elimination.

My revised plan then is continue to work my way out of debt, finish my divorce, save hard for a further 12 months while resident with my parents – taking advantage of the minimal overheads that provides – and then look for a small rental property much closer to work. This will enable me to cut my diesel bill considerably as well as cut the time it takes me to get to work and back home.

Is this a sensible strategy? Would you do different?

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This is part 3 of the “Dig Yourself Out of Debt” Series, published every Thursday. Surfing old posts? You can catch up on Part 2 by clicking here, or view every post in this series by clicking here.

So far we’ve found out exactly what we owe, and hopefully freed up some extra cash. The next step is to begin actually paying off our debts as quickly as we can. This isn’t pretty if you want to do it quickly like I am, but if you’ve no real urgency and can handle being in debt for longer, then pace yourself. Just remember that the longer you take, the more it costs you in interest.

Reverse Snowballs, Avalanches and Snowflakes

No I haven’t gone mad, and Christmas hasn’t come early! Not in that sense, anyway.

Reverse Snowballing (aka Avalanching) is a method of debt repayment, and one that makes the most sense as you’ll see below. Snowflaking is a term for making micro-payments on top of what you’d planned if you find extra cash that you didn’t calculate having.

Consider this: If you find a fiver in the street, what is a better use of it? Buying you and your mate a Starbucks, or sending it to Barclaycard? Ultimately only you can decide what you’d rather do with it but I’d send it in as a snowflake on top of my snowball.

Time to Reverse Snowball

Continuing my imaginary friend example from Step 2, Selina has decided she has made all the changes she is willing to make in her life in terms of cracking her debt problem.

Her situation was not all that dire, and simple changes were sufficient to see her out of her spiral and into positive balance each month. You (and I) may need to make bigger sacrifices if we’re to dig ourselves out of our respective holes. Perhaps you’re luckier than Selina and I and your debt situation is smaller or less expensive. Either way, it’s fair to say that life would be more fun with no debt.

As a quick reminder, Selina made £480 from decluttering, and had £222 spare each month after paying all her bills and making the minimum debt repayments all round.

Step 1: Order Your Debts From Most Expensive Downwards

There are several thoughts on this but the bottom line is paying off your most expensive debts first, saves you cash in the long run. In Selina’s case her most expensive debt is her second credit card, charging her 27.9% on her £1,000 balance. Her other card followed with its £5,000 balance at 14.9%, and then finally her mortgage at 4%.

In Avalanching (or Reverse Snowballing), you pay off the most expensive debt first, then the next, then the next, trying to cut how much you give away in interest payments. In a traditional snowball, she’d by chance still pay off the £1,000 balance first, as it’s the smallest but if the interest rates were reversed in our example and she followed the traditional snowball method, she’d be keeping the more expensive debt hanging around while she concentrated on paying off the smaller balance.

While this feels good emotionally (it’s always good to see the back of a debt, and attacking the smaller one makes it happen quicker), it doesn’t make money sense. If you’re interested in the raw numbers of why, Trent @ The Simple Dollar worked it all out already with examples.

If you’re not all that interested in the why of the method, just order your debts from highest APR to lowest, and pay off the highest first. It’ll save you lots of money!

Step 2: Discount Your Mortgage

If you are not in arrears, then don’t count your mortgage. It’ll be the cheapest line of credit you have anyway, even though it (hopefully) has the largest balance outstanding. Mortgage Freedom comes long after Unsecured Debt Freedom.

Step 3: Throw Snowballs, From Top to Bottom

Once you’ve ordered your debts from highest APR to lowest, start paying off the most costly debt first. Selina paid £480 to Credit Card 2  in one go from the sale of her clutter, and then £222 every month on top of the minimum payment. With a couple of snowflakes she found in her budget, she paid the card off in just 2 months.

Her next card would take longer, but she also had an extra £50 a month to pay it off with as she was no longer making any payments to Credit Card 2 because it has a £0.00 balance.

