How to set up separate pots?

Bumbelina

I've just done my SOA (on separate thread) and now need to make it work in real life instead of just on paper. That's where my previous budgets have always come unstuck in the past. It's all very well saying I've got £10 a month for the dentist or whatever, but in reality if my roof leaks and there isn't enough in the house maintenance pot, what am I going to do?

What I've always done before is have all the money for irregular or one-off expenditure in a savings account, but then what happens is that I run out of money at the end of the month and end up raiding it. Or some unforseen thing happens that I hadn't accounted for.

When it's in an online savings account it's all too easy just to transfer it accross to my current account. I know some of you have separate savings accounts but I need 8 in total and I don't think the Co-op would let me open that many. Also, now that my credit rating has gone down the tubes I'm limited as to what bank accounts I can open.

So I'm sure I'm going to get shot down in flames for this but I thought about drawing the money out every month and putting it in actual physical pots. I know it wouldn't earn any interest that way but interest rates are crap anyway and at least that way I would feel in control of it.

My other question about the pots of money is, how do you get off the ground with them? Eg your tax disc is due at the end of the month but your car maintenance pot is empty because you've only just started this system. I can see that in that case I'll have to scrape together what money I can to pay for the tax disc, but that will mean robbing the other pots...do you see what I mean? I can't see any way of getting going with this without having any money to put into the pots to start with.

Please let me know what you think

Bumbelina

rising_from_the_ashes

Bumbelina wrote: »

So I'm sure I'm going to get shot down in flames for this but I thought about drawing the money out every month and putting it in actual physical pots.

A lot of people do this - either pots or envelopes or with online accounts. Have a look at this thread for ideas https://forums.moneysavingexpert.com/discussion/3798553

For me, cash doesn't work, I raid but with the online pots, I treat the payment as any other d/debit and never touch them until it comes to actually paying for something.

Aside from not earning interest - it's a bit of a risk keeping largish sums of money in the house in case of break ins.

Bumbelina wrote: »

My other question about the pots of money is, how do you get off the ground with them? Eg your tax disc is due at the end of the month but your car maintenance pot is empty because you've only just started this system. I can see that in that case I'll have to scrape together what money I can to pay for the tax disc, but that will mean robbing the other pots...do you see what I mean? I can't see any way of getting going with this without having any money to put into the pots to start with.

I've been having this problem - I started my pots around October time and my car tax, breakdown cover & service all fall in January - I should be able to put away £35 / month to cover these, but to get to enough money by then, I've had to put away a lot more. Same with the House Insurance (due May, will be £15 / month, but having to put away £25 to have enough by then) etc etc

It's really hard but if you can get there in the first year, things will get easier as you go along. HTH

mildredalien

Lots of people do use actual pots rather than virtual!

I add up all the 'unusual' amounts from my SOA that aren't regular monthly payments - so haircuts, dentist trips, car maintenance, presents, emergency budget etc. and put it all in one online account each month. It's a regular account with the same bank as my main one, so I can transfer money in between as and when I need. I find it really works to keeps the non essentials separate from my general direct debits and monthly spends on groceries etc. It does sometimes mean that I'm robbing from other pots to pay for one, but overall it works for me as a 'non essential extras' account, after all I can always postpone a haircut if I really need to. It might actually be better to separate car maintenance from the rest as that is essential!

I think it does take an attitude adjustment though, I can't see that money as my money to spend on everyday things, and I have to make sure that I'm withdrawing money from that account for a damn good reason.

Maybe keep a couple of online accounts for big things like car and emergency household issues, and smaller pots for semi-regular things? You won't immediately have all the money you'll need for the year, but eventually you will, and it's better than never saving for those big expenses!

