Learning how to stick to a budget...

DanielleR

Hiya,

I feel really, really silly about this. I'm 25 years old and I've never really... budgeted. It sounds awful I know. I start off with the best intentions but, like most things in my life, I end up getting distracted and it falling by the wayside.

At the moment I have managed to clear a lot of my debt and I've got my DFD as the 1st November 2011, but the thing is I've worked out all my debts etc and worked out a budget but I just can't stick to it.

I am in the fantastic position of not having to pay any rent etc but when it comes to silly things like... groceries, going out etc I start off well and then it all goes out the window then I end up dipping into my emergency fund or what I've already paid off and it just starts over again.

I really, really, really want to get this sorted as my fiance and I are planning to get married, get a home together etc and I want to be able to keep control of mine/our finances when it comes to it. At the moment our money is very separate (though I do owe him £400 for an unexpected bill).

Here's my SOA, I've highlighted my problem areas

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1172.85
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1172.85

Monthly Expense Details
Rent.................................... 0 < Living rent free with OH's dad
Mobile phone............................ 20
Groceries etc. ......................... 120
Clothing................................ 0 < I buy clothes rarely and only when I have to
Other travel............................ 150.3 < Train pass and driving lessons
Presents (birthday, christmas etc)...... 0 < It varies and I can't judge it
Haircuts................................ 0 < Never get my haircut (and you can tell)
Entertainment........................... 0 < Again, it depends what happens!
Holiday................................. 0
Emergency fund.......................... 100
Total monthly expenses.................. 390.3


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................1949.6....39........5
Overdraft......................1694......40........17.9
Total unsecured debts..........3643.6....79........-


Monthly Budget Summary
Total monthly income.................... 1,172.85
Expenses (including HP & secured debts). 390.3
Available for debt repayments........... 782.55
Monthly UNsecured debt repayments....... 79
Amount left after debt repayments....... 703.55

Personal Balance Sheet Summary
Total assets (things you own)...........
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,643.6
Net Assets.............................. -3,643.6

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using other browser.

The thing is, it says I have £703.55 after everything but I don't! I have kept a spending diary and I can't seem to pinpoint where it goes. It varies between someone's birthday or a heavy social month. I can't seem to find a medium ground with anything. At the moment I'm paying at least £500 pcm towards debts of this but the remainder just disappears.

I really want to be able to budget properly but at the same time I don't even know where to start! Every month is different.

Any advice on how to work out how much to allot each bit would be very much appreciated!

Kiramanic

Your problem sounds pretty similar to my fiance's in that he *should* have plenty left over at the end of the month, but doesn't and has no idea why. I've currently got him keeping track of EVERY SINGLE TINY THING he buys, whether it's a can of pop to get change on a morning or a sandwich at lunch.

An easy way to stop yourself spending more than you should on, say, socialising, is to get a second bank account or a prepaid credit card. Load up the credit card or the other bank account with your monthly "party allowance" when you get paid and don't take the card for your other account out with you, so even if you end up walking home in a group of shoeless women who can't afford a taxi and think it's hilarious, at least you stuck to your budget

intranicity

Or take your monthly 'Spending' money out of the bank in cash every month and give your other half your cards to keep them safe, hopefully you'll get used to it then, or maybe even get your money weekly, then if you do 'lapse', you'll only have a few days til your next payday.

i got in a hell of a mess through pride and ended up bankrupt, all clear and sorted now, but I take my 'allowance' out once a week and manage that way quiet well, and i've learnt the dicsipline that I have my cards with me too lol

Derivative

Clothing................................ 0 < I buy clothes rarely and only when I have to
Presents (birthday, christmas etc)...... 0 < It varies and I can't judge it
Entertainment........................... 0 < Again, it depends what happens!

