First British Serial Rights

(This book was written in 1993 and updated in December 2001 to be offered free as an ebook)

1. Introduction. When and why can income suddenly plummet? Who are the victims?

2. Can you survive the drop? Is it even possible to thrive?

3. Facing facts. Is your new income really that low?

4. Positive advantages.

5. Totalling your assets.

6. Totalling your liabilities.

7. Reducing your liabilities.

8. Your future needs - the problems.

9. Your future needs - the solutions.

10. The bottom line minimum.

11. Essential budgeting and monitoring.

12. Investment advice. And a word about inflation.

13. As good as money.

14. Economies - when you buy.

15. Economies - when you use.

16. Sidelines. To help out. Your choice of hobbies.

17. Sacrifices.

18. If you know it's coming - a one year plan.

19. If you know it's coming - a five year plan.

20. The social side.

21. Conclusion. What price your self-respect?

Thousands every year suffer a drastic drop in income. People of all ages and from all backgrounds. Sometimes, one person's drop would have supported another's family in comfort.

Redundancy, retirement, bereavement and divorce explain many. Illness or disability strike down others. Then, add the self-employed owners of failed ventures. And the company directors/shareholders of flopped private companies. Not to forget those whose prosperity relied on their youth or physique.

A shock awaits most sportspeople and others in physically exhausting careers when they approach forty. How many jobs are reserved for the young - the computer whiz kid, the frantic stock or commodity market or foreign exchange dealers, the media `glamour girl'. For some families, even an unplanned pregnancy can suddenly halve foreseeable income.

When does such a disruption occur? For many, it falls completely out of the blue. Others receive one year's warning, maybe even several. Yet more can predict precisely when the blow will fall. Say in five year's time when they reach sixty-five. Others again, like employees in a volatile manufacturing industry, live on the knife-edge of ruin for years.

Such a variety of causes and timings. Yet, a major drop in income is rarely planned for. Why? It seems a statistical certainty that most of us will face it at least once in our lives. The cautious as much as the adventurous.

The main reason, is fear. People prefer not to think about it. We all tend to live up to our incomes. What appeared a luxury before that last pay-rise is now a necessity. But above all, we live attuned to judging the world (and our place in it) in money. Its loss is too painful to contemplate.

Many assume a vast drop just threatens poverty full stop. As a result, a redundant high-flyer endures six desperate months frantically searching for alternative employment. At the same time, he and his family vainly attempt to hide the truth. They spend and live as before.

Both these tactics dissipate his assets. In the end, the fifty-year-old executive, the forty-year-old jockey, the thirty-year-old advertising executive, the twenty-year-old swimmer or child star or model admits defeat. By then, he is not so well-placed to accept his change in life. The results make sad reading. Depression, illness, apathy, even in wild cases, murder of the family followed by suicide.

How many of you read the title then opened the book with a cynical smile? Is it really possible to live - thriving rather than surviving - on a quarter of your income? Yes it honestly is. We, and others like us, are the long term living proof. We explain how in the next chapter.

Can anyone possibly live equally well (in some respects better) on far less? Yes. We ourselves have achieved it twice.

The first time, in our thirties, we abandoned two lucrative safe careers in return for one lower-paid job in another country. Why? A mixture of boredom and curiosity. And the result? Within six months, we had saddled ourselves with two jobs, each more lucrative than before. At the same time, we faced fewer outgoings. No mortgage for instance. Why did we change back? Not because of lack of funds. Rather because we found the new lifestyle uncongenial. So we do understand the pitfalls and social pressures you will encounter.

The second time, we abandoned two lucrative easy jobs in favour of retiring at 40. Now, thirteen years on, we are still happily living on one quarter of the amount we jointly earned fifteen years ago. Legally. Without state aid.

Nor are we the only ones. Hundreds have volunteered, or been forced to abandon their careers and seek out alternatives. You can meet British ex-teachers working as self-employed window cleaners in France. Or British accountants laying bricks. Computer experts now run hotels in England. Oil executives sell second hand books. Others have grown passionately involved in their hobby or in charity work. Or, like us, they relish their leisure.

Think how many nations have repeatedly found themselves with nothing and turned it to good advantage - the Jewish race for instance.

Or consider the go-ahead Chinese in Singapore. The older generation endured hard times to transform an island of tropical jungle into a thriving commercial centre. (Many of the ultra-modern skyscrapers were built by women - the hard way.) To prevent the next generation `going soft', they send them abroad as emigrants. Many choose Australia or Canada. The self-imposed rigours of starting from scratch pay dividends. Now, full circle, advertisements in professional journals world-wide entice skilled Singapore nationals to return home to work.

The English aristocracy traditionally expelled younger sons from the stately home to battle their own way in the world. Public school education created a taste for all life's luxuries in younger sons without the wealth to pay for them. And the result? The outcasts were forced to develop initiative, self-motivation and innovation.

We `nouvelle poor' stand in a long tradition.

- - -

Our first step now is to dispose of two fallacies.

1. You can only live on less money if you turn the clock back.

How did you live at nineteen? Digs? A grotty flat? A diet of fish and chips, snacks and takeaways? Evenings mooching around in pubs to avoid that flat? Then it was tolerable because it offered a novel independence. Besides, you probably met plenty of friends in the same position. You all knew fortune would smile soon.

2. You can only live on less money if you opt for The Good Life.

You must wind the clock back a century or so. You slide into cultural, if not actual dropouts, in some backbreaking form of agricultural self-sufficiency.

Both ideas are false. At nineteen, you knew your set-up was strictly temporary. Your hopes and aspirations buoyed you up. Perhaps twenty years of domestic ease have drifted by since. The prospect of returning, alone, to such a life, hardly appeals. Besides, long term it is restricting and expensive.

As to the `good old days' - no thank you. We possess as many domestic comforts as ever we did. Better still, we can actually enjoy them. Have you ever been struck by the irony of slaving five days a week (minimum) in dismal conditions in order to improve a luxurious home you only occupy for two (maximum) and in which you prefer not to spend your holidays at all? The most palatial office can hardly compare in space, comfort or cleanliness with a home, however modest.

We run a car, computers, tv, hifi, a swimmingpool, pulsed shower etc etc. But we also enjoy digging compost, harvesting home grown vegetables, d.i.y. And we clamber on the roof to replace cracked tiles. The solution to a reduced income is a judicious blend of old and new, of hi tech and low.

But enough about us - your situation is far more important. How do you, still reeling from the shock that caused your income drop, arrange your new life to achieve similar success? For the first step, turn to the next chapter.

The first step is to find out exactly where you stand. Only then can you ask yourself the vital and perhaps, surprising, question -

Is my new income really that low?

Throughout the book, we will use the word `income' for convenience. We take it to cover whatever form the money you live on takes. Never mind whether it is strictly earned or not. It could be anything. From wages, a pension, alimony, an annuity, interest from building society or bank account, dividends from shares you own, an allowance for invalidity or for any other reason paid by the DSS, to rent you receive from property you own. The possibilities and combinations are endless - we'll call it all income. (Footnote - Some state benefits depend on what or how much other income you have. Some are short-term only, or mutually exclusive. So we have not shown them in our examples. You include as income whatever you know you will receive.)

First you need to know accurate figures. Don't guess. You can't plan if you are vague. Find out. Occasionally you are forced to estimate. But only for the sorts of income where no one can gauge the precise amount beforehand - building society interest say. You know how much you keep in each account. The society can tell you what interest they currently pay. The two together give you a good notion of your future income.

Equally, you need to know if changes are looming. Benefits can cease after a certain period or if you reach a set age. There is no sense in planning on today's figures if you know what they will change to tomorrow. That said, avoid including amounts which are not guaranteed. Like compensation you might receive, income you might earn. Be a realist rather than an optimist.

You must know the figures for a full year. Why? Some income may arrive weekly, some monthly. Some pensions are paid six-monthly and so is much interest. Other income is paid yearly. Equally some bills fall weekly, others monthly and so on. Some bills are payable in advance (beforehand) and some in arrear (afterwards). The only way to make sense of this tangle is to relate all income and expenses to a year. There is no mystery to this. Just multiply income you receive weekly by 52, monthly income by 12, quarterly income by 4 and so on.

When you have genuine annual figures for all the various sources of income you receive, add them altogether. You will find an example at the end of this chapter. Just adapt it to your own circumstances.

What figure do you get? Fine, that is your new figure of total income. Set it to one side.

Now look back to your income before the `fall'. Again, calculate it on an annual basis. When using payslips, use the starting figure of salary, not the amount you actually received as shown in your bank statements. Add together all your old types of income to get your old figure of total income.

Now compare the old with the new. On the face of it the new is depressingly low. But is that the true picture?

You never really saw that old income did you? Too many chunks were bitten out of it before it arrived in your hands.

Starting with your old annual salary, reduce it for the horrendous amounts you lost in the year for:

- Income tax,

- National Insurance Contributions,

- other compulsory pension contributions,

- union and/or professional body subscriptions,

- any other compulsory levies your position obliged you to pay.

That narrows the gap doesn't it?

But working required other, substantial costs. Like:

- commuting

- the need for a status car to look the part, or a second reliable car for backup and/or family use

- special clothes to look the part - any garments you would never wear for choice or at weekends

- protective clothing or tools if you had to provide them yourself

- lunches out

- entertaining

- for a working couple, the cleaner, childminder or au pair at home

- anything else you only spent because of your position. Like dinner out because you both ended a long day too shattered to cook. Or snatched, weekend breaks and extra holidays to gain a few hours respite at any price.

The gap is still shrinking isn't it?

What do you now obtain free that you previously needed to pay for? Perhaps welfare state benefits of all sorts, maybe medical expenses, or prescriptions, or education for your school-age children.

How much did you pay under each heading in the past? Logically, you must add these amounts to your new income total. You benefit in kind if not in cash.

Incidentally, it is unwise to assume blindly that because you paid for such services in the past, what you received was automatically better. Part of your money simply earned you a better place in the queue. Useful, but now not so important. Your time is at your own disposal. Besides, you probably remember having to fight for your place even when you paid for it.

On the other hand, you will meet new expenses you did not incur at work. Then, you automatically received certain benefits. Like heating and lighting. How do you value them? They are the difference between your heating bill during the twelve months before your circumstances changed and your heating bill during the first normal twelve months afterwards. You cannot consider `normal' a year which you might have spent in hospital or convalescent home for instance. The amount of such new expenses must be added to the total of your old total income. They were benefits you used to receive. Strictly, this valuation will be a little too high. Most heating bills increase annually anyway because of inflation. Not to worry at this stage.

After all these adjustments, how do your old and new total incomes compare? Take the difference and divide it by the amount of your old annual income if you want to know the difference in percentage terms.

We hope you are pleasantly surprised. And encouraged.

Remember too, that success and promotion can create a drop of income. More often than you may imagine.

- a senior Non-commissioned Officer is promoted to an officer. His new mess commitments leave him with less income to spend than before.

- a factory worker joins the management team. He loses any right to overtime/shift/dirty money payments. But a 90hour week may still be expected of him.

- an army officer at the end of his commission gratefully agrees to continue doing the same job as a civilian. But he loses his rights to accommodation. He finds himself buying and furnishing a new house from scratch. Expensive. And no generous `X factor' in his pay either.

- a rep on the road can be promoted to district manager without loss. If he makes it to office manager, it is goodbye company car and expense account. The mammoth salary increase needed to compensate is rarely forthcoming. He finds that out the hard way. Unless he is so blinded by status that he never bothers to do his sums.

- extra salary may be paid in such a tax-inefficient way that your take-home pay is lower than before. For example, the addition to your salary tips you over the limit so that benefits, previously tax-free are now caught for tax. (Helen has seen even mature accountants fall into this trap, so blinded are we all by salary figures).

You may have stumbled across the payments known as golden handcuffs? An executive can see his salary eroded over the years. But he dare not leave his company even though other opportunities beckon. Why not? He is tied into the company pension scheme or cheap mortgage scheme. Or he cannot face losing his prestige company car or even accommodation.

Moral -

Things are rarely what they seem. Even success.

You always need to do your sums.

Don't worry that the figures bear no relation to your circumstances. They don't to ours either. The point is, an apparent drop from £14,800 to £4,000 (a drop of 73%), turns out to be a drop of 22% in real disposable income. Serious but not overwhelming. We suffered an apparent drop of 75%. In reality our real disposable income (after the exercise described in these chapters) is little changed and our standard of life improved.

This example just shows the layout. Follow how the figures were arrived at and apply your own to the framework shown, adapting as necessary.

Now you know the worst. Even to face that in cold figures, is an achievement. But it only shows how things stand under present arrangements. Our aim throughout is for you to improve your position. And the first thing to consider is how many factors are now working on your behalf. We spell out the positive advantages of your new situation in the next chapter.

How can anyone find positive advantages to less money and probably, no job?

The first one may sound vague. Yet everything else springs from it. Do you realise that from now on

EVERYTHING YOU DO, EVERY ACT, EVERY DECISION IS FOR YOUR OWN PERSONAL BENEFIT?

Not your employer's.

Not your customers' or clients' or students' or trainees' or staff or business.

But for you - and for those of your family for whom you are financially responsible.

This knowledge will revolutionise your thinking. In every aspect. Unless you were the sort of person who devoted every working minute to his own affairs (they do exist, both as employees and as bosses, self-employed or not). From now on, what counts in every decision, what colours every action is improving your own position. And comfort.

Properly grasped, this gives a heady feeling. Whatever your age, it may be the first time in your life that you are totally responsible for your own present and future. You probably passed from parental orders to school orders to employers' orders and adopted their aims as your own. Small wonder then that many people panic without someone else to boss them. They flounder, give up and sink into apathy. But not you. Now is the time to review. Everything.

Your second great ally is TIME. From now on, every last second is your own. More than a millionaire could claim. Or any public figure. Well used, this brings enormous benefits.

- No more tiring, frustrating, useless, expensive commuting.

- You can get up when you chose, not when you must. And similarly go to bed. Arrange your whole routine in fact.

- You can embark on tasks at your own convenience. No longer do you need to elbow your way around the shops at peak times. You can dodge queues, select quiet times and stand the first in line. This can be as useful as `going private' (choose to pay for goods and services that the state provides free, in the belief that what you pay for is better).

- No more time squandered resentfully `Dressing up'. It can be a real relief to drop a restricting image. Perhaps a sober, severe professional guise. Or a laughably youthful posture.

- You can take all the time you need to recover after exertion. We spent two years with only bicycles for transport. Occasionally, we got soaked. Once home, we could plunge into the bathtub, luxuriate and generally cosset ourselves. If we had been working, we would have mopped up a little and continued wet and uncomfortable all day. So if you suffer more short-term discomfort, you need suffer far less long-term.

- You can tackle jobs you previously put off because of the long-term effort and disruption demanded. It is a question of pacing yourself. As any athlete discovers, it is not the distance but the pace which kills.

- You can sort out trivia. You can spare a moment to check your supermarket bills (they are almost always wrong). Then march back and get errors remedied. The same applies to bank statements. Direct debits can continue too long or unjustified charges slip in. Some banks, like the Royal Bank of Scotland, blatantly introduced incentive schemes to staff to maximise account charges! So a detailed study can save you cash.

Innocent and deliberate mistakes creep into every field of life. Harassed people trade time for money by ignoring them. But not you.

- Rushing from place to place, juggling obligations, cuts you off from people even when you live surrounded by them. Your new life will offer time for more people contact. This applies within the family too. Plenty of time now to devote to a better love life for instance.

- If you do not enjoy a single hobby, something that you do purely for pleasure, you are poor indeed. Years ago, the education system stood condemned for creating `first-rate technicians and third-rate human beings'. Now is your chance to explore your untapped potential. We consider this in more detail in chapter sixteen. Welcome this opportunity to appraise and extend yourself as an individual not just a useful employee or a work unit.

All this presents a challenge to your imagination. But the stimulus melts away if you persist in yearning for the old routine. Aim instead to create a new one that suits you. Try to enjoy what you are doing now. And if you do not - seek to change it. Or to make it more enjoyable. You are in charge now.

Do not let yourself be deceived or fobbed off. Your time is not unlimited. Indeed, because it is your own, you should cherish it all the more. We still loath queueing, waiting, dithering and time wasters. So should you. If not, you risk becoming lethargic.

The third positive advantage offered is VARIETY. Or at least less monotony. Honestly. We were surprised too. We swallowed the old maxim that you study, then work hard to merit a more interesting job. Not necessarily true. And between us we have sampled more different working environments than most people - office, school, shop, factory, college, postal sorting office, post round, civil service, local government, on-the-road selling, even an ice-cream van and a holiday camp. An airline pilot holds a responsible job. So does a bus-driver. Once learnt, neither need be enthralling. Every week drags by the same.

Worse, the higher you climb in your career, the more you become a physical, mental even social prisoner to it. Weekends too. How many executives, once they have achieved that coveted private office, discover what a lonely place it is? How many invent endless excuses for spending their time leaning against other people's desks? And summon subordinates into their sanctum just to hear a human voice?

Well planned, you can achieve more variety not working. Now is the time to end family demarcation. Turn your hand to tasks you have never tried before. Your own skill may surprise you. And the pleasure you receive from trying. You can do so many tasks you used to employ professionals to do. It will take you ten times as long but you will probably end up with a far better job. (Recently we paid professionals to paint and paper the hall, despising our amateur efforts over thirteen years and hoping to learn something. What a shock to discover how slapdash they were. They laughed at shortcomings we would never have tolerated. Their only skill was in half-covering-up mistakes.)

The first thing you discover when money runs short is how extravagant everyone else is. And for so little satisfaction.

`D'you fancy this?' yawns husband.

`S'pose so,' drawls wife. `We might as well buy it.'

In your new position, by contrast, you rediscover the zest of spending. It is an activity which demands enthusiasm. Not only should it give pleasure - you are buying something that will enhance your world - but that pleasure should endure a while.

Earning too can supply a thrill out of all proportion to the money received when it is viewed as an act of faith in you. If you are really lucky you can rediscover the joys of sharing and self-help too. Not simply buy in anonymous factory products.

Properly arranged, your new life should entail less stress. So it should slow down your inevitable ageing. More relaxed and contented, you find less need for holidays. Even if your job allowed you to enjoy your full quota in the past. And many do not.

Sure, you would relish basking in a pampered change of scene. But you don't need it in the same way. You should be so content in the new lifestyle you have created that you long to get back to it. (We have cut short our last three holidays.)

Another discovery awaits you. How wasteful the average person needs to be to fit everything into their crammed lives. You, by contrast, know that leads to ecological disaster. Firstly, you can now husband your resources more effectively. Second, you find time to explore more natural, low tec` solutions.

Do you really need a permanent car for instance or would a bike serve? A dishwasher or washing up? A waste-disposal unit or a compost heap? An electric can opener or a mechanical one? An address book and pencil or an electronic gubbins?

It is a reflection on our society that almost every way in which you choose to spend less money will improve both the environment and your own health!

High-flown stuff... Enough to know that you have discovered a positive side to your new situation. Now we want that situation to be the best possible. The next step is to consider your assets. That is the goal of the following chapter.

An asset is anything you possess which may prove useful to you. It may physically exist, like a car. Or it may be no more than a piece of paper. Like a valuable blueprint, a copyright or a patent. Or even an idea in your head. Your asset may generate income, like money in a building society acount. But it need not, like a valuable painting. So the range of possible assets spreads very broadly indeed.

Some readers may be producing rueful smiles. `If I had assets I wouldn't be in this mess.' We hope we can convince you by the end of this chapter that you own more than you ever realised.

Other readers will possess a ragbag of assets amassed piecemeal over a prosperous working lifetime. Until now, they have relied on their salaries. They never needed to consider what such assets might do for them.

The first step is to make a realistic list item by item. That means going through your house, your garage, your attic, your records, with a fine toothcomb. Include everything. Never mind that you would rather die than part with it. Include what belongs to you yourself and your spouse, if you act as a financial unit. Which you should - especially now. (This applies to your personal finance even if you are blatantly dodging the bankruptcy rules!)

If you normally live and plan with a brother, sister or parent, include all your joint assets. That said, note precisely who officially owns what. That is, legally, as shown on the documentation.

You need undisturbed quiet away from the television and room to spread your papers. You will require plenty of lined paper, not just the back of a cigarette packet. You intend to evaluate every aspect of every item thoroughly. Use pencil and rubber as accountants do. On separate sheets, with a cross-reference show how you arrived at any composite figures. When all the figures are assembled and double-checked - then ink in. You will find a short example at the end of the chapter.

Firstly, how much did you pay for the article and when? Again, only estimate when there is no record available and no possibility of finding out.

If it was a gift or you inherited it, put the date it came into your hands and a nil original cost. You will only need to know probate value or its market value at the time you received it if, later on, you sell it and there is capital gains tax to calculate.

Next, how much could you honestly sell it for now? That is its current value. Remember to deduct estimates for the expenses of sale. Things like estate agent's or solicitor's or broker's fees and removals. Would it be quick and easy to sell, like a share on the stock exchange? Or slow and difficult like a house?

Does it generate income? Like a garage you rent out. If so, how much a year?

What is the income you receive as a percentage? For the moment it makes more sense to compare the income with what the asset is genuinely worth now rather than with what you historically paid for it, perhaps long ago. So, if your holiday home yields £1,000 a year after all expenses and you could sell it for £40,000 net (= clear of expenses of sale), you are receiving £1,000 x 100 divided by £40,000. That is 2.5% (Footnote - Although you can usually sell your home, car and furniture without considering capital gains tax, this can be an expense of sale for say a holiday cottage. For a crude calculation of tax payable, take your selling price and deduct

a) your selling costs if any

b) the original purchase price and buying costs and

c) £7,500.

Then multiply the result by 20%. That will probably be the maximum tax you must pay. It could be much less. Or totally exempt. A generous allowance for inflation exists too.)

That percentage figure is your starting point for deciding if you could do better elsewhere. By selling the asset and putting the money on deposit at 6% for instance.

Could your asset generate income? Perhaps yes, potentially, but you never thought to try. For instance by turning your house into a guesthouse. Offering a pedigree dog as a stud animal. Turning a houseful of antiques into the stock for a business. Or a clutch of paintings into a gallery. We look at this in more detail in chapter sixteen.

You live by the sea/a beauty spot/ a major airport? You could let your house out/or part of it/or offer parking facilities short or long-term. The possibilities are limited only by your imagination.

Could your asset generate capital? Obviously yes, if you can sell it outright. Or there may be other possibilities. Like leasing out a house for ten years rather than selling it outright. Some assets are unsellable - like the funds you have accumulated in a pension scheme.

Perhaps you possess an assurance policy you could cash in. How much capital would it yield? Impossible to guess. Only the insurance company can tell you how much they would offer. The historical value of the policy is the total of the premiums you have paid into it over the years. The present value is what they will pay you now. Compare the two to decide whether it is worth while cancelling. But no decisions yet. In fact, none are possible until you have read the whole book. Other possibilities exist for assurance policies which we shall consider when we look at liabilities in chapter seven.

Many policies have a mixed character, there is an insurance side and an assurance side. The first covered you for something that might have happened (premature death say) but luckily did not. What you paid towards that, is lost. You bought peace of mind. The assurance or savings side covers you for something that will happen (either you will now reach 65 or you will not). It is this savings side that you are now considering claiming back. So, when comparing what you paid and what you could now receive, you must only include the parts of each premium which related to the assurance side. The insurance company obviously has a complete record of this.

Does an asset generate heavy expenses each year? Costs like maintenance, servicing, insurance, specialist cleaning. Even storage. Are you still paying out heavy mortgage or loan or h.p. interest?

If you want to be painstakingly accurate over shared expenses like household insurance, take the cost of the insurance, multiply by the value of the asset and divide the result by the total value of all the assets covered by the policy. Normally such precision is not necessary. You will be taking account of the cost of the insurance later on in chapter eleven.

As you know, many `contents' policies exclude individual items over a certain value (say a fur coat) unless they are named on the policy itself. The individual high cost for each extra item is quoted to you year by year. So you can directly link the cost with the asset itself.

Perhaps you bought a lease some years back. You know how much you paid. Especially if you have a short lease, what you could get if you sold it on, may bear no relation to what you paid. Normally, unless rents in general are rocketing, leases tend to plummet in value as they near the end of their life. Then, of course, they lose all value. Nonetheless, include the lease as an asset. For our purposes, the value of your asset is the present value of the lease and one expense associated with it is the rent you must pay annually. That is an expense you are committed to until the lease ends unless you can come to other arrangements with your landlord.

Start a hunt for hidden assets. Not just at home, try grandma's attic too. Did someone buy you premium bonds years ago and you have never bothered to check if they won? Tens of thousands wait unclaimed because people have moved etc. Mothers take out savings policies for infants and then forget all about them. Old pass books and share certificates get pushed into the backs of drawers, used as bookmarks, shoved behind the cushions of the settee. This happens so often, specialist tracing firms have long existed and flourish. They make a handsome profit (on a percentage basis) out of tracking down the ignorant owners of such bounty. Or you can start the search your end, if you believe but cannot prove that specific assets exist, by contacting such organisations. You can find them on the internet or ask a librarian.

