What is value for money?

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In a lot of my life I come back to the question: What is value for money? Knowing the actual value of everything in your life and what you want is so important, but what is more important, is then knowing its value to you. Different things will have different values to different people, but that doesn’t make anyone’s value they have put on something right or wrong.

Value and cost aren’t always linked

The mindset we have to get out of, is that value and cost are linked. We need to get out of the mindset of expensive things either being value for money or not value for money, based on the price tag. When you are trying to save money you can get so wrapped up in things needing to be cheap and thinking that expensive things aren’t value for money. The price you pay is the transfer you make for something, but it has nothing to do with its value. Yes you can make good deals and bad deals on things but a good deal can be a bad deal, if you didn’t really value the thing you are getting.

In a sport I love at the moment ‘value for money’ is a big subject, the sport being football. In England we are getting ready for the end of the transfer market and already, in this shopping window spending records have been set. With every player purchased the first thing that is talked about is – if the player is worth the price a club has paid for them. So even before a player has kicked a ball for the team or had a chance to make a return on the investment the club have made in them, the purchase is judged.

Return on investment

Now in football players are purchased for silly money, so it is hard to see value for money in any of it but prices are still relative to what else is happening in those markets. The one thing I question though is – how many players actually make the club back the money they invested in them? There are lots of ways a player can make a club money, like prize money for trophies won and league positions obtained, merchandise sales from merchandise featuring their name or likeness, ticket sales from people who come specially to watch because of that player and so on. Regardless of their price, some players are better value than others and I wish we knew more about which players and deals actually were.

Money may be tight for you, but I encourage you this week to look at the value of things and not at the price. Are there things you are paying for, that actually have not enough value to you to be worth paying for? Could you be getting value by paying more for something, like buying a bigger box of washing powder that might make each wash cheaper and save you money long term or a brand of washing up liquid that is slightly more expensive but might last twice as long as the slightly cheaper one and so on and so on.

Debunking the ‘Cost of a child’ report

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This week the yearly research (Cost of a Child) carried out for insurance company LV by the Centre of Economic and Business Research hit the headlines. The takeaway from the findings was that the cost to raise a child from birth to 21 was measured as £231,843, an increase of more than £2,500.

First thing you have to ask yourself about this report is – why are LV (a for profit company) investing time and money in to this if there isn’t a measureable gain to show to their shareholders? The answer I believe to this question, is partly that it is good publicity for LV and secondly because they provide a range of insurances, which people could be, more willing to buy based on the figures produced in this report. Both the publicity and a possible surge of people buying insurances wouldn’t happen without some big numbers, hence where we get £231,843 and why on the LV website they are saying this is more than the price of an average house, when no comparison was needed.

On the LV report on their website (https://www.lv.com/life-cover/cost-of-a-child/the-facts) they have listed percentages of vague, generic areas next to some cute graphic to depict that area. They have called it the facts yet it is filled with opinions.

The small print

One of the interesting things about the report is the small print at the bottom, as unlike how the press is reporting that the research came from the Centre of Economic and Business Research, there was another body involved:

Additional research was conducted by Opinium Research from 22 to 27 January 2016. The total sample size was 1,000 UK adults with children under the age of 18 and was conducted online. Results have been weighted to nationally representative criteria.

This additional research has been heavily used by LV and it means that out of the 8 key facts they list on their review of the report, 5 are opinion based and nowhere near representative of the UK as a whole.

Opinions

Out of the 8 opinions they chose to highlight as ‘key facts’ the last one floored the whole research for me as they listed – 49% of people didn’t have a plan in place for a sudden loss of income. When a quick look at the LV website shows they sell Income Protection insurance. This shows me that this document isn’t to help us; it is to encourage us to take out insurance, as having no plan in place for a loss of income has nothing to do with the cost of raising a child.

So if we go back to the start and take the number they are banding about of £231,843 that means they reckon on average a child costs £11,000 a year to raise (I am raising a child with no pay increase of a penny a year let alone £11,000). For the first year of our daughter’s life our actual costs are going to run around the £1,000 mark, far short of that yearly average.

Breaking it down

Looking closely at the numbers here are some breakdowns and numbers that amused me:

Education: £74,430 – Cost of schooling is taken out in our taxes so not a cost that we see and there is no guarantee every child will go to University. When they go to University there are things like loans, grants and working. If as a parent you want to contribute you can start up savings accounts now with good levels of interest and pay in a slow, constant and manageable way.

Childcare and Babysitting: £70,466 – For us this will cost us nothing and I know for lot of people it will too. This is one of the many reasons why I think having a parent at home instead of working, works during the pre-school years. As parents we sacrifice, we don’t both go out with out our baby. We will go out individually or take her with us; it’s not that difficult.

