Budget overhaul advice

getmore4less

Along with the top down, bottom up and diary approach there is the pick a category and analyse so you make a budget/plan just for that.

Is there is something you think uses up cash, but are not sure because it tends to be impulse buys mainly or just drains loads over time.


IME(from reviewing lots of SOA) clothes often fits into that category of spend, the essentials get bought there are impulse buys and a wardrobe full of stuff that gets used once or twice.

one way to attack that is to set an annual limit but first do an audit of what you have and what you will NEED to replace over the next year,
Anything you don't use much why? can you do something to make you want to use it more does it fit, will it ever fit no get rid.

Many find that they can reduce their clothes spends significantly as they really don't need much and can use up what they have, OK this cannot go on forever but it could well be that a year could save enough to get some of the debt down, and then with careful purchases you renew/replace on a more considered basis. if you just have a wardrobe full of rags then it won't help but most have more than they need.

Another is your home entertainment/internet, at £1k a year not that big overall but are you getting value out of it, could you look at something like NowTV/freeview/freesat, even with a decent internet phone package might be able to get the total down to maybe £500 per year and hardly notice any loss of facility.(if on a contact look at the retention deals threads for your provider)

The food budget is something you feel you need to address, with that one it often comes down to a bit of planning and smart shopping.
many will go extreme on that but it does not have to be that way, often there are one or two things that be adjusted and they knock loads off the bill.

Plenty of guides and help on that area on debtfree and the old fashioned boards. sometimes when both full time working people fall into the trap of easy ready meals/takeaways but the reality there are loads you can do that are just as quick, taste better and are cheaper from scratch might just need a bit of planning.

Depending where you are in your careers another strategy is set a spends budget based on numbers now.
Any pay rises go to longer term savings/investments/overpaying the mortgage etc, not to increase the standard of living(which will be adequate anyway).

enthusiasticsaver

megwump wrote: »

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.

.

You have relatively high household income yet have little savings, almost £10k of unsecured debt, a mortgage and according to that soa fairly high disposable income although there are gaps. Can you pinpoint why you are in debt and why you don't feel the need to get rid of it?

enthusiasticsaver

megwump wrote: »

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.

That is a good step forwards. Having a buffer is essential.

enthusiasticsaver

megwump wrote: »

This is too true! Because we can 'afford' our debt, we sometimes spend on the cc on the basis that it nets off that month. It's rubbish though, because every time we do that we're extending our period of being in debt by a month

I would agree you have fallen into that trap 100% along with millions of other families. Unfortunately the availability and acceptability of having numerous 0% credit cards has encouraged this undesirable mindset. People think, I can afford the minimum payments, I am not paying interest.

Please consider this only works until or unless one of the following things occurs.

Redundancy
Illness
Maternity leave
Childcare costs
Retirement
Loss of overtime/downgrade at work
Unavailability of credit
Rise in the cost of borrowing

There are many things which can throw a spanner in a family budget, some avoidable and some unavoidable. Consider what you would do should your income reduce due to any of the above and try to get in the habit of saving up for things rather than spending regardless of budget. In the end this will give you financial security.

trailingspouse

Well done on the story so far.

A few basic principles for you to think about (you may not be able to do these straight away, but you should be working towards them) -

pay all credit card balances off at the end of each month - that way you never pay any interest, so it really doesn't matter what interest rate is on the card.
pay by direct debit where it is cheaper (usually utilities), but pay annually where that's cheaper (eg car/house insurance)
for instant savings, start by looking at your biggest spends
do you have an interest-bearing current account? They're not as good as they used to be (I speak as the owner of a Santander 123 account...), but it's still better than nothing.

Start practicing saying those 5 little words that mean so much - 'No, we can't afford it'. Say it out loud.

You work hard for your money, don't just give it away. Every time you're thinking of spending money, ask yourself what you're getting in return. If the answer is 'not a lot' then don't bother.

LabRatty

“
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.
Originally posted by LabRatty
”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.

It's quite possible for your savings to do two things at once. We keep around two months' money in interest-paying current accounts and then have several regular savers on the go. In a dire emergency, the regular savers could be plundered.
If not required, they go on to earn interest at the end of the term and are then either used for specific projects (old house, maintenance often needed), recycled into new regular savers to continue the cycle or parked in investments if there is enough readily available cash held.
LR

megwump

enthusiasticsaver wrote: »

You have relatively high household income yet have little savings, almost £10k of unsecured debt, a mortgage and according to that soa fairly high disposable income although there are gaps. Can you pinpoint why you are in debt and why you don't feel the need to get rid of it?