The point of budgeting is that you set an amount you don't want to spend more than for presents and stick to it. Same for 'entertainment'. Personally, I just cut entertainment out completely when I'm facing a shortfall as a 'punishment' for overstepping the budget :P

DebtfreeBY40_2

To budget you have to have a budget and your "I can't judge" needs addressing I'm afraid. I've spent years (accruing £60,000 of debt) buying what takes my fancy. This year I've realised that I have to spend what I can afford. So now I have a £15 budget for presents. Its actually helped me buy great presents! By budgeting you'll know whether you can afford a heavy social month. You can't! You need to pick and choose and be proud to say, I can't afford that night out. Budgeting means putting aside an amount of money for everything you spend money on and doing your best to keep to it. That'll cut that debt short before it gets out of hand. Best of luck x

Derivative

Above post is excellent. Noone will begrudge you for not buying extravagant gifts for birthdays and so on. I would be more proud to know my friends are building themselves secure futures, than having more trinkets to store!

ixwood

Budgeting is great once you start and get used to it.

The problem I think a lot of people have is not anticipating/planning for non monthly costs and spending everything they have each month.

For example xmas, birthdays, holidays, weddings, new boilers, roof repeairs, new washing machine, Car MOT/Insurance/Tyres/Exhaust/Brakes/Breakdowns/Tax etc etc. These are all entirely predictable events (e.g. boilers will need replacing at some point between say 5-20 years, you just don't know exactly when) and should be in the budget.

So if you want a budget of £600 for xmas and £600 for holidays that year, you need to save £50 PM towards each.

Same for future car costs, house repairs, new appliances etc.

The easiest way is to set up new saving accounts for each and just set up a standing order for the start of each month.

I do this and at the start of the month £x goes into separate accounts for House maintenance, car expenses, new car purchase, holidays, xmas & birthdays, appliance replacement, and savings.

Whatever's left is my disposable income for the month and can be spent (any excess gets "sweeped" into my mortgage). That way you can't overspend without realising.

It's quite eye opening budgeting this way. Including my modest new car savings, around £500 gets moved out of my account into the various pots at the start of the month.

And you'd be surprised how quickly small amounts can build up over time. I've now got quite a healthy house repairs fund built up from small monthly savings.

The peace and mind of knowing everything is covered is great. As is having savings and actually increasing your net wealth over the years, rather than your debt.

NeverAgain_2

You have built up a fair amount of debt for someone with very low living expenses, especially as you say you've cleared a lot of it already.

The low living expenses might be part of the problem, deep down you know you can manage.

That is also likely to be contributing to your out of control entertainment budget.

Living with OH's dad is presumably a bit like living in a bedsit, you may be going out a lot because of boredom or to get some privacy.

Getting your own place with the boyfriend sooner rather than later would enable you to enjoy nights in, which are much cheaper.

Without wishing to sound like your grandad, young couples used to save up to get married, to give themselves a start together.

So you need to set your target higher, clearing the remaining debt should be fairly easy, aim to save a few thousand for married life, you will be very glad you did.

[Deleted User]

Statement of Affairs and Personal Balance Sheet
Monthly Income Details
Monthly income after tax................ 1172.85
Total monthly income.................... 1172.85

Monthly Expense Details
Rent.................................... 0 < Living rent free with OH's dad
Mobile phone............................ 20 Are you in contract? There are some good PAYG/SIM only deals for £10
Groceries etc. ......................... 120 (Is this your contribution to the groceries? If so how many people does this have to cover? - Drop brands, batch cook, meal plan etc)
Clothing................................ 0 Perhapse put something here like £5 or £10, and if it doesn't get spent pay it off your debts at the end of the year
Other travel............................ 150.3 < Train pass and driving lessons (Any wat to reduce train? weekly, monthly, quarterly, yearly pass?)
Presents (birthday, christmas etc)...... 0 < This is why a budget is a good idea - consider how many people you buy presents for through the year & christmas - so family and friends, birthdays, Christmas, mothers day, fathers day, any thing else that you celebrate (anniversaries, valentines day, etc etc) Then you have to set your self a guide of what you are likely to spend - add it all up and divide by 12. Then put this amount into an account every month, and spend it when required. This means that Christams won't break the bank, and neither with a month when you have 4 or 5 birthdays to celebrate within a few days of each other)
Haircuts................................ 0 Again maybe something here if you EVER get your hair cut Entertainment........................... 0 It does depend on what's happening, but if you budget for it here (try putting down an average)then if an expensive month crops of, you won't have to say no
Holiday................................. 0
Emergency fund.......................... 100
Total monthly expenses.................. 390.3