Grandad's cherished stamp or cigarette card collection, old Hornby trainset, his debenture for Cardiff Arms Park, old gramophone records, early radio, even the guitar from his fifties skiffle group. All these things can lie ignored and unvalued by his descendants for years. Yet they may be both valuable and regularly increasing in value.

If you should strike lucky and unearth an antique say, how do you know how much it is really worth? Your first step may be the public library for a book to help you decide if it is genuine. Librarians are normally very helpful finding or even ordering what you need. After all, you can now call at a quiet time for them and obtain undivided smiling attention.

Alternatively, you could visit an antiques fair or market. That is far less intimidating than a quality antique shop. You can browse at will and try to spot something similar and discover what they are asking for it. Large auction firms run road shows all around the country where you can take items for a free `valuation'. Careful about the internet - you do not want to announce to strangers that you possess something and know precious little about it!

Antiques are a fascinating hobby. If you sell something you did not specifically buy to resell, then you can forget income tax. You only have to think about capital gains tax if all your gains (what you sold it for less what you paid) exceed £7,500 in a year.

You know how much an asset cost, you know how much it is currently worth but is it likely to appreciate (increase in value) or depreciate (the opposite)? Cars are notorious as depreciating assets. When you drive one out of the show room, it is already worth less than you paid for it. It is easy to find out the value of a car - use Glasses or a similar guide.

Furniture too rapidly loses value. Take a three piece suite. You paid a high price. It remains as-new. But you will be horrified at how little it will fetch second hand.

In general, to gauge an item's current worth, you need to know its expected lifespan. (Here, we are no longer talking about antiques - they are assumed to last forever.) At the end of that, it is virtually worthless. The maker's guarantee period is some guide. That runs out just before trouble can be expected. Even so, with servicing and/or repairs, the item may well give useful service for many years more. For electrical appliances, ten years is usually the most you can hope for.

Starting with the asset's cost new and how long it can be expected to last, you can calculate roughly how much it loses value each year. Say an item cost £100 and should last four years, divide £100 by 4. It loses £25 a year. So at the end of two years, it is worth only £50. that is £100 minus two lots of £25.

This is a crude calculation because many items lose proportionately more in the early years. The first above all. Still, it will serve.

Other items, by contrast, can appreciate in value. Especially in times of inflation. Or when viewed long term. Classic examples are houses (despite present hiccups), shares, antiques. You may possess something, currently not worth much but with enormous potential. A small plot of land just where someone else wants to develop. Or so placed as to restrict his access and make development impossible - unless he offers you a very attractive sum to sell it.

Obviously, when you come to a choice between which assets to sell and which to keep, you aim to get rid of depreciating assets and hold on to appreciating ones.

Take the holiday cottage we considered a while back. You have calculated that it is only yielding you 2.5% at the moment while the same money in the bank would yield 6%. On the other hand, the bank pays out 6% full-stop. The value of the cottage may be appreciating every year at the same rate as inflation. Suppose inflation is 7%. That increase, plus the 2.5% cash argues strongly in favour of keeping the cottage rather than selling it to put the net proceeds in the bank. Provided, of course, the appreciation is genuine and not just wishful thinking.

Some assets have `hope value'. No-one particularly wants them at the moment but there is a fair bet they will some day. Like a plot on the outskirts of town. Or next to an expanding business.

Assets may be directly linked to a liability - like a car you bought on h.p. If so, note the liability concerned in the next row. We will consider the last two rows - sentimental and pleasure value - in the next chapter.

Perhaps you possess rights which you have never thought to exercise. Like the right to buy something at a price far below its current value. Helen had a client with a option dating back years to buy an old airfield for a million pounds. He had no intention of buying. Or any money to do so. But the site was currently worth many many times that. Armed with his option, he could have borrowed the million from the bank and sold on at a multi-million profit within the hour. Yet he did not. Why not? The site value, hence the profit he could make, was increasing annually. All sorts of options, warrants etc have been given or bought over the years. How many of them languish forgotten?

If someone else owes you money, that is also an asset. Provided they acknowledge the debt of course and are in a position to pay it. Many people land themselves in difficulties through lending on a casual basis to family or `friends'. Now is the time to ask for your loan to be repaid. People genuinely do forget. A friendly letter can work wonders. Alternatively, a solicitor's letter can do the trick. As this will obviously cost you, you must find out in advance what he will charge, set an upper limit and only consider it for sizeable sums.

People do not just lend cash. All sorts of assets change home when people move or replace or temporarily run out of houseroom. You never know, the new `owner' may be glad to see the back of your baby grand piano. He was only sparing it houseroom to oblige you.

When you have listed all your present assets, total their current values. In other words, the figures in row five. Set the total aside for future use.

Now start a separate list for your potential assets. Things like future compensation you may receive in respect of an accident or injury. Alternatively, a tax refund (if you claim it). Perhaps because you overpaid on PAYE. Or your business made losses which you can carry back to set off against your income of earlier years and reclaim tax you paid then. Sometimes you can even carry these losses back to before the business started.

Some readers may have formerly worked in a continuing family business run as a private limited company. Family squabbles, conflicting personalities etc often result in one family member (you?) being forced out. Properly exploited, this situation can generate potential assets.

For instance, it is not uncommon for an ex gratia payment to be made by a family firm to a sacked ex-director as a `sweetener'. An ex gratia payment is one to which you have no entitlement in any contract. For that reason, it can sometimes legitimately escape income tax.

Alternatively, if the younger generation has made life intolerable, they may be persuaded to offer you an annuity or payments as a consultant. Or simply your company car at an advantageous price.

If you are a continuing shareholder, they may propose to buy the shares off you for a very high price. This is called `nuisance value'. Or, for a sum, to swap your voting shares for non-voting shares.

Perhaps in the past, you lent the company money. Or maybe you put assets at its disposal. As a result, there is a director's loan account in existence. The company still owes you money. As it is the repayment of a loan, it comes tax free. If you ask for it! Often, and especially if no interest is paid on director's loan accounts, the new people can happily ignore this debt for years.

If the sum is sizeable, the company might find it embarrassing if you ask for immediate repayment in full. It may make attractive alternative offers. If nothing else, you have a good case for requiring interest to be paid to you on your loan in future - like any other creditor.

All this is high-faluting stuff. But many new-poor have spent a working lifetime as directors and left the paperwork to other members of the family. When the crunch comes, technical ex-directors may have no idea of their entitlements or how to get them. Or even the strength of their own bargaining position.

If this is you, we recommend the advice of a professional accountant. But definitely not the one who audits the company's accounts. He faces a conflict of interests. You want someone totally on your side.

Most readers will have expectations. Some aged parent or relative has promised to remember you in their will. Perhaps, as a new pensioner, you have yet to receive the lump sum associated with your pension. Or further pensions/savings schemes/assurance policies will pay out at a known future date.

Obviously, you will not make the mistake of counting your chickens too soon. Some of these assets may never appear. Even more important, you will never dare borrow using uncertain future assets as security. Those who do risk being crippled with debts and no means of paying them. More on borrowing in chapter seven.

On the other hand, potential assets can and do transform themselves into real ones. So you must include them all. Better that than to abandon your rights by default. Hundreds forget to claim pensions they have paid into over a long and varied working lifetime.

Next, make a stab at valuing them. Now guess when they might arise. It is important for you to know how long the present situation is likely to last. It may be permanent. Or you may expect future changes which would completely alter your financial position. If you know the definite date which will bring these changes, that sets the limit for the planning you will be doing in chapter eleven. Again total your potential assets and set the figure aside.

Having researched your physical assets real and potential, you review your personal ones. List your skills (not just job but life-related). Can you drive, ride, type, cook, do you know any languages? Are you handy with a car, at d.i.y., in the kitchen, with a pair of scissors? At present such skill may lie dormant. Nor do you expect to use them. They remain assets nonetheless. Probably no figure could be fixed to them. They can still furnish a vital source of ideas.

Do you realise for instance the value of your own objectivity? Because you are freed from daily work, you have time to think about the workplace. Your perspective has changed. You can look down on the whole set-up dispassionately. That ability has stimulated dozens to write or design or create improvements, modifications, alternatives.

Lastly, there are your contacts. Who do you know with genuine specialist knowledge that you can call upon? Who can help you find out information? Help you decipher it when you obtain it? The internet can be everyone’s friend. It is awash with people, formerly prominent in their field, now eager to pass on their knowledge. Crooks and conmen abound too. As in normal life, it is up to you to sort sheep from goats.

As they say,

A little help is worth a lot of sympathy.

So now you know your hidden assets.

Look again at the first total, your present assets. More than you expected? We hope so. Later on we will look at ways in which assets can be rearranged, turned to best use, perhaps disposed of in favour of more positive alternatives or generally enhanced. But first we must consider the down side - your liabilities. Often they are directly linked with your assets - like a mortgage with a house. We bet you can think of plenty of liabilities. That is what the next chapter is about.

Liabilities are broadly, the debts and long term commitments for which you are responsible. As with assets, you need to draw up a list of liabilities. Don't include your daily expenses, electricity and the like, unless you have already built up arrears. These arrears, as they are your debt, are a liability and must be included. We consider running costs later in chapters eight and eleven.

Below each liability, enter precisely whose liability it is. Then the amount still owing if you repaid today. It is these amounts you will add to arrive at the grand total of your liabilities. If you have been repaying for years, perhaps a mixture of capital and interest with tax relief, you will certainly need to write to the lending organisation to find out exactly how must you still owe.

Next enter the amount due each year. Then the frequency of payment (monthly? quarterly? yearly?). With some borrowing, all interest is repaid first. With others, all at the end. With yet more, each payment is a hybrid of interest and capital. So, for simplicity, enter here the total of every penny you must pay in the year. Next enter for how long it should continue.

Then, whether you are both entitled to and benefitting from tax relief. Obviously, paying less tax is an advantage - but only to a taxpayer.

You may well need to read your contracts to see if it will cost you more - yes more - if you pay up early. Many organisations slip in penalty clauses because they are losing the interest you would otherwise have paid. Don't forget your credit card(s) either.

If you pay alimony, that must be included obviously. But have you explored a return to the courts to plead for reduced contributions because your personal circumstances have changed?

Before you total your liabilities, marry up those that relate to specific assets. Do not change any figures - just consider the asset and liability details together in your mind. The result may be that some `assets' turn out not to be assets at all.

Suppose the house described in chapter 5 had been bought on the mortgage shown below as a liability.

(Insert PRESENT LIABILITIES 6a here.)

The current value of the house then becomes not £46,000 but £25,500 because of the mortgage to pay off and the penalty clause for early repayment. The running costs of the house would not be £2,000 a year but £6,000 because of the payments to the building society. Annual expenses of £6,000 on an asset worth only £25,500 to you represent 23.5% of its value. That is a very heavy burden indeed.

So why did we not show the house as a liability from the outset? Firstly for clarity. Secondly, taken alone, it is not. Even the size of the mortgage does not make it one. In extreme cases, it could - if there had been a top-up mortgage too and a fall in the value of the house, say. But an asset which is very expensive to maintain can be as bad as a liability. Until you know the full figures, you cannot tell.

Above all, we want you to think thoroughly around all your assets and liabilities. If you have other, unincumbered assets (cash in the bank or a second home say), it may make sense to use or sell some of them to pay off or reduce the mortgage. Or it may not. But every avenue should be considered and that means spelling out the asset side and the liability side and then linking the pair.

When you have spelt out your cast-iron commitments, then list your moral liabilities. Here, although your obligation is not a legal one, you should be able to put a firm figure on the costs.

Perhaps you have a child happily settled in a private school. You would hate for him or her to be forced to leave just now. Nonetheless, you have a moral, not a legal liability to continue to foot the bills. The same goes for granny in her private nursing home.

Now total separately your liabilities, legal and moral, adding the total amounts owing as shown on row 3. How does the legal total compare with your assets total from the last chapter? We hope the assets figure is larger, and comfortably so. If legal liabilities exceed assets, you are technically bankrupt. Unless the margin between the two is generous, moral liabilities and even some assets will have to go before you can tackle the problem.

At least you have faced the worst. So many people lack the courage. Our aims throughout are:

to maximise your assets

to maximise what they will gain for you in one form or another

to minimise your liabilities

to minimise the expenses associated with your assets

to minimise unavoidable living expenses and lastly,

to prevent you from innocently adding to your liabilities.

Before we suggest umpteen ways to achieve all this, one last word about liabilities. (Yet more liabilities?)

We have looked at your money liabilities, now let us consider other `moral' liabilities. That is, unquantifiable liabilities you could legally walk away from tomorrow.

Unless you are very lucky, the most pressing will be your family. Your first aim should be to limit the number of your dependants to those for whom you are genuinely responsible. This may involve getting other family members to take a larger share of the burden.

Perhaps you, your brothers and sisters all jointly contribute towards aunty Flo. Now may be the time to find out just what social benefits she could be entitled to, if only you could persuade her to claim. Or to persuade her that the ridiculously large house to which she clings alone is more than the rest of the family can maintain. More on that in chapter nine.

Having decided just who you are really responsible for, your next aim is to make those dependants less dependant. Don't reproach yourself for acting unnaturally. Pigeon parents jointly beat their young off the nest to force them into independence.

If your offspring are working and not living at home, should you be paying for their holidays, their cars, their pleasures? If they earn well but live at your expense, isn't it time you brought home the facts of economic life to them and demanded an economic rent? Or stopped acting round the clock as unpaid chauffeurs? Or informed the bank - in writing - that, as they are of age, you cannot be held responsible for their debts and not to lend them any more…

High flyer absentee parents often substitute money for time and attention when dealing with their young. Their high pressure lifestyle forces them to. It is easy to continue to shell out for your children's pleasures, never mind needs, for decades after those children have been earning on their own account. Fine as long as daddy can manage it. Or is mug enough. It may even be a highly tax-efficient arrangement. But things have changed now. Your children's expectations of you must be made more realistic. And their children’s.

The same applies to possible future dependants. Your parents may be hale and hearty at seventy-five and good luck to them. Your role now is put them into a position so that they are eligible to claim all the services, allowances etc they need when that happy situation comes to an end. Then to ensure no foolish pride or ignorance, prevents them from claiming. That means knowing what is available, to whom and under what conditions. We recommend Tolley's Social Security Guide rather than just the DHS's own muddly pamphlets.

If you have to limit dependants, this extends beyond your family. We doubt whether you can genuinely afford properly to maintain a pack of meat-devouring Dobermans. Or a couple of racehorses, or even ponies out to grass. With small-scale exceptions you should aim to keep animals for their breeding, selling, eating or swapping potential. The same applies to what you grow and produce. The hothouse orchid collection fine - if it genuinely pays its way.

The worst millstone you family can hang around your neck is a put-back-the-clock attitude. You will find life an uphill struggle linked with a partner who harps on about past glories, refuses to accept the truth or ceaselessly envies others. And encourages the children to do the same.

Perhaps your partner has turned out to be more mercenary than you realised. You should point out at an early date that it is a better bargain to make a final break while there are still assets to share. Also that the expenses of a disputed divorce will further erode what is left!

That said, no one denies that it is hard to admit you can no longer afford the neighbourhood you live in. Or to entertain as you did. Often the impossible burden of keeping up a social facade falls far more heavily on the woman. Chapter twenty is devoted to this.

We said you must reconsider every facet of your life. We were not kidding were we?

Now for some solutions. How do you limit your liabilities? Above all, how do you avoid adding to them? That is the subject of the next chapter.

Our aim overall is to limit your liabilities. Of course methods vary. Perhaps returning the hifi system on hp which you only recently started to pay for. Or approaching your creditor (the person or organisation to whom you owe) by letter or directly. You explain your changed circumstances then suggest that they extend the loan period. Or accept back the item in question.

It never hurts to point out the difficulties and expense to the collector in pursuing relatively trivial amounts through the courts. Also the long delays involved. Or to suggest a compromise. If the lender himself is hard pressed, he may welcome 50% of the loan as an immediate cash payment in full and final settlement.

Take the school fees problem. A discreet word with the bursar may reveal that there are funds available to meet special cases. Or for particularly deserving or gifted pupils. It is up to you to make a case. Yours is not a unique or even rare predicament. One in four of all pupils at Eton relies on support from someone other than his parents. (Scholarships, parents in the diplomatic corps supported by taxpayers etc.)

Britain is also stuffed with eccentric old charities. Many hail back centuries. But the welfare state has eliminated such classes as poor spinsters, honest servitors and the deserving poor. Present-day charity administrators are sometimes hard put to allocate funds.

Many of the charities cover only the descendants of a certain family or folk who live in a limited locality. It makes fascinating reading. A librarian can help. You never know your luck. Payments - being gifts - come tax-free.

Other nouvelle poor faced with this dilemma contact the citizens advice bureau for advice on their rights and obligations. They find out the alternatives available. Or they apply to their own bank who is often willing to rearrange their debts. That is, the bank pays off the various organisations. It steps into their shoes and collects the principal and interest owing from your bank accounts directly over the agreed period.

Obviously your bank will only consider this if it knows your history, other assets and potential income. The lists you have already drawn up in chapters three (current income) five (assets) and six (liabilities) offer precisely the evidence they need. Also strong proof that you are resolved to win through. A solution proposed by a bank is likely to be more convenient and cheaper for you than one offered by other organisations. It should also be sensible. That is tailor made for your individual circumstances so affordable. Your bank will ensure there are built-in safeguards.

We cannot advise too strongly. DO NOT THINK YOU CAN DODGE MANY SMALL DEBTS BY TAKING OUT ONE BIG NEW ONE. The blatant, relentless television advertisements on this subject are wickedly misleading. They make it seem simple. You just pay one small amount every month instead of umpteen big ones. You can even have money left over to buy something new straight away. Cloud cuckoo land. No mention that you will be paying through the nose, for the rest of your life and you have really done nothing at all to solve, still less improve your situation. Forget it. Do your homework, as we show how. Then make a genuine, sit-down in his office appointment with your bank manager, not get a brochure or two from a smiling girl at the counter. Take your calculations - better, post him a copy a week before, to consider in detail. Ask for his guidance. That is the adult approach. After all, you stopped believing in Santa years ago, didn’t you? Why should you believe in loan companies now?

Your aim is not to shed assets and liabilities in panic as bills, stroppy letters, debt-collectors arrive piecemeal. Instead, you want to view the total package calmly, decide what is worth keeping and what can be ditched.

Perhaps you have contributed for years to an assurance policy or pension scheme. That made perfect sense when you were a high earner and probably saved you tax. But now? You may well discover you no longer qualify for tax relief (no suitable job). Or you don't now pay enough tax to benefit from relief.

One possibility is to have the policy made paid up. Another jargon word for it is `frozen'. That saves you further contributions. The money you have paid in was not lost. It continues to earn for you. A pension or whatever will arrive at the due date. The difference is, between now and then, you cannot make any further contributions. Nor can you touch the money. Yet you may be able to borrow (perhaps even from the insurance company itself) using your policy as security. Naturally, as you will pay fewer contributions than expected, the pension etc will not be as high as anticipated. The insurance company can give you all the information to make a decision.

Depending on your circumstances, you may find a further solution. Perhaps another member of your family will take over the life assurance policy from you. Say a son. He continues to pay the premiums and receives the eventual payout. For him it can offer a rewarding cast-iron long-term investment. This may be a more attractive proposition all round than for you to cash in for a miserly sum now. Or for you to wait years for a shrunken payout.

When reviewing your assets for chapter five, we recommended you to enter the original cost of the assurance policy (or whatever) and compare it with what you could obtain for the policy now. Fine, to begin with. Now adopt a more sophisticated approach.

Turn your back on the historical cost of the policy. Much of what you paid probably disappeared as salesmen's commissions. What matters now is the choice between what you can get for the policy today as opposed to what it could provide for you in the future. This applies to all assets, not just assurance policies.

Why didn't we recommend this at the outset? Frankly, it takes a lot of courage to draw a veil over past spending. Especially if you suspect you were deceived with no possibility of redress. Of course, it comes easier, if you previously lived off insurance commissions...

As well as limiting your liabilities as much as possible, you must make sure you are not adding to them. It is fatally easy to make a weak situation worse. Don't assume that because you are no longer earning, people will be unwilling to lend to you. Quite the reverse. Credit card companies, h.p. salesmen, loan sharks will still queue up for your business. You still fend them off on your doorstep and over your phone. Their tempting mailshots will stuff your letterbox.

Many lenders make a feature of `no questions asked', `loans offered to pay off other loans' `noone refused' or `only £5 a week to pay'. Beware. They neither know nor care what trouble their persuasiveness could land you in long-term. Worse, they may assume that you are desperate enough to pay horrendous interest for an indefinite period. And so grateful that you will not ask any questions. Or do any sums.

Because it is so important, we take a detour here to consider

Borrowing

From now on, you avoid borrowing like quicksands. Like an unleashed pit terrier. Like a puff adder. That covers every form of borrowing. From informal loans within the family to documented long term agreements. From hire purchase to credit sales. From lease purchase to flourishing your credit or charge card limit and not repaying within the deadline. Even the pawnbroker. So many easy alternatives exist. You can simply quote your credit card over the phone, by fax, on the internet, even internationally, to buy or hire things. No wonder people slip unknowingly ever deeper into debt.

The only exception is free credit. If offered, you can accept this sort of borrowing because you can earn interest on your cash while repaying the loan. Watch out though for tradesmen who inflate their prices to pay for your `free' credit.

Why the blanket prohibition on borrowing? Well, what are you borrowing for? Here are the five commonest reasons.

1. To get by.

In other words, cover day-to-day living expenses. Sorry. That destroys any idea of budgetting. If someone in the family really wants to help, let them give you money, not lend it.

2. You have spotted a sudden, unrepeatable bargain.

Wait until you have read chapter fourteen. Perhaps you will change your mind on what a bargain really is.

3. To invest elsewhere for more.

This is possible, but highly unlikely. Too many professionals are scouring the world for just such opportunities. More likely, you have misread the small print. Perhaps the interest you must pay is fixed at 8% while the interest you hope to receive is variable, currently 9%. If it plummets tomorrow to 6%, you have lost out badly.

Equally disastrous, you could end up with a short-term loan which you lend out to someone else long term. When your short-term loan comes to an end and you are forced to repay, the money you lent long-term is out of reach.

4. You are eager to start a capital project.

This is some brilliant new scheme that will net you a fortune. Sorry. You dare not risk your capital in this way. You have to preserve your assets remember. Until you can afford to finance your scheme without borrowing, put it on ice.

If it is state of the art and dare not wait, your task is to patent or copyright your idea to protect yourself. Then to interest others. Let them be the ones to risk putting up money to commercialise your brainchild.

As far as you are concerned, you dare not chance joining a partnership. Partners have unlimited liability - all their assets stay at risk. Worse, they have joint and several liability. Your assets could all vanish to pay for the debts incurred by a muddleheaded partner!

A limited partnership does exist. You could safely join that. In practice however, it is very rare because one partner must stay unlimited. Few people are willing to take on this burden alone.

Alternatively, you could join your backers in a limited liability private company. At worst, you lose the value of the shares you bought. Never sign a personal guarantee as a director. Doing so puts all your assets at risk again.

Other possibilities exist to exploit your project. First, as said, you establish copyrights or take out patents. Then you sell/lease/franchise rights to others. You allow others to exploit your brainwave, in return for a guaranteed share of the profits. How much control you keep over the manner in which your discovery is exploited, depends on the agreement. All sophisticated stuff, demanding professional advice. But please, no personal borrowing!

5. To pay deposits on a number of articles you intend to buy on hire purchase.

Never. If borrowing to lend is a sin, borrowing to borrow is far worse. As the Irish say - for such a sin, Satan'd throw you out of hell. Yet people fall for it. They pay interest on the bank loan. Plus interest on all the hire purchase agreements. Not to mention finding the money to pay for all the articles themselves. Impossible to cope. We bet no bank would ever lend if they discovered that was your dodge.

Borrowing - such an instant, painless solution to your problems? In fact, the reverse. Longterm it can turn out highly painful. The true cost can loom far higher than you calculated. Beware of advertisements which stress the miserly amount you would repay weekly. Unless you also know how long the repayments would continue, it is utterly impossible to calculate what interest rate, hence how much, you would pay. It could be astronomical.

Look for the APR (annual percentage rate). This must legally be shown somewhere on the advertisement. That is your guide to the interest that will be charged. Most people ignore it because it is deliberately printed small. Besides, they don't understand its importance.

Don't be fooled by the low interest figure leaping out at you from the advertisement. The difference between the two is probably whether you pay interest on the full amount of the loan or on the diminishing or reducing balance. If the former, the interest quoted will look attractively low while the APR will soar dizzily.

To explain, suppose you are repaying a small amount of the loan regularly together with your interest. 10% on the full amount is far higher than 10% only on the amount which you have yet to repay.

Suppose you borrow £100 for a year at 10%, repaying in twelve monthly instalments. If the interest is not calculated on the diminishing balance, you pay £10 (that is the 10% agreed). But your regular instalments mean there is virtually nothing left to pay near the end of the year, yet the interest was calculated as though you had not repaid a penny. So you are effectively paying 18.46% on the lot. Yet the documentation said, and quite legally, 10%. Close attention to the APR mentioned above should warn you about this one - if you remember to look for it.