This is where the reverse snowball analogy comes in, for those who were still wondering if I had lost my mind completely. As the snowball continues to roll down the hill (this is you paying off your debt), it gets bigger and bigger as it goes. It’s the same for your debt repayments: As you clear debts, your ability to make bigger and bigger payments increases.

Thanks to her snowball and some snowflakes, she cleared this card in just under a year.

The Power of Snowflakes

Don’t underestimate the power of making many small payments to your currently attacked debt. If you manage to find a spare £5 every two weeks, then you’ll have paid off an extra £130 on top of your other big payments each year.

Selina is now debt free – and you can be too!

Selina’s example is quite simple in terms of how many debts she had and how much she owed. But it serves as a great example as to how it is possible to get out of debt, and how quickly. It just takes dedication, time and belief in yourself.

Next week I’ll be looking into the reasons we end up in debt in the first place and how you can combat them.

Have you snowballed? Did reverse snowballing make more sense to you? How are you currently getting out of debt if you’ve already started on another method?

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A little over nine months ago (January 2009) when I was at the very bottom of my financial meltdown, I made a couple of resolves.

Firstly, I vowed I’d pay off all my debts within a year, and at the time this was a massive undertaking as I owed somewhere between £15,000 and £20,000 in unsecured loans and credit cards. I had been in debt to some degree or another for my entire adult life and I was tired of it. The thought of being able to break myself free of this was truly empowering.

Secondly, I vowed I’d save for a deposit to buy a house. Right now I am back living with my mum and step-dad. While it is comfortable and super-cheap, it is just not sustainable in the long term. I am after all, 26 years old and in need of my own space to continue to enjoy the rebirth of my financially-sensible self. On the flip side of that while my mum enjoys having me back home, I am a bit of a thorn in the side of my step-father which I totally understand: It has been quite a few decades since he’s had “children” in the house.

Do I Save to Buy?

Nine months ago the decision to buy my own house made sense on an abstract level. I’d rented for 3 years, thrown a considerable amount of money at someone else in doing so, and had nothing at the end to show for it. I lived paycheck to paycheck and got deeper and deeper into debt. Right there and then, the prospect of renting again did not seem exactly enticing.

The reason I was piling on the debt as some of you will have read wasn’t entirely my fault, but that didn’t change the perceived economics of it for me. I may as well have been spending the rent money on a mortgage payment instead and have something to show for my efforts.

I’ve thought long and hard about my decision to buy since, and come up with the following issues.

I need at least a 20% deposit to get a good rate.

A few years ago 100% mortgages (even 125% mortgages) were not uncommon. For those unfamiliar with the term, this means the bank would loan you the entire purchase price of the house outright with nothing down (in the case of 100%), or would give you the entire purchase price and then another 25% as cash on top in the latter case! Needless to say this turned into the banking credit crisis/global recession we are now all suffering, courtesy of valuation fraud, irresponsible lending, artificially high prices and lots of other reasons.

My Mortgage Advisor has pre-approved me for £154,000 (c. $255,000 USD) on my own salary.  20% of this is £30,800, or a years gross salary before overtime bonuses. That’s an awful lot of money.

House prices remain very high where I live.

Most areas in England have seen property prices fall considerably. Where I live in the cosy, relatively wealthy South East, things have not been so bad. Prices have dropped, but not to the same degree. The result therefore is, compared to the rest of the country, prices remain very high and (I posit) artificially inflated.

A 30%+ deposit would secure the very best rate.

A 20% down payment secures a good rate, but 30% or more secures the very very best. This difference could end up costing (or saving) me tens of thousands of pounds over the life of the mortgage. Except, assuming I manage to find something nice in this area for ‘only’ £154,000, that would take the required deposit up to at least £46,200.

