Using cash got me out of more than £50k of debt

Well, I agree with Ian 🙂 . We can get ourselves into painful debt by borrowing money when we do not really have a plan to repay. But in my view, like Ian, the key here is to make a budget so that you know, out of the money coming in, where it needs to be spent on unavoidables, what might be left to save for a rainy day and, if you are fortunate, spent on nice things.

I was brought up in the days before credit cards and also believe there are merits in cash; taking real money out of my wallet still gives more of a feeling of parting with real wealth than does the credit card, debit card or online bank transfer. I doubt that modern people will experience that. But I don’t believe that cash is the answer. It is to budget and to use common sense when committing to spending.

The Money Advice Service has what looked to be an excellent tool to help people prepare budgets. Banks should promote the same tool to all their customers.

One of Which?s services, as part of its social responsibility, could be to offer a “Which? Budget” tool.

What has happened to Ian’s comment? Both Malcolm and I have referred to it but it cannot now be seen.

It is being moderated, folks; quite why eludes me. It concerns me that the thrust of the header – and in particular the title – is misleading. Cash was not the solution; budgeting was.

If Which? is promoting the idea that using cash is a panacea to debt-related problems then I think that should be raising red flags.

Ian, I’ve sent you an explanation by email.

And I’ve replied, Jon.

I read Ian’s opening comment and cannot for the life of me see why it has disappeared. Can someone explain?

I could print Jon’s email, except he might put it into moderation.

Katie, I appreciate(d) your predicament and understand the difficulty people get into with money. I went through the same kind of problem when I was young.

I did look carefully at your story. I still maintain that the key to staying out of, or getting out of, debt is to firstly know how much money you have coming in and secondly to know what your absolutely essential outgoings are. You can then see your financial picture. This is about creating a budget. Even if your essential outgoings exceed your income you need to know the detail which is what a budget is about; without one you are simply financially blind.

How you decide to operate that budget is the next step. I am from a cash generation and I find that spending it has more of an impact than cheques or, particularly, credit cards. So if that works, then fine. But putting pound notes in envelopes is still preparing the budget.

I guess most people cannot pay for everything with cash. They will have direct debits – mortgage/rent, insurances, car loan, maybe so they need to track all these as part of their financial control.

I do a fairly detailed budget every year, even though I have less need to now. It is a habit and was essential in earlier married life with a family to stay out of debt.

Teaching students in school about financial matters is an essential life subject in my view. I’m sure you find it rewarding.

Katie, you say above
“I don’t believe the ease of gaining credit was the issue”

but in the introduction you say:
“we wanted to buy our first house. We took out a £6k loan for our deposit – incredible to think you were able to do that back in the early 2000s… then we got a loan to buy our first car.
We got married in 2002 – we took out a loan to pay for our wedding and honeymoon. We didn’t even have big incomes, but loans were just so easy to get – no one refused us. And it just went on like this.“.

I’d suggest that if credit had been more difficult to obtain you might have got a cheaper house, cheaper car, spent more prudently on your wedding and honeymoon and thought harder about what home improvements you needed and could afford. So I suggest going for credit and loans was a major factor, ignoring the balance between income and outgoings – the essence of budgeting.

Thanks for coming back to your Conversation, Katie. I hope you can remain debt free in future and be able to save for your retirement.

I strongly support the need to keep cash available for everyone who wants or needs to use it.

I don’t believe debt per se carries a stigma, Katie. But events happen in everyone’s lives; I lost both my parents, but before we had children we took care to do the sums carefully to ensure we could live within our means, even if our income were to halve. We didn’t have an expensive wedding, we didn’t buy new cars until we knew we were financially secure and we deferred buying new household items until we knew we had the money in our accounts.

You say

I just didn’t have enough money coming in to cover costs: the near full-time job barely covered my rent (this was before minimum wage) and my parents didn’t have a lot of money to help me.

My parents had no money to help me. My first full time job paid £17.00 per month.

Now, and as he will tell you, I’ve debated with Malcolm long and hard about punitive interest charges on accounts for those least able to afford them. There continue to be significant sections of society in real need and I’ve been active outside of W? with groups opposing the government’s continued austerity which affects only the low income earners and which is iniquitous in the advantages in gives the wealthy.

So I do not regard debt itself as anything to be ashamed of. In many cases it’s utterly unavoidable. My issue is with both the title of this piece, which I feel is misleading, and my confusion over the details. When you say

loans were just so easy to get – no one refused us.

even back in 2002 I believe you had to complete a loan application which would have asked how much else you already had on credit.

You also said

by having a new relationship with money that was cash based, I paid off all of my debt

which is laudable, but I do wonder about what the phrase

by having a new relationship with money that was cash based

actually means. I suspect most of us write down our outgoings and income, because that’s far safer and easier to comprehend than having a bag of notes and loose change every week.

