Budget overhaul advice

badger09

I doubt it.

Have another look at all those 0s

If you're serious, you should probably start with a very detailed spending diary - both of you. And be scrupulously honest about every penny you have spent. Until you know what you are both spending that apparent:cool: surplus of £2600 per month, you will make little progress.

Good luck

megwump

badger09 wrote: »

I doubt it.

Have another look at all those 0s

If you're serious, you should probably start with a very detailed spending diary - both of you. And be scrupulously honest about every penny you have spent. Until you know what you are both spending that apparent:cool: surplus of £2600 per month, you will make little progress.

Good luck

The zeroes are all real in terms of what we budget for each month (no pets, kids). What I did miss off was a pretty big one!

We each take £800 per month into our own disposable income. That's where each of us pays our personal expenses such as mobile phone.

That leaves us with about £1k surplus each month:

The only things we need to start properly budgeting for are the annual things which we pay for each month because we can afford it - namely car tax and car insurance. We need to get a handle on HOW we allocate the money we're spending on things I've mentioned previously like home improvements. We're definitely overspending on food and 'stuff'!

I've started on YNAB, set my budget up and gone through two of their webinars today - feeling positive about getting a handle on this!

getmore4less

There lies the root cause of your problems you don't really budget.

As you have the ability to manage the cash flow through a decent income and debt you can just look at the annual totals, it does not matter when the spends happen as long as they are planed.

Amount left after debt repayments....... 2,668.5

on a well developed SOA this will be close to zero.

The amount left goes on entertainment, holidays, gifts etc - at the moment we are tending to put a big chunk towards home improvements each month

Get those into the SOA

Home improvements make a plan for the things you want to do cost them out and get them on the SOA as I said before do at least 12 month ahead so if you want to spend £12k on the house in the next 12 month stick £1kpm on the SOA. it does not mater that the next project costs £3k it is the £12k for the year you track.

We each take £800 per month into our own disposable income. That's where each of us pays our personal expenses such as mobile phone.

It is up to you how much detail you want but start with two new spend lines
£800 my spends
£800 his spends.

if you want to look at those in more detail do mini/personal SOA for the £800. ideally you pull the regular manageable costs that you want to track out of there ie. mobile contracts

The only things we need to start properly budgeting for are the annual things which we pay for each month because we can afford it - namely car tax and car insurance.

there is a lot more than a couple of insurances
Stick those 2 on now annual/12 again the cashflow will sort itself out once you have everything on the list.
you will soon think of others.


What you are trying to do is build up a picture of where the money goes till you get a balanced budget.

As time goes on you can get into more detail of the bigger items on the SOA like the £800 each that's quite a lot that just goes on stuff break it down as and when you are ready.

Another classic big one is the catch all "grocery shopping"

often the first breakdown for that one is to split out food,alcohol,other.

entertainment is a big catch all does it include takeways, pubs, restaurants theatre ....

they can be broken down. might be some of those spends are mixed in with the £800 each

Holiday................................. 0

no holidays planned for the next 12 months not even a weekend away, you must have an idea how much you want to spend on the next one.


Petrol/diesel........................... 50
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0

You cannot run a car on fuel alone. tax and insurance are known,

look at the last 3 years of bills add them up total/(3*12) gives a monthly estimate and add at least 10% that will be a start for maintenance.
You also need to start planning for the replacement.
£50pm would give you £3k over 5 years(but that would be redirected to debt payments first just having it on the SOA gives focus.

Unsecured Debts
Description....................Debt......Monthly.. .APR
Joint credit card..............7410......400.......0
Clarity card...................1980......60........19
Total unsecured debts..........9390......460.......-


Two things stand out,, where is the overdraft?
why the £1980 at 19% that wants overpaying the most.

Cash.................................... 1200

seriously think about throwing that at the CC or the OD


if you want to nail the "drains up" thing you are going to need a lot finer detail, that will come once you get into the diary and see where the money is going.

getmore4less

Just to be clear the SOA is not a view of just any one month.

It is a view of the next 12 months expressed at 1/12 of the total annual cost/saving.

once the next year is nailed then the longer term goals can be planned in so big spends don't creep up on you.

..................
I will add that if your plans for the house are going to stretch the cashflow then it can be worth considering longer term debt options.

There is value in getting stuff done sooner that can justify a bit of interest and the right things may add real value as well.

megwump

Interesting comments, thank you. Our 'buffer' amount has gone up fairly recently, so the budget used to get the balance at lot closer to zero rather than today's £1k.