Assets
Cash.................................... 0 Where's the emergency cash?
Also probably worth having another account for the things that you budget for,, but don't spend every month - birthdays, clothes, etc
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Overdraft......................1694......40........17.9 Paying this off should be your priorrity as it is costing you the most in interest (According you toyr SOA, you have a surplus of £700 at the end of every month,put this towards this debt and reduce your overdraft by £600 this month, next month, and by th remaining amount the third month.
Credit Card....................1949.6....39........5 Then move on to this, and once your overdraft is under control, overpay your monthly surplus here.
Total unsecured debts..........3643.6....79........-


Monthly Budget Summary
Total monthly income.................... 1,172.85
Expenses (including HP & secured debts). 390.3
Available for debt repayments........... 782.55
Monthly UNsecured debt repayments....... 79
Amount left after debt repayments....... 703.55 Do you actually have this at the end of every month? I suspect not (as your SOA needs tweeking still: presents, entertainment, clothes, etc), when you have come up with figures for the missing amounts that you feel comfortable with you will be able to predict more acurately what you have available at the end of the month to get rid of debt.

Personal Balance Sheet Summary
Total assets (things you own)...........
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,643.6
Net Assets.............................. -3,643.6

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using other browser.

Hi,

Made some comments above, hope that they'll be of some help.

D9

david_hellier

Plan a spending diary to prevent overspend. The encouragement of overspending by the banks is the main problem with the economy, and they will look for ways to perpetuate this, for example by the introduction of contactless cards. The complete elimination of paper money is their long term aim so we as consumers must pay hawkish attention to exactly how much is available to spend.

One of the best ways to tackle this is to use the weekly subtraction method. Firstly work out all your income. If your income is monthly then divide this by 4.33, this will give you your weekly income. Note it.

Then work out your monthly essential outgoings, but exclude food (more later). Divide this by 4.33 to give you your weekly out goings. Note it.

Take the outgoing figure from the incoming figure. This is the weekly Start amount available to spend on anything else including food.

Get any little notebook ( a spending diary) and write the Start figure in it at the start of the week. As you spend or withdraw cash deduct it as you go. Try to get to the end of the week with some left in it and carry this forward to the next week and add it to the new Start figure.

Using this method ensures you do not overspend. I suggest you include food in the Start figure because the amount we spend on it can vary widely. My personal experience shows allowing a specific amount for food is impractical, however, it's up to you.

This method also requires you to effectively ignore your bank balance, because it is meaningless on a day to day basis. What you should see is it increasing steadily.

Also remember to include any OD charges, interest or other fees in the essential outgoing list, otherwise overspending will continue.

Other top tips: stop using credit cards for further spending and make FIXED repayments, never the minimum.

I have an excel spreadsheet which can work out the Start figure if you PM me with an email address.

curlytop12

david_hellier wrote: »

Plan a spending diary to prevent overspend. The encouragement of overspending by the banks is the main problem with the economy, and they will look for ways to perpetuate this, for example by the introduction of contactless cards. The complete elimination of paper money is their long term aim so we as consumers must pay hawkish attention to exactly how much is available to spend.

One of the best ways to tackle this is to use the weekly subtraction method. Firstly work out all your income. If your income is monthly then divide this by 4.33, this will give you your weekly income. Note it.

Then work out your monthly essential outgoings, but exclude food (more later). Divide this by 4.33 to give you your weekly out goings. Note it.

Take the outgoing figure from the incoming figure. This is the weekly Start amount available to spend on anything else including food.

Get any little notebook ( a spending diary) and write the Start figure in it at the start of the week. As you spend or withdraw cash deduct it as you go. Try to get to the end of the week with some left in it and carry this forward to the next week and add it to the new Start figure.

Using this method ensures you do not overspend. I suggest you include food in the Start figure because the amount we spend on it can vary widely. My personal experience shows allowing a specific amount for food is impractical, however, it's up to you.

This method also requires you to effectively ignore your bank balance, because it is meaningless on a day to day basis. What you should see is it increasing steadily.

Also remember to include any OD charges, interest or other fees in the essential outgoing list, otherwise overspending will continue.

Other top tips: stop using credit cards for further spending and make FIXED repayments, never the minimum.

I have an excel spreadsheet which can work out the Start figure if you PM me with an email address.

really like this post,thanks