How do you manage your finances?

Pepperoni

Just curious really - I know standard advice on here is to put away each month for annual costs (TV licence etc). But is that what you do?

Or do you just work month by month - i.e. I know I have XX left each month after all of our bills, and I know I need to allocate XX of that to a one off annual cost this month, which leaves me with XX for anything else this month?

~Beanie~

Most of my bills are paid monthly by DD so there aren't many annual costs I need to account for.

The ones I do have, such as saving for Christmas or car MOT etc, I work out how much it usually costs, divide by 12 and try and save that amount each month. I use YNAB to help with this, its great.

Pepperoni

Beanie, Thanks. I think that's what we will probably start doing once debts clear. I just can't help but think of the other things we need to save for and how much quicker we could get them if we just put all our 'spare' cash into the pot for them, then the months when we had expenses (gifts, car tax, etc) just paid it and saved less that month.

But - we have debt, so the way we have been managing finances obviously hasn't been the best...!

bargainbetty

I find it easier to have two accounts. My salary goes into one, and I have all my direct debits set up to go from it. I have another, which is used for my disposable income. I transfer the amount I have to play with into that, so I cannot accidentally spend allocated money (includng savings towards annual costs). If I have any left on payday, that sum is transferred into savings, and has built up a nice pot.

I know my household bills are safe, my savings are growing, and my fun money is mine. I've done this for 18 years, and it makes life very easy.

System

I'm really not good with finances

Personally (i get paid weekly) i allocate my rent per week (which includes all my bills, internet and tv licence), then out of whats left some goes towards food etc, and some goes towards my only other bill which is my phone bill. Anything after that either gets saved or spent. With christmas coming up, i've been buying a present or two a week to spread it out.

That's pretty much it...

Pepperoni

Beanie / Bargainbetty - Do you consider clothing etc as part of your annual costs and calculate that monthly?

trailingspouse

I know how much per month goes out in DD's etc, and I know roughly how much I'm going to pay for food/fuel and other regular outgoings.

We then have a buffer for annual/quarterly outgoings, and unexpected expenditure. On top of that we're doing major renovations to the house - we basically work out how much our budget is for each room and make sure we have that in savings before we begin the room.

As we run our own business, and our money comes as dividends (paid quarterly, but only if the business can afford to do so, and not the same amount each time), budgeting can be ticklish!! It tends to be a bit 'feast or famine'. But we're both very good at drawing our horns in if the money's a bit tight.

We have an unwritten rule that we discuss big expenditure (anything over about £100). But we also trust each other not to buy anything daft!!

We don't tend to have an 'allowance' each to spend on ourselves - I've always felt that might make you feel that you 'had' to spend it, or you were entitled to spend it, when in fact it might be better for the family unit to save it.

Pepperoni

Trailingspouse - we have recently stopped our 'allowance' and my personal reasons for wanting to do so where exactly the same as yours!

PeacefulWaters

Budgeting rule 1: Always round up your bills / direct debits when doing your sums. £53.68 is £60.
Budgeting rule 2: Then add on 10%.
Budgeting rule 3: Always round down your income. £1,517.56 is £1,500.
Budgeting rule 4: Save before you spend. Saving is part of budgeting.
Budgeting rule 5: Once you've repaid credit, never borrow again.
Budgeting rule 6: Clothes, food, petrol, social are part of your monthly (or weekly) budget.
Budgeting rule 7: Keep your spending money separate from your direct debit account.

Here's some thoughts on savings. I tend to have half a dozen accounts to split these between. One account and a spreadsheet is just as good.

Contingency fund - crisis time: Ideally an amount between 3-6 months net income that you only use to plug gaps in the case of loss of income due to ill health or unemployment. It may gave to be a slow build, but it should be the cornerstone of everybody's financial planning. Alas, few have it.

Known annual bills - the things that will happen and you control when: Car insurance, MOT, servicing. Holiday, holiday spending. Christmas, birthdays.

Unknown occasional bills - things will always break, you just don't know when: Car repairs and tyres (I do £50pcm). Washing machine, laptop, TV or fridge breaks (again, I do £50pcm). House maintenance (those windows will rot, the boiler will fail). Don't empty this account out if you have a surplus. Two things will break the following month if you do.

Aspirational saving - things to improve your life: Replacement car (this is inevitable - otherwise you'll end up needing credit again, I like a new car so try to get £200 a month into this). House move. Home improvements. Career break. Childbirth / Maternity Leave. Holiday of a lifetime.

Pension - don't leave it late: Make sure you are at least maximising your employer's contribution to a pension with your own contribution. And look to increase your own contributions beyond this over time.

Hope that helps.

These are my rules for me. Not compulsory for you!

TrickyWicky

Simple answer is that I don't manage my finances at all.

I have £0 income and health thats so screwed up I am unable to find work. I have at least 5 operations ahead of me which will require recovery time etc. Nobody in their right mind will give me a chance so there we go.

You'd be right if you said i was out of control!

~Beanie~

Pepperoni wrote: »

Beanie / Bargainbetty - Do you consider clothing etc as part of your annual costs and calculate that monthly?

Some. I buy a fair amount from Next using an account and I budget a set amount each month to pay off that. On the odd occasion that I don't owe anything to Next, I let the monthly budgeted account build up till I need new clothes.

Anything extra comes out of my personal spending money.