Budget advice please!

macaronicheese

Ok so Im new to this... Im following the tips to clear debt. Ive started to make a budget, all is going well so far; Im feeling positive. I am a little confused though and I wonder if anyone can give me some advice....

I have divided all the less than monthly outgoings (christmas, birthdays, easter, car tax, mot etc etc) into monthly amounts. But what do I do with that money each month? I worked out that next month, because Im getting paid more (as going on maternity leave soon) and because of all the monthly payments to things not this month there will be around £400 that isnt for this month. Am I supposed to put that in a savings account?? Because surely if Im paying interest on cards and overdrafts thats silly? and how do I seperate everything in this account? Do i need a Christmas savings account, car tax savings account etc? and what if something comes around before enough months have passed (ie christmas) ill be back at square one using credit cards!!

Thanks for any advice anyone can give. Maybe my name should be confused.com

xx

Ebe_Scrooge

In general yes, you put the money aside into a savings account, and keep a spreadsheet so you can see how much of that is allocated to Christmas, how much to MOT, etc.

But I take your point about paying off credit cards. It makes sense to pay those off, you'll be paying far more in interest than you'll ever receive from your savings.

For "non-negotiable" costs such as MOT, make sure you save for that. You're going to have to pay it no matter what. Now comes the hard part - for things like Christmas, Easter, etc., then you need to make cutbacks. Whatever you've budgeted for, can you halve it, and pay the difference towards your debts ? It's not easy, particularly if you have children, but if you want to clear your debts then it needs to be done. Family and friends will understand if you explain that you can't afford to buy presents for everyone. And presents needn't cost a fortune, second-hand toys and home-made gifts can be every bit as good.

Aside from that, take a long hard look at your outgoings. What is essential ? Things like food, heating, mortgage or rent. Food, you may well be able to make substantial savings by shopping at Lidl / Aldi rather than Tesco.

Of your outgoings, what are non-essentials ? Subscriptions to the gym or TV channels are definitely luxuries. Mobile phone - can you negotiate a cheaper deal ? Though even that, it's debatable whether a phone is really a necessity, even in this day and age !

If you post up a Statement Of Affairs, people here will be able to come up with suggestions as to where you can make savings.

Hope this helps.

macaronicheese

Thank you for your reply. I have already looked at my outgoings and taken off unimportant ones etc I realised for example that i spend over 80 quid a year on cards for birthdays christmas etc! so im going to try and find cheap ones, 10 for a pound or something!

I have realised we spend wayyyyyy too much on food. We had a budget before as in we allowed ourselves £300 a month for food. When I looked at how much we actually spend it was a lot more! but I'm not really sure what to put as a realistic amount?

Then theres clothes.. I try and buy alot of my daughters clothes second hand and as for hubby and I we dont generally buy that many (I buy more than him) but with being pregnant Ive had to buy clothes and Im assuming when I give birth Ill have to buy clothes again as none of my old clothes will fit straight away (specially now Im getting rid of gym membership!) and Ive forgotten how much baby clothes cost.....

I am finding the whole thing daunting to be honest, but we cant go on like we are...

Horseunderwater

Try freecycle/freegle - people give away huge bags of baby clothes as well as adult ones. U go & collect it.

grumbler

macaronicheese wrote: »

...
I have divided all the less than monthly outgoings (christmas, birthdays, easter, car tax, mot etc etc) into monthly amounts. But what do I do with that money each month?...Am I supposed to put that in a savings account?? ...

Ebe_Scrooge wrote: »

In general yes, you put the money aside into a savings account,....

In general, you just don't spend this money. You can keep in in the same current account or separately in a savings account - in general this doesn't matter. It's even better to keep this money in the currrent account to reduce the risk of getting overdrawn accidentally and to get higher interest as good current accounts pay much higher interest nowadays (unless it's some good regular savings account).

The main point of budgeting is to calculate how much you can spend and don't exceed this amount, not to keep money in different pots and move it between them, although some people find the latter more convenient.

macaronicheese

The trouble is though Grumbler is my current account is overdrawn to its limit at the end of every month so I fear if i dont put the money aside seperately its not really there, Im just using my overdraft as usual. But then if I put it in savings, Im paying interest on my overdraft.

