Advice for budgeting & money management

PrincessBubba

Hello all!

I have been messing about with budgeting for a while now and have decided it is time to get serious!!!

I have had a go and the budget planner and come out in the green which is nice!! I am aware that we spend too much money on 'crap' - ebay is my weakness! I have just sat down and created a spreadsheet with all my different accounts so I can make a note of everything that goes in and out of my accounts. I figure if I realise exactly what I am spending I will start spending less!

I have an appt. at the bank tomorrow to open a 2nd current account so I can keep bills and personal money separate. I'm also planning on opening an ISA once I've done some research on the best one.

Is there anything else I could be doing to be money wise? Can any money-savers pass on some life-chaning tips?

Thank you in advance!!!

Leanne x

LeeSouthEast

What I find really helps (besides the spreadsheets you already mention) is to consider the long-term cost implication of a purchase. e.g. I looked at getting a super-dooper mobile contract upgrade, which would have 'only' cost £9 more than I was currently paying per month. Except, for the life of the contract period (18 months), that worked out an extra £162 on top of what I was already paying (£762 over 18 months + £162 = almost a grand!).

So instead I said "go whistle" to my provider's offer, stayed on a rolling 30-day contract, lowered my tariff down 4 notches and actually saved money instead of spending what initially appeared to be a small increase. Why do I need a new phone? The one I've got works perfectly well thank you!

Sleep on purchases and 'wants'. That is the real saver. Defer BIG purchases for at least a week. I guarantee if it isn't essential, after a week, you don't end up buying it.

opinions4u

Here's a reply I gave somebody else earlier. Their circumstances may be slightly different, but you can adapt accordingly:
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lukamon wrote: »

basically, im 19, never had a credit card, but am thinking of getting one so i can pay my monthy bills hassle - free.

I've lived my life on credit card since I was about that age. I've always used a cashback card, never used it to make a purchase that I didn't have the cash for and always paid off the balance in full.

Credit cards are great used the right way, but a nightmare if you are using it to supplement your income.

my outgoings that cant be broken down into weekly are the gym - £35, bank account, £14, and phone, £35.

Take a look at how much the breakdown cover and travel insurance would cost you if you bought them separately. The breakdown cover on my bank's fee charging account could be bought for £35 on its own and I bought an annual travel policy for £30.

Can i transfer these payments to a credit card and set up a DD to my bank on the last friday of every month (paid on thurs) to make it easier or is this a sily idea and i may get hit with charges ect? (I wouldnt use the card for anything else, i have restraint)

I'd be cautious for a number of reasons.

- making regular payments on credit/debit card (such as gym) can make them a nightmare to cancel. With a direct debit you can cancel at either the bank or the gym. On a continuous payment authority to a card you can only cancel at the gym, who may choose to delay the cancellation until after another payment or two have gone out.

- will your bank pay a standing order on the last Friday of the month? Many won't. Some will make a monthly payment on the 28th of the month but the Friday could sometimes be after that. Some will pay a weekly standing order.

well, i wanted to do this with a credit card as my bank won't give me an overdraft. I dont want to get caught out on a wednesday when i'm skint and waiting for payday!

This suggests that you spend all your money and don't save. It worries me that having a credit card will simply allow you to spend more than you earn unless you are very disciplined with it.

Here's what I'd do (and that doesn't mean you should follow, because finding a sensible way of budgeting is a very individual thing and you need to do what is best for you).

1. Build up a balance in my current account of £100 (or more) and discipline myself never to go below it. That way you minimise the likelihood of bank charges and also have an emergency fall back. Just never have an emergency .

2. Open a second current account and pay a fixed amount weekly in to it to cover your direct debits/standing orders + 10%. A weekly standing order every Friday should mean that you never miss the money. Additionally, move across enough each week to cover spending on any credit card that you've done. Never use the card or cheque book on this account.

3. Open a savings account and save a fixed amount each week by standing order. Even if it's only a modest amount, prioritise saving before spending. It's the route to a secure and prosperous future. If you have excess cash the day before payday be religious about adding it to your savings.

4. Take a cashback credit card if you can get one, but only use it for the occasional big purchase (where you've saved the money up) or for normal shop purchases that you would have made anyway, and make sure that these are covered by you weekly pay. Never spend money on your credit card that you haven't got saved up .

www.moneysupermarket.com has both savings and credit card sections to help you choose the best value products. It may be, at the moment, that you prefer to stick with your existing bank. If you have 2 current accounts, a savings acconut and a credit card all in one place online this is easier to manage (but might not give you the best rates).