So I admit to being confused about this scenario.

Most of us have been in debt at some time – buying a house for example. There is nothing wrong with debt providing when you take it on you are able to repay it. No stigma in being sensible about making us of “credit”.

We should teach everyone about financial affairs including debt.

Ian is quite right in that we disagree about overdrafts (but we don’t argue 🙂 ). My fundamental disagreement is that some people do not ask their bank if they can go overdrawn – borrow money without agreement, an unarranged overdraft. That does not give the bank the opportunity to decide whether they are a good risk or not. I also criticise the banks for allowing this to happen and, yes, using it to generate income. I simply believe we should ask before borrowing money.

We were lucky getting grants to go to university, Vynor. Nowadays, most students have student loans and graduate in debt. It promotes the idea that debt is normal.

I agree we were extremely fortunate. I had total grants for both my universities, including accommodation, fees and extras and our local authority made extra grants available for the holidays for those of us who had to work at our chosen subjects during the vacations.

However, none of this addresses what I believe is a basic flaw in this entire topic: the header title, which reads Using cash got me out of more than £50k of debt. This is sending the wrong message to those reading it, firstly because it’s patently untrue and, secondly, because I believe Which? has a responsibility to be honest and truthful. This is neither, and it sets a very dangerous precedent.

How is it untrue? To paraphrase the story, Katie accumulated debt beyond her income and cash flow. She was able to overcome this debt by sticking to her income and creating a budget around the physical cash she withdrew. Cash is a payment system she understands, so she made it work for her.

It is also worth restating here that this is a guest post, not necessarily the views of Which? (as stated above).
What Which? is advocating for is the freedom to pay and to manage your finances in the way you prefer. (You can read more about that and, if it’s something you agree with, sign our petition: https://campaigns.which.co.uk/freedom-to-pay/).

Ian – It would certainly be better to have said ‘avoiding credit’, but it seems that using cash was one of the ways that Katie chose to control spending and tackle the debt. It is made clear that views are Katie’s own and not endorsed by Which? Usually this appears at the end of articles produced by guests, but in this case it is near the start.

I don’t remember seeing anything offensive in your post.

Katie found a way to get rid of her debt, but did she use cash for everything? House purchase, car, utility bills, council tax, insurances and so on? I think her way of being strict with spending, putting cash into envelopes specific purposes is one way of disciplining your spending, worked for her and well done for succeeding.

However, what she did was to set up a budget and that is the point that was being made. If people were taught when they are growing up the value of things, that money (for most) is limited and can only be used once, and how to construct and operate a budget, we’d have fewer people getting into debt. My first introduction to the need to spend money carefully was at university, making the grant pay essentials, lodgings, food, books and travel, because there was no other source. Working in the hols supplemented the following year’s allowance.

Most – if not nearly all of us – need to use a mixture of payment methods these days: cash, cheques, credit cards, debit cards, direct debits, online banking. Budgeting with money management keeps track of this. I believe that is the general lesson that needs to be promoted. I write in a small book all my spending and put an annual budget together, by month, each year that tracks whether I’m under, over or on target. Easy to do and invaluable when you have little, if any, spare income.

Jon Stricklin-Coutinho says: Today 14:30

How is it untrue?

It’s the title: Using cash got me out of more than £50k of debt. The entire tenor of the following article therefore seeks to expand on and develop that title. So we need to look at exactly what the title said.

Did using cash clear the £50k debt? Or did managing money in a more organised way clear the debt? You see, if the title is to be taken as it stands, the answer to anyone with debts is to use cash. But using cash doesn’t somehow magically clear debts, does it? What does is organising personal finances in a way that monitors cash flow carefully and takes into account outgoings.

Now, I do not want this to be seen as my getting at Katie, because I’m not and I am, in fact, someone who has a record of defending those who find themselves in bad financial situations as many of my posts will attest. So why am I so exercised by this piece?

It’s because I’m genuinely puzzled by what I see as a huge contradiction in the entire topic. Katie attended a university for which, in most courses, a certain degree of intellect and awareness is required. Yet Jon writes Cash is a payment system she understands, so she made it work for her. The clear implication of that is that she didn’t understand other payment systems, such as DDs, standing orders, cheques, credit cards and so on.

So we have a piece here which claims something that is patently untrue – a claim that using cash cleared a large debt when in fact good management did – and then the glaring contradiction to which I have alluded.

I have thus far steered clear of the arguments relating to the tabloid quality of many conversation headers but this particular one would stand proudly in the DFM. It’s agenda riddled, extraordinarily weak on fact and, since I doubt that Katie made up the headline title, does Katie herself no favours whatsoever. All this could have been avoided had a better title been used.

Ian, I agree with your comments here.

Thanks, Derek.