You will even find a difference between the amount of interest a building society says it is charging you on your mortgage and the APR calculated in the official way. The APR will stand 1% or more higher. Why? Building societies calculate the interest you owe on the amount owing at the start of each year. Naturally, that works in their favour.

Those are just a sample of the dangers of borrowing. We have not touched upon the unpleasant methods of extraction some loansharks employ on defaulters - and their innocent families. Enough said.

Enough too, for the moment about liabilities. Reviewing them may force you to the conclusion that some assets must go.

Two more factors will sway your decisions on which assets to part with, besides the cold figures. You would not be human if they didn't. The first one is `sentimental value'. You probably own articles you could not care less about. Money in the pocket would be equally, even more welcome. Other possessions, you would be deeply sorry to lose. Because of the giver, because of happy memories, because of family feeling.

In your present position, you can indulge sentiment to a certain extent. Hold on to your prized belongings in preference to others of similar value, earning potential and with similar associated expenses. You may have to choose though - you dare not reserve every last jamjar as having sentimental value. The natural desire to keep hold of property loved for past associations should also stimulate you in your efforts to shed other, unnecessary liabilities, within the family and elsewhere.

The second unmeasurable factor in deciding which assets to ditch is the `pleasure' factor. If your £200 inflatable boat gets used more and gives you more pleasure than your £5,000 cabin cruiser, it is obvious which one you sell first.

There are many ways to sell, depending on the asset concerned. From local paper small-ads to factory or office noticeboards. From carboot sales to fifty-fifty sales. With the latter, your local church say, collects unwanted sizeable quality articles from parishioners. It auctions them publicly. Half the proceeds go to you as owner and half to the church. It saves you the expense and hassle of trying to sell for yourself and attracts a wider audience.

Nearly-new shops often sell on commission. They usually ask for one third of the sale price, which they decide. You must collect the goods if not sold within a month or they are donated to charity. Commercial nearly-new shops (not charity shops) know what will sell and the price to charge. Otherwise they would not stay in business. This is a big help to you.

If the shop or organisation you bought an item from also handles second-hand or reconditioned articles, you may interest them in buying it back off you. Alternatively, there are collector's or antique fairs or swopshops.

You can sell items via internet using ebay and similar auction sites. Call up their sites to read the details. It has the advantages of being anonymous, not as humiliating as visiting shops only to be refused, and offering a far wider range of potential buyers.

Computer-based registers exist. They bring together buyers and sellers, of houses say, while cutting professional fees to a minimum. You can get your property included for a small sum.

We would hesitate to put our housecontents at the disposal of house`clearers'. Their prices are rock-bottom, all-inclusive and, if they spot anything valuable, you will never know it. At the other end of the scale, with really valuable artefacts, you need the widest possible buying public. Only professional auctioneers can provide it.

It may be that you are on your own in your efforts to adjust. In this case you have the rest of the book to guide you. You are collecting the vital facts and edging your way towards decisions but in no position to make them yet.

Other readers who face the same choices will, for better or worse, be part of a larger family structure. Parts of it may remain very affluent still. The art here, with family agreement of course, is to transfer out your liabilities and/or transfer in their assets.

A few examples:

Did you as a generous father agree to pay your married daughter's mortgage? Perhaps the property is in her (or the couple's names) but the mortgage in yours. Now is the time to suggest placing it in their own names. At a stroke your liabilities are reduced.

Consider giving away assets with associated liabilities. For example a car currently roadworthy but whose age and background warn it is likely to develop troubles. Your young carless son may be delighted to receive it. He can afford the maintenance and repairs when they arise. Or be handy with a spanner. Obviously you will not offer him a pup or a death trap - you explain the pros and cons - but youngsters are born optimists. And he could prove right. Gifts need proper documentation. In some circumstances a letter giving and a note accepting are sufficient.

Tax planning is usually founded on shunting assets and income around the family. If yours are well-heeled, they may consider setting up a discretionary trust with you or your current dependants, or both, as beneficiaries. (If they are stinking rich such trusts probably exist already.)

A well-disposed uncle may say, You'll get it when I'm gone but you need it now. He sets up a trust and transfers assets into it. This requires a solicitor to set it up and an accountant to prepare accounts each year. The uncle and usually his professional advisers act as trustees. Because they have discretion, they can dish out funds to or for the benefit of the beneficiaries (you and/or your dependants) when they like.

Trusts are infinitely flexible. The uncle need not go short himself. He may transfer in an asset which currently yields him no income but will mature just nicely in five year's time to fund your daughter's university education. Alternatively, he may transfer in income-bearing assets which neatly meet your son's school fees. Again he may transfer in a house and give a beneficiary (say you) a life-interest in it. That is, the right to use it (live in it without paying the outgoings which are the responsibility of the trust) for as long as you live.

Cash income received from a trust is naturally taxable, like any other income. The saving comes in which member of the family it is payable to, and when. Every individual from birth can receive several thousand pounds a year before tax is payable. Obviously advisers try to ensure that payments out, while meeting the needs of the moment do not incur adverse taxation or put in jeopardy welfare benefits.

This is a very brief explanation of the advantages of a trust. All you need are a wealthy willing relative and professional advisers. After all, uncle may not take kindly to you renting out the ancestral home or flogging the family heirlooms in a vain effort to hide your changed state. Or lending the prestige of your name for advertising. Or even to cloak dubious ventures in respectability.

You may possess a sympathetic relative unwilling to set up a trust but willing to put income your way. Perhaps he will agree to put the garage which he owns and from which he runs his business into your name. `It's coming to you one day.' Other than a change to the deeds, life continues as before - except that you receive the hefty rents and not him. He is not paying you - his business is. Rent is of course, an allowable business expense to his business.

These are just ideas. We have seen each one put into practise in appropriate circumstances with useful results.

Whether you have a well-disposed wealthy family eager to help you or not (and we don't) you still need to consider next your own future daily needs. Then how best to meet them. That is what the next chapter is about.

Everybody needs to provide for the following:

accommodation

energy (for heating, lighting etc)

food

clothing

health and insurance cover

transport

occupation and amusement

unavoidable payments (perhaps bank charges or debts you have incurred)

with

something left over for emergencies.

Without that lot, life as we expect to lead it, would drag on bleakly. Do you know how much you currently spend a year on each item? Now is the time to calculate it. Unless you have the figures at your fingertips already, your answers will be culled from a combination of old bills, chequebook stubs, bank statements, credit card statements, supermarket till rolls, rent book and headscratching.

Accountants place bills in date order. Then they number each sheet. As they include each item, they put a pencil tick against it. That way they can check at a glance if an expense has been included twice. Or overlooked.

There are sure to be overlaps. Your could legitimately include part of your electricity bill as food (using the cooker), entertaining (playing the hifi) or accommodation (putting up shelves with the electric drill). For simplicity, include the whole bill under energy. For other mixed bills, allocate them as commonsense dictates. What is important is that you know where you got your figures. That way you always compare like with like.

Before we look at each area individually, a word about something which can crop up under many headings - the repayment of loans. You are committed to repay the original capital you borrowed and to pay interest on top. Obviously, you must provide enough to meet each payment whenever it falls due. That applies whether it is officially interest, capital or a mixture of both.

With some borrowings, like hire purchase, the sum you pay takes account of both interest and repayment of capital. So you include everything automatically.

Some lease purchase agreements include a `balloon' where you pay a high proportion of the total at the outset. Or a lot at the end. Include the full figure of what you must repay, when it falls due, in your calculations.

With straightforward loans, you repay all the capital at the end. Perhaps you have an asset earmarked whose sale or maturity will repay your debt. A life assurance policy for instance, often serves to pay off an endowment mortgage.

If instead, you plan to sell an asset, allow a safety margin between what you think it will fetch (an estimate) and what you must repay (a certainty). If your selected item may take a while to sell, do start selling well before the debt is due. Otherwise you risk incurring penalties, further interest and even legal expenses for late payment.

Depending on the nature of the liability and the asset you have set aside, have you considered selling the asset now and paying off your debt at once? Can you really expect your asset to increase at a faster pace than the loan interest you must pay?

If you have no such asset earmarked, you must spread the capital repayments over the length of the loan in your budget. Suppose you owe £2,000 which you must repay in three years' time and you pay your interest monthly. Include in your expenses each month an amount of £55-55. That is £2,000 divided by three divided by 12. Obviously you do not pay this money over to the lender every month. Put it on deposit. If it already sits on deposit (and it should) it stays untouched, and untouchable until the time comes to repay. That way, you have built up enough reserves to meet the repayment when it arises.

Accommodation

When calculating what this costs, you include outgoings like rent, council tax, mortgage interest and capital, repairs, maintenance, loan interest on the extension, money spent on d i y materials etc. Naturally, your accommodation greatly determines your energy bills. We will look at this in more detail in the next chapter.

Compile this set of figures on one page (more if you need). Total them. Then transfer this total to the summary sheet on another page. The transport example at the end of the chapter illustrates the layout.

Energy

This might comprise your electricity, gas and/or coal bills. Do not attempt to split electricity for instance between all the possible categories. But you must know which bill you have included where, include them all and not include any of them twice. The `ticking' system ensures this.

Food

You will gather some idea of what you spend on eating and drinking from supermarket till rolls, chequebook stubs, credit card statements, restaurant bills. But much expenditure - pub, off-license, canteen, cafe, snacks, chocolate bars - will pass unrecorded. Here you must estimate, based on how often you buy, what you buy and how much it costs. Logically you also include money spent on cooking (from oven cleaner to kitchen towel). If you only use gas for cooking, you could include gas bills under `food'. For clarity though, we recommend you record them under `energy'.

Rather than separate out such items, include here everything you spend at the supermarket on household (cleaning materials etc) and/or the chemists (toothpaste, aspirins etc). So this category now contains cleaning articles, personal hygiene and cigarettes. It could be described as `household running expenses'.

You will have included household appliances (vacuum cleaner, fridge etc) as assets. Here is the place to include the costs of running them - freezer bags, hoover bags, servicing etc.

As with all categories, compile a set of figures on one page (or several). Total them. Transfer the total to a summary page.

Clothing

No difficulties identifying this spending. The next chapter will spell out some of the economies possible in future.

Health and insurance cover

If you live in the UK, there is not much to say about health cover. It is taken care of by the state. And/or you pay into a private scheme. If you buy a prescription season ticket, include that here. Also whatever you spent last (normal) year on dental care and prescription charges all round. Include too, the likely replacement costs of glasses/dentures/contact lenses etc. Do not include insurance you pay which is included elsewhere, like car or house or household contents. Total as usual.

Transport

Include the costs of all forms of transport you use regularly. That means bus fares as well as car costs. The latter covers so many bills - servicing, insurance, oil, road tax, parking, repairs, carwash, even fines if you have no intention of mending your ways. As for petrol, if you did not keep receipts of any sort, do not guess. Motorists stand second only to fishermen in exaggeration.

Look at your mileometer. What does it read? What did it read when you bought the car? People always remember that because it was a selling point. Take one from the other and divided by the length of time you have owned the vehicle. Now you know your annual mileage (a). How many miles do you get to the gallon? Unless you have kept strict records of every drop bought over 2,000 miles, this will be an optimistic guess (b). Divide (a) by (b) and multiply by the present cost of petrol.

Suppose you do 8,000 a year in a car that manages 30 to the gallon and petrol costs £3 a gallon.

£8000 x 3 = 800

30

You buy £800 of petrol a year - horrible isn't it? (In litre terms, there are four and a half litres to a gallon. So 66p a litre x 4.5 = £3 a gallon.)

As before, total your transport expenses and insert the figure in the summary.

Occupation and amusement

Avoid double-counting. If your restaurant meals were included as food, do not enter them here. Entertainment will be undervalued all round. The petrol for your pleasure jaunts will have been included in transport for instance. But you must enter the cost of tv licence, holidays, Xmas and birthday non-gift spending (tree, lights, decorations, crackers etc), books, magazines, comics, records, cassettes, hp on the hifi, football matches, bingo, membership of the leisure centre or the Senior Citizens club, the kids schooltrips. Even if you had a rotten time, you officially spent your money enjoying yourself.

Unavoidable payments

Typical entries are postage, taxes, bank charges, any interest paid and not already included under another heading, deeds of covenant, perhaps other charitable donations, Christmas and birthday cards and presents, telephone.

Another vital entry is a monthly sum towards replacing essential domestic appliances. You have a detailed list from chapter five. You know what articles are already giving trouble or near the end of their useful life. The sum you enter is a token amount, not one based on their replacement cost. After all, creaking gates last longest - they could still be wheezing away, carefully nurtured, in ten years' time.

Something left over for the unexpected,

that is - contingencies

Unforeseen expenses drain everyone's purse. They can overturn the most sophisticated budget. In reality, no two days are ever alike. The problem is to know how much to set aside to cope. Past experience offers little guide. Such shock payments by their nature arrive unheralded.

We can only suggest 10% of your total income. You know that figure already from chapter three. If when you review after a year, that % has proved inadequate, increase it by the necessary amount.

That recommendation assumes you plan to live solely off your income. If instead, you intend to use a mixture of income and capital, the figure will not be high enough. So allow 10% of your total other expenditure.

Total your summary page. This demonstrates how much you must spend if everything stays unchanged. How does it compare with your total income? Much smaller we hope.

But perhaps your essential spending, living as you do now, exceeds all your anticipated income. At least you admit it. Facing that is the first vital step. After all, this chapter only marks a starting point. In your new lifestyle, many areas should change radically. No more commuting for instance. No more of those hidden expenses of your job which you listed in chapter three.

Even if a comfortable margin cushions the two, turn urgently to the next chapter. We consider each essential area individually and offer many worthwhile savings.

How can you reduce essentials? And not at the same time suffer an intolerable decline in living standards? The answer is to go to the root of the problem - how you live. We doubt whether you have lived as you now do all your life. Or even very long. Probably present habits built up without you even noticing them. Now is the time to re-examine every last thing. And rearrange it in the light of your changed circumstances.

Accommodation

Look again at the amounts you spent on repairs, maintenance and upkeep. Now be honest. How much of it was necessary to protect the fabric of the house? How much was really spent on an idle whim? Repapering/reupholstering/replacing furniture/units/carpet simply because you were bored with the old. Or it suddenly looked old-fashioned. The amount you can spend on a house is boundless. Year after extravagant year.

People justify their binges by pretending they are adding value to an asset. Not likely. What adds value is extra living space (measured by the square foot). Novelties like a swimming pool, aviary, conversion of a bedroom into darkroom or gymnasium add nowt.

To limit your spending to real repairs and replacements, chose only what you like. Not what this month's glossy mags dictate. The more classical, traditional and upmarket it is, the more discreet the colours, the longer - yes longer - before you find it boring. More on this later when we look at spending economies.

That said, maintenance is a side-line. The first vital question really is

Where do you plan to live?

That will determine what sort of accommodation you can afford. Conversely, what you can afford should greatly determine where you live. In our case, the choice of where to live has been the single biggest contributory factor in our success.

Remember, you are planning for the rest of your life. (Or until the next major upheaval if you know there will be one.) Where do you fancy living? A heady question. It may well be the first time in your life it has ever been posed. Up to now, you have been fixed by your parents' then your own career.

Why should you even think of moving? Turn the question on its head. What is keeping you where you are? It is the cheapest alternative. All your friends and family are settled nearby. The children must finish their schooling. All good reasons. Or lethargy, inertia, lack of imagination, fear of the unknown. All bad reasons.

If you have not found out already, you will soon learn that a house to live in all week is far different to a dormitory-cum-weekend-retreat. You will judge your beloved home far differently. It may not come up to scratch.

Living in each others' pockets imposes great strains on the most loving couple or family. Every individual needs somewhere private, away from the television. Where they can shut the door and follow their own pursuits undisturbed. The garden shed is no use in mid-winter.

On the other hand, many elderly people live alone in the cavernous house where they fostered their family. That demands huge annual outgoings. Equally bad, all the money tied up in the house sits idle. As we stress throughout, you can no longer afford to leave a penny unemployed. Is it worth scrimping and sacrificing, yet still watching the garden riot into a jungle and the house decay through neglect? Just out of sentiment?

If this is your predicament, please don't leave it too late. How many people are stuck because they no longer possess the energy - mental or physical - to tackle a move? How many frail oldsters are finally beaten down by young energetic buyers? How many elderly people stick to a mausoleum of a house for the sake of their children? Then they watch helpless as the sale proceeds eventually go to the local authority to pay for their own sheltered accommodation? All very sad.

At least calculate how much your sentiment is costing you. You know what you could expect to get for the house after paying all expenses. The asset list of chapter five supplies this. You can calculate broadly what an acceptable dwelling would cost from estate agent's windows. To the difference, apply the going rate of building society interest. A difference of £20,000 and a rate of 7% means you are turning your back on £1,400 a year. That is only the start. The new, smaller house should be easier and cheaper to run. Now look at your present income as calculated in chapter three. If £1,400 represents a sizeable proportion of it, oh boy are you sentimental!

Some pundits advise you never to move on retirement. That depends on where you are living. With many people whose careers have demanded constant mobility, their final resting-place is mere chance. Besides, why should you want to reside in a commuter's dormitory? A few non-working weeks should soon tell you whether you still fit in. On some huge estates, the only men around during the working day are the visiting milkman and postman.

Equally, if you are not forced to, why choose to endure the pollution and accumulated muck of centuries of industrialisation with all the associated health risks? Free, clean air beckons somewhere else.

Quite frankly, if loss of status is the biggest drawback of your present situation, a house-move - and a long-distance one - is the only real solution. Provided you do not make the mistake of seeking out the sort of `executive cul-de-sac' you have just left. More on status in chapter twenty.

What sort of area do you like? Town or country (living in the latter is far cheaper)? City centre, big town suburbs or small? Seaside or inland? Touristy or quiet? And who says you are restricted to your own country or continent, even? Tens of thousands of the new poor are spread all over the globe, taking advantage of kinder climates and lower living costs.

It is your life now. You are no longer restricted to the three-bed semi or even isolated penthouse expected of someone in your position. If you have always hankered after a houseboat, a caravan, a motor home, a country cottage, life on a farm, an ocean-going yacht, a canal barge, dedicating your life to converting a ruined castle - now is your chance.

Of course, yours are rarely the only views to consider. For goodness sake, try out your dream life-style for a while before you throw up everything. (Perhaps hiring yourself out as crew for a few weeks or renting a boat to see whether you really like life afloat.) Such outlay is not extravagant if you were serious in your intentions. Rather it could prevent you making expensive mistakes.

Alternatively, accommodation expenses may be avoidable altogether. How? Because someone else pays for them. Many positions supply free housing - if you or your wife is a warden/caretaker/concierge for instance. Yet again, you may be able to reduce your own expenses for a few weeks a year if you offer yourself as a `housesitter' while others go on holiday or are called abroad.

Yet another possibility is not to sell your own, expensive house but to let out a part. Thousands offer holiday accommodation, student accommodation or set aside unwanted space for a lodger. How much potential there is depends greatly on the location of your house.

House-sharing is common Down-Under but has not yet caught on among the Brits. Or at least those over thirty. Perhaps because Australian wooden houses are so much bigger. In house-sharing you only reserve your bedroom as private. All other facilities are shared. Clearly this only works where people are considerate and hold similar standards.

You may adopt the solution favoured by people posted abroad. You let your house completely on a short lease (say a year or two). The rent, with luck, covers the mortgage and to spare. Meanwhile you continue to own what you hope is an appreciating asset. Or at least, you do not have to give it away at the bottom of the market. Naturally you need to find somewhere else to live in the meantime. Also, usually, you employ agents to collect the rent, see that repairs are carried out etc.

Another way to retain an interest in your house but use it to obtain capital in the meantime is to sell it piecemeal. Georgian town houses for instance convert well into four flats, one on each storey. Either you complete the work yourself, consoling yourself that there is no capital gains tax to pay on your profits, or you finance it from the sales. Equally, you may try for planning permission for part of your garden. Then sell that off separately. Again, no tax. Unless your garden was half of Berkshire!

If you are considering living abroad but fear you may be lonely, consider an aparthotel. This is to outward appearances, a normal luxury hotel with round-the-clock facilities, restaurant, swimming pools etc. In fact each `room' is a self-contained flat owned privately. Some are occupied all year round by their owners. The big plus is that, unlike serviced and unserviced flats in the UK, management has every incentive to keep down the annual charges. They are paid by letting and non-letting owners alike. Sky-rocketing management charges in ordinary flats (and especially purpose-built developments for the elderly) can make them a very expensive proposition. The original promoters can bleed the purchasers white year after year with little redress.

People worried about loneliness in the UK should consider a holiday town. Crowds can pose a problem in the Summer. But at least you live surrounded by cheerful people out to enjoy themselves. Indirectly, visitors pay for a far higher level of amenity (entertainment facilities for example) than the town would otherwise enjoy. The locals benefit from that all year round.

If you move, your new accommodation may itself offer a source of income, or potential for one. Alternatively, if you are lucky, you may find yourself enjoying a far higher standard of amenity (freedom from pollution, getting to know the neighbours, improved diet from your own produce) than you ever could working.

Heating

The more you stay at home and the less active you are, the more you will need to spend on heating. You have no choice. Experts calculate it costs 10% more to heat a house non-stop rather than mornings, evenings and weekends only. But a life huddled in a public library or nursing a half in a pub all evening dodging the publican's eye, is no life at all. Nor is crouching at home, swaddled in thermal clothes, gloves and scarves staring at an empty grate.

So much depends on your house. Is it too big for you? Even if you don't directly heat many rooms, the heat you are paying for is dissipating into them. Is the building thoroughly insulated? That means roof, walls, double-glazing, draught excluders, carpetting, the works in fact. Are you losing heat up the chimney? Or because you must always leave windows open to solve ventilation/condensation problems?

Unfortunate people squander a fortune trying to make cosy an impossible dwelling. Perhaps its situation condemns it never to see the sunlight. Or it stands exposed to the prevailing cold winds. Or on a promontory near the sea. Or in a frost hollow. Alternatively, the materials of which it was built do not retain warmth. Perhaps the heating system is inefficient, not working correctly or obsolete.

Warmth is essential to your well-being. You know from chapter three how much extra it is costing now you are at home. If that figure is unacceptably high, if your house is realistically incapable of any improvement that will not pay for itself within three years, consider a move. Only a different house or a different climate can reduce those bills for you.

Food

This heading currently covers food, household running expenditure and personal hygiene items. Obviously, when you have a year's faithful recording under your belt, you will be able to allocate expenditure more accurately between them. A detailed knowledge of how much you spend on each sector should help you pinpoint excesses. Then plan and monitor economies.

We have no hesitation in claiming that we eat far better than we ever did working. Than we ever could working. Yet we ate at quality restaurants daily, sometimes twice a day. We now eat far better than the best restaurants can offer. Strong words? Yes but true.

How many of these apply to you:

gobbled breakfasts?

snatched lunches?

keep-you-going snacks?

convenience foods?

stand-up meals?

skimpy television dinners?

soggy takeaways?

you love puddings but never make them - dishing up one course for a meal is enough of a chore without two?

long-drawn-out restaurant meals where they do not open until 7.30. Then keep you hanging on getting half-sozzled. Finally at 8, the cook arrives. The waiters start serving up catering packs as proudly as if bearing in their own work?

Visit a trade-only cash'n'carry in a tourist area. You will discover the incredible range of ready-made meals restaurants and hotels buy in bulk. All they do is heat and serve.

The vast majority of restaurants cannot afford to produce good food. What counts is the cost of labour. That eliminates any dish which requires a lot of time-consuming preparation. Like pastry, a decorated pudding, yeast cookery, long-term marinades, elaborate vegetables. This remains true despite the range of kitchen gadgets - most are used by restaurants for little more than whipping up sauces.

The funny thing is - not only is home food genuinely higher quality but it comes far cheaper too.

So how, without being a top chef, do you take advantage of these facts? Firstly, what is to stop you becoming a top chef? You have the time and the equipment. The ingredients are hardly expensive. Puff pastry, eclair (choux) pastry, pie crusts, bread - all are basically flour, fat and water. It is only technique you lack.

Technique equals practice, trial and error and a discriminating use of cookery books. Forget the traditional Good Housekeeping kind - they just perpetuate the old myths. Similarly, the snobby kind. Their idea of luxury is to smother everything in cream then douse it in sherry and flambe it in brandy.

We could write a book but here are eight guidelines to help.

1. Rethink your eating habits. People who insist on a top-price chunk of meat surrounded by four vegetables for every meal and refuse anything else, will not get far. As thing stand, one dinner based on beef costs as much as two pork dinners, three chicken dinners or six omelette dinners.

Here is a list of food we now enjoy which rarely finds a place (certainly not as a main dish) on a British table.

liver, especially chicken or turkey liver

tuna

crab

sardines, tinned or fresh

brains

sweetbreads

roe

pasta - everything from spaghetti to canelloni to torti. Chinese shops offer another excellent range of noodles, some that even look like nylon string before cooking.

pancakes - sweet but equally savoury ones filled with chopped chicken and vegetables in a creamy sauce

fritters, spring rolls

rice

all those bitter winter salad vegetables like endives

leeks - with ham rolled round and covered with cheese sauce, in tarts, the king of soups

kale - for every dish where you would use broccoli

courgettes

Notice - no mention here of cheap food substitutes (spun protein or tofu). No mention either of living on monotonous beans, lentils and pulses. Or expensive junk food (crisps, nibbles, choc bars).