A couple of big expenses came up - I needed a new car and my husband unexpectedly had to return his HP car before the end of the term which came with penalties. A few spending habits which have since been broken also crept in & added up fast, though we were never using it for essential living expenses.

I do feel the need to get rid of it, but I'm not precious about hugely speeding up the process beyond the payments we're already making which are far in excess of any minimum payment. Add to that the fact that it's interest free (on one card - the other card is one we specifically use for overseas spend because it is so good re charges etc, and we've just had some time abroad - that balance will get transferred onto the other one so we don't pay interest on it).

megwump

getmore4less wrote: »

IME(from reviewing lots of SOA) clothes often fits into that category of spend, the essentials get bought there are impulse buys and a wardrobe full of stuff that gets used once or twice.

one way to attack that is to set an annual limit but first do an audit of what you have and what you will NEED to replace over the next year,
Anything you don't use much why? can you do something to make you want to use it more does it fit, will it ever fit no get rid.

Many find that they can reduce their clothes spends significantly as they really don't need much and can use up what they have, OK this cannot go on forever but it could well be that a year could save enough to get some of the debt down, and then with careful purchases you renew/replace on a more considered basis. if you just have a wardrobe full of rags then it won't help but most have more than they need.

Clothes doesn't come out of the joint account - that would be part of the £800 each we get allocated. For now, I'm not looking at reviewing our personal expenses, only our joint ones. That said, I do take your point.

Another is your home entertainment/internet, at £1k a year not that big overall but are you getting value out of it, could you look at something like NowTV/freeview/freesat, even with a decent internet phone package might be able to get the total down to maybe £500 per year and hardly notice any loss of facility.(if on a contact look at the retention deals threads for your provider)

Fibre broadband (no landline), spotify, nowTV, netflix and audible. That makes up our costs and we both use all of them a lot. Apart from the broadband, I don't think there's any way to lower those costs, so I'm all ears if there is.

The food budget is something you feel you need to address, with that one it often comes down to a bit of planning and smart shopping.
many will go extreme on that but it does not have to be that way, often there are one or two things that be adjusted and they knock loads off the bill.

Plenty of guides and help on that area on debtfree and the old fashioned boards. sometimes when both full time working people fall into the trap of easy ready meals/takeaways but the reality there are loads you can do that are just as quick, taste better and are cheaper from scratch might just need a bit of planning.

Practice, practice, practice! Sometimes we're better at this than others, and this is definitely the month to month area where we've got the most scope to make changes.

Depending where you are in your careers another strategy is set a spends budget based on numbers now.
Any pay rises go to longer term savings/investments/overpaying the mortgage etc, not to increase the standard of living(which will be adequate anyway).

Agreed. We have recently committed to this

megwump

enthusiasticsaver wrote: »

Redundancy

We're both in growth phases with our organisations and I've got exceptionally good protection. I've never particularly worried about this - we were one income for a time and coped really well.

Illness

Statistically more likely to happen to me not him and I get 6 months full pay and six months half.

Maternity leave
Childcare costs

I can safely and happily say that's never going to happen

Retirement

We're in our mid thirties with good pension packages behind us.

Loss of overtime/downgrade at work

Neither of us get o/t and downgrades genuinely don't happen in our professions

Unavailability of credit

I'm not sure what this really means as we've no plans to extend our credit situation.

Rise in the cost of borrowing

The place this is an issue is with the mortgage. We will be remortgaging in about a year and if the rates have gone up then we have the option to a) afford the increase because we'll have less debt by then anyway or b) extend the years remaining on the mortgage as we're on track to be mortgage free by 51 at the moment

There are many things which can throw a spanner in a family budget, some avoidable and some unavoidable. Consider what you would do should your income reduce due to any of the above and try to get in the habit of saving up for things rather than spending regardless of budget. In the end this will give you financial security.

I totally agree and my reason for explaining one by one is to show how we've got into the belief that we're safe - which truly is paper thin when you get into it, I know that. I've bounced back from some bad situations and I am better at reacting and dealing with a situation than preparing for one, so this is a big shift for me.

megwump

LabRatty wrote: »

It's quite possible for your savings to do two things at once. We keep around two months' money in interest-paying current accounts and then have several regular savers on the go. In a dire emergency, the regular savers could be plundered.
If not required, they go on to earn interest at the end of the term and are then either used for specific projects (old house, maintenance often needed), recycled into new regular savers to continue the cycle or parked in investments if there is enough readily available cash held.
LR

I like that plan a lot - an on hand fund and a background one earning away which you don't touch. I will come back to that when we're ready to get saving again (and I will look into moving the isa money somewhere more fruitful in the meantime).