How do you pay for things?

cakeforbrains · 9 February 2015 at 2:58PM

A question for those of us who are paying back debt, how do you pay for day to day stuff?

Do you always pay cash? Debit card? What about having a credit card that you pay back in full each month?

If it's the credit card is it only for groceries? What about clothes, furnishings, presents?

What about non-monthly costs like Christmas? Or unexpected things like insurance excesses or car breakdowns?

We've been using a credit card and paying back in full, but admittedly this can run away from us occasionally, especially if there are bigger costs. And we want to get out of that buy now, pay later mentality. That said, we don't want savings either because we'd rather use that money to repay debt.

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Willowpop · 9 February 2015 at 3:20PM

I use cash for every day day to day things. I take a set amount out at the start of the month, put it into allocated envelopes and that is the budget for that category for that month. I find I can keep an eye on things easier that way.
I have a savings account that I transfer a set amount into each month for Xmas.

cakeforbrains · 9 February 2015 at 3:31PM

Willowpop wrote: »

I use cash for every day day to day things. I take a set amount out at the start of the month, put it into allocated envelopes and that is the budget for that category for that month. I find I can keep an eye on things easier that way.
I have a savings account that I transfer a set amount into each month for Xmas.

Thanks Willowpop. So, if you don't mind me asking, is one of your envelopes marked 'general spends' or similar? What happens if your kid (if you have one) suddenly grows 3 inches and you have to buy him new trousers and shoes? Would you have saved up already for that kind of thing?

datlex · 9 February 2015 at 3:42PM

I use a couple of credit cards which I pay off in full. I use one for rent, travel to work and council tax- this is paid from my bills account. I use a different one for most other spending, this is paid from an account I use specifically to pay that card. I transfer money into that account when I make a purchase on the card. Both of these cards earn me rewards which I then use as part of my budget alongside things such as boots points, nectar points, Tesco points to buy things like Valentines, Birthday and Christmas presents. I use some cash too when it is not possible to pay on card.
I use direct debit for bills which comes from my bills account which is fed each pay day from my principle current account.
For expensive purchases, I research how much the ones I feel will meet my needs are and then save up for them by putting money aside into a different account. I then make the purchase on the card to get section 75 protection and transfer the money saved to the account which is used to pay the card.

Willowpop · 9 February 2015 at 4:00PM

cakeforbrains wrote: »

Thanks Willowpop. So, if you don't mind me asking, is one of your envelopes marked 'general spends' or similar? What happens if your kid (if you have one) suddenly grows 3 inches and you have to buy him new trousers and shoes? Would you have saved up already for that kind of thing?

I have a box with loads of envelopes in there…. off the top of my head, I have
grocery
car tax
petrol
oyster card
child allowance
afterschool activities (DD hobbies)
school expenses (trips, red nose day etc)
birthday presents.
savings.
Each week I take out enough to divvy up between the envelopes..so I put 4 x £50 in the groceries, £60 in petrol, £20 in car tax (old car, high tax!), £5 in school expenses, £10 in birthdays and my £80 child allowance goes into the child allowance envelope.
Anything left over at the end of the month goes into the savings envelope which then covers some of the unexpected bills that might come in, like fixing the car etc.
The child allowance covers the things you mention like DD's feet suddenly growing and needing new shoes, or new school trousers etc. I rarely spend £80 a month on her essentials though tbh, so whatever is left goes into savings envelope.
Hope that makes sense!!

findingthisdifficult · 9 February 2015 at 4:32PM

I'm relatively new to this forum but what I have been doing since December is;

I have a bills spreadsheet, on payday I open the spreadsheet and also log on to my online banking. I see how much money I need for my bills, I transfer £750 in to a spends account, this will cover food, fuel, dog food, presents, the unexpected stuff etc. I also transfer £150 in to my savings/emergency account, if after bills and the £900 transfers have happened I still have spare money in my bills account I put that in to my savings/emergency fund account.