2. Stop planning meals in terms of meat. The meat is by far the most expensive part of the meal. What is worse, it is hardly necessary - for flavour or for bulk. We are not suggesting you become vegetarian - merely, never buy meat in bigger pieces than you need. Where is the sense in buying a chunk of steak then chopping it small or even mincing it? Or slices of smoked salmon to shred for a mousse? Cocktail pieces at half the price would taste as good.

Meat tastes even better and goes far further coated in batter, frittered, covered with pastry, surrounded with pasta (say ravioli or canneloni) or mixed with vegetables as in a real cornish pasty. How many delicious and nutritious dishes contain no meat at all? Or a sprinkling of bacon at most? Omelettes, other egg dishes, pasta dishes, quiches, cauliflower cheese, nut loaf. It all depends on the skill of the cook.

If this is too extreme - and like all changes, you should acclimatise gradually - consider producing your own meat. According to the experts, three does and one buck will provide a rabbit to eat every three days of the year. (Footnote - Self-Sufficiency by John & Sally Seymour published by Faber and Faber. According to Home Farm by Michael Allaby and Colin Tudge published by Sphere Books Ltd, a doe under backyard conditions produces twenty offspring a year and under factory conditions sixty. At 14 weeks old, a rabbit yields 2 to 3 lbs of meat, when prepared for the table.) They require little outlay, little space and don't annoy neighbours. Or you could rear chickens, bantams, ducks or pigeons. You may find the process of killing and gutting them, makes you reconsider your attitude to meat anyway.

3. Grow your own produce as much as possible. Even people without a garden can produce mustard and cress and Chinese bean sprouts all year round. Those with a small space can grow plants like kale and broccoli which you pick, not once, but many many times. Start at as early a stage as possible - why buy plants when you can buy seeds? Why plant an ornamental cherry when you can grow a real one? What greater luxury can life afford than a cherrytree to yourself?

Growing vegetables and fruit is not difficult. Our ancesters did it all through history. Don't be conned into thinking you need fancy equipment, chemicals and sprays. You don't - especially if you stick to easy things and reliable old varieties.

In themselves, the produce will not necessarily save you much money. What they will do is give you a healthy appetite. Equally, they will exercise your imagination for how to use them. They will taste better - if only because you can pick them exactly when they are ready. The range is broadened when you bottle, salt or pickle produce. Each method produces a new taste. In addition, of course, you can freeze produce.

Take the modest potato. We cook them every way you do. In addition, we eat delicious flans with potato (and leek/onion/cheese/broccoli/you name it) filling. We thicken wonderful soups - carrot, leek, artichoke, onion, tomato etc. Because they are home-grown, so not chemically coated to preserve them, we can eat skin and all. Skin-on chips or slices taste far nicer.

4. Aim for flavour. A Chinese cook can convert any ingredients to a tasty meal. The secret lies in the flavourings. Firstly, forget stock cubes. You can make your own stock by boiling up a left-over chicken carcass or beef bones. Easier still, add a little oyster sauce to almost anything. You can buy it in any Indian, West Indian or Chinese shop. It is only the British who have not yet discovered it. A rind of bacon, especially smoked bacon, cooked with vegetables, imparts a delicious flavour too.

Aim for a wide range of herbs (home-grown if possible) and spices. It may surprise you to know that the most widely-used spice in Britain is nutmeg. It features heavily in all commercial meat pies, sausages etc. You have eaten it day after day - and you didn't even know you liked nutmeg?

The following can be delicious - braised pork chops rubbed with French mustard just before serving, lamb spiked with rosemary, chicken stuffed with a mixture of onions and chopped-up spicy salami. A few leaves of basil or tarragon chopped up and cooked in with pasta lifts it out of all recognition. Or slip in a bayleaf (homegrown) and fish it out at the end.

5. Return to bread. It comes in all forms and flavours. If you cannot find loaves to please you - make your own. That is not difficult. It only takes twenty minutes work. The rest is waiting time. Real bread is nutritious and sustaining not dull wadding around something interesting. Open sandwiches can form a satisfying meal.

We use crunchy bread, not dry biscuits to accompany our daily cheese course. (Another Continental habit well worth cultivating.) There is no nicer end to a meal than crusty bread, creamy butter and your own home-made jam. That said,

6. Rediscover puddings. The range is endless. If you choose, you can produce your own yoghurt. All you need are pots and a warm cupboard. Imagine enjoying your own fresh fruit in Summer and tarts/pies/flans/purees of your own bottled/frozen fruit in winter.

7. Learn to make a white (bechamel) sauce. If it was ever tricky in a saucepan, it is easy in a microwave. And you can freeze what you do not use. The point is, why should every meal be smothered in basically the same-tasting gravy when you can offer a myriad of sauces instead? Cheese sauce, parsley sauce, onion sauce, bread sauce, mushroom sauce, anchovy sauce offer just a few delicious examples. Simply good old white sauce with something added. Not to mention all the delightful sweet sauces - caramel, lemon, orange, chocolate, coffee, you name it..

8. Avoid readymade food. Why buy a pizza when you can make your own? Forget fancy pizza-bases too, you can make the real thing in a few minutes, with a second pizza-base for the freezer for next time. The same goes for other part-prepared foods. Quick cooking rice is a con when ordinary Basmati rice only takes twelve minutes.

Avoid takeaway food. When away from home, take your own. Otherwise you will end up buying expensive rubbish to gobble on street corners. Out or at home, avoid quickly-cooked grilled or fried meats. They demand the very best, hence most expensive meat. Unless you fork out in style - disappointment is guaranteed.

When we travel, we carry a small kettle to run off the car cigarette lighter. A hot drink afterwards or soup turns a picnic into a satisfying meal. Similarly, we pack a tiny multi-voltage kettle to use in hotels. (Yes we still regularly stay in hotels.)

That's all very well, you may say, but...

1. We don't like unfamiliar food.

2. It sounds like extra work.

3. It sounds a lot of skill.

The first one is a question of educating your tastebuds. There are five tastes - sweet, sour, salt, bitter and acid. Processed food has reduced our discrimination. All most people now appreciate are sweet and acid. No farmer can sell a bitter lettuce. Customers assume it is an `off' ordinary one and complain. Sugar is ladled onto just about all tinned and processed food. In New Zealand, even salad dressing comes sweet.

At first, we could not appreciate bitter vegetables either. Now, we love them. Ease yourself in gradually. If cooked, toss them in a little butter. If raw, toss them in a little oil and vinegar dressing (homemade not bought in). It is the juxtaposition of flavours which is nice. You savour different flavours together, not chomp your unthinking way through a monotonous pile.

The answer to the time question - except it is not really such a problem for you now - is fourfold. Firstly, don't wait until the first stomach rumble and grab a frying pan. Plan well in advance. Second, no one stops you using modern appliances - blenders, mixers, choppers, microwaves etc. Thirdly, make up a good batch at a time and freeze most. Fourth, decide beforehand on your portion-size. If a tart can be cut into six and there are two of you, make it last three meals (freezing part to avoid monotony) - unless it turns out particularly tempting...

Skill? Of course. Except that many foreigners who run restaurants here had never cooked before in their own country. They soon learn to adjust to what the British public will tolerate.

Equally important is knowing your utensils. Is your oven really as hot as its dials indicate? Should you always add extra cooking time? Or turn it up higher?

Does non-stik really work? We have rejected it completely. We use castiron frying pans and pyrex or pottery ovenware. We also discovered that if you fry in a mixture of butter and oil, you can produce perfect fish/escalopes/eggs every single time. They never ever stick. (We were amazed too.)

Imagine too how much a good frying pan increases your repertoire when you can offer perfect pancakes, fritters and omelettes, sweet or savoury, every single time.

Cooking is an exciting process of discovery, not a dull way of filling your belly. If you have decided beforehand what you will be serving, it makes life easier for shopping but dull for the cook.

How much should you spend on booze? What a question. Some would insist that all alcohol should be slotted under the heading `luxury' or `entertainment'. Others that they could not survive the day without it.

There are umpteen ways to reduce your spending on alcohol:

- choose wine or beer rather than spirits

- avoid mixed drinks (a spirit plus mixer yields a pub more profit than anything else you could buy)

- drink at home

- simply drink less

- brew or make your own

- try unknown rather than famous wines and emerging rather than established countries. (This can prove a pleasure in itself and may improve the quality of what you drink.)

- in public, learn to nurse a drink

- only drink when you eat

Which of those appeals to you depends on why you drink - to be sociable, for the alcoholic content, for the taste, for any combination of these.

Any drinker stands particularly vulnerable at a time of stressful change. How many unfortunates, swamped with depression, idleness and unlimited time, turn booze into a prop they soon cannot live without? And how much is too much?

We have a vineyard at the bottom of our garden. So you can guess how much booze costs locally. We also enjoy a drink. Nonetheless, we do observe two trusty guides:

the time of day when you take your first sip. For us it is rarely before five pm. Wine accompanies lunch on special occasions only.

how many points you drink a week. (One point = a half pint of beer or a single spirit or a glass of wine). Beyond twenty for a man or fourteen for a woman and you risk liver damage.

Clothing

In this area, your previous spending bears little relation to your future needs. No more daily business suits or routine trips to the drycleaners. So no difficulty reducing your spending on this - the minute you turn your back on the tyranny of fashion. And what a pleasure that can be. Any of the following contrives to make life hell:

a corset, tight or very high-heeled shoes, garments that tug at the crotch, elasticated clothes that remain at stretch, clothing designed to slide off, garments with weak elastic.

Not surprising then that we cheerfully claim a far higher standard of physical comfort than when we were wealthier.

It is self-defeating to struggle to economise on heating bills then wander round as if you lived in a tropical paradise. The following fabrics keep you warm: wool, other animal products like angora, alpaca or mohair, thick silk, some synthetics like courtelle. The following never can, even when heavily padded: cotton, nylon, most acrylics, polycotton. The more of yourself you cover up, the warmer you will be.

Some materials keep out the wind and rain, like leather, but do not actually keep you warm. You need a warming layer underneath.

You can't expect warm feet wearing canvas trainers. Besides, if you allow yourself to get wet, you chill off far more rapidly. Any yachtsman will confirm this.

Fabrics however can prove very deceptive. Even fur-outside sheepskin need not be warm if the skins have been so treated and shaved that the benefit of the heavy pile is destroyed. Generally, the weight of sheepskin is a good guide to warmth. What a pity clothes never carry a tog rating like duvets!

Once you refuse to be dominated by fashion you can buy top quality and buy to last. Stupidly enough, this comes cheaper. It is gimmickry and heavily advertised brand-names which cost. Not the underlying raw materials or skill of manufacture. The final test is always to ask yourself before buying:

When, for what and how often will I wear this, relative to its price?

All these points appear simple and obvious. Yet, people who have bought winter coats made out of jean material and fashion winter boots with open toes; who used to flit from heated house to heated car to heated office; who spent a fortune on an item to wear once, or even not at all; really do need a reminder.

At the outset, you do not know what your future lifestyle will demand. So it makes sense to spend virtually nothing on clothes for a while. Once your new way of life is established, and it may not turn out how you expected at first, you can plan for what you need. Meanwhile you buy replacement garments only. And the proof? You must take the old, worn, shrunk, motheaten or torn original - and throw it away. If there isn’t one to jettison, you are not replacing.

Health and insurance cover

If you live in the UK, health cover comes wondrous cheap. Usually free for the unemployed or elderly. For those outside the UK, health insurance will loom very large among your outgoings. For us it is 15%. Very few countries indeed boast a free health service comparable to Britain's - certainly none in the EEC. We speak from experience yet find it hard to convince Brits. People place a touching faith in that DHS form which promises reciprocity. The snag is - if the locals get nowt, you get nowt too. That is reciprocity.

In France, for example, the state scheme costs you 15% of your income, with a minimum figure of £1,100. For that, you get back 70% of what you `officially' spend. So everyone pays for a second, private insurance to cover the rest. Unfortunately, the official 70% excludes many treatments. What is included is at a fixed price which may be as little as one sixth of what you pay. So you fork out £60 ( you find the money up front to pay doctor, pharmacist etc), complete and forward umpteen forms and wait. Eventually your refund arrives - a derisory £7. (Real price £60, official reimbursable price £10, 70% of that £7.)

Health cover is an expense which increases greatly with age. Not many private companies will accept you over seventy. Others are rigid in what complaints they exclude. On the other hand, with any luck, a milder climate, should keep you hale and hearty.

Do you need life insurance any longer? If you were previously a large earner, your family stood to lose heavily if anything happened to you. Now, things are different. Your wealth is tied up in your assets which, presumably, they stand to inherit anyway.

Simple life insurance (term insurance say, to cover your mortgage if anything happens to you) can be stopped at will. It only makes sense to continue if you have dependants and you have continuing commitments like a mortgage. A single person needs it solely to reassure the building society.

What about life assurance? Should you continue to finance what is basically an investment scheme? We have considered this already where you paid into a mixed insurance/assurance scheme. Your options usually are at best, to continue paying as before, to have the policy made paid up, to transfer the policy to someone else to continue it, to cash it in. Previously we discussed transferring to a family member. An alternative is to transfer (sell) to an outsider. There are organisations which buy schemes (Foster and Cranfield to name one). If they are interested, they usually offer far more than the insurance company.

Obviously some forms of insurance are obligatory - car insurance say or house insurance if you have a mortgage. We consider motor insurance separately under transport below. You can reduce the cost of most insurance by shopping around. Try an independent broker rather than a rep. The latter can only offer a limited range of schemes. The former (do make sure he really is independent) can search around to find one tailor-made for you.

Next, household contents policy. Do you really need inflation-linked, `replacement as new' cover? Will simple and far cheaper indemnity cover suffice? After all, you will spend far more time at home in future - itself a guarantee of safety. Fire, burglars, burst pipes etc have less chance to wreak havoc than in your absence.

You would clearly prefer to insure valuable assets. On the other hand, insurance may be very costly. The quote - or the refusal of a company to offer cover at all - can prove the deciding factor in whether or not you sell an asset.

Transport

Once more your past spending is no guide here. No more commuting for example.

We all need some form of transport or access to it. What sort we settle for depends on where we live, the length of our regular journeys and our state of health. Only those rare few who live within easy walking distance of everything they routinely need, can consider doing without it altogether. Normally, that means city centre (but not commercial or run-down city centre, neither of which is well served). Alternatively, a tourist area. Especially abroad, a tourist can find everything - shops, entertainment, medical centre within a few yards of the beach. After all it was built with his comfort in mind.

We lived without a car for two years. It was possible because the area was flat. Everyone else cycles, young, old, male, female, so car drivers take care. The climate is warm. All shops etc were within a 15 mile circle.

It was incredible what we managed to cram onto our bicycles - even a peach tree once. John's heaviest load was 40 kilos. Equally surprising - we found it less tiring to cycle a thirty-mile round trip, visiting several parts of town to shop than to catch the bus. Why? Because within town you were forced to walk. A short pedal by bike becomes a weary drag on foot. Worse, you had to struggle along laden down under your purchases. A bike carries them for you.

As to large items - most shops will arrange delivery but it is costly. £10 when you are spending £200 is acceptable. The same £10 when you are spending £20 appears extortion. This provides a big incentive to buy from catalogues.

When cycling, eggs and foodstuffs - even goldfish - arrived intact. But, you dare not cycle carrying a pane of glass. Mobile friends and neighbours can be very helpful, provided you don't ask every five minutes. The glass was the only purchase to defeat us in two years. No doubt similar problems would have emerged if we had opted later for a motorbike rather than a car.

In our circumstances, it was more vital to have a telephone than a car. Properly managed, a phone can save both time and transport costs. So many things can be settled by letter too rather than a visit. In this automated age, why does anyone need to travel, queue and wait to pay a bill? Yet thousands do. Again, as always, so much depends on your habits and where you live.

If you do decide on a car, running costs should loom large in your decision. There are reliable modern cars around that offer more than 50 mpg. A change to one of them will save more than fuel. It should also reduce your insurance bills.

How many passengers will your vehicle routinely carry? Routinely, not exceptionally. That should determine how large it needs to be and whether a two door model will suffice.

Insurance also involves choices. Do you opt for fully comprehensive or third party? We strongly advise the former. You are probably in no position to replace a damaged car. You must avoid borrowing at all costs. Yet you need transport.

You can arrange a useful discount by accepting an excess. Another by limiting the driving to yourself or to people over 25. Perhaps you belong to a favoured class of driver. Or hold a good safety record. Obviously the model you choose will also influence the price of insurance. Some companies reduce their rates for a low annual mileage.

If you previously drove a company car, you may not have qualified for a personal no-claims bonus. Reputable companies will accept a statement of your history from the insurers who dealt with your company scheme. We have even flourished tenyearold British statements abroad to get no claims bonuses without problems.

Once you decide on a car, you must also fix how many miles a year you plan to do in it. Then monitor and stick to that. Obviously at the outset, until your new way of life becomes established, you can only record promptly where you drove, how far it was and the reason. More on this in chapter fifteen.

You can no longer justify being a jack-in-the-box family. You know the sort. Someone is always dashing off in the car(s) with no thought for the planned future journeys of other family members.

Occupation and amusement

Entertainment is vital for our well-being. So is occupation. Some of your extra time will be taken up by the new way in which your life is arranged. Now you are trading time for money, not the other way round. Even so, you should cherish interests over and above providing for your physical survival. Your mind needs stimulus too. We devote chapter sixteen to considering hobbies. Plus you need a treat to look forward to. The occasional holiday is also essential to reassure you that you are not missing out on life. Watching others miserable but officially enjoying themselves is the perfect antidote.

Unavoidable payments

First establish that they are genuinely unavoidable. Many people pay first and ask questions after. Then they uncover a form to complete, a claim to make, some proof to supply which would have exempted them from this payment.

Other people accept automatically that when they receive a letter asking for money, it must be correct. The power of cold print! Not so. Computers get hiccups, customers with similar names get confused, records fail to be updated.

Unscrupulous people even make their living out of the fact that one in ten will pay up like a zombie. For things they never ordered or which never existed. Read, think and check before you pay. (John recently showed a supermarket manager that there were more wrong than right items on his bill and received a bottle of champagne as an apology!)

Once you establish a payment is unavoidable this year, will it recur? Or can you change your circumstances in such a way as to dodge it? Obviously, you would be silly to cut off your nose to spite your face but that may not be necessary.

Otherwise there is nothing left to do but pay up and look big. But you will have budgetted for it beforehand.

In the last chapter we recommended that you include under this heading a provision towards essential appliances likely to need replacing soon. Your judgement, though sensible, may turn out to be pessimistic. What you do not spend, you just roll forward until you do need it - cushioning the blow still further.

Something left over for contingencies

Never make the mistake of assuming that because what upset the budget last year was a one-off which could not possibly happen again, nothing else equally expensive will. That is why the money you set aside regularly to cope must never be squandered heedlessly. You don't need it today, but you will - if not tomorrow then the day after. Because noone can predict the timing of emergencies, we look at this again in chapter eleven.

After a year or two, there is a human tendency for the `contingencies' budget to grow. If the cause stems from a few large items, that is bad luck. If the growth is spread over many items, the blame probably lies with sloppy budgetting. Every `contingency' that is at all likely to recur, must be anticipated. Then provided for somewhere else in your normal budget. `Contingencies' stands for real wobblers only.

One final word of caution. You may be tempted to say, ‘Only 10% of my total spending goes on food. So whether I manage to reduce it greatly or not, is neither here nor there.’ Wrong thinking. You need to adopt the same new attitude to all your spending. You are changing the whole of your life remember.

This chapter has cantered around your most basic areas of expenditure. In the next we look at the bottom line. What really is the minimum? But don't worry. Even after that, we include chapters more on how to maximise what you receive and add to it. Then others on how to ensure full value when you do spend.

After reading chapter eight you totalled up what you currently spend on essentials. Chapter nine supplied you with umpteen ideas for reducing that amount. Now for the crunch. What really is the least anyone can live well on? So much depends on what you are used to, your preferences, even your culture.

In Britain, the welfare state should provide us with some clues. Take the Old Age Pension for a couple. At the moment, that is £6,046 a year for 2001 (£115.90 a week). It is designed to cover virtually every outgoing except buying or renting a house.

It may not be popular to admit it but, in fact, many pensioners save even on that. They live better off than when they were working. Why? They have a lifetime's accumulated assets behind them. They are not attempting to furnish a house or fit out a family. Perhaps they cannot physically get out and spend.

Equally, student loans may seem tiny. Add in living off parents, holiday jobs and no appearances to keep up or car to run. Now the picture looks brighter. Helen saved during her student days. While having a good time. Then, after the first year, she realised she did not need to - so spent it all!

When Helen was reviewing taxpayers' accounts back in the 70s, she was expected to look critically only at anyone who claimed to be living on less than £1,000 a year. In New Zealand, ten inflationary years on, the similar figure was only £500.

The point is, how much you need depends totally on your commitments and your aspirations. If your income changes, so must they. And radically!

Chris is a junior officer in the New Zealand army, married to a Pacific islander.

`I do wish he'd retire,' his wife confided to us. `And move to our island. With his pension, we'd be the richest people on the island. We'd live in luxury.'

`Never,' whispered her husband privately. `I'd be propping up the whole family - twenty, thirty people. If one of them fancied a car or a house, I'd be expected to provide it!'

If wealth or poverty (above starvation level) depends on your culture, perhaps all your money problems will be solved by a change of climate. If you believe this, here is the sort to aim for:

- somewhere warm enough for enough of the year to minimise your heating bills. (Even in the South of France, heating is our second biggest expenditure after health insurance.)

- somewhere not so scorching that you sprawl a panting prisoner in your house or spend a fortune on air-conditioning, fans, icemakers...

- somewhere fertile. You can't feed yourself in semi-desert.

- somewhere with low humidity. High humidity `feels' far hotter than the same temperature with low humidity. 100 degrees with low humidity may be more comfortable to live in than 80 with high humidity.

- somewhere healthy. You don't want to spend your life dodging malaria, hepatitis, Delhi Belly etc etc.

- somewhere where you can easily buy what you consider the essentials. Rare imports come costly.

- somewhere physically safe and not regularly devastated by typhoons, hurricanes, earthquakes etc. Your capital could soon vanish that way.

Obviously, you will be searching for somewhere politically safe as well. A modern Eden with state-of-the-art healthcare facilities available at a price your insurance company can afford. Equally important, you need modern banking facilities. Then to be sure that your income can be paid to you at a reasonably stable exchange rate. Ideally, internet access too.

For recipients of state retirement and/or private and/or occupational pensions, payment abroad poses no problem. On the other hand, thousands of UK pensioners around the globe don't receive the annual increases in their state pension. And never will. It is a long-standing irrational UK government economy. Ensure that your country of choice is not one affected. The DHS provides a list. Welfare benefits will almost certainly not be paid abroad. Nor can you rely on getting much out of the local system (even within the EU). And even assuming your language skill and patience can cope with foreign officials and forms.

That is a very brief guide. The pros and cons of changing country would fill another book. (We have written one - Going for Gold, the expatriates’ financial handbook. It is also available on this site to be downloaded free.)

So, in your personal circumstances, what is the minimum you need to live well on? All you can do is

Try it and see.

But you monitor as you go. Either you keep on track or you must change the track. We look at budgeting and monitoring in the next chapter.

What have you achieved so far? You have compiled the following annual totals:

- your income (from chapter three)

- your assets (from chapter five)

- your liabilities (from chapter six)

- your essential outgoings (from chapter eight)

You have also researched each asset (how productive it is and how expensive to maintain). You recorded for each item of income or expense, when it is receivable or payable.

Now you progress one stage further. You compile a budget. That is a list of what you will receive and everything, not just essentials, that you will spend next year. Probably neither come evenly. So you compile it month by month. The technical name for this is a cash flow projection. It is designed to ensure that you never fall short.

Choosing a clear layout is half the battle. You will find an example at the end of the chapter. You can budget with pencil (for inevitable corrections - accountants use pencils) paper and calculator. Quicker still long term, if you can use the spreadsheet on a small computer. (Nothing fancy or expensive - any IBM compatible will do.)

A spreadsheet enables you to change one figure and the machine churns through to the final result in two seconds. So you can consider umpteen alternatives without drudgery. You can draw up your own budget design on a spreadsheet or you can buy one ready made. Then just slip your own figures in.

Your budget needn't follow the calendar. Your first month should be the next month - for convenience we have called it January. Enter as A the total of known receipts for the month. Then as B the total of known and expected outgoings. This includes contingencies.

If you plan to allow 10% of all income to cover these unknown contingencies then include 10% of your annual income divided by 12. Include a similar amount each month.