Most financial experts would advise that you have around 3 months pay saved up to cover redundancy or illness. Make this your next financial goal. Come back when you've achieved it and talk about what you think your next objective should be!

- how/when will you replace your car in future? They all crumble eventually and it's better to save than borrow.
- how will you save for a house deposit?
- how will you pay for a fantastic holiday before life's commitments (wife/husband/live in lover and kids!) take away the opportunity to have it?
- how will you pay for <insert something individual to you>?
- how will you fund your retirement?

You don't have to attack them all today, but some of them will be realities for you in the not too distant future.

Good luck.

PrincessBubba

Hi guys,

Thank you for the replies! :T

I will try and take note of your advice... we rarely make big purchases, but do consider and shop around before we do anyway. My phone is great - I have an O2 sim which I get 500 free texts a month for £10 top up and that lasts me a month so think that is the cheapest option for me. Nice to realise I am doing some things right!

I have no credit card debt. I do have a card, but it is for emergencies only and haven't used it for 18 months or so. I did have, but transferred to a loan which was cheaper. Next year when we plan to move I think I will get a cash back credit card for big purchases (we need a new sofa but will get one when we move) - obviously I will only spend what we already have saved up. Should I spend occasionally on my card to build up my credit rating? e.g. £10 a month or something? Again, only spending what I already have in my account.

I do have a small overdraft (£200) which I do end up in come the end of the month and so I will try to build up a reserve as suggested in my current account.

I think my main problem is my income is very small!! I am a PhD student (only 25) and so my income is small and fixed until next year when I hope to get a 'proper job'!! Once I have achieved that goal, my income will effectively double (possibly treble) and so I can pay back the loan quicker and sort out pensions etc.

I also need to work hard on saving. I may have to take some weeks/months after my funding runs out to complete my thesis so need to build up a buffer zone for that. We are also trying to save for a house deposit (rental) as we will probably have to move next year when I get a job.

Thanks again for you suggestions! Please add any more you think would help a new money saver :j

Leanne x

YorkshireBoy

PrincessBubba wrote: »

Should I spend occasionally on my card to build up my credit rating? e.g. £10 a month or something?

It's not necessary to actually use the credit card to build a credit rating. Even if you don't use the card the provider still reports a 'green zero' (as it's often known) to the credit reference agencies (CRAs) to show that your payments are up to date.

However, there's a danger that the card provider may cut your credit limit, and may even withdraw the card altogether, if it's not being used.

My suggestion?...use it occasionally.

I do have a small overdraft (£200) which I do end up in come the end of the month

If the current account is being reported to the CRAs then this is helping to build your credit rating.

CLAPTON

I would agree with yorkshireboy that you should use your CC occasionally for something you buy anyway (maybe petrol or occasional food shop) and then pay in full... in the current climate many CC companies are closing un-used CC and once closed you may find it difficult to get another.

PrincessBubba

Hi Yorkshire boy,

Thanks for the reply.

My card limit has already been cut from £3000 to £1000 and that was a while ago. I'll try and use it occasionally then. I'll request a pin number today as I have forgotten it!!

If the overdraft if being reported to the CRAs should I keep it in place then?

Thanks again,

Leanne x

PrincessBubba

Thank you too Clapton - I was typing my reponse when you replied!

YorkshireBoy

PrincessBubba wrote: »

If the overdraft is being reported to the CRAs should I keep it in place then?

Keep the overdraft facility in place...but again, it's not necessary to actually use it to build your credit rating.

That said, Yorkshire Bank have just written to me to say they're cutting my (unused) overdraft facilities across my two accounts from a combined £8,000 to less than £1,000.

PrincessBubba

Ah I see now!
I suppose that as it is only £200 it won't be too catastrophic if they decided to cancel it.
I have to say I get a bit anxious when banks make such big decisions and reading through the boards it seems to happen quite often and without warning. I think it is the fact there is no warning that freaks me out!

YorkshireBoy

PrincessBubba wrote: »

I think it is the fact there is no warning that freaks me out!

Although they don't have to, they've given me around 3 months notice.

I'll be asking them to leave my facilities where they are because it's handy for routing cheque values to savings accounts more quickly, ie I can move money after 2 days not the 4 days it takes for clearance.