Saving this will take 3-5 years

If I stay with my parents for between 3 and 5 years, I will have somewhere between the 20% and 40% deposit required. The problem therein, is staying with my parents for between 3 and 5 years. I know it makes sense to do it but I’m not sure I’d be welcome for that length of time. Realistically then we are talking significantly longer saving to reach the required level of funding with a ‘life on hold’ attitude to get there.

I would be spending outside my comfort zone

Interest rates are historically low right now, but they won’t stay there forever. Will I be able to afford my monthly mortgage payment when the interest rate goes up to 5%? 8%? 10%? How about 15% like it did in the 1980’s? When you load yourself up high at the beginning, a small change can tip you over. A 15% hike on a £1,200 a month repayment will be significantly more painful than one on say £500-600. Trent over at The Simple Dollar has written a couple of times about the same feeling.

I need to buy for much less than my approved maximum mortgage

What this means ultimately, is that to continue my sensible debt-free, financially secure future life, my mortgage needs to be considerably less than the maximum I know I can get. If I go all out, then for the entire term of the loan, I am going to be counting my pennies wondering when they might run out. I want to count pennies in a positive way, not in a paycheck to paycheck way.

That is a lot of issues and many of them reflect my new-found sense of requiring security in my finances. This list doesn’t even touch on the usual home-owner worries such as maintenance costs, breakdowns, insurances and many more. Get Rich Slowly (another financial blog) had a similar discussion.

Or Do I Save to Rent?

When you consider all those points, renting is incredibly simple in comparison. For a deposit (that usually equates to just one months rental payment) and one month in advance, I’d get a bigger property than I could likely afford if I tried to buy, and none of the hassle. I’d also keep my liquidity without tying it up in bricks and mortar.

Fixed Outgoings

I’d know well in advance what my monthly outgoings would be in terms of the actual physical property. Rental agreements are negotiated annually and are unlikely to vary by more than 2% in either direction in any given year and if my previous experience is anything to go by, don’t vary at all. This is very comforting to my newfound financial security complex.

Keep My Cash

If I remain with my parents for another 2 years, I can leave with £30-40,000 in the bank, with some effort. That is some serious operating capital in terms of my desire to look towards longer-term investments, bonds, the stock-market and a general healthy emergency and opportunity fund. Stick it for 3 years, and that could rise to £60,000.

No Maintenance Costs

If the boiler breaks in my rented apartment, it’ll cost me a phone-call to get the matter resolved. If I own my apartment, then the whole thing becomes my responsibility to fix. Storm damaged? Flooded? Broken into? All these are covered by a landlord. I realise Buildings and Contents Insurance will cover these but they themselves are an additional expenditure for homeownership that are not necessarily required under a rental.

Bad Area /  Street Decision?

If you’ve misjudged an area and find the crime rate high, or your neighbours a nightmare, then a letter and a few weeks can see you moving out and going somewhere better. You just do not have this kind of flexibility when you buy your own house.

But: No Security of Tenancy

There is always a downside to renting. The landlord with 2 or 6 months notice can decide he (or she) doesn’t want you as a tenant any longer and you have to move. Is this an acceptable risk, given the benefits?

And Nothing to Show For It

Finally we come back to my initial issue with renting – the fact that after possibly decades of giving someone else hundreds upon hundreds of pounds month in, month out, you still don’t own a single brick of the place. Is that a problem, long-term?

Have I Decided?

In short, no. I have no idea what to do.

I think that is part of the reason why I find myself angering quickly at the slightest thing of late. I’m grumpy, seem to have lost my sparkle for life and generally feel like I may be dipping into something I’ve rarely experienced before: depression.

I need to choose a path and then drive myself towards it. All the time I remain exactly where I am now, I will continue to feel like my life is without direction or purpose. My debt freedom goal continues to approach, and I really need to have made a decision as to what to do by then, as it will drive my saving and investment decisions. I don’t want to just feel like I’m rolling the dice to make a choice. I want it to be informed and well reasoned, and above all, right.

What would you do?

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