If you are living on a mixture of income and capital, 10% of income will give too low a figure. In that case, allocate one twelfth of 10% of your other annual outgoings each month. You cannot calculate this contingencies figure until you have entered all outgoings for the full 12 months ahead. Slip it in at the end.

In the next row, C equals A minus B.

D is the cash you hold available in wallet or purse or sitting in your current account at the end of this month. It is your float.

Enter as E the figure equal to C plus D. If E is negative, you have already run out of money. The only solutions are to borrow or scrounge. This is the situation you are aiming to avoid.

In February, you calculate A,B and C in the same way. For D, you substitute the figure of January's E because that will be your cash starting point. Add C to January's E to give the new figure of E for February.

If this is negative, you are still in debt. If not, you have made up any January deficit and survived through February with something to spare. February's E is your cash starting point (D) for March. And so on.

This exercise highlights the dodgy expensive months. How do you overcome them? There are so many possibilities:

- sell an asset to create a starting float now

- rearrange your affairs so that income comes in at different times. Obviously the earlier the better. Perhaps you change to an account that pays six-monthly interest instead of annual interest.

- delay the times your debts fall due. Suppose you buy groceries by charge or credit card instead of cash. If your statement date is the 10th, buy on the 11th, not the 9th. That way, your bill will come through a month later, giving two months interest-free credit. Your own cash meantime earns extra interest.

It is not vital when budgetting to arrange for all your receipts and outgoings to spread themselves evenly over the year. Highly unlikely in fact. With us, over half of our outgoings fall in the first four months. What you must ensure is that you can cover all months. (Footnote - We include at the end of the chapter our personal list of monthly items. Some we could change if we wanted to, others not. You will also guess why we go on holiday in September - no bills.)

Now you have built up a 12 month plan. You need to compare your expectations and reality as you proceed. This means you must

record every last penny spent and received as it happens.

Then complete the `actual' columns when the full figures are available.

If you use a computer, you can slip in a single figure and it churns through and updates your predictions for you. If you are budgetting by hand, update monthly unless an enormous number of transactions are involved. Then fortnightly might be necessary.

Compare month by month, your predictions and the reality. Some predictions will fall too low, others, we hope, too high. The first year, especially if your record keeping in the past had been poor (nonexistent?), your estimates will be vague. They should improve with practise.

Overall, are you keeping within the budget on expenses? Suppose your outgoings are way over what you expected for the period. You daren't wait until the end of the year to review and retrench.

Is your contingency budget coping with the unexpected items? If nothing horrid crops up one month - great. It simply provides more of your contingency money ready in following months to meet emergencies. The figure of E that you transfer from one month to the next is proportionately higher.

At the end of the year, did you break even / end up with a surplus / end up with a deficit? The first two are fine, the third disaster. Something must be done. You increase your income or reduce your expenses - ideally both. More on how to later.

In the second year, life grows easier. You have last years' figures to guide you. Obviously, you cannot assume that the size of any bills will remain unchanged. You need to allow for inflation. Suppose the latest annual inflation figure is 5%. Take last year's payment multiply by 105/100 and that gives you next year's estimate. Month 12's final figure forms D for the first month of year 2.

With a computer spreadsheet, you can play all sorts of What If games. What if I sold my house, bought cheaper elsewhere and invested the savings? for example. Keep your actual budget figures and your What If figures quite separate. In other words, have separate files for each. Otherwise, you risk corrupting your vital budget - the truth - with What If figures.

What If is very valuable for telling you the likely results of any course of action that tempts you. It protects you from taking a wild leap in the dark, eyes closed.

Many projects carry long term effects. There is no need to look only one year ahead. At the moment, we budget for five. (There was a time when we budgeted for fifteen -admittedly, that is rather exceptional.) Now our pensions are five years off, so the whole scene will change. Naturally, the further into the future you try to peer, the wilder are your guesses. You can only apply the latest known figures and amend them as new facts emerge. An example is shown at the end of chapter six when estimating future school fees.

The biggest problem is inflation. However much do you allow for it? Ignore the government's predictions (those are only designed to win elections). Instead, use the latest figures they can claim to have achieved. Then add on a similar amount each year to your expenses.

Fortunately, interest rates and inflation track each other to some extent. When one rises, the other usually follows. So, if much of your income comes from bank or building society interest you should be partly protected from inflation. We consider this in more detail in chapter twelve, which deals with investment.

Future receipts? Where they are genuinely inflation-linked or politically sensitive (like welfare payments) you can increase them by a similar amount. Otherwise, you have no guarantee of anything more than you are getting at the moment. And even that is not certain, except for fixed-interest investments, because interest rates change. So repeat those figures year by year in your forecasts.

People abroad have another joker in the pack - the foreign exchange rate. Again you must assume `present trends continue' and incorporate the latest figures every time you update. Not every time the rate changes or you will go crazy.

If you use a computer, copy in too your lists of assets and liabilities. Amend as you buy or sell. At the end of the year, revise your asset valuations. Are they still realistic? If your asset is depreciating or is simply a year older, you need to substitute the present value. If your asset has appreciated revise upwards. Perhaps you own a house which was let and you now have vacant possession.

Liabilities may have changed too. Perhaps you have paid off some of the principal of the mortgage as well as the interest. Now less is owing. The Building Society will give precise figures on request. They appear anyway on the annual statements you receive.

So, a year on, you now compile new totals for assets and liabilities. If you have a longterm project you can calculate year by year the likely values of your assets and liabilities up to your future target date. That is the date when things will change radically.

If you foresee no major change and you are not currently living on your capital (= eating into your accumulated savings), forget future years.

In general, to help with budgeting:

- keep all receipts, as the law requires (here in France, the limit for some is 30 years!)

- number or letter them so you can find the one you want easily.

- cross reference. That means use a separate sheet (as many as you need) headed Sources of Figures giving a breakdown of how each total was arrived at. That way, you know where your figures came from without needing to work them out again. This is illustrated at the end of the chapter.

- don't get bogged down in detail.

- if you are using a computer do occasionally print out all your figures. Store them safely. That way you keep a record if - heaven forbid - your computer breaks down or gets a virus or all your data is lost or corrupted.

Not to worry at this stage if your budget shows a deficit. At least you know when and approximately how much. Even if your budget promises a healthy surplus, the next step is to consider ways to expand that income and economise on those outgoings. That is what the following four chapters cover.

In this chapter we look at how you can develop your assets to increase the income available to you. This is not the only way to expand your income. So, if you genuinely possess no assets, turn to chapters thirteen and sixteen for other ideas.

So many books have been written on investment. Although Helen has given advice professionally, we can only offer general guidance here. We recommend you continue to read more on the subject. The prosperity of your future relies on your mastery of what may previously have been an unknown sphere to you.

What are you trying to do? Plug a hole in your income. The easiest way is simply to spend your capital instead. Obviously, there are drawbacks.

You cannot continue doing so for ever. If you spend part of your capital this year, it can't earn you a penny in future. On the other hand, if you are advanced in years, so what? You cannot take it with you. If you later on need residential care, you will receive it whether you hold assets or not. It used to be the case that the council or whatever, simply demanded, if you had assets, that you sold them. You handed over the receipts to pay for your care. When all had disappeared, the same care was provided free. These days, you are allowed to keep assets to a certain value. The local authority, citizens advice bureau or a good librarian can tell you the amount.

Some artful families, realising this, put pressure on frail Aunty Flo. They point out that her nieces and nephews will not see a penny unless she gives it to them now. Today. Before the need for care becomes acute. With modern life-prolonging techniques, they are probably right.

On the other hand, if Aunty Flo shells out everything, she is vulnerable. Her health may hold out for many poverty-stricken years. One possible solution is a discretionary trust. Another for Aunty to give her family the freehold interest in property but to retain a life-time interest (that is, the right to live there, rent and expense-free). There are sophisticated ways in which you can give away capital but reserve the right to receive income from them. Sophisticated stuff, requiring professional assistance. But you may have an Aunty Flo. Or fear becoming one.

The second problem with living on your capital is that your assets may not exist in `sellable' form. Perhaps your savings are tied up in a long-term investment or pension or insurance scheme. If you can get at them at all, it may be at great sacrifice. Perhaps you have to accept heavy penalties or the cashing-in value offered is derisory.

Sometimes the scheme organisers will suggest a loan instead. They use the accumulated funds in your scheme as security. Although this is really your money, you will obviously have to pay interest. Think long and hard before you accept. We have already stressed the dangers of borrowing in chapter seven.

Trying to live off capital can raise a third problem. Your asset may be realisable in theory but you have stumbled onto the worst time to sell. Perhaps property prices lurch around rock-bottom because many people need money. If you can hold off for a year, that may make all the difference.

So how do you bridge that income gap?

Sometimes, it is possible to compromise. To glean money from your asset while still retaining ownership. Suppose instead of selling a property, you lease it out. You release some of the value tied up in the house by obtaining a lump sum for granting the lease. Even better, you `milk' the asset yearly by obtaining an annual rent. If the lease is a short one (say ten years) the value of your freehold will revive dramatically until at the end of the term, the property is returned to you intact.

With imagination, you can `milk' assets in all manner of ways: - only selling prints instead of your Old Master painting, selling the film rights/tv rights/magazine serial rights/theatre rights/even video game rights of the book you have written. You own land, you can sell a right of access over it/a right to extract gravel or peat/a right to fell timber/the removal of a restrictive clause in an existing lease. Think of Walt Disney. Some of your favourite cartoons were created before you were born. Yet they remain top earners by careful `milking'. Again, high flown stuff, but we `nouveau poor' turn up in all shapes and sizes.

Overall, the most obvious way for anyone to fill an income gap is by ensuring every last asset works hard for you. What are they achieving at the moment? Is each penny that could be earning interest doing so?

Do you run an interest-bearing current account? If not, you should. Why should you pay the bank to look after and use your money?

Do you leave funds sitting in a low-interest account that could be earning more, with the same organisation, at no greater risk? Banks, building societies and the like launch new schemes every five minutes. They stand under no obligation to direct you to the most profitable for you. By definition, it nets them less. Nor need they inform you each time they introduce a new higher account.

Could you quote exactly what rates your money is earning today? And what else is available? You should aim to - at all times. The internet is a great boon here. The time you devote to finding out and keeping abreast of the market is another valuable way in which you trade time for money.

Perhaps you have sold an asset. Do you possess a sizeable sum of money (say £20,000) sitting in the bank temporarily, on deposit while you are thinking how best to use it? Consider placing it on the money markets. That means you instruct the bank to do so on your behalf.

They take the money, day by day and use it themselves. You never know in advance what interest you will receive except it is sure to be higher than the deposit account and equally safe. Yet, because this is a day-to-day investment, you keep instant access. So why doesn't the manager arrange this automatically? Firstly, we are concerned with large sums. Secondly, he would prefer you to be satisfied with less interest.

Every day counts with money. The moment you receive any you do not immediately need, put it somewhere it can earn for you. Wise people order their wages, dividends, interest etc. paid directly into a building society account or an interest-bearing current account. Never leave a wad stuffed under the mattress. Never dally over cashing or paying in a cheque or collecting your pension or benefits. You are forfeiting interest - and inflation is increasing that loss daily.

Equally, leave as much money as you can on deposit for as long as possible. If the sums are substantial, it is even worthwhile posting your payment cheques so that they arrive on Friday or Saturday or before a public holiday. Than they can't be paid in and cleared until Monday. That way, you continue to receive interest over the weekend. (£50,000 at 10% and a weekend lost means goodbye £27.)

To illustrate, we had £50,000 sitting comfortably in a Building Society. The 7% it was earning, was a good rate at the time but we continued to monitor the alternatives. We discovered another, equally safe Society was offering 8%. That meant an extra £500 a year for the price of a postage stamp. We were all set to ensure the transfer took place on a Monday so we did not lose a weekend's interest. In fact, our original Society suggested we change to their brand new account at 8.3% That meant an annual increase of £650 income and not even a day's lost interest. But they would not have mentioned their new account if we had been satisfied with the old.

All investors face three broad alternatives. They can aim to:

1. maximise their income,

2. maximise their capital growth, or

3. compromise and settle for a bit of both.

If you choose the first, you put money in the bank. Every year you receive income. At the end of the period, you reclaim your original capital unchanged. It has not grown at all. Nor did you expect it to.

If you prefer the second, you buy an old master painting and hang it on the living-room wall. It impresses your friends but never earns you a penny. Ten years later, when you decide to sell, you expect to receive far more than you paid. In other words your capital grew.

An example of a compromise would be a holiday flat. You let it out every year so receive some income. When you sell it, you hope to get more than you paid.

Note, with both 2 and 3, you usually need to fork out money. The oil painting may require insurance, security installations, specialist cleaning, valuation. The flat involved repairs, insurance, paying someone else to manage and clean it, obtain tenants, collect money and so on.

At least your present choice is clear. As a `nouveau poor' - unless you are absolutely sure you are in a short-term trough until Aunt Annie snuffs it and leaves you everything - you must choose income. Forget capital growth.

That does not mean you simply plump for the investment that promises the highest return. Your investments must be SAFE. Your capital is not renewable. Lose it now and it is lost for ever. And bang goes any hope of increasing your income this way.

Do not worry that with safe investments your choice will be over-restricted - there are still more investment opportunities than you can hope to keep abreast of. Whatever salesmen promise, plug your ears against all the following:

1. dabbling in foreign currencies and any unit trusts associated with them.

2. dabbling in the futures markets (also known as the commodities markets).

3. dabbling in options, warrants or any unit trusts associated with them.

4. buying a racehorse or a share in one.

5. buying paintings, uncut diamonds, jewellery in general, bullion etc etc Even with specialist knowledge, this sort of investment is long-term and for capital growth only.

6. investing in any scheme linked with The Arts (notorious loss-makers).

7. any scheme that `guarantees' to double your money in a year (or two years).

Obviously these prohibitions are just examples and not a complete list. In fact, such investments can be even riskier than you dreamt of. In the futures market for example, you risk the loss of your capital, never mind any capital growth which would have taken the place of income. Worse, you could fall liable for massive debts over and above what you staked.

You should think more than twice before investing in any concern based in a tax haven (Panama, Liechtenstein, The Caymen Islands, the Netherland Antilles etc). Promoters have a habit of disappearing with your money. Similarly you should hesitate to lend money to a foreign bank or foreign government in a dubious country or one at war. At one stroke of his Parker, a dictator can `nationalise' your money.

So much for the wildly risky investments. The next six carry dangers too. In your situation they are definitely best avoided.

1. Equities. In other words, stocks and shares.

2. Similarly, unit trusts based on equities.

3. Equally, insofar as they invest in equities, investment trusts.

4. ISA (taxfree individual savings accounts) or TESSAs. Tax relief is great but only for taxpayers. That may exclude you.

5. Buying a property with sitting tenants.

6. Building Society accounts linked with the Stock Exchange 100 index or similar.

With 1 to 4, you run the risk of losing your capital and your income is neither guaranteed (in amount) nor is it certain any will arrive at all. With 5, you run the risk of being stuck with tenants who have lifetime tenure at a tiny unincreasable rent. Or alternatively not being able to get overstaying tenants out without tedious and expensive legal proceedings. Either way your capital remains locked up with no possibility of a decent income.

With 6, the Society may promise to pay you 150% of the gain in the SE index over a 5 year period or, if it turns out lower than now, return your capital intact. But, stock exchange values fluctuate daily. You have no say in the date the period ends. If the index dropped the week before, tough. True, you receive your capital back but it has lost value through inflation. Even if the index has increased (and past increases are no guarantee of this), you still earned no income during that five years. If you had invested directly in stocks and shares, you would have expected to. You need a mammoth increase in the value of the index to compensate.

So what choice remains?

Plenty. British banks and building societies may sound dull but they are reliable and offer a vast range of safe deposits. If you want to earn higher interest, you usually have to forego one or several of the following:

- a fixed return.

- instant access.

- a household name.

- a branch on every corner.

- frequent payouts.

a fixed return

Banks etc want to attract every sort of lender - those with a fortune to deposit, those with a piggybankful: those who don't mind waiting for their money and those who daren't. So, some accounts offer a guaranteed return and others not. Any organisation which commits itself to a fixed sum in a changeable world, must pitch it on the low side to be safe. On the other hand, if you think all interest rates are going to plummet, you do better to opt for the fixed return now.

instant access

The longer your money is tied up out of reach, the more interest you require to compensate. Normally, you can withdraw your money in an emergency but you lose so many days worth of interest. The rules vary with the account. The only penalty-free emergency is the death of the accountholder. That said, some accounts offer one penalty-free withdrawal a year. With others, you can withdraw without losing interest repeatedly provided you maintain a certain high balance in the account.

Does it matter if you cannot withdraw your money today? If you have ample money coming in day-to-day, this is no problem. A week's notice is usually tolerable too. Or even a month's at a pinch.

On the other hand, suppose you tie up your money for a long time, say a year or over. If interest rates improve, you are not free to shop elsewhere.

By contrast, if you are receiving an exceptionally high guaranteed rate of interest, you want to sit pretty as long as possible. This is called locking in. You are glad your money is tied up (assuming you don't need it urgently) because if it was repaid you wouldn't be able to find any other investment that paid as well.

a household name

Investors often nourish a misguided loyalty towards an institution. Not so long ago, you chose a bank and stuck to it for life. Now, most people realise that it pays to shop around. Also, many smaller building societies offer higher rates than larger ones to attract money. They cannot afford massive advertising campaigns. A government scheme protects you against loss or fraud by even non-Association members.

a branch on every corner

Some organisations can pay you higher rates because they only operate by post. No prestige chain of branches to maintain. If you prefer doing transactions in person or like withdrawing tiny sums regularly, this loss of convenience needs to be compensated by a higher rate of return. As regards safety, again, look for membership of the Building Societies Association, to cover you. Another plus - you stand a chance of benefiting from a cash payout if your small society is taken over by a large one. This happens often. We struck lucky twice in four years!

frequent payouts

If you have a choice, it is better to receive 10% a year in monthly payments. Failing that - quarterly. At a pinch - sixmonthly. The worst is annually. Why? The sooner you receive your interest, the quicker you can invest it again. When comparing quoted rates, add on a mental half a percent to the rate if you get paid more frequently than once a year.

Each advertisement must quote the CAR (compound annual rate). This is the figure you use for comparison. Everyone must calculate the CAR in the same way. Other figures shown are calculated using a flattering method of the organisation's own choosing.

In a perfect world, the interest you receive would always be related to what you sacrificed in terms of the five factors we mentioned. Reality is different. All the organisations that want to borrow your money are in competition with each other. They try to guess what the future will be and how their rivals will react. So it is possible to find the best of all worlds - high guaranteed income with safety and instant access. But you must shop around.

The quality press helps. The Telegraph regularly publishes a league table for instance. Internet searching is a big help. www.rate.co.uk provides information on the best rates available. Teletext and free satellite tv channels are agorge with up-to-date figures.

If you have the chance, always opt to receive income gross rather than tax-paid. Otherwise, if you are not liable to tax, you have to churn through the rigmarole of claiming it back. During that time, your money that could have been earning you more interest has sat in the clutches of the Inland Revenue. Even if there is ultimately tax to pay, the longer you can legally keep the money in your hands, the more it will earn for you.

Another factor that determines what income you can hope for is the size of your capital. The healthier the sum you can invest, the higher the interest rate the bank etc will propose. Normally, this favours the wealthy. However banks exist, like Tyndalls, which gather in small amounts from many depositors only to invest them collectively in safe organisations. Because they amass huge sums, they attract more generous interest rates than an individual could hope for. These they hand on - minus management fees - to all the small investors.

Naturally, no one confines your choice to banks and building societies. Insurance companies, central government and the local authorities all want to borrow your money and are trustworthy. They will not skip off with your loot.

The government's own borrowings are called gilts or consols or consolidated stock. Local authorities often offer bonds. Then, you consider near-official organisations like the Post Office or the utilities (privatised organisations that offer a product or service always in demand - like water or telephones).

There is no need to bolt for ultra-safe, traditional refuges like the Post Office Savings Account. It is because every child knows and trusts such accounts that they can offer low returns. Search further afield to enhance your returns with safety.

Rule out speculative investment in stocks and shares of little-known or new companies. Alternatively, you may have held shares in so-called blue chip (ultra-reliable) companies for years. You benefitted from generous annual dividends and made capital gains when you sold the shares. That said, a company is not obliged to pay out any dividends at all. When times turn hard, it turns off the tap. Nor does every sale of shares guarantee a gain. Many people suffer losses. In your present position, if you already hold good shares which regularly pay dividends and maintain their value well, why sell? But think hard before you risk buying shares in untried companies.

Preference shares provide a little protection for your capital. Ultimately though, it relies on the strength of the company you select.

Debentures offer another alternative. A debenture is a loan to a limited company. It doesn't entitle you to a share in the profits. Instead, you look forward to a fixed amount of interest. If the company goes smash, debentures must be repaid before shares - assuming there is enough money. Choosing preference shares instead of ordinary shares or debentures instead of shares, you trade off income for safety.

Another method for raising income is to channel your money through a solicitor. He lends it to clients in need of top-up mortgages. You should receive a higher income than lending through a building society. On the other hand, you are contributing a sizeable chunk of money at the outset. It remains tied up longer and there is no Association to protect you. In practise, solicitors handle the sale proceeds of the houses they convey. So they are well-placed to protect their lenders - people like you. By contrast, imagine a market where property prices actually fall. If people are forced to sell before they have had a chance to pay off much of the building society or the top-up loan, your capital stands at risk.

Property traditionally represents an ultra safe long-term investment. `As safe as houses' we boast. Homebuyers who have come to grief in recent years have mostly treated it as a short-term speculation. Or borrowed despite an unstable domestic set-up. Considerable help is forthcoming if your mortgage difficulties arise through unemployment. Not so if the cause is one partner stomping out.

If you buy property as an investment to rent out, your asset can never disappear. In the long term - and property is only a short-term proposition for developers and builders - bricks and mortar rise in value faster than inflation. We remain an overcrowded island packed with potential home-owners. On the other hand, being a landlord is not troublefree, unlike leaving your money in the bank's safe hands.

A word next for those living abroad, so contending with erratic exchange rates. If you are truly settled there, the wisest arrangement is to hold most your deposit investments in the currency of your chosen country. This does not mean you need to transfer the investments into that country. Nor do you need to invest with that country's institutions. They may be primitive or unreliable. Most British banks, either mainland or off-shore, offer foreign currency deposit accounts. You can earn generous interest, depending on the underlying currency. You can switch quickly and cheaply from one currency to another, by phone or fax, if necessary. Underneath lies the strength and reliability of an established British bank.

Rearranging your assets to create the maximum income is fine if skilfully done. On the other hand, extra income may attract income tax. And/or it may deprive you of benefits you would otherwise receive. In that situation, what you seek is extra money which cannot be called income. This can be legally arranged by investing to generate capital gains rather than income.

Some insurance investment schemes are designed with this aim. You receive a payment every year for ten years. Or every year that you choose to take it (because you need it to live on). However, because of the way the policies are written, these payments count as capital. Even if you make a capital gain, you pay no capital gains tax on it until all your gains for a tax year exceed £7,500. It should not be too difficult to arrange payments to keep under this limit. Even if you can't, only the amount above £7,500 is taxable, not your whole gains.

In practice, many state benefits are payable regardless of the capital you possess. Others only cease if the capital takes the form of cash. A capital gain is unlikely to be treated as extra income you have received and a benefit refused because this extra income pushed you over the limit. On the other hand, a capital gain may affect your entitlement to a benefit if, after a sale, you hold a large amount of cash.

Another way to aim to generate capital gains rather than income is to buy gilts (government stocks). If you buy one due to mature in 2004, you will receive the interest due between now and then. The capital will be repaid to you in 2004.

The attraction of gilts is that you buy them secondhand, that is, on the stock exchange rather than from the government which issued them. Your particular gilt may have been issued twenty years ago when the government needed money. Since then it will have changed hands dozens of times, at many different prices. What you pay now in 2001 may be much less than you will receive in 2004. The difference is a capital gain.

Equally, nothing forces you to keep the gilt until maturity in 2004. You could decide to sell it next year. The money you receive is capital, not income. As the date for the next payment of interest approaches, the value of all gilts normally rises. Once payment is past, it drops because any buyer has to wait months for his first interest.

The advantage of gilts is that you can decide when you want your money and in what form - income or capital. Besides, because it is the government which is borrowing, your capital is safe.

If you are really elderly, you can use your home to generate income but still continue to live there and even transmit some of its value to your heirs. Some organisations will offer you an annuity in return for an interest in your property. Generally, their offers are not very attractive until you are 75.

So far in considering how to invest, we have not considered inflation. For income to keep up with inflation, you need to provide for capital growth - you might think. That is, your capital must increase regularly to provide the higher income you need to buy the same articles each year. We do not agree.

You are providing for inflation in future budgetting by upping your estimates annually as shown in chapter eleven. You are hedging against it by your choice of assets to buy or retain, preferring those which are appreciating. With regard to pure investment, aim to maximise your income. That was the first of the three alternatives we described. The advice holds true even if the investment you choose `dresses up' the sums you can regularly draw as `capital payments'.