Which? do mislead us from time to time in pursuit of particular aims. This worries me because we should see it as an objective, independent and impartial organisation giving the full information to consumers to help them make rational decisions.

For example, in the past:
They have told us that energy providers overcharge us by £1.3 bn; not supportable (in my view) but despite being challenged they never respond nor justify the claim.

They tell us that “Around 3,000 cash machines have vanished from UK streets in the last six months of 2018, fuelling concerns that cash is under threat“. The don’t go on to explain that the vast majority of these are probably duplicates or close to others, that protected ATMs (more than 1km from another) have had relatively few closures ( from the information LINK give, as far as I can see), with alternative cash outlets generally provided.

Now, I am in favour of keeping energy prices under review, and maintaining access to cash through ATMs. But I do not believe I need partial or unsupportable information to persuade me to join the causes.

I expect to be reprimanded, removed, moderated, for expressing a rather critical comment that might be seen as off topic. Sorry.

But I found it worrying that Which? felt it necessary to remove Ian’s original comment (albeit temporarily) because of “the wording”. We see many comments where “the wording” might seem a little critical but most times we take it on the chin. It is a conversation; if we have to continually study the wording of our contributions, reword, rephrase, just in case it might be misinterpreted by some, or appear unsympathetic, then the whole essence of a Convo seems lost.

The Convos on loss of ATMs and bank branches have provided plenty of examples of how life has been made harder for those who live in rural areas. Many of the ATMs have disappeared years ago thanks to closure of branches. Why has it taken years to start to protect an essential service?

In my view it’s time to put the needs of customers ahead of the wishes of the banks. Banks need to be profitable overall but that does not mean that every ATM has to be. I could manage without cash but support the efforts of Which? in trying to help those who would find this difficult.

That was not the point I was making of course. I want to see proper information.

However, I have said before there are very many people who have never lived within convenient distance of a bank, post office or ATM and I would like to see their needs addressed when we look at access to cash. It needs a wider approach than simply focusing on ATMs – they will never be made available near to everyone. https://conversation.which.co.uk/money/atm-cuts-free-cash-machines-interchange/

I have regularly advocated planning so that the needs of communities are met, though I think it is easier to maintain an existing service than provide one that has never existed.

If service provision was done purely on a commercial basis we might find ourselves unable to post here because our service provider preferred to offer broadband services to those who live in built-up areas. I have been told that local action was responsible for the replacement of our dire broadband service with a proper service. Thankfully we are moving in the direction of a universal service obligation and if realised will go some way towards providing rural communities with a service that is vital in the 21st century.

I think this is drifting off topic.
e.g. https://conversation.which.co.uk/technology/boost-your-broadband-ofcom/

We moved this temporarily out of public view as some of the wording did not sit well with others. Ian has since reworded this, so we have reinstated it. I appreciate (and do apologize for) the disruption to the comment flow.

As always, please do bear others in mind when commenting – this is a public site and as such one’s comments a wider audience, of more experiences, backgrounds and world views, than many realize. Our discourse helps makes this into a community, so let’s make it so we can welcome many more.

Will Which? look at looking at money management and budgeting tools to help people who find difficulty in controlling their finances?

We already do. This aspect of giving people the freedom to pay the way that helps them has only recently been recognised so isn’t a part of the advice yet.

https://www.which.co.uk/money/money-saving-tips/budgeting

I was thinking of something more like this:
https://www.moneyadviceservice.org.uk/en/tools/budget-planner
The service has many useful tools and much information on its site. It includes this:
https://www.moneyadviceservice.org.uk/en/articles/managing-your-money-using-the-jam-jar-approach

I would be surprised if it didn’t. I recently wanted to buy a dress and being short of time I bought it on line but at the same time saw a few I really liked and bought them thinking I would choose one and return the other three. I ended up buying two of them.

If you pay your credit card bills by direct debit then you won’t pay a penny in interest. It also gives time to make sure that you have sufficient funds in your current account to avoid going into the red and facing overdraft charges.

Wavechange, you are right. I know people who pay off their American Express credit cards weekly by bank transfer, as they don’t like owing money but want to receive points or airmiles for all their expenditure. Of course, they lose out on interest-free credit, but they don’t care about that.

Patrick, cash is one of the most expensive ways of spending abroad. You’d be far better off using Revolut, but it has yet to launch Apple Pay despite saying for three years that it’s coming “soon“,

Good point NFH! I’m off to Spain for a little bit and won’t be taking any cash this time, however, it’s more about the psychology of having a limited number of notes in your wallet

I agree. Psychology is at the root of this in more ways than one.

There seems to be some good advice here:
https://www.moneyadviceservice.org.uk/en/categories/debt-and-borrowing
But how do we point people to such advice? Perhaps when others see people in debt – their bank for example – they can instigate a helpful advice process.