Bumbelina

Good advice, thanks. Hadn't thought of splitting them between online and actual pots but I think you're right about keeping online accounts for real emergency stuff. Will just have to be super-disciplined about staying in budget for every stuff so it's not sitting there begging me to raid it...

debtfreewannabe321

I have 13 'virtual' pots with the hsbc works for me and if an emergency does come up then yes i borrow from one pot or another......but far better than going on a CC or an O/D good luck

mildredalien

debtfreewannabe321 wrote: »

I have 13 'virtual' pots with the hsbc works for me and if an emergency does come up then yes i borrow from one pot or another......but far better than going on a CC or an O/D good luck

Absolutely - there's a difference between 'oh crap my car MOT threw up £200 of extra stuff I have to get done, better raid the pots' and 'hmm I reaaaaallly want those shoes, maybe I'll raid the MOT pot to add to my clothing budget'

I have to say, it feels very comforting to have the extra money there for things that I have budgeted for/know are coming up. I actually don't WANT to raid the pots, I'd hate to go back down to having no margin for error!

rising_from_the_ashes

mildredalien wrote: »

I have to say, it feels very comforting to have the extra money there for things that I have budgeted for/know are coming up. I actually don't WANT to raid the pots, I'd hate to go back down to having no margin for error!

Totally agree ..... I have never budgeted properly for annual things and they usually ended up on the cc (which just grew & grew as I never managed to get the money together to pay them off) so I'm positive it contributed hugely to my debts .....

I did have a bit of a "hiccup" with the car - it turned out new tyres were needed (extra £140 which wiped out the fledgling emergency fund) ... I knew they'd need done soon so had incl it for this years' pot but it was not to be!

Learning2Budget

I have a mixture of online pots and actual pots. Emergency fund is online savings account so i don't tuck into that. But i have cash for food shop, kids clothes then post office budget card for car tax.
Im taking it slow but feeling more in control of my money now. Good luck it does get easier.xx

FireWyrm

I to have a mixture of real and virtual pots. I have a house account from which all DDs go, I have a personal account which has pocket money and a savings account which is hard to get to which holds money for Christmas. The Christmas fund is fed by a £50 a month DD and I have to work hard to get the money out again. I have some debt sitting on 0% cards for which I made a point of never learning the PIN. Lastly, I have a terramundi which takes notes and pound coins when and if I have them and a locked multi slot tin which has chambers for pin money (groceries like milk), kids shoes, takeaways and bus pass fund. These are fed on the first day of the month. When its gone it's gone. I have a final tin for 'emergencies' which is admittedly a little light, but I'm working on it. At the moment, it has £100 in it which will, at a pinch buy food for a month.

You can never fully cater for an emergency situation, but in my opinion, you should be making a concerted effort to put money into it each month. I am working on being debt free by next Christmas and we are a long way towards that goal as of this month. Christmas is paid for. I've had ti SORN one of my cars this month due to leaving my job, but I anticipate being right back on track again by the end of April. However, this is now month 13 of my austerity drive, so I have a little bit of a head start. During last year, I moved house, got a new job and dealt with a leaky roof...all of which depleted my reserves. It is entirely possible to work this way and I would recommend the split approach. Online accounts are good, but you should make access as hard as possible. Physical cash concentrates the mind. It seems to work for me.

misswissy

Hi Bumbelina

Everyone has different ways of making their 'pots' work and I guess you need to think about what will work for you.

I split all my expenditure into yearly bills, monthly bills and weekly/daily bills. So I have three accounts.

My yearly bills are Christmas expenditure, car insurance, mot, car maintenance, school uniforms, birthdays, holidays, etc. I have added all these up and divided by 12 to get a monthly figure. I transfer this amount every month into my yearly bills account. When a yearly bill comes up, eg, car insurance, I transfer the amount back to my current account and pay it.

My monthly bills are my direct debits for gas, elec, council tax, etc. I transfer an amount every month into this account to cover it.

My weekly/daily, eg, food shopping, kids pocket money, petrol, etc stays in my current account, and I monitor what goes out of that by using a spreadsheet.

But you're right, its a nightmare when you start this as a big bill can come up before you've put enough away. I got round this in two ways. One: have £500 free overdraft facility on all the accounts. That way you can still take the money knowing it will go back in gradually over the next two or three months. Two: Pay slightly more into these accounts so that in a year or two you will have a surplus which acts as a buffer through the year.

I no longer use the overdraft facility on these accounts and feel totally in control of my bills. Its a lovely feeling - one which you will soon be feeling yourself.

Good luck whatever you decide to do.

mrsb83_2

I have a savings account that all my regular savings for insurance, car tax, clothes etc goes into. I keep a written note of the totals for each category.

If you're running out of money at the end of the month, then your budget isn't working properly. You need to sort that out first. If your budget works then it's easy to think of the savings pot as separate untouchable money.