It all depends how much that bogey of inflation really affects your lifestyle. Inflation is no more than a set of government statistics based on prices collected from typical supermarkets and paid by typical families. But you do not live (or spend) like a typical family any more - if ever you did. The further you remove yourself from the stereotype, the less `inflation' affects you. You must aim to redirect your spending away from articles whose price is dictated by the government and shackled to past inflation figures. Ways to achieve this are outlined in the next four chapters.

In this chapter we consider how you can obtain benefits that are as valuable as cash in your hand. If you receive income, you run the risk of paying income tax on it or limiting benefits you would otherwise have received. If you receive `payment in kind', you avoid both problems. Better still, `payments in kind' automatically keep up with inflation.

For example, you tidy an elderly neighbour's garden. No contract exists between you. You have no entitlement to a penny. In fact, she gratefully gives you a bottle of whisky. If you had had to buy the bottle yourself, you would have needed extra income.

Naturally, there are drawbacks. Firstly, what use is whisky to a teetotaller? Secondly, a mean neighbour might grudgingly have offered you a thank you. In practise, you only perform such services for folk who know you well enough to know what would be acceptable. Or those who have the sense to offer what most people like. At least if you are the exception, you obtain something `swoppable'.

Also if you mow the lawn once and nothing is forthcoming, you do not suggest it again. Or at least, you offer as a kindness only.

Equally useful to money or gifts are someone else's free services. Remember in chapter five, you listed all your assets and included everything you know how to do as well as what you possess? Also you catalogued everyone who has useful professional skills they would agree to put at your disposal. We are not suggesting you scrounge. If you can service someone's car and they can give a hand with decorating or plumbing or whatever, both parties have benefited.

Two drawbacks here. Firstly, you must be sure that the other person will try to do a decent job. Never mind that your brother-in-law passes himself off as an electrician. He must be a competent one that you trust. Cowboys will cause you more expense than they save. Worse, in a non-contractual arrangement, neither of you has any redress if things go wrong.

The second difficulty is how do you assess the relative value of the work involved? Various people have tried to develop organisations to link up people on a mutual self-help basis. We know of none that have succeeded long-term. The problem is usually pricing.

Take a mechanic who knows his work is worth £20 an hour. He will be reluctant to work three hours in return for three hours' work by someone whose skills only cost £5 an hour. He should be willing. In return for three hours' work he is getting the equivalent of more than £15. He should add on the VAT he would have paid an outside organisation. At 20%, that gives £18. Then he grosses up for the tax and national insurance he himself would have paid beforehand. Why? Because he would otherwise be meeting the bill out of pretaxed income. (Footnote - This is how you gross up. Your final figure is 100%. If tax is 20% and NIC 10%, the figure of £18 represents 70% (100 - 20 - 10) of your total bill. £18 x 100 / 70 = £25.71.) The mechanic is receiving work worth £25.71. That is a far better bargain than he expected. The trouble is - human beings never think like that.

The mechanic calculates that his opposite number has gained even more out of the arrangement than he has. Which is true. So, somehow, he has been cheated.

Also, who can guarantee both jobs last exactly the same time? Highly unlikely. Or one task might be routine and the other a swine of a job.

Conclusion - skill-swops are fine and advantageous to both parties. But keep them among true friends. Don't count the cost precisely. Don't watch the clock. After all, your time is your own now. You allocate it as you choose. Even when you spend two frustrating days doing a job a pro with all the gear can complete in twenty minutes, you are still `earning'.

You should offer more than your skills and experience. You can also swop surpluses. A productive garden or livestock or kitchen or workshop should all generate surpluses. Something you have created yourself from your own raw materials - jam, preserves, cakes, chutney - is always an acceptable present. It should generate a return in kind and make life more varied for everyone.

Everyone has something else valuable to offer - their time. What is more handy to the harassed worker than someone who can babysit/catsit/be available to ensure the children arrive safe from school/let in the repairman, serviceman or meterman? Or someone who can collect your parcels and deliveries and stop them becoming a sodden mass on your doorstep. Thriving businesses exist based on plant sitting. Someone who has paid £100 for a bonsai tree, is not willing to abandon it to die of thirst while they gad off on holiday.

You might think a neighbour would do these services as a kindness. True - but only where stay-at-home neighbours still exist. In commuter belts, they may be extinct. Besides, mobile couples often do not know their neighbours well enough to ask. Nor can they reciprocate. So, even if you are never paid in money or kind for such help, you should no longer have qualms about asking in your turn - for a lift, say.

Do not underestimate your own scarcity value. A colleague of Helen's, a woman with three children, had a live-in mother. Granny was usually the sole woman present at parent-teacher meetings, school sports meetings or open days. Her daughter and all the other mothers were too hard-pressed between work and running the home. Only dads could squeeze in the time.

If someone does you a service, don't over-reciprocate. This is a particularly female failing and a sign of insecurity. Perhaps someone feeds your spaniel while you are away. You return with such a lavish present that it would have been cheaper to put the dog in kennels. You may not be doing your neighbour a favour either if you initiate a transfer of extravagant gifts neither party wants or can use. Worse, the person who will never accept the slightest kindness without over-reciprocating (stressing their financial superiority) is a pain and not a friend.

A similar error is to employ a little local tradesman, ensuring you get the keenest quote. Then you slip him a backhander of such generosity that it would have been cheaper to employ a national firm with a guaranteed service who could start at your convenience and not theirs.

To be able to borrow something, saves you the cost of either buying or hiring it. It may also make possible, projects that you would otherwise not have attempted. If your neighbour possesses some specialised tool or apparatus for example. Or simply, long ladders. Naturally, you will ensure you return it at the agreed time without being asked and in the same condition as you received it. In the ideal neighbourly world, friends decide future purchases on the basis of what is not already available to share.

No one is a scrounger if you reciprocate - in goods or services. This extends to the provision of help or advice. Perhaps your friends or relatives possess non-tradesman skills they are willing to put at your disposal. Anything from typing to starting you off with your personal computer to investment advice. The same provisos apply as for swapping physical skills given above.

If you baulk at approaching your friends and family in this way, consider the free services available to every citizen. Britain is very advanced in this respect. For a start, there are the citizens advice bureaux. Do you know what areas they cover? What variety of information they can find out for you? It is probably far broader than you think. They can call on experts in a wide range of fields. Their help comes completely free. And you've paid for it whether you try it or not.

Your library furnishes another great ally in the librarian. A public library supplies far more than a source of free shelter and novels. Reference books cover every subject under the sun. (We were horrified to discover a manual for making nuclear bombs in a New Zealand public library!) Newspapers and magazines span every interest. The librarian is specially trained to track down where to find the answer to your problem. But only if you ask. They can call on the resources of the library service nationwide to reserve or buy the volume that interests you. Just think what all that would cost if you had to pay for it yourself.

Don't make the mistake of thinking books are only useful for academic subjects. Our Uncle, living the good life in wildest Wales, cut down a tree. Instead of toppling, it hung, dangerously suspended, among nearby trees. He consulted his books. The advice was - leave well alone. The weather will soon bring it down. And it did.

The trick is to choose a useful book. That is not a glossy coffee table picture book written by a journalist. You want a down-to-earth guide by someone with real experience who can foresee where you will go astray. So study the blurb on the author first. And the date it was written or revised to be sure it is up to date.

Often, you can only judge the value of a book by using it. Far better to borrow from the library or friends, before you decide to buy. If it is a subject on which you know nothing, choose a children's textbook. Far easier to follow. No fancy language. (A colleague with a Ph D in computing told us he picked up something new from a Ladybird book for toddlers.)

Of course the internet abounds with experts of every description. There are thousands of retired or redundant people out there eager to put their lifetime’s skills at your disposal. (In your turn, you may be joining them.) The art is to find them and distinguish them from the salesmen and the useless. Call up a good search engine like dmoz.org, call up advice and work your way through the most likely ones. Generally, British sites are more down-to-earth and likely to be helpful than American ones.

If it is personal advice you are after, you are likely to be swamped. Local authorities employ counsellors and social workers. Newspapers and magazines offer problem pages and answer thousands of letters privately. Trade unions, old comrades associations and charities do their utmost to help members and former members. The BBC, watchdog bodies (the securities council for instance) foreign embassies or your own abroad produce factsheets. And all for the price of a stamp.

In practice many people find putting their problem down clearly on paper has clarified it for them so that the solution stands out. No need to post the letter. After all, that is only what many experts, psychiatrists, pundits, analysts do for you, at very high fees. By contrast, reaching for the nearest phone, before you have even defined the problem in your own mind, is no solution at all. People who pester everyone they can think of, immediately forget who advised what, and keep going until they get someone - anyone - to endorse what they wanted to do all along, have solved nothing. And lost a lot of valuable goodwill.

There are other ways of acquiring benefits which are as welcome as money. Fancy a holiday? Consider acting as caretaker for a holiday home in the mountains or at the sea. Such schemes may demand little more than living on the premises. Other owners expect you to work, unpaid, in return for board and lodging. Typically people prefer a couple, the wife to help indoors, the husband to mow lawns and trim hedges. Free accommodation is not income as no money changes hands. On the other hand, you have earned a welcome change of scene which is itself refreshing, all expenses paid.

More adventurously, people volunteer as unpaid crew on a cruising yacht. Others volunteer themselves as guinea pigs and enjoy a pleasant subsidised rest while scientists try to give them the common cold - then cure it. Still more join a National Trust work camp clearing the countryside. And so on...

A season at a holiday camp, is ordinary paid employment. But with entertainment, meals, lodging and free use of all camp amenities thrown in. Plus the bracing holiday atmosphere.

If you live within reach of an international airport, you can obtain trips abroad at a tenth of the normal price by acting as a courier. Why? Every minute counts for urgent items. Airlines unload passenger's personal luggage first. Then you clear it through customs immediately you touch down. Unaccompanied items wait hours, frequently days longer. All you do as courier is collect a baggage reclaim tag at one airport and hand it over to the local handling agent at the other. You may never see what you are accompanying. Couriers need to be available to fly within 48 hours notice. Contacts are given at the end of the chapter.

No one despises a hitchhiker as a scrounger. After all, every motorist chooses whether or not to stop. Many lorry drivers welcome passengers. A little human contact helps the miles to pass.

Even a miser is happy to give you something which cost them absolutely nothing, which they do not need and which is cluttering up the place. Take just one example - medical samples. The world is awash with reps supplied with samples, freebies and novelties to urge on doctors, dentists, pharmacists. Often the reps cannot offload one consignment before the next arrives. The recipients rarely want them - they already have too many from rival companies. Doctors dump them on their receptionists to offer to old people's homes and charities.

We are not talking about sophisticated drugs - no responsible person would put them in untrained hands. Instead, they are flushed down the loo, put out with the rubbish or burnt on bonfires. But a doctor who knows you would otherwise have to pay for what he prescribes when he possesses a mountain of it gathering dust, can be persuaded to give it to you. (This is very valuable abroad. Firstly because patients pay the full cost of prescriptions. Second, because no watch is kept to encourage doctors to try the cheapest solutions first.)

We have known dentists offload toothbrushes, mouthwashes and painkillers on us. Similarly doctors clear out their surplus of notepads, pens, office paraphernalia etc. And only because they knew we would rather not pay if it could be avoided. Where is the shame in admitting you do not want to be taken for a ride?

That is only one field of which we have professional experience. Most salesmen, reps etc carry a range of giveaways which their ever-more-sophisticated clientele is reluctant to accept. And what factory or institution does not regularly throw away or give away valuable items for which it has no use? A shirt-factory for instance, burns remaining bolts of cloth when an order is completed. We are not suggesting you steal or become receivers. Nor that you pick over contaminated or potentially dangerous material. However, the disposer may be thankful to you for saving him a job.

Besides, how many business ideas have been stimulated through a disgust at other people's waste? Or of something an institution possesses and does not value? Like the man in the train who noticed the weeds alongside the train-track. He bought the right to harvest them from British Rail. He picked wild radishes, converted them into horseradish sauce and a thriving business was born.

For other ways in which you can take advantage of this world-wide squandering, turn to the next chapter.

For would-be couriers:

Courier Travel Services 071-351 0300

Line Haul Express 081-759 5969

Polo 081-759 5383

Speedbird Courier 081-562 6279

World Speed Express 081-893 7744

Also,

The Insider's Guide to Air Courier Bargains by Kelly Monaghan published by Inwood Training Publications, POBox 438 New York NY 10034 USA.

One of the first shocks that hits you when your own income plummets is how wastefully everyone else lives. Like Mr Coleman admitted - it was not the mustard people ate that made him rich. It was the mustard they left smeared on their plates.

So this chapter is dedicated to making every penny count. Luckily, modern society renders this easier and easier. Yes, we did say easier. Consider before you choke with disbelief, the ideal world, seen from the point of view of manufacturers.

We would buy whatever is novel, regardless of what it does or that it renders obsolete what we bought last year. We would prefer to replace rather than repair it. We would prefer to buy new rather even than clean it! We would insist on a different product to clean every possession. Better still, each time we spilt something on it, we would use a different product to clean off every type of stain. We must buy a pretty or protective cover or carrying bag for each possession. We would regularly buy accessories for it. We would employ a different machine to make each different dish we cook.

Ideally, we either use the product every day (shampoo?) or once in a blue moon (garden furniture). Every possession would need a lavishly-advertised brand-name or label. It must come expensively wrapped and presented. Indeed, we would be more influenced by the vast wrapping than the tiny contents which we could not even thoroughly inspect, let alone try out, beforehand.

Each possession must be colour coordinated. Above all, the unmistakeable colour would change with every fashion season. Next we insist on a scaled-down, non-working model for our child and increasingly, for our dog. The affluent demand a working model (miniature car, say).

Every plant in our house or garden would die without its special soil and individually-crafted fertilizer. Not to mention a separate spray for each ailment and pest it suffers from.

How far down that giddy slope have you already slid? Plenty of scope for rational economies there.

In fact, there are economies to be achieved in the use of your money, then in deciding what to buy. We consider each in turn. Simple economies in both make possible a more lavish lifestyle than you could otherwise attain. Later, in the next chapter we offer further ways to save as you use what you have bought.

Using your money

From the annual income available, we deduct all large expenses (electricity, insurance, water etc) at the amounts we have budgeted for them. Those items we pay by cheque or credit card. What is left, we divide by 365. That fixes the daily amount for day-to-day expenses. At present we are living on £8 a day between us. Obviously it is not uniformly spent. A large stock-up shop at the beginning of the month eats into the month's money. Nonetheless, you keep a constant reference as to how you are progressing.

We have already stressed in chapter eleven that you should keep virtually no idle cash, just the odd pound or two in purse or wallet. Everything else should be earning for you. Yet you hold enough within easy reach. At the twitch of a credit card or charge card for instance.

You can save in how you pay for things. Avoid like the plague paying any interest. In the Australian phrase, that is money down the gurgler. If you use credit cards, they must be as short-term loans only. That is, you repay within 25 days of receiving your statement. To ensure this, give your credit card company a direct debit authorisation on your bank account.

It is better to keep your money in your bank earning interest until it is removed to pay off the credit card than to spend your money outright. That said, obviously the trend towards making you pay an annual charge for the facility of a credit card will encourage you to review your use of it annually. Check whether the convenience and interest you earned outweighed the annual charge.

Seek out a discount for cash. For preference, without paying cash. Many shopkeepers accept a cheque as equal to cash for discount purposes.

Or you may qualify for a discount as a member or ex-member of an organisation (trade union, forces, professional body) or for cut price pensioner or student rates. Seek out the technical colleges for some real bargains. Trainee hairdressers, beauticians, chefs and waiters, even car mechanics all need practical experience. They need guinea pigs. What you pay covers the cost of materials only. The teacher ensures a reasonable job is done.

Delay payment whenever you legitimately can. That is not a recommendation not to pay your debts on time. How many small businesses have cruelly gone to the wall because their customers did just that? Rather, if offered a choice between paying interest-free instalments and cash - take the instalments. Many catalogues offer this. Or shops for limited promotions.

Deciding what to buy

(everyday things)

The golden rule is - draw up a shopping list. Then stick to it. You can decide in the privacy of your own home what you really need. Keep a list readily available, open all the time. As an item runs out, add it to the list.

Commonsense. Except in practice virtually nobody bothers. That said, leave enough flexibility to take advantage of special offers. Write `joint of meat' on your list, rather than `joint of pork' in case chicken are particularly cheap this week.

Once inside the carpark, never mind the supermarket, shoppers are deliberately moulded into zombies. They are pounded by music and assailed by promotional announcements. Inside, they are diverted by television screens or waylaid by demonstrators even diverted by entertainers rigged out as clowns etc. Shoppers wheel obediently from rank to rank wanting to be tempted. Gaudy packaging and `bargain' signs by the hundred struggle for their attention. No wonder people snatch at groceries as though their lives depended upon it. No wonder people overspend. And that is during an ordinary week. The pre-Christmas or public holiday pressure approaches meltdown.

We don't recommend you trail from supermarket to supermarket, queuing at umpteen checkouts to save a penny here and tuppence there. You just exhaust your temper, arms and shoeleather. Remaining exposed to temptation poses a far greater danger to your budget.

Stick to the one or two supermarkets whose products/quality/price range you prefer. You get to know their layout and which of the two specialises in what cheap. Get in quick and out quick. Remember that your new life leaves you free to choose quiet times.

We also hate paying for parking - it is money thrown away. Shopping at quiet times greatly helps here. Modern retailers know we are creatures of habit. They are fully aware how much extensive free parking and easy access influences our choice of shops. So they do their utmost to provide it.

Finally, do you check the till roll at home afterwards? You must - it's almost always wrong. A few weeks reviewing them and you will find you are checking in the store itself, to save yourself a trip back!

Brand loyalty is fine - until you discover that factories wrap different labels on identical products from the same conveyor belt. If a shop's own label comes considerably cheaper than the original heavily-advertised brand, then you really must be able to appreciate the difference to justify paying the extra. Test yourself and family (with a blindfold) to prove it.

Personally, we favour catalogue shopping. You can consider alternatives logically away from pressurising salesmen, crowds or rumpus. Because you have to wait a while before you receive the goods, you make sure you really want them. Identical branded goods can be inspected in local shops if you absolutely must see before you buy.

In our experience, people who are disappointed in what they buy (clothes usually) failed to visualise from the accurate picture and description, what was on offer. Pay particular attention to the materials used. If buying furniture etc, measure out the dimensions they quote in your intended location. Don't just guess, `That'll fit. It'll be big/small enough to go there.'

All this requires a long, cold, dispassionate look, not a snatched glimpse. That of course, rules out buying direct from the television etc. So beware of interactive tv. The temptations can only increase.

The most expensive method of selling (for the seller that is) is through parties. It follows that when you buy such goods, you are subsidising these high costs of sale. Steadfastly refuse all invitations. We know women who were reluctant to go at all yet ended up grudgingly throwing parties of their own - so fierce is the social pressure. You must buy something out of courtesy to your hostess. So the suppliers ensure there is a range of suitably cheap, useless `somethings' on offer - craftily priced to earn them the highest mark-up of anything they sell.

Similarly, in restaurants, the wine with the highest mark-up will be the second cheapest on the list. The trade knows that no one likes to be caught choosing the very cheapest. Often, if you ask, it will be `unobtainable' (= non-existent) anyway. So you are steered towards the most profitable for them - the second cheapest.

Given a choice, always plump for the rechargeable, the refillable, the article that runs off cheap mains electricity rather than expensive batteries. That said, ensure that shops which propose this service really do provide it. We have found with Body Shops for example, that although they make it a selling point that you can return with containers and get them refilled cheaply, some franchisees refuse. They would rather you bought new.

Some manufacturers offer their wares in packaging which is itself useful. Like mustard or some drinks which come in a glass container with a plastic top. After use, you have a free tumbler.

Experiment with refilling. Some articles can be reused at great savings but the manufacturers would rather you did not know this. Like computer printer cartridges. The cartridge we buy officially prints about 300 pages. Then it is dead. In fact, if you find the right ink (cheap from a specialist computer store or direct from the makers via the internet), you can refill it at least 10 times. We have printed at least 1,000 pages from the current one.

Again, given a choice, always plump for something that will grow or that you can enhance the value of yourself. That means seeds rather than a potplant or a small potplant rather than the same thing three times as large. Select something you can finish off yourself. Perhaps furniture or units in kitform or which need painting or varnishing. Time is now your ally remember.

There can be some sense in buying items cheap, out of season. Christmas cards in January - that sort of thing. On the other hand you are tying up your money for a year. And you run the risk of forgetting where you put them! Or them lying growing dog-eared in a corner. In general such impulse buying is not to be encouraged. See later for the definition of a true bargain. But if you find one out of season, and your budget permits - so much the better. We normally lay in a stock of unusual attractive blank cards from holiday countries at a fraction of home prices. Or print them out from the computer.

Avoid buying any article in either of the following categories.

1. Products that work but do something useless.

2. Products that it would be wonderful if they worked but unfortunately they never do. Not under normal conditions anyway.

Obviously, our lists are personal. As both categories grow every day, you should be able to find plenty of your own.

1. Useless products - air fresheners; fabric softeners and conditioners; loo-blue; toilet seat covers; pot plant leaf-shiners; frills to hide the furniture or the legs of the bed; covers to place over covers; containers to place inside containers; cupboards that only hold one toilet roll and two bars of soap; multiple dispensers of everything; the majority of knick-knacks and souvenirs; products that cure newly-invented illnesses; pens that need special pens to erase them then more special pens to write over them.

2. Ineffectual products - sprays to deter dogs and cats; products that remove stains but maintain brilliant colours; oh-so-many beauty, slimming, hair-removing products; kitchen chopping or preparing devices; petrol additives. If the latter really worked, the oil companies would add them automatically.

The French swear that anything lemon scented keeps off mosquitoes and cedar balls deter mites. In Thailand they use mothballs against snakes. Much of the third world uses Coca cola as a contraceptive douche - but not diet Coke, it is not so effective. We laugh but we British trust just as many ridiculous remedies of our own. A waste of money.

On the other hand, the problems they pretend to cure persist. If you do find a solution to one - and can persuade the world to believe you after so many false promises - a fortune awaits you.

Deciding what to buy

(new exceptional things)

Suppose you are tempted by an item new to you. You have never bought one before. You have never even seen one in use. But it looks ideal. Why buy it? Hire one first. The range of items on hire grows all the time as Yellow Pages will show. If you hire it for the shortest possible time, you can test it in action. If it breaks down, it will be replaced free. And if, after the first enthusiastic flush has worn off, it sits gathering dust, you have saved yourself a lot of money.

Some shops will hire you a new article and, if later you decide to buy it, your past rental payments count towards the price. Musical instruments are a common example. Far better than to buy little Jimmy a euphonium which, after two lessons, he discards.

Alternatives are to borrow one from a friend, simply to try it out. Or buy an old one second-and. Again, for a fraction of the cost, you discover whether you really will use the article short or long term.

Your main question always when buying something new is

What will it let me do that I can't do already?

So many new products appear for which the honest answer is `nothing' except you now get an electronic read-out instead of a manual one.

The second question is

Will it allow me to do the same thing sufficiently better or quicker to justify the outlay?

There is no guarantee that the answer is yes. Take gardening tools - like power trimmers or sit-on mowers. Our neighbours all vaunt sit-on mowers. They take twice the time to mow the lawns that we do, yet we are collecting the grass as we go and stopping to walk with it to the compost heap. Never mind the noise, smell, fuel costs and the second garage they need to house them in.

They flourish hedge cutters while we use handclippers. They are labouring away long after we have finished. Our clippings are collected as we go - theirs litter the garden until they rot. The fact remains - new, bigger, noisier and even more powerful does not guarantee a better, cheaper or even quicker job.

By contrast, there is no contest in terms of speed and effort between a chain saw and an ordinary saw. But will you have tasks that demand so much power sufficiently regularly to justify buying one? They are widely available for rental.

The third question when buying something new is

Does it render obsolete something that I already own?

A compact disk player may be fine but what if your fabulous collection of conventional records is your delight? Would the money be better spent now on a stock of new styluses - if you can find them? Difficult. Unless what is now made obsolete has a resale value (unlikely because the very reasons you are trying to get rid of it will lower its value) you may be forking out a lot of money for not much advantage.

Do you forget your collection and duplicate from scratch at huge expense, even assuming what you want is available? And what about the digital compact cassette? Do you change again? And what will they introduce next year?

Catch 22. For such reasons, never be the first to buy something new. Let someone else endure the teething troubles. Let them pay the inflated price. Wait for mass production and for rival manufacturers to force their way into the market to push prices down. (If only there was a rival for Microsoft…)

Equally, never be the last to buy something new. If your purchase is only cheap because better substitutes have already appeared, you will soon find it impossible to get spares, accessories or servicing.

Deciding what to buy

(replacing exceptional things)

The first thing to calculate is exactly what it will cost you. There are three factors to include -

1. the cost of buying

2. the costs of running

3. its resale value, if any.

Add 1 and 2 and deduct 3, if it exists.

1. the cost of buying

1. Obtain a proper cash quote - forget the `so-much a week' merchants. You are allergic to interest, remember? Now, what does the quoted price cover? If you are buying a car, is that the on-the-road price? So often, hidden extras lurk to emerge later. Builders too, are masters at quoting - then `remembering' extra work you really cannot do without. So are Italian restaurants, for that matter.