I used the emergency fund the first month I had it (January) for an unexpected £100 vet bill.

I have a spending app on my phone which I use to track my spending as I usually use my debit card, if I have actual money on me I'm more inclined to waste it. I normally check my app prior to any purchases to ensure I can actually afford it.

FatVonD · 9 February 2015 at 4:35PM

I prefer never to have/carry cash because if I have it i'll spend it, I pay for everything with my debit card, the only cash I have is to leave for DS for college.

twiggy86 · 9 February 2015 at 4:56PM

I use a combination! I find that I spend less if I'm using cash - other people say the opposite so it does depend on you.

Each month once I've set aside money for bills and debts, I work out how much I can have for "my spends" and divide the rest up between various "pots" (e.g. tax, insurance, clothes, dentist, holiday etc). My spends I have in cash - my OH gets paid weekly so I use the money he gives for my spends and for groceries (which I keep in an envelope in my bag separate from my money). That way I can see exactly how much I have (or don't have) for that week. The other "pots" are actually all just in savings account in my bank but my spreadsheet tells me how much belongs to each pot.

Actually that all sounds really complicated but it isn't! You need to develop a system which works for you, as I'm sure there are loads of different ways which work for different people.

cakeforbrains · 9 February 2015 at 5:10PM

Fab. I find it really interesting to hear how other people do things. I guess that there's no right or wrong way.

We're finding that, although we are in less debt than 12 months ago, we still overspent. On more than one occasion the credit card supposedly used for groceries-pay-back-in-full got out of hand and had to be balance-transferred onto another card. Like I say, we did pay it back, but it's not ideal.

As I mentioned on another thread, our income is massively variable, depending on how much overtime my husband has done (he does a lot). We've literally just got into a position where his basic wage will cover all standard bills, groceries, fuel, and minimum payments on debt. Obviously, though, we want to pay more onto the debt and we want to have something to spend.

So, for instance, we're taking our children to Alton Towers in May. We're doing it the 'cheap' way in that we're staying at a Premier Inn (it's a long distance from us) but because of that we wanted to book the hotel early (as the prices increase over time). We didn't have enough cash to pay for this in January (light pay day) so we went ahead and booked on a card with the intention of paying it back over the next couple of months (DH gets a big bonus in April).

Putting a trip on a card and then paying later is kinda 'normal' but it's not very DFW. Through experience I know that these kind of purchases here and there can add up and even if you have every intention of paying them back soon they just become a figure on a card...a debt.

So I've said that from now on we can only use the one card and it HAS to be paid back in full (out of the already-budgeted £600pm). And I guess we're going to have to really get used to not buying anything at all in advance.

Grapes · 9 February 2015 at 5:15PM

I tend to stay away from cash, reason being I might have to break a ten or twenty pound note for something small, a couple of pounds for instance, and with my change, this no longer looks a lot. I tend to then spend the smaller change on silly things that sure add up. I got into the practice of emptying my wallet of change every night into a tin, but I was soon owing this IOU's. Now I use my debit card, and every couple of days I have a look at what I have bought. This is a little more risky, don't really comprehend how much you're spending. I like the envelope idea, great budgeting tool.

weebit · 9 February 2015 at 5:40PM

I have a credit card which I earn 1% cashback. My wife is a second card holder on the account so we both spend on this card and it's paid in full every month. It has a £1000 limit and most months we spend more than this so it's often paid off more than once a month. last year was a pretty heavy spending year so we earned £153 on it, but crucially no interest was paid. I'm proud of that fact

The only problem is that we always seem to working a month behind, i.e. January's spending is paid off using the wages paid at the end of the month. I'm trying to get into a position where (if i wanted to), the money in the bank could pay off the card at any time. This is one of my targets for the next 6 months.

For bills such as gas/electric, TV licence etc, we have a Santander 123 account so earn cashback on that too.

How do you pay for things?

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