With ynab we've factored in things we want to save ahead for and got the balance to zero for the month ahead, that includes saving a portion for insurance and tax for the car, plus an allocation for gifts and home improvements.

getmore4less

Making great progress tracking down where the money goes

The problem I had with YNAB was it was great if you are in cashflow crisis and always running out of money month to month, which in a way that is where you are so it should help a lot.
For proper planning it came nowhere near what MSMoney has built in especially visualization of the future cashflow and net asset with long term stuff included like pensions.

Ultimately it is all about the plan, if that is realistic the rest just falls into place.

You know you have £56,400 available for the next 12 months think about how you want to allocate all of it.

£13k mortgage,council tax & bills
£19k personal spend.
£5k food ( you have £4,200 but say you overspend over budget/plan if not sure)...
£1k in home entertainment/internet.
£5500 debts

That's £43500k sorted only another £12900 to allocate.

LabRatty

Hi Meg,
Looks like you're making good progress already. In your first post you talk about wanting to make sure you have the best bank accounts etc. for your purposes.

Suggest you either use that £1200 ISA balance to either pay off the OD and get your baseline back to zero, or use it as the basis for building up your stated aim of a 3 - 6 month emergency fund, as it's not earning its keep at the moment.

You don't say who you bank with, but Nationwide flexdirect pays 5% on balances up to £2500, and you can have three between you (one each, and a joint). These would take a chunk of your intended savings and have the additional benefit of an associated 5% regular saver too.
The only disadvantage is that the 5% rate lasts for one year only, but this can be dealt with by having one account each for a year and than a joint account when that first year ends. At the end of the second year, rinse and repeat. This gives you uninterrupted access to the regular saver which takes up to £500 pcm each, ie £6K at maturity if you fill it completely.

This or a similar scheme would be a useful home for your monthly surplus once you find out where it's hiding! Martin's bank account guide gives you all the info you need to make your money work for you; you only need consider an IFA once you want to get into investing.

All the best,
LR

megwump

getmore4less wrote: »

The problem I had with YNAB was it was great if you are in cashflow crisis and always running out of money month to month, which in a way that is where you are so it should help a lot.
For proper planning it came nowhere near what MSMoney has built in especially visualization of the future cashflow and net asset with long term stuff included like pensions.

After a couple of days it feels like YNAB is actually really going to hep me with my savings (toward annual expenditure etc). We've put monthly targets in for a few things, so we'll have to consciously decide if we do x or continue to save towards y for the first few months while we re calibrate.

I'm not desperate to speed up paying the debt down - that would be a nice bonus though. Likewise the mortgage - I want to start overpaying that but not until we're out of CC debt. Pensions isn't an issue, neither of us need to contribute to a separate private pension, so that doesn't feature anywhere on the plan.

I will probably also look more at the MSMoney tool when I've got a bit more time - I generally use an ipad rather than a desktop machine and when working with spreadsheets and detailed budget tracking I need to get the laptop out - touch screen doesn't really work as well.

megwump

LabRatty wrote: »

Suggest you either use that £1200 ISA balance to either pay off the OD and get your baseline back to zero, or use it as the basis for building up your stated aim of a 3 - 6 month emergency fund, as it's not earning its keep at the moment.

Logically, you're quite right, but emotionally I just can't do it. If it meant a significant difference in how quickly we'd pay off our debt then I would, but it will only make about two months worth of difference, maybe even one if we have a really strict month on 'extras'. I feel really nervous when I don't have money I can draw on in an emergency which isn't credit.

You don't say who you bank with, but Nationwide flexdirect pays 5% on balances up to £2500, and you can have three between you (one each, and a joint). These would take a chunk of your intended savings and have the additional benefit of an associated 5% regular saver too.

Thanks - this is a great one to look into. I'll do a bit more digging around re this and other info on the banking part of the MSE site.

Much appreciated.

enthusiasticsaver

Cash isas pay pitiful rates. If you need a cash buffer use a high interest current account like nationwide or Tesco. You only need an IFA if you are looking to invest significant amounts which you are not although you could look at regular savings either into a regular saver or stocks and shares isa depending on your attitude to risk and your long term goals.

You have not said how old you are, whether you may have kids in the future or move to a bigger house or indeed would like to retire early. Getting an accurate budget though is the first step. I use spreadsheets rather than ynab and record all categories including annual spends on insurances, tv licence, Christmas, holiday.