They all know that people prefer a series of little bills to one big one. Even when the big bill is far smaller than the total of the small ones. That innocent bias is one of the main dangers of managing your money week by week, or monthly instead of yearly. It can cost you dear. Find out about and add up all those indispensables. Only then do you know the true cost of buying.

Now, is that a good price? For comparison of car prices, try the library for backcopies of Which magazine, or Glasses or similar car guides. Consider too, what other garages are offering. When buying, say furniture, compare with high street shops, furniture warehouses and (particularly useful and convenient) catalogues. Why waste time, petrol and shoeleather visiting round, when you can phone? Or use internet. Shopping sites abound. We are only looking at prices remember.

Remember the real definition of a bargain.

A bargain is something offered cheaply for which you would willingly have paid the full price.

Anything else is not a bargain. It is simply something going cheap. For that reason, never buy by price alone. `It's only a fiver so it must be a good buy'. Not so. It is only a fiver because no-one else wants it. There is usually a good reason for that.

Never buy without enthusiasm. `I suppose we ought to have one.' If you cannot summon up more fervour when you are buying - forget it. Your money is just burning a hole in your pocket - a life-threatening condition for those on a budget.

For that reason, be very careful when you have just been on a planned spending-spree. Spending is a habit and once indulged, the habit remains with you for a day or two. Treat spending like Champagne - great, in moderation.

But even if the price looks great, you daren't decide yet. Remember:

2. the costs of running

Cars provide a common example. You often see a large newish car with high fuel consumption and expensive insurance on a forecourt at the same price as an older smaller model with higher mileage. Why? Because its owner found out the hard way that he was being bankrupted on running costs.

We have never faced so much choice, so many competing models of everything. The whole world rushes its products to our shores in the hope of tempting us. Where known, running costs can be a deciding factor between them. Always aim for the repairable, the replaceable, the cheap to maintain rather than the use once and throw away. And ideally for the item you can clean or repair yourself.

Beware of buying wrongly through mistaken patriotism. How many people have been annoyed to discover the British-sounding manufacturer is foreign? Brother is Japanese for instance. How many others to find a sticker inside a genuinely British firm's products saying `Made in Taiwan'? Buy what appeals - if not, you are encouraging British manufacturers to continue producing unsellable products. Which can only spell disaster in the long term.

3. the resale value

The resale value of anything depends on how quickly it depreciates and if there is a market for it second-hand. Obviously, if you buy an item, intending to use it to death, forget any resale value. But be honest. We have relatives who would swear that is their policy. In practice, they regularly replace after a year or two on a whim. And still declare every purchase is `their last'.

A car, as you know, depreciates horrendously. That said, it does not depreciate evenly. The greatest drop in money terms is in the first year or so. Or until it has done 40,000 miles.

Let someone else bear that loss. Buy second-hand. But from a reputable source. Pay a decent second-hand price. That way you should get some guarantee. Also you have come-back if the vehicle does not come up to scratch.

In general, we buy everything second hand it is possible to buy. Houses above all, as explained later. Why settle for new furniture either which, despite its expense, is factory made out of unseasoned wood, when for a fraction of the price, you can buy antiques? You will search far to find anyone to take your new furniture off your hands (no market). Antique stuff holds its value and should even appreciate. We mean antique in the modern sense of anything pre-Second World War.

Reproduction is simply the same expensive shoddy new furniture in an old style - it loses value not gains it. If you aim to maximize the resale value of anything, avoid reproductions, imitations, copies. Especially those master-hoaxes called `limited editions'.

Equally, buy antiques according to their usefulness - tables, chairs, cupboards rather than knickknacks. Their beauty comes as a bonus.

Buy second-hand - why not profit from other people's mistakes and miscalculations? You are doing them a favour helping them minimise losses. Charity shops, jumble sales, junk shops, carboot sales, hobby fairs - what fun! What a treasure trove for the discerning and the imaginative.

Stand in the unending queues at Marks & Spencers after Christmas and watch all those customers changing unwanted presents for cash. Now imagine that nationwide. Worldwide. Yet you have only glimpsed a small portion of the presents given by people considerate enough to realise they might `get it wrong'. And received by people active enough to bother to change them. Now imagine the mountain of unreturnable presents. All brand-new, quality articles. And where will they all end up? Charity shops, jumble sales, junk shops etc.

One word of warning - you want what you buy secondhand to be safe. If you do not know where or how an electrical appliance has been used, only buy if it is serviced beforehand by a reputable dealer.

In general buy appreciating assets or at least, non-depreciating ones rather than depreciating ones - a flat rather than a mobile home.

On the same principle, choose a `second-hand' house rather than a new one. Someone else has added on all the extras (wallpaper, extra power points, telephone installation and extensions, a planted fenced garden, even carpets and curtains) which will otherwise eat up every spare penny you have for at least two years after you move into a new house. Better still, you can see your predecessors’ dreams in reality. How many people change their houses radically only to find they do not really like the result? (Builders know this - they will confirm that owners often move six months after they have completed major alterations.) There is no comparison in value for money between a pre-owned house and a new one. We have owned both. The former wins hands down.

Aim wherever possible to buy things with two values - the value of the item itself and the value of the raw materials from which it is made. That way, even when it is worn out, you still have something left. A silver jug may be crushed beyond repair but it still has scrap value. Stainless steel does not, nor silver-plate.

Above all, when buying, keep a sense of proportion. We opened a glossy magazine (April 1993). Among other clothing, one article featured a pair of lurex harem pants for £1,500. A few pages on, another article recommended you to sew your husband's old shirtsleeves to make continental-style bolster pillows!

If you try you will be amazed how much less of everything you need than the manufacturer would like you to believe. Do you really load your toothbrush from one end to the other with paste? Why? Because the hero in the advert does?

Do you need to wrap a foot of dental floss around each fist, draw a skein delicately between your teeth and throw the lot away? Why? What possible harm can it do your teeth to reuse it yourself? Yet we have been conditioned so that the very idea seems dirty.

One trivial example: A medium-sized bar of soap last the two of us four months, with daily washes, baths and showers. How? We use sponges. Not real ones (very soft but fall apart in two days), synthetic Boots babysponges. Wet them before applying the soap and the tiniest amount produces a rich lather. We ensure the soap is never dropped in the water or left under the shower. Pure habit, we never think of it. At that rate, we can treat ourselves to the most extravagant luxury soap we choose.

By contrast, a relative visited who was used to wastage on a North American scale. The three of us wiped away a toilet roll a day. Our metred water consumption tripled. We sloshed twice as many chemicals in the swimming pool (her lavishly applied hairconditioner polluted the water). And so on...

Incidentally, do you know how long things last you? You should now. You possess a record of what you bought and replaced when. Perhaps some of the answers will shock you. If so, check to see that items are really being used for what they were intended and not just squandered because they are to hand.

Any organisation employing women which provides soft toilet roll for instance, should brace itself for a shock. It is grabbed for makeup remover, makeup applicator, kleenex substitute, floorcloth substitute, towel substitute, to do any sort of mopping up by the mile - you name it.

Good habits and awareness are the main ways of reducing what we use. Another ploy is to make an article more difficult to squander. If you reduce the water-pressure, people soon use less water. Why? They cannot be bothered to wait for it. Often, they never needed it but, because it was there, they let it flow.

Instal your telephone in a less comfortable place. Family will think twice before exchanging trivia by the expensive hour. Instal it high up - even toddlers can call up the speaking clock in Japan. Avoid a mobile phone completely. How many people realise that you pay lavishly for both out coming calls and those you receive - whether you wanted them or not. Fancy paying to tell a pestering saleman to get lost! Keep that telephone card well away from your children too. The phone must act only as a convenience, a way of saving shoe leather and petrol, and of providing internet and faxes. It is emphatically not entertainment nor a way of avoiding decisions by asking everyone else first - and then relaying their opinions to everyone else. Nor does a phone protect your children or keep them under your control.

Watch as you use a cleaning product - where is it actually going? Spray polish for instance mostly ends up on the floor. Spray it direct on your polishing cloth rather than at the article to be polished. That way, you get the benefit of all the spray plus the advantage of the very fine mist. That is true of many spray products.

Incidentally, a refillable aerosol was patented in the States - in 1941! What is more, you could gauge at a glance how much product was left just by turning it upside down! (footnote - Source Comment Ca Marche vol 1 published by Editions Atlas 1978 p65) Which leads us to another point. How many containers are designed so that the last drop is wasted? Yet that `drop' might be sizeable.

Or you are led to assume you have used it all. Cut open plastic tubes, containers etc - you will be surprised and annoyed how much you would have jettisoned. Anything saved is a bonus.

Save money by finding a second, or multiple use for things. Bleach, diluted with water, cleans and disinfects just about anything. Why buy binliners when you throw away supermarket bags by the dozen? Why buy dusters or floorclothes when you throw away old jumpers and vests? Everyone gets dozens of free envelopes in their junk mail. If you baulk at drawing a line through the address and using them yourselves, they make ideal labelled containers for tiny things like seeds. Why buy jampots for your jam when, if not you, your friends sling away shop-bought ones by the dozen?

Why buy slugpellets which can poison your children or animals when you can use the cardboard cylinders inside toilet and kitchentowel rolls? We cut them in 2 inch lengths, and place them firmly in the earth around each threatened seedling. Slugs and snails rarely manage the steep double slope. When the plant reaches 2 inches, we remove them. Imagination again.

Similarly, yoghurt pots substitute for seedpots. Old toothbrushes are ideal for cleaning delicate tiny things. We save any ribbon, padded postbags, buttons for reuse. The limit is your imagination. Provided everything is stowed away so you know where to find it.

The correct approach was summed up centuries ago by a poet

Sparing not spending.

Mindful though not mean.

O'er all presiding.

Yet in nothing seen.

Economising should not make you miserable, nor does it mean you do without things. It is simply habit. And manufacturers would rather we bought more instead.

Everyone cherishes their own pet economies - some are not economies at all. We list a modest three examples.

1. False economies - like buying what you do not really like because it is cheaper. We buy top-quality products - no question of substituting cheaper junk - and we use them completely. Nothing is thrown away half-full. Every last crust is used, either for dried breadcrumbs to coat meat or fish, or to put in the compost heap to make free fertilizer. Anything we do not eat up is offered to the cat. If he refuses (rarely), it goes on the compost heap. Who was it who described the fridge as a device for throwing away tomorrow what you would otherwise throw away today? Not in our house.

People who are rushed off their feet have neither time nor energy to extract the most from what they buy. You now have the time - well-used it can make a lot of difference.

2. False economies - like doing-it-yourself when factory produce is much better and cheaper.

Look in the local paper - we can almost guarantee someone is trying to sell an expensive knitting machine. They bought it in the hope of kitting out the family or expanding into a profitable sideline. Yet the world is awash with cheap woollens. The same applies nowadays to dressmaking. Can you really hope to save, taking quality into account?

By contrast, the person who can iron as well as a drycleaner's press can really save money. So can one who can repair rather than make clothes, bedding, curtains etc Or alter second-hand ones. Not to mention the one who is handy with the scissors and shampoo and can genuinely produce a salon-quality cut, colour, set or perm. How much they have saved. And how greatly in demand they will be.

3. False economies - like doing-it-yourself without learning how to first. Such people are a pest in the house and a godsend to the building trade. Sorting out bodgers' mistakes is more lucrative to tradesmen than if they had been employed from the beginning. An unhandyman starts impulsively to work without a thought for the clothes he wears. Never mind protecting either furniture, carpets, flooring or his own tools. He will ruin new clothes rather than change. He saws through the settee arm because he uses it as a sawbench (we have known an educated professional man do this!). A bodger paints the ceiling and splatters all the uncovered furniture and carpet underneath (this too we have witnessed). Or he dismantles a motorbike engine in the living room, spreading grease and oil as he tos and fros. And he whistles happily, content that he is saving money!

A few pages back, we urged you to profit from other people's purchasing mistakes. How do they manage to make so many? One reason is the decision was rushed. Another is their own erratic decision to change their lifestyle. Change, when it is not forced upon you, is the most expensive luxury in existence. A restless urge for novelty at any price comes prohibitively expensive.

We are not saying you should never change house or car or whatever but

1. Do your sums first as outlined above.

2. Be sure that the new really is better.

3. Be sure it is the one you genuinely fancy. Not merely the only new model you can afford at the time. Otherwise, you grow tired of it in five minutes and yearn to change again. Skimping to salve your conscience as you change is the worse sort of extravagance. Why? Because you do not even enjoy it. That guarantees you will soon long to change again.

When you have bought

Read the instruction book first and keep it. Obvious. But the percentage of people who actually do both is almost in single figures. How many men snatch up the instruction book for a kitchen appliance and skim through to learn how to assemble it? When their wife tries to use it, the manual has already found its way to the bin. Or the husband assembles his new workbench with difficulty and much swearing because his wife burnt the instructions with the packaging.

Keep the instruction books for everything you possess together in one drawer for ease of access. How many hundreds of washing-machines have been ruined through ignoring the instructions and overloading them?

Lastly, take care of your new acquisition and ensure the whole family does. Whatever it is, don't bash it or throw it around. Even if is claims to be strong enough (kitchen units) don't sit or stand on anything not designed for it. Ensure it stays clean - on the inside too. How many vacuum cleaners go phut because the bag was never removed? Or the filter never cleaned? These are all such trivial things yet to ignore them costs you a fortune.

Motoring expenses

You save expensive wasted miles by advance planning. Your trips are never spur-of-the-moment dashes except in an emergency. That does not include running out of sugar - which your stock control methods should ensure virtually never happens anyway. No, each drive is planned in consultation among all family members concerned, with a full list of what you hope to buy or achieve.

No more dashing off only to find it is early closing day. Or the public office does not open until the afternoon. Or the hospital has restricted visiting hours. Or the professional only sees clients by appointment. Or the shop does not stock what you hoped. Check in advance with either timetable or by phone call.

How much frustration could be avoided among do-it-yourselfers among others by ensuring you have all the tools and equipment to hand before you start the job. How many have to drop tools midway and dash off in an expensive and perhaps fruitless search for one item without which they can do nothing and the house remains in chaos?

Can your trip wait? Why dash twenty miles today for one item when you plan to make the same trip tomorrow for the regular stock-up trip? Yet how many parents endure this just to quiet a pestering child?

Need you go at all? Can you substitute a phone call or a letter for a meeting or to pay a bill?

Must you always take the car? Unless it is both urgent and pouring with rain, if you are just going around the corner, had you considered using a bike or even walking? Or will such a prospect make you think twice about the urgency of the trip? It is the shortest journeys, where the engine does not get warmed up, which are far heaviest on fuel consumption.

Think very seriously about keeping a second car which is virtually always idle. It could be justified as a back-up for a vital work vehicle. Now, the urgency has gone. On the rare occasions when you do need two vehicles at once, a taxi works out far cheaper over the year than the running costs of a little-used car. Besides, the capital tied up in the car is depreciating. Worse, it is not earning you interest.

Any chance of saving mileage through a rota system organised with neighbours or those who make a similar journey regularly?

Finally, the average worker uses his car between 7 and 8,000 miles a year. If, without commuting, you exceed this, you are not planning properly or you are living in the wrong place. Or a combination of both.

One major factor which determines so many of your outgoings and whether you can economise on them is the climate. If you can improve this, by moving, you can save yourself a fortune in all directions. We have already described the ideal climate in chapter ten.

For the moment, we are turning to another method of economising. How best can we employ our extra free time to increase the funds available to us?

How can you use your free time to generate more income? The only limit is your imagination. Refer back first to the list of personal assets you drew up for chapter five. What can you do? What services can you offer? What do you know about?

Perhaps it is a skill which you have never exploited before - like your ability to speak a foreign language. Translation agencies exist which farm out work to be done at home. You can find them in the telephone book. The police keep lists of translators they can call upon in case of need. In our experience, most translators are limited by their academic background. If you can marry up technical and language skills, you will really be in demand.

If the language is widely-taught, there will be dozens of children who cannot cope. Parents are often willing to pay handsomely for individual tuition. This applies also in such guaranteed problem areas as maths. Personal tuition by post (and even telephone or internet) is a fast-growing area. Worldwide.

We all possess an incredible advantage in speaking English. The whole world wants - needs - to learn it. Imagine the potential market in China where it is compulsory. If you knew the low quality of local teachers or even unqualified students who charge for tuition, you would not feel diffident about offering your own expertise as a native speaker.

Perhaps you have a skill but feel it is at too low a level or too rusty to be offerable. Now is the moment to improve it. You can find the time. You have the energy. The public library is free. There may be an enthusiastic local club you could join. Equipment can be hired or borrowed. It is amazing how quickly things come back to you, once learnt.

You may have an aptitude but not realise how rare, hence valuable, that skill is. People have made careers and businesses out of their ability as story-tellers, sympathetic listeners, jokers, letter-writers, mimics, animal lovers, cake decorators, flower arrangers.

If you cannot offer a skill, how about utilising an existing asset? House too big? Could you take in an old age pensioner or student or lodger? In the Summer, many organisations advertise for temporary accommodation for foreign students say. The Brighton coastline becomes one vast dormitory. A three-week stay should not upset your life irrevocably. But it could provide a trial period to check out this possible source of revenue. An acquaintance of ours was rewarded by students for an enjoyable stay with solid gold bracelets! And an invitation to visit the palace!

House too big? Could you rent out a room for use by an organisation. Many groups find the conventional `public hall' beyond both their needs and their purse. Or perhaps they need premises to offer childcare. Just check your insurance and your deeds.

When you have exhausted the possibilities of all your assets, perhaps you will find a source of inspiration in the wastage of the previous chapter. Invent a use for old tyres/plastic cups/junk mail/anything we throw away by the tens of thousands of pound loads daily. A fortune awaits the person who can solve any of the problems for which we still hopefully buy products that never work (the dog-scarers and such described in chapter fourteen). Equally fruitful can be the stupidities, duplications, muddle, you must have witnessed when you worked, in whatever area.

Many people possess skills they do not know about. Why? Because they have never tried. Perhaps wife (or husband) always handled or dealt with such and such. No demarcation disputes from now on. Versatility is the keynote. Everyone finds out what they are best at. And no cheating. Like deliberately flooding the kitchen to get out of laundry duties in future!

Have you ever read the letters published by newspapers and magazines and said to yourself `I could do better than that'? Then noticed that the lucky writer received £10 or more. Why not try? But not off the top of your head. Do your homework first to increase your chances and save postage. Writing For Cash by Jon Atkinson and Beryl Sandwell published by Clarefen Limited, 18-20 High Road, Wood Green, London N22 6BX is one of many books which explain how.

The same applies to so many activities. Paul Hogan (Crocodile Dundee) worked on a building site. He bet his friends he could clown better than the jokers he had watched on the box the night before. - He was right. Confidence and an I'm Only In It For Laughs attitude works wonders. Michael Caine is just one example of a megasuccess who was nearly put off trying because he thought acting was not for people from his background. Such self-limitation is a great pity. Do pause before you say `I couldn't'.

Exhausted your abilities and your assets? We doubt it. Buy one copy of Exchange And Mart and study it from cover to cover. Note the million-and-one ways in which other people are generating more income.

Now exhausted your abilities and your assets? Again, we doubt it. Lateral thinking will throw up many more. Work through De Bono's Thinking Course (footnote - published by BBC books) and your imagination will be stimulated beyond belief. No need for previous qualifications or knowledge. His methods are even being taught to `no-hopers' in borstals with dramatic results.

Reached the limit? We wonder. The internet will introduce you to a mind-boggling range of more possibilities. How many people are there, world-wide, who have been through or are going through, your situation? Benefit from their mistakes and their generosity in sharing their successes.

Is there something you already do for yourself which you do well and could therefore expand? Like becoming agent for a catalogue? Pools collector? Charity collector (many these days are on a percentage basis)? Perhaps a hobby. Like beekeeping.

A general word first about hobbies. Some are potentially if not actually lucrative. Few never can be. You can spend years developing an invention, improving, producing or breeding something better than what exists at present. Perhaps you enjoyed every minute. There was also the distant (or not-so-distant possibility) that it was commercial.

Then there are hobbies with no obvious commercial application. You do them simply because you enjoy them. They are an end in themselves. Like horse-riding or playing the piano. You know that at your level of skill, no-one will employ you. But stop a minute, there may still be a way to cash in on your hobby. Can you photograph others, comment intelligently for the local paper on their performance, write a history of the sport or a simplified guide for young players? All can be remunerative.

Now you have free time to occupy, you should definitely review your hobbies. Often the most dedicated workers, the single-minded souls hit hardest by the loss of their job, were those with no hobbies at all. Now is the time to remedy that. You are a rounded human being not a work unit. You now have the physical and mental freedom to occupy yourself how you choose.

Most homes are cluttered with the abandoned relics of hobbies. Give them another look. Why did you give up? It may have been no more than lack of time. Perhaps it was not originally your hobby at all but someone else's. Why not have a try now before sending the lot to the jumble sale? You have everything to hand.

When deciding on a hobby, you obviously consider what you enjoy. That said, do ask yourself:

1. Is there genuine commercial potential? And

2. What is the capital cost relative to the time I shall spend on it?

Some hobbies come horrendously expensive. Yachting was described decades ago as `standing in a cold shower tearing up fivers'. So, even if you could coach others, offer trips or training holidays and write articles on the sport, you are highly unlikely to generate enough income to justify it.

Other hobbies need cost virtually nothing. You can write stories with little more than an exercise book and a pen. Or poetry. Your life-story or that of someone you admire. How many people create enduring works of art out of the contents of someone else's dustbin? How many others engage in crafts using raw materials they gathered free in the hedgerows?

So much depends on your staying power. You can spend profitable years with a musical instrument and a book of instructions, or a foreign language course. Or a bundle of bits reconstructing a Jaguar. Or a kit to build a dingy. But only if you are self-motivating. We have seen men of retirement age given a wonderful new lease of life on being introduced to a personal computer. And a second lease when the internet really took off.

You want a hobby you can practise locally all year round (or nearly). Some hobbies are sociable, some are solitary. The latter usually turn out cheaper, unless you have a well-equipped local organisation you can join. Even then, well-heeled members will probably push you into spending more than you otherwise would.

We have not commented on part-time jobs, night work, working from home or seasonal work. All are possibilities. On the other hand, many are notoriously sweated labour. Not only do you receive precious little but by absorbing your valuable free time, they prevent you from economising in other directions. To say nothing of the loss in the quality of life.

Equally, we do appreciate many of the ideas suggested to create income could make you 1) taxable or 2) put in danger security benefits you may be receiving. Obviously check up on this first. You may well find there are tolerances. You can earn so much daily in whatever way you choose, and unemployment benefit remains unaffected. Sometimes, it makes a difference when you earn. Provided you stay free for interviews or work Monday to Friday, you can earn as much as you like at weekends.

Paying tax is not the end of the world. Do not get paranoid. It depends what you receive. 100% of nothing is still nothing. So is a 60% pay rise. But even 50% of a decent amount can still be worthwhile. And you should keep far more than that after paying tax.

Alternatively, it is possible for the business, income etc to stand in the name of one spouse and for the other to continue to receive benefits or escape taxation. That is one reason why it is important to establish who owns what assets. And to arrange everything with one eye on the financial implications. That way, even a pleasurable activity can be turned to good account.

A sacrifice is something you choose to forego which, if you had the means, you would still enjoy. If you have never experienced it in the past, it is not a sacrifice. Who knows if you would have enjoyed it? Many things, widely considered pleasures are not enjoyable at all. Helen knew affluent clients who sold up everything and retired to the sun only to return six months later, half dead with boredom.

Something is a sacrifice only as long as you still want it. If you have found an agreeable substitute - or even something better - and it ceases to rankle, there is no sacrifice.

Here are our personal sacrifices:

1. Helen - hairdresser, beautican, housecleaner, dry cleaning.

2. John - drinking at home instead of at the pub, buying a carafe not posh wine in restaurants.

3. Both - all impulse buys. Going a la carte in restaurants. Steak (unless it is on very special offer). We used to run a dishwasher. When it packed up, we could no longer plead time-saving to justify not washing up by hand.

Not exactly crippling is it? For the price of a pint in a bar, you can enjoy three bottles at home. Here in France, we can enjoy seven. And when a single hairdo costs more than a salon-style hairdryer....

These are the sacrifices we thought we would be making:

1. House-size. Not so. Cheap big houses abound in low-price areas.

2. Car-size and status. Yes. But we would never trade a small car with an open road and all the time in the world for the most luxurious limousine stuck in traffic and racing against the clock. (Even this sacrifice turned out to be short-lived when we discovered what excellent cars Daowoo make and sell at ridiculously low prices with incredibly comprehensive guarantees.)

3. The companionship of workmates. Surprisingly, this turned out to be a myth. All one really had in common was shoptalk. Besides, however politely masked, these workmates were really rivals, in and out of work. Only selected occupations form a really tight group of mates - miners, police, soldiers perhaps - and that often at the expense of excluded families.

What you finally decide to do without depends obviously on your individual choices. It must be firmly based on what you actually spend compared to near-substitutes.