Clothing: £10,942 – So far for our daughter we have paid the grand total of £4 on clothes. The rest of her clothes have been hand-me-downs from friends or gifts. At her age she doesn’t care what she is dressed in or if it is new or if it is the most fashionable thing. Yes I daresay as she gets older and builds her own style that clothes will become more expensive, but nowhere near this £10,942 number bounded about.

I could go on and on but will stop there. I just wanted to show how the actual cost of raising a child can be so cheap. Research like this really annoys me, as it is why people buy in to the lie that raising a child is expensive. Before I knew of this report I wrote about the lie the media pumps out about the cost of children here:

https://adamsibley.wordpress.com/2016/01/22/why-have-so-many-people-bought-into-the-lie/

If you want to have children, have children you will find a way of making it affordable if you truly want to.

Why have so many people bought into the lie?

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The one thing in this world that really saddens me as how so many people have bought into the lie that we all need the fancy house and the fancy car, that we all need to work every hour we can, that we need to get big mortgages, finance options and loans so we can have everything we are told we should want.

The simple way to afford everything and not work yourself in to the ground is to buy everything you want. Yes that might sound strange but I am not kidding. If you don’t take out loans, finance, credit or leases, you never owe anybody anything and never have to worry about working to pay them off. When me and my wife want something we first make sure that we do want it and discuss why we want it, we then try and find it for the best price and then we pay for it up front which sometimes means saving up. Paying for everything up front also makes everything much cheaper.

Managing your finances

At the beginning of every month we look at the money coming in and then do our budget. We budget for all the expenses of the month and then with any leftover we decide what we want to do with it. This means we don’t go in to debt and we always know what we want and what we can afford, we never say “we are not sure if we can afford that or not.” Trying to raise the money you have coming in can be hard and out of your control but the money you spend is completely in your control and it is very easy to cut your bills. This month alone my wife and I were able to save hundreds by simply cancelling contracts, renegotiating contracts and changing providers.

Being a parent now myself I am seeing other parents being forced back to work to keep up with payments and the lifestyle they lead. I see so many children being looked after by grandparents now during the week as both parents are back at work full time before their child is even one. It seems to be a declining trend now in stay-at-home parents but I am so thankful that my wife is a stay-at-home mum. It was so important to us for our child to have one parent at home as we truly believe this is the best investment we can make in our child.

What really matters

Our child doesn’t care what house we live in, our child doesn’t care if her clothes are hand-me-downs, our child cares about our hugs, our smiles and our time. Time with our child is worth more than any amount of money to us or any possession we could buy.

Don’t let society and media tell you what you have to have or implant in your brain that you want something. Get what you truly want out of life, if you truly want to be at home to raise a family you will find a way to make it happen, it is never too late to make that change.

Being Thrifty

I think since the economic crash we have become a thriftier world. Finances now seem to dictate a lot of our decisions, from where we eat, to what we buy and to what we go without. I personally think this attitude change was long overdue and if we can keep this mindset when we are next in an economic boom period we will be able to do even more with our money than we were before.

One thing I have loved is the rise of groups on Facebook where for free you can list your unwanted items to people in your local area for sale or to give away. My wife and I have taken advantage of these groups to buy things or get things for free and think that it is brilliant. I love how it encourages people to buy second hand at a fraction of the price that you would have to shell out to get it new.

I also like the voucher deals and promotions that restaurants are doing to get people in the door. With so many choices out there and eating out seen as a luxury thing to do, my advice would always be to shop around and check online for deals.

A good trick that my wife and I do is if we want something we will set a budget for what we can afford and are willing to pay, then after we have set that we will try our hardest to get it for less. The key thing is don’t rush in to buying anything, as if you do you will probably see it cheaper or see something better after you have brought the item. Research what it is you actually want and then work hard to find it for the lowest price, don’t just buy something that is kind of like what you want because it is cheap, as regardless of how cheap it was it is still money wasted.

The key for me is not cluttering up your life or your home with things you don’t need. Anything that you don’t use or need, can you sell it? That item taking up space in your house could be money in your pocket. Ask yourself do you really need that thing you are looking at online? Acquiring clutter will only hold you back financially and emotionally so do your best where you can to free your life from it!

I think being thrifty can teach us a lot of life lessons. I think it is important in all areas of life to really focus on the things you want to do and achieve. It is only by doing this that we have a chance to succeed. Think of your time and energy like currency. Is what you are doing now really helping you be happy and get where you want to be in life? Like setting a budget, have you set goals? Invest in yourself and you will make all the currencies at your disposal achieve so much more.