Since I started my debt freedom journey, I have found myself becoming more and more obsessed with working out the true long-term cost of the things I consider buying.

One off purchases are not a big problem, but if the cost is recurring, you’re making that payment month in, month out. Left unchecked, these ‘things’ keep accruing.  Even if you no longer use them, you keep paying for them.

• Gym Membership (£35)
• Magazine Subscriptions (£5)
• Contract Mobile Phone (£35)
• Mobile Broadband Dongle (£10)
• Golf Club Membership (£50)
• Sky+ (£25)
• Sky Multiroom (£10)
• LoveFilm Max (£16)

These are just real quick examples off the top of my head and are not all that unlikely to be sucking the life out of the average persons bank account right now. On their own, each individual entry appears fairly innocent. What’s £5 here and there? But in one month you’ll pay out £186 on those things in that list.

Every year that is £2,232!

If you have taken my advice and created a SCRAM Plan, then what comes out of your account each month probably isn’t a surprise to you.

Combat Your Money Drains

All banks provide a method of reviewing your Direct Debits, so every couple of months spend 5 minutes reviewing what’s in that list. If you no longer need a service, phone them up to cancel and then on your next direct debit review, cancel it out of your account.

Before signing up for the next ‘thing’, work out the long term cost.

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I touched on this in my Planning for Possible Redundancy post a few days ago. One of my principles of money management is everyone should have what I call a SCRAM Plan. It’s the button you hit when the proverbial hits the fan and you need to cut your outgoings to the bare bones immediately, for example because of job loss.

Why is it called a SCRAM Plan? According to Wikipedia, “A scram or SCRAM is an emergency shutdown of a nuclear reactor – though the term has been extended to cover shutdowns of other complex operations, such as server farms and even large model railroads.” It doesn’t take much of an imagination stretch then to make it cover the shutdown of personal finance drains, too.

Know What You Owe – Before you can even begin to implement your own personal SCRAM Plan, it is hopefully obvious that you must know what you pay out in a given month. Review your direct debits, and go through your last 6 months of bank statements to find out where your routine spending occurs. If you have a budget plan, give it the once over and just make sure it’s accurate. Some of your regular outgoings will be obvious:

• Rent / Mortgage Payments
• Utility Bills (Water, Gas, Electric)
• Council Tax
• Landline Telephone
• Mobile Telephone contracts
• Broadband supplier
• Satellite / Cable TV
• Car Insurance

Some will be less obvious:

• Car tax
• Magazine subscriptions
• Gym memberships
• Web hosting provider
• LoveFilm subscription

Those are just immediate ones off the top of my head. You’ll probably surprise me with your own. If you have time, review a years worth of statements to get the full picture and make a note of every recurring payment you make, then total them up.

If you’re not surprised how much you spend a year, then congratulations. You likely already have a good hold on your finances. Chances are though, it came as a massive shock. But don’t worry, half the battle is working out where your money goes before you can begin to tackle it.

Work out how to cancel every non-essential entry on your list – this will form the basis of your SCRAM Plan. Dig out account numbers, phone numbers, subscription references and anything else you may need and write yourself a little ‘howto’ for each one. If you’re tied into a contract, note the minimum term expiry date for each. If you don’t know, find out. Be brutal, your gym membership is not essential to life, and neither is your LoveFilm subscription or monthly subscription to Nuts Magazine. Your mortgage payment is absolutely essential. Providing you have a roof over your head, food on the table and fuel to heat your home, you have covered the essentials of living. I can’t stress that enough. Be prepared to be brutal with your cuts if the worst should happen.

Keep it safe, keep it up to date – Your SCRAM Plan is no use if you can’t find it in 18 months time when you’ve just been made redundant, and it’s similarly of little use if you’ve changed mobile provider 3 times and taken out 4 other magazine subscriptions that you can’t remember the publishers of. If you use Google Mail, click the ‘Calendar’ link top left of your inbox and set yourself a recurring reminder to check it every month or two. If you’re slightly less on the technology cutting edge, write SCRAM in the margin of your diary every couple of months as a reminder instead.

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