Whatever you decide, it is easier to live with if you avoid temptation.

Why buy glossy magazines at £5 each raving over sportscars you could never afford? Most magazines these days have no content, no information. They just assist you to daydream.

Avoid expensive `friends' especially the sort who try to be helpful. `We'll treat you,' they promise. The callous sort know full well the guilt that creates through not being able to reciprocate. The dim sort never understand. They think they are promising you a treat trailing you round shops watching them buying what you cannot afford. It can border on mental cruelty.

Avoid an expensive neighbourhood. If you ever indulged in `keeping up with the Jones', even unconsciously, now is the time to stop. You are not on the production line at work, nor should you be at home. Establish yourself as `eccentric'. We British respect that.

Remember too that a change of job means sacrifices too. Paradoxically, the higher the promotion the greater the sacrifices can be. For instance more commuting, longer hours, isolation, uprooting from a loved area, disruption or separation for all the family.

It helps too to feel virtuous. Most people rarely see the direct ecological damage their corner-cutting creates. Take our defunct dishwasher. Our dishwasher powder degraded into a hard white scum, recognisable, widespread, harmful and unsightly even after it had passed through septic tank purification. So does yours, except you never see what you are responsible for. A little washing up liquid vanishes.

We don't advocate the sort of sacrifice that means downgrading. Sparing use of everything you buy means you can stay with top brands. Again, this has never been easier. Everything new is designed for a mass-market. This is what Lord Sieff of Marks & Spencer calls `the democratisation of demand'. Very few appliances remain the privilege of the elite few. And if you have never been one of them, doing without is no sacrifice. If you have ever visited the Far East, you will scorn `designer' label for the joke and rip-off they are - and the cover for sweated labour.

It is also vital to build into your life a regular luxury treat. That is something to look forward to which is not strictly necessary. Perhaps a monthly meal out. Or a modest gamble. Again, what you select is up to you. All non-smokers would insist smoking is a luxury. We have yet to meet one smoker who would agree!

No one budgets exactly. Sometimes an item in fact costs less than you provided for. Do you return the excess to the kitty? Should you try to save?

Conventional wisdom said,

If you can't save on a little,

You can't save on a lot.

Alternatively, do you splurge out? Or invest the extra? Even gamble it? Or provide a nest egg? It all depends on you.

The point is - you now have a choice. More choice probably than when you were working. Then, especially without detailed budgetting, your money and your borrowing capacity were exhausted/spoken for for months/years ahead. It is calculated that the average Spaniard owes six year's salary at any given time. Just on his credit cards! Choice is freedom. Odd that a chapter on sacrifices should finish up pointing out your additional freedom.

Many people receive advance warning of a future drop in income. It may be a guaranteed change - they will reach 45 or 60 or 65 or whenever it is that they must give up their present employment. Or it may be a high probability - their industry, their firm is in recession and jobs are shrinking all round.

A lot (the majority?) would declare it is defeatist to resign oneself in advance. They would rather devote all their energies into finding a new job. However unrealistic such a quest may be. Their self-image is so tied up with the job they do that they fear without it, they would cease to exist. Or at least to count.

That is understandable. It is why the following recommendations, although vital guidelines, will not demand much of your time and energy. You are still free to search. On the other hand, the planning we suggest provides a fall-back position. Would you cruise on a liner with no lifeboat?

So what should you do? Firstly, and especially if you are in business or on the books as `self-employed', do warn your accountant and financial advisers. Your fears will be kept confidential but it will enable others to arrange your affairs in the most advantageous way possible for you - whether or not you manage to continue. More on this in the next chapter. Helen has seen clients who could have been helped, not necessarily to survive but to make the best financial bargain out of the situation. If only they had tipped the wink beforehand. Obviously you should not give a similar warning to your bank manager or creditors! To do so would turn a possibility into a certainty at the worst time for you.

From now on,

Do - record all outgoings. It gets you into the habit and will provide invaluable comparative figures when drawing up the lists described in chapters three, eight and eleven.

Don't - bother to record your assets and liabilities yet. Or to go any further with calculations you do not usually make. It is time-consuming. Wait for the blow to fall when you will have more time to be thorough.

Do - slowly acclimatise your family to the idea of changes.

Don't - spring it on them when the worst has already happened. You will be reeling, at a low ebb too, no matter how much you have expected it. Not in a state to think positively or encourage them to.

Do - Pay off your debts in general. Now is the time, while your income is still high. Assuming that is, that you have not already committed every penny for months ahead. People can slide into this position without realising it when every form of credit is made so easy. If this is you - at least you should know it.

Don't - take on any new debts. The same applies to commitments and responsibilities, like that adorable Newfoundland puppy that will eat three pounds of steak a day. Never mind that its elevated pedigree guarantees it will cost more in vet's bills/kennels/obedience classes/even psychiatrist and clairvoyant than your family's medical cover.

In general, keep an objective eye on your lifestyle. Where is big money regularly disappearing without giving proportionate pleasure?

Not too onerous is it? On the other hand, it sets you up for a positive approach to change if it materialises. Other people receive more than a year's warning. Consequently they have time for more radical action. We look at their situation in the next chapter.

We do not recommend that you squander your life in nerve-wracking nail-biting, waiting for a blow that may never fall. If you are planning five years ahead, then it is for a certainty. Like retirement. Or the end of a commission in the forces. Or the completion of a particular contract, posting or assignment.

Firstly, everything advised in the previous chapter still holds good.

If the big change will be retirement and you have not done so recently, review your pension arrangements. If you are an employee with a company pension scheme, can you `buy' extra years? That is, make additional payments now which will earn you extra pension as though you had worked for the firm for longer than you really have. Depending on the figures, this can be a worthwhile, tax-deductible investment.

Alternatively, if you have no occupational pension, can you start a private scheme now? Pensions can be bought with a single payment and the contributions should be tax-deductible. On the other hand, you are starting very late in the day. The money you invest will have very little time, relatively, to build up.

Above all, ensure your contributions do not vanish in salesmen's commissions. Where part of your money is funnelled off in this way, that part never goes into your pension scheme at all so never builds up to provide the fund from which your pension is paid. Choose non-commission houses. That is assurance companies who pay no commissions to their salesforce. One such is National Provident Institution (NPI).

Paying into a pension scheme is good discipline for living on less in the future as well as helping to provide for it better.

If you run a business, as sole trader, partnership or private limited company, tell your accountant and financial advisers of the changes you envisage. Even possible collapse. They can make many recommendations to enable you legally to arrange things to minimise income tax, capital gains tax and national insurance bills for yourself, family and on behalf of employees. If they are not told, their planning will be on the basis that you continue indefinitely - with quite different results.

Further for a private limited company they can legally ensure that you draw the maximum out of your company even where that company goes into liquidation. The more warning you give them the better. A few random examples:

- they advise when you should vote yourself remuneration, bonuses etc and how.

- they arrange how you can vote (as shareholder) yourself (as director) redundancy payments, golden handshakes, ex gratia payments or the transfer of company assets, like cars, at advantageous prices.

- they calculate whether it is advantageous for the company to make pension contributions on your behalf, perhaps even setting up its own pension scheme and borrowing back its own money, even on the eve of cessation.

Each of these items can make a difference of tens of thousands of pounds to how much you have legally left in your pocket at the end of the day.

Even if your business is not a limited company, your accountant can tell you when best to officially finish trading. That can make a lot of difference to the tax you pay.

Now for your investments. In general, aim to adopt the investment strategy of chapter twelve. This is a gradual process depending on market conditions. You certainly want to avoid any panic sales. More modestly, aim to keep investments in more liquid form. That gives you flexibility for future changes. For instance, if you decide to sell your holiday flat, don't buy another. Rather, keep the money invested but accessible.

On the home front, gradually pay off all debts. Ideally, your new life should start with you free of interest-payments. As stated in the previous chapter, reduce your commitments and outgoings. This is a forerunner of the reviews we have been recommending from chapter eleven onwards.

Use the five years to replace and pay for all essential appliances that are near the end of their active life. Or set aside funds ready for when they do expire. Otherwise, appliances tend infuriatingly to all wear out together which comes as a blow. No doubt it is a legacy from when you set up home originally (or the last time).

When you choose between models, take account of the running costs of the replacement. Now is the time when you really might get bargains. You know what you want, you have the money. If your selected item comes `on offer' you can snap it up.

These guidelines will place you in the best position to face the storm - when it comes. There is only one major area left unexplored. Although not directly financial, it still effects every penny you spend. It is the social side. We consider it in the next chapter.

Suppose ten thousand of you grew up together, toiled in the same factory and lived together in the same streets. Now you all find yourself on the dole in one fell swoop or over a succession of cutbacks. At least you do not have to worry about one problem - isolation. Everyone is, in the French phrase, in the same bath. No question of guilt or rejection.

The dismissed executive in his exclusive cul-de-sac undergoes a different and more subtle trial. He lives surrounded by pushy affluent successful people. The material evidence of their undimmed success lies outside his living-room windows all day and night long.

Not only are his commitments job-related, but he may have been encouraged by his employers to over-extend himself. Perhaps to move to a more expensive area in the hope of turning neighbours into clients or establishing himself as `sound'. He may have severed all connection with his original family and childhood friends. Perhaps he chose to. Perhaps it was forced upon him (and his family) by an endless series of promotions requiring uprooting. Now, he stands alone.

Even his former pleasures are denied him if they were job-related. Maybe the company paid for his membership of the golf club in the hope of building up contacts. Banks allocate funds to employees to be spent on a charity of their choice. The employee decides which charity. It is his duty to set up and run a branch of it, all moneys naturally passing through the bank's hands.

Once the neighbours know of his changed situation, what will their attitude be? He may dread, not downright rejection, but the way he is sympathetically treated as though he is suffering from an illness. As though they will approach, but not too close, for fear of contagion. And what when even the sympathy runs out? Our hero knows he is not good company at present. Depression never made anyone gay. And he is probably relying more than usual on booze.

Suppose everyone rallies round. They determine he shall not be left out of any communal activities. The trouble is everything done communally is terribly expensive because you have every encouragement to splash out. Compare drinking in rounds with drinking over a family meal. Compare the amount a group of smokers offering their packets around every five minutes consume to what a solitary puffer enjoys. Someone suggests entertainment and everyone compulsively agrees for fear of seeming a killjoy. Collectively, all consume more than any individual wants. And when you are flush, you don't even notice.

The only solution which will keep you solvent, respected and cheerful is to move. You must move far away from people who knew you when you thought you could afford to cut a dash. After all, what is considered poor in one society is average in another and riches in a third. Even within the same town, never mind area or country.

Let's face it, if you were only a member of a group through accident of finance, your membership ended when your wallet shrank.

Many people - and their spouses - try to maintain a facade. That is reasonable so long as you accept it will be short-term only. It is good for morale to enable you to make a dignified get-away.

Executives who have clawed their way up should be good at this. They know it is not ownership of assets that counts but their use. So when the company car has to go back, they hire or borrow. If they are desperate to retreat with honour, they dismiss the domestic staff and do not employ fewer or cheaper ones. Instead, Helen has seen `Granddad' becomes the chauffeur.

Some people care greatly for their family name and do not want any branch of it to be obviously down-at-heel. It would reflect on them. Sometimes, they can be persuaded to transfer to the unfortunate member a life-interest in family assets. Without much cost to themselves, their relatives stay `respectable'.

For the same reason, it has been known to change the name of a long-established family firm before it goes into liquidation. The aim is not necessarily to cheat creditors (it may be a voluntary liquidation with plenty of funds to cover debts but advisable for tax reasons). The idea is to avoid any stigma attaching to the family name because many (most) people do not understand the difference.

Helen had clients, director/shareholders of prosperous companies who wanted to retire. They knew it was far cheaper if they allowed the company to be liquidated than wind it up themselves. They refused even to consider it while it bore the family name.

The social side is not just what the neighbours think. It is your family and friends and how you plan to entertain yourself. We will look at each in turn.

Your family

As already stated in chapter seven, you must pare your commitments to the bone. That means no family passengers.

When you watch a group of children making something, they seem so useless, clumsy and easily-distracted. You wonder why wicked employers during the Industrial Revolution ever bothered to employ them. Surely, they never got any work out of them? The same applies to a pack of dreamy, bored adolescents mooning around. Neither state is natural. Both are products of our civilisation.

We have watched five-year-olds in Morocco, cheerful, conscientious, adroit, helping Dad with his tailoring. We have seen in Britain, how the Chinese community expect even the tiniest to play his part, perhaps preparing vegetables for use in the restaurant. A tot has to work to adult standards and in an adult time-scale. Wicked exploitation? Child labour? Or valuable training? For a child, helping Daddy to work is play. It is the enforced slowing-down of the schoolroom, the eleven and more years of institutionalised boredom which is stifling.

Children take their cue from adults. Not the other way round. Tell them a task will be difficult and they find it so. Promise them it is fun and they will enjoy it. Enthuse your children with your new plans and projects and you will create invaluable allies. They will perform to the standards you set and insist on, not special `child' standards dreamt up by educational psychologists. It broadens their horizons too.

Your friends

Once you decide to limit your communal spending, you must expect your range of companions to contract. You will keep real friends but have fewer acquaintances. That is in the short-term. Later, when your new life-style is established, you may well know more people than before. We certainly do. Why? Because you are always available. More time again. Previously, work swallowed up non-business socialising time. The freedom to choose who to spend your time with is a pleasure denied to most wealthy people.

If you previously spent lavishly at Christmas and for birthdays, these are obviously areas for economies. If it were just presents, it would be partly justifiable. But cards, fancy paper, ribbons, wrapping, postage on top... A costly way to fill everyone's dustbins!

In France, no one sends Christmas cards. They make a phone call instead. What a marathon local off-peak call the price of one card plus postage covers. And if the person is such a bore that you dread talking to them on the phone, why are you sending them a card?

Like every other aspect of your life, now is the time to review your emotional priorities too. Mothers Day, Fathers Day, Easter, Anniversaries - wonderful for florists, chocolate manufacturers, the Post Office and stationers.

From now on, every time you buy entertainment, ask yourself - why am I spending? You normally find one or more of four reasons:

1. pleasure - you actually enjoy the activity.

2. it is expected of you because your mates do it. Enduring something awful for the sake of being thought a good sport is a sign of immaturity, isn't it?

3. to fill in time. Life is so dull, there's nothing on the box, I might as well...

4. it is good to talk about afterwards. For many people, the pleasure lies not in the activity (boating for instance) but in congregating in the clubhouse afterwards to talk it over.

Analysing why you spend will help you choose between the various alternatives when your means are limited. Always ask yourself too, is there a cheaper acceptable alternative? Perhaps watching the match on tv instead of paying £100 for a ticket. Perhaps waiting a while instead of dashing off to the First Night, the Premiere, the Opening Day?

Boredom can wreak havoc on your careful budgeting. So it is vital that you develop suitable hobbies and activities as outlined in chapter sixteen. Remember the old Chinese proverb:

If you want to be happy for a week - kill a pig.

If you want to be happy for a month - get married.

If you want to be happy for the rest of your life - start a garden.

And if you really want to stretch your garden-dawdling pleasure to the maximum, build a pond. A wonderful time passer. Place it where you can see it while sitting comfortably inside your lounge and it becomes a winter pleasure too. Or a bird-table...

Another wonderful way of occupying a group of adults for the maximum time for the minimum outlay is to hire a cine- or video-camera, borrow a book on film-making and try to make a film. We bet days pass before you even agree on the subject! Yet everyone is creatively enjoying him or herself.

You have already provided for contingencies? Some of the worst are those not of your own making. Things like visitors and duty visits which you feel you must make. It is not expensive to make people welcome and provide board and lodging. If they expect to be entertained free as well, the sky is the limit! Make sure they understand at the outset just what you are willing to supply. Real friends will not object. They will happily pay for their outings. The family may be more difficult. Here your own past generosity may boomerang back to haunt you. This is a particularly acute problem when you move to a holiday or scenic area. Especially if you are planning to cash in on your location by letting out the spare rooms.

Do spell out in advance how long the visit will last. Beware of bored pensioners with open-ended air tickets. They can virtually move in! We had friends who moved to the other side of the world only to have in-laws follow. They remained in residence for 18 months of the first two years.

`Alright,' you may capitulate, `You've convinced us. It is possible to live well on far less. But it would be so dull...'

People crave excitement. That is the lure of gambling. But, it is the game that generates the excitement, the struggle, not the stakes. Players and watchers can grow as tense over shove-halfpenny as over the baccarat tables. People get as elated when their simulated portfolio doubles in value as millionaires do when they have achieved the real thing.

We rule out completely -

1. Gambling with your investments.

2. Relying on a win to pay your bills.

3. Payment of large regular stake money.

And that applies to all forms of gambling from casinos, the horses, dogs, dares and bets between friends, cards, pools, bingo, charity draws, you name it...

On the other hand, a flutter may be your choice of a luxury. Or entering competitions may be your hobby. If it is excitement you are after, opportunities flood in every day in the junk mail. Free competitions, draws, whatever.

Beware the sort of `free' competition which requires you to make phone-call. Your `free' entry is charged at an exorbitant rate per minute. The organisation has no incentive to rush to tell you if you are the lucky winner - quite the reverse.

If you have to pay to enter, chose the competition which takes longest to resolve, not the scratch-now immediate sort. With both, you are buying hope. But the former is far the better buy.

Helen once worked with a happygolucky Irish gambler. `Put something on a horse for me,' Pat ordered when not wanting to accept payment for a service. On her way to the betting shop, she passed someone selling draw tickets for the Mentally Handicapped, so bought one instead. Pat was disappointed. `Now I'll have nothing on today's 2.30,' he complained.

`Yes,' she replied. `And at 3.00, it'll be all over. This ticket won't be drawn for two months. You have two months to look forward to winning a holiday in the Bahamas.'

`Terrific,' he answered, `I never thought of it like that.'

Moral - long term hope comes cheaper than immediate hope. Also, by gambling less often, you savour a keener pleasure when you do. Routine of anything blunts your enjoyment of it.

The cheapest entertainment you can offer others is home cooking. Properly managed, everyone enjoys the all-help-out meal in the kitchen. Besides, compared to a restaurant, the choice of wines and spirits is under your control. If your cooking is not up to much, you can buy in ready-prepared dishes at a fraction of restaurant prices. We have eaten out with French families where, even on Christmas Day, out of eight delicious courses, only one was actually cooked by our hosts.

`I prefer to call in caterers rather than go to a restaurant,' said one French women planning a wedding reception. `Caterers let you keep what's left over. Restaurants bicker!' Logical really, when you have paid for it. But we would never have thought to ask.

Entertaining at a technical college `training' restaurant also comes incredibly cheap without loss of standards - quite the reverse. It is the only restaurant where we have ever been served grapes individually! Each one was cut at our direction from the bunch, with special scissors. Then washed for us in the bowl provided.

We hope for the sake of your wallet that your preferred pleasures are simple ones. Or capable of simplification. After all, you can fish in the canal or off the end of the pier for little more than the cost of the tackle. Or you can fly round the world in pursuit of the few surviving marlin at £1,000 a day boat hire. If you wish to keep your catch, you pay lavishly again or it is sold by the boat owners.

You can go boating in your own luxury craft, or hire one or you can bob around the bay in an inflatable (we found the last far more fun).

The acid test is to take the total cost and divide it by the number of hours you actually spent enjoying yourself. Many pleasures are strictly seasonal.

Pleasure is not cumulative, whatever shops would like us to believe. If buying a child a bike makes him happy, buying him two bikes will not make him twice as happy. Nor should you fall prey to the idea that you can only enjoy yourself doing whatever it is you delight in:

1. wearing the latest fashionable gear.

2. doing it with the very latest hi-tech equipment.

3. doing it in the most exclusive resort.

4. doing it at the most expensive time of the season.

5. doing it before it catches on and becomes commonplace.

6. being seen to enjoy it.

7. being photographed or filmed for posterity.

8. wearing a walkman and chewing gum (otherwise it would really be a tiny bit boring).

9. with a dozen more fun activities lined up to fill in the rest of the afternoon.

By contrast, what does matter, is the level of skill at which you can still pursue your chosen activity. If you have achieved a high standard, a game with beginners can turn into a hell of frustration. Unless you appoint yourself teacher - not always a popular role.

Luckily, many pleasures come free. The public library provides not only a fantastic selection of leisure reading but, usually, it is possible to borrow records, cassettes, videos or compact disks. A video recorder enables you to record programmes to watch later, or indeed, again and again. Why pay to hire today what will be shown on television tomorrow? The television or radio can be marvellous. It is only the nonstop, automatic, half-watching, half-listening that ruins either for us.

The following are some of the wonderful, top quality freebies we have been able to download via internet:

Books (project guttenberg offers 10,000) either to read onscreen, print out or read as e-books

Sheet music

Jokes, funny stories, cartoons

Pictures from some of the finest museums in the world to print out

Names and addresses of correspondents if you are a keen letter-writer

Birthday, Christmas etc card to print out

Recipes

Instructions, everything from knitting patterns to Japanese flower arrangements

The catalogues of specialist shops from all over the world

If someone else pays for your entertainment, fine. But you must reciprocate in some way or another. A meal or food items or produce or home-grown flowers are always acceptable. They offer a cheap way to pay your entertaining debts. So you must aim to keep a fund of them available. Our enormous mimosa which flowers midwinter enables us to pay many social debts and so does our large bed of lily-of-the-valley on 1^st May.

In your budgeting, plan to have something to look forward to in the middle future. Perhaps entertaining your friends next month, say. Allow a little flexibility for the odd extravagance so that its allowed-for cost does not leech the pleasure away.

Perhaps in the past, you donated regularly to charity. Now, you donate, not your money but what is just as acceptable - your time. Offer to help instead. Or become a local councillor. That way, you still enjoy making your voice heard - expenses paid.

In conclusion, if the social side is really vital to your well-being, you must aim now to be a big fish in a small pond. It may even come as a relief. You and your family may have been waited on hand and foot as governor of a prison farm or mental institution or abroad with plentiful cheap labour. The perks of your job could have furnished you with a lifestyle beyond most people's reach. But security? Safety? Congenial company?

Anyway, it is all relative. Like the baby catfish who swam up to the surface and saw a mangy tomcat looking down. `Mummy,' burbled the tiny fish, `Come quickly. I've just seen God.'

Throughout the book, we have shown you ways to enjoy a high standard of living on far less than you would have normally spent. There is only one thing missing now for you to be happy on a limited budget. And that is your self respect.

In a big pond, everyone is obsessed with their own image. Do you now feel that to settle for less is an unbearable comedown? Even if noone you now associate with has seen you in your so-called `heyday'? If so, you will never make a favourable impression. People judge you by your own opinion of yourself.

So let's consider your self-image. What are you? What you are as an individual? Or the representative of the job you have been trained to do?

The British still value an eccentric. Such people are more interesting, more fun. What they do not like is a scrounger, sponger, idler, or chiseller. That is, someone who rather than try to make the most of their own resources, chooses to squander them. Then sits back idle and bored and live off the state.

If you are terrified, despite your obvious industry and careful returning of favour for favour that you will receive one of those labels, you must invent an occupation. This is purely for social purposes, so that people can label you.

There are so many to choose from - vague but prestigious, which commit you to nothing.

Company Director for instance. This can be arranged relatively cheaply. Who is to know if the company you own is dormant?

Author is another. If anyone enquires too closely, you are either working on an idea, at the research stage or finding a publisher. When all else fails, you have been told that, unfortunately, your work is of too high a quality to be commercial!

Or you are a freelance working from home. Or you work for charity. Who knows whether you work as an unpaid volunteer/a salaried official/on an expenses-basis-only or even as an honorary official?

Everyone respects those `of independent means' or who chose `to retire young'. Such distinction speaks for itself.

These titles just exist to tide you over until you acclimatise yourself to your new position. Then you can take your stand as an individual.

People are far more generous in their attitude than you may believe. Or than your work taught you to expect.

John organised the computerisation of pay for forces personnel in a foreign country. It came to light that one ex-soldier had continued to receive both his former pay and his pension for twenty years. He could hardly have been unaware of it. And what was everyone's attitude? Villain? Criminal? Not a bit of it. Poor fellow. He must be getting on now. What a shock it will be for him when he loses his pay. Of course, he will have spent every penny - no question of asking for it back. Everyone sympathised.

One last thought. When we visit old friends, we have been surprised to find that we are the dynamic ones not them. Why? They are too tired.

And your first step now? Read the whole book again. It is a package with many different approaches to the same problem. And now, you're on your own. How many people ever get the chance to review, revise and, we hope improve, every facet of their existence? You are responsible for the rest of your life. Exciting isn't it?

If you have found this book useful, why not try

Going for Gold by Helen and John Baker, to learn how to go abroad to work for big money - and not come home skint! It is also written from personal experience and is available free as an ebook from www.oocities.org/unclruss/ebooks.html

Money Matters for Women by Helen Baker published by Penguin 1993 price £4.99

ISBN No. 0-14-017230-0

It contains all the financial information women need to know and very few men know either.

If you have any comments on this book, you can contact us on unclruss@yahoo.fr