Learning to budget

Ellie_BB

I've been a DFW for years and years, but have just realised that I really don't know how to budget. I keep setting up lists of how much money I can afford to spend on things, and then either celebrating or commiserating every time I hit or miss target, but with no real plan on how to control this. I've been kind of hoping that by having a paper budget, my spending would some how match.

So, I've set up a budget for 2018 and set up DDs for all my debts at the level that I think I should be paying. I figure DDs mean I can't cheat on that bit.

The bit I'm stuck on is what do I do with money that I need to set aside for bigger payments (like my oil bill, or holiday). In the past I've always had an idea of how much I need to put aside each month, but in reality all I've done is spend everything I earn each month, then put the holiday on credit card and it's eventually made its way into my overall debt when I do a cc shuffle. Long story short, it doesn't matter how much I pay off the cards, it goes back on because I've not planned for the big stuff :mad:

I'm thinking I may need to set up a savings account for the 'big stuff' savings. This way I can see the money build up (hopefully before I need to spend it). This has always seemed counter productive as the interest rate on debt is so much higher than on savings, but I'm not sure what else to do.

I've been doing this too long to still be so bad at it!!

Any suggestions folks?

System

Set up a regular saver account and put the maximum monthly contribution in. It should be at a decent rate and some don't allow you to make any withdrawals so that'll get your emergency fund built up.

Ultimately though it is about self control, it isn't really a budgeting issue. Many of your costs such as mortgage, gas/electric, phone etc are fixed and grocery shopping usually doesn't vary much, it is the impulse spending that is the issue.

clairebeth

Make sure you set up ALL your payments, including debts, bills, rent and savings for the day you get paid. Allocate yourself some monthly 'fun' money and either withdraw that in cash or put in a separate account, same for groceries, ring fence the money, put it in an envelope or a separate account so you know that's what it's allocated for.

Dobbibill

Hi Ellie,

I find allocating an account/envelope for a particular category helps hugely.

I have my budget and because it's in different places, once that category is empty then I cannot have anything in that category until there are more funds.

Categories would be anything you spend money on.....absolutely anything. Mine include things like Xmas, birthdays, holidays & treats, hobbies, spending money, house repairs, bills, emergency fund etc etc.

The trick is to give every penny a job to do.
I do it every month on pay day and now it's just the norm.

datlex

Having accounts for different purposes/different bills definitely helps a lot with budgeting. You want to be in a position where you don't need to use this month's money to pay this month's bills.

debtfreeforlife

I'm echoing the suggestion to put it in separate accounts of envelopes (I use clearcheckbook for this). I did this for the first time this year (as I've previously just taken big expenses as they come) and it made a huge huge difference. First year ever that the credit card didn't come out at Christmas!

concrete_kid

I think the key to a successful budget is to track your spending meticulously for a month (or 3 if possible). This really does have to be every penny. Once you know what every penny has been spent on you can create a realistic budget.

Once you've done this you can set yourself goals for reducing your spending, but it's best not to go mad. If your food bill is £400 per month it's not really realistic to slash it to £200, but you could aim to reduce it to £350.

Also there needs to be some give in it for things you can't plan for, mine is a 'misc' category that is 10% of my pay.

Once you have your accurate budget you do need to keep an eye on it through the month to check you aren't over spending too much in any category. If this happens you can always 'steal' from other categories and rein it in a bit.

I've had quite a detailed budget for about 5 years. It has not ONCE perfectly matched with what I ended up spending, but that's not the point - it's a guide that needs to be flexible and can be regularly adjusted.

zippygeorgeandben

Dobbibill wrote: »

Hi Ellie,

I find allocating an account/envelope for a particular category helps hugely.

I have my budget and because it's in different places, once that category is empty then I cannot have anything in that category until there are more funds.

Categories would be anything you spend money on.....absolutely anything. Mine include things like Xmas, birthdays, holidays & treats, hobbies, spending money, house repairs, bills, emergency fund etc etc.

The trick is to give every penny a job to do.
I do it every month on pay day and now it's just the norm.

Is your house full of brown paper envelopes then? Are they behind the cistern?

Castrum

I use a separate current account for my spending money. All of my main bills come out of my main account, where my salary is paid into. I then transfer my spending money each month into the separate account.

This is a budgeted and fixed amount, enough for me to do all of the things I would like, but once its gone its gone! You need the discipline not to tap into other funds.

I have a savings account for the one off large items e.g. car repairs, Christmas etc. I make an estimate for what I'm going to spend each year and transfer in an amount each month.

When I was in debt I used what was left to pay off the outstanding amounts. Remember to make a plan for what you will do when you become debt free! As your debt reduces it is tempting to get into more debt, I know I made that mistake. It seems affordable, but it's actually a huge waste of money.

Now I'm out of debt I put half my surplus income in a separate savings account and the other half split between a SIPP and a low cost index fund with Vanguard. This generates a modest passive income, but as it builds up it will get more worth while and also bring me a step closer to retirement

suki1964

Oil/holidays/Christmas/birthdays etc all have to be budgeted for as well through out the year

These are the things we budget for each week/month

Oil
Coal
Electric
Rates
Car insurances
House insurance
Road tax
MoT
Services
Dentist
Hair cuts
Clothing
Phone
Wifi
Food
Petrol/diesel


Your list may also cover rent/mortgage, water rates, tv licence, prescription charges , vet fees

All those things have to be accounted for and money put aside for before we can look at what's left over to either put towards holidays, treats, savings etc

If we had debt, debt would also need to be serviced before holidays/treats/savings

If there's no money left at the end of the month for savings, then we don't get the luxuries in life such as holidays, days out etc so we live within our means and make sure we do have savings at all times

We have been in debt in the past, those days are behind us thankfully. We live quite well on very little Our biggest expenditure is cars , my OH loves his cars and likes to get a new one every few years , but we save for them

Budgeting just eventually becomes a way of life and seeing your money going in to savings rather then servicing debt becomes addictive

Perhaps you may want to do a SOA? You do t have to post it if you aren't ready, but doing one for your own personal look make help you focus on what you really can afford to "spend " each month without adding to your debt. If you do post it, there will be lots of help and advice offered to help you make savings