I think I have a long way to go with this budgeting. Ive not really worked out what I CAN spend if I want to pay any of this debt off but I have taken off all outgoings I see as non essential like eating at restaurants, gifts for each other but gifts for other people at Christmas etc ARE essential I think. Plus I need to seriously look at reducing my shopping bill....

getmore4less

If you have debts then the stratagy needs to be modified a bit.

Look at snowballing.

What you can do if disiplined is use the excess(pot)money to pay down more debt but it is allright to use a CC for some/all of that spend when the time comes.

This can be a way to get the debts onto a lower interest rate quicker as well if you have a card that has lower rates.

You must however track that the real spending is to the plan(budget) it does not matter where the money is(debt is just negative money) as long as the net position is moving in the right direction.


For the things that are less than a year away you need to look at cash flow and idealy have the SOA amount on the high side to make sure the cashflow is better.

If payments are staggered then it often works out OK but if you have car insurance MOT and Tax at the same time that can make a dent.


SPENDING DIARY is a must track every penny,
Adjust the SOA to reflect reality so it ballances,
if your target for food is £300 and you spend £400 put £400 on the SOA and there is less for other things to make it ballance.

As you start to find the savings you can adjust the amounts back down and realocate the savings

If the SOA does not reflect what you actualy spend it will not work.

If the regular spends are using up the cash then there is less for holidays,xmas and other discretionary spends.

I always think it is a good idea to look at annual totals for things you get a more realistic sense of value.

getmore4less

Another stratagy is to do the last 12months as a seperate SOA to see where you money went that is a guide for where it will keep going if things don't change, but you will have a better picture where you can cut back, somthing has to give and untill you know where your money goes you won't know where the cutbacks need to be.

How much are those Xmas gift really costing when you add a years worth of interest?

grumbler

macaronicheese wrote: »

The trouble is though Grumbler is my current account is overdrawn to its limit at the end of every month so I fear if i dont put the money aside seperately its not really there, Im just using my overdraft as usual. But then if I put it in savings, Im paying interest on my overdraft.

In this case it makes even less sense to keep the money separately in a savings account.

knack92

Further to the advice above about keeping a diary of your spending, I would highly recommend the budgeting app You Need A Budget to help you out with that. It is a really good piece of software and their website has lots of info to help you set it up. 30 day free trial at http://www.youneedabudget.com

Basically you create budget categories for everything you spend and add the spending to the software as you go which will deduct it from the remaining balance. I have the following categories/sub-categories:

Fixed monthly outgoings which I'm obliged to pay eg. gas/elec, tv/phone/broadband, council tax, other direct debits
Everyday necessities that can vary in value month to month eg. fuel, groceries, parking, lunch on the go
Future spends eg. Mot, car tax, birthdays, christmas,
Discretionary eg. Cinema, nights out, eating out
Rainy day (only used if I have money left over from everything above) eg. Unexpected car repairs, holiday fund

It's very flexible so the above is just an example but you'd want to add one for debt repayment so you can see what's going towards that each month and allocate more to it if you have extra money left in a category.

As I go through the month I make sure that no category is running into the red and if so move some money about. Eg. If I spend extra on fuel one month I cut back on my discretionary spending that month.

The key thing is that the budget doesn't care where your money is kept - it could be in one current account or split across multiple savings accounts - so it really makes it really easy to manage and see exactly how much you have spent and have remaining to spend.

FireWyrm

macaronicheese wrote: »

I have realised we spend wayyyyyy too much on food. We had a budget before as in we allowed ourselves £300 a month for food. When I looked at how much we actually spend it was a lot more! but I'm not really sure what to put as a realistic amount?

Family of 5 on £250. It is entirely possible and practical.

macaronicheese wrote: »

and Im assuming when I give birth Ill have to buy clothes again as none of my old clothes will fit straight away (specially now Im getting rid of gym membership!) and Ive forgotten how much baby clothes cost.....

Not necessarily.. I weighed less at full term than I did at my booking appointment. The little !!!!!! literally sucked stones off me.

Why do you need a gym membership? Is there nowhere to walk in the fresh air?

macaronicheese wrote: »

I am finding the whole thing daunting to be honest, but we cant go on like we are...

Come over to the Debt Free Wannabe board and talk to us...we're better equipped to help you over there. Repost with an SOA (sticky on that forum) and we can advise from there.