YNAB - 1 year of budgeting, I can see why I'm in debt now

Sharon87

UPDATE ON PAGE 2 FOR NOV 2019

I always start off with good intentions of getting my debt down, I make a budget, transfer what I need for savings and monthly spends into different bank accounts at the beginning of the month. But nearly every month I overspend.

On YNAB I have my credit cards as 'off budget' accounts, I try not to spend on these if I can help it (doesn't always work though, I should have put on 0% spend card as a budget one - the card I got to book my holiday on).

So now I've been budgeting for a year I can see what I've spent in certain categories. These are the big red categories where my spending needs to reduce:

Restaurants/Takeaways (inc expensive lunches)
Yearly: £999.95
Monthly: £83.33
(my new monthly budget is reduced to £30)

Entertainment (pubs, DVDs, cinema, theatre, apps, special birthday meals/drinking)
Yearly: £1409.88
Monthly: £117.49
(my new monthly budget for this is £50)

Holidays (and holiday savings)
Yearly: £1771.94
Monthly: £147.66
(I'm thinking of setting a new monthly budget of around £40)

Taxis:
Yearly: £206.56
Monthly: £17.21
(monthly budget of £0 - will only get one for holidays if necessary and will come under holiday budget)

Total on 'indulgences' is £4388.33
Total on future indulgences for the year: £1440
What I could have saved: £2948.33

Here's what I've paid towards my credit cards this year:
£3064.43
However I have cheated and used my credit cards for things like clothes, new phone and holiday, so my debt is almost the exact same as last year, with the indulgences spent as it is, I could have paid almost 3 grand off (3k was the aim to pay off this year).

I've done this to show how easy it is to spend so much money without realising (even when budgeting). I have made a vow to not get any takeaways or go to restaurants this month or next month. I have even gone to the extent of blocking the sites to make it a bit harder and to remind myself to just cook instead!

I have a holiday next month (been saving and planning it for years and years!), which I've decided will be my last major holiday until my debt is paid off. I have set of a limit of £480 per year for holidays/festivals, which I will set so in line with my budget. Most people veto holidays whilst they're paying off debts, but I want this to be my one treat. I can forego DVDs and the pub if I can go on holiday.

Taxis - I don't need to get a taxi except maybe for holiday, I get them sometimes because I don't want to wait for the bus! This is also getting cut out.

Entertainment - I am cutting this right back, this past month I've not spent much on booze when out, so my aim is for when I do go out with friends is to drink more soft drinks than alcohol (or lots more water), so that way I don't spend £60 on a night out! The exception being a special occasion in which I've saved up for it in advance.

It's quite disappointing to see my debt not going down, but doing this budget makes me see the reasons why and then I can change what I'm doing. I could be maybe £3000 less in debt than I am.

The one positive is that this year my debt has not increased for the first time in 8 years. I am putting the brakes on and about to reverse my way out of this debt!

Here's to a year where I actually stick to my budget and my debt goes down! :beer:

[purplesignup][/purplesignup]

tempus_fugit

Well done on getting on top of your budget and making a plan for the future. It sounds like you are bing sensible about it and allowing for at least some fun money whilst cutting back generally.

One thing I would say though is that your credit cards should really be "on budget" as all spending should ideally be budgeted for so that you accrue the funds for paying them off, or alternatively, you can build up the credit card funds from savings (if you have un-budgeted expenditure on the cards). But certainly, any cards you are using for spending should be on budget to get the best out of the way YNAB works with them.

Anyway, whatever you do, good luck with the budgeting.

enthusiasticsaver

You have discovered the holy grail of budgeting in that it all works only if you keep within the budget. Ideally you would have been looking at this monthly and realising you were over budget on those categories and either upping the budget or borrowing from other categories. Credit cards should be in the budget. I don't use YNAB but do use clear checkbook which has envelope system for categories.

Sharon87

Most of my credit cards I don't spend on, they are balance transfer cards at 0%. So to make my budget each month read 0 they are under the off budget category, it also means I have a way of tracking payments made toward them.

My spend card I should have put on budget and will do that from now on.

One thing I've also started doing last year is to put money away into a savings account for annual expenses like TV licence, contents insurance and my tax bill. Which means in January when most of these are due I can pay them without worrying! This was one thing I never did properly and probably the reason I spent money on other things and then had to use credit.

I am just debating the best way to pay off my cards, whether to save it in my 3% current account that I use as savings or pay it off straight away (all debt is on 0%) to remove the temptation of spending that money. On most cards I pay over the minimum amount so I can clear the cards quicker, and so I can pay almost £300 a month off of my debts a month, so that's also an option is to increase that. I change my direct debit to a fixed amount.

My next mission is to find a job for when I come back from holiday. I work short term contracts and there's plenty of work around so I'm not worried. I'm also doing extra work transcribing from home which is mostly how I've paid for my holiday! Another reason for no big holidays is to find a job I really want to do and not just pick anything that fits in around holidays just because I need the money,

Sharon87

3 months into the year. I've paid £626 off my debt so far. Could have been a bit more, but I did do a couple of balance transfers so the fees added to the debt.

I have reduced my entertainment spend, not quite to £50 a month, it's averaging at £73 at the moment, but still less than before.
Restaurants is average of £53, more than the £30, but less than the £83 a month average from before
taxis - completely cut out. I have taken 1 taxi (barring holiday) since then, but that was for work and can claim the money back!

I've also opened a HTB ISA, I know I can't think about buying a house until my debt is gone, but I've put £130 into it so far. Even if I don't use it to buy a house it's long term savings at an ok interest rate.

This month's challenge is surviving on 3 weeks wages instead of a whole months as I've just changed jobs, had 2 weeks off after my holiday looking for a new one (I work contracts). So my budget for April shows -£200, so need to look to see where I can make savings, whether that's walking to/from work - it takes about 80 minutes to walk (20 minutes on tube/walking), or spending less on food or not put anything towards the annual things like Christmas/large purchases, but really don't want to do that.

I might try and ebay a few things to get a bit of extra cash and try and take on some extra transcribing work.

I have spent more on clothes than I intended, but most things were necessary (my bras are expensive!), I've spent 5 months of budget in 3 months. So no money will be spent on clothes until June at the earliest!

System

Sharon87 wrote: »

I am just debating the best way to pay off my cards, whether to save it in my 3% current account that I use as savings or pay it off straight away (all debt is on 0%) to remove the temptation of spending that money. On most cards I pay over the minimum amount so I can clear the cards quicker, and so I can pay almost £300 a month off of my debts a month, so that's also an option is to increase that. I change my direct debit to a fixed amount.
,

Sounds like you have a great plan now. How about a spare treat pot that you give yourself an occasional indulgence - and so you don't feel too deprived as you ease out of old habits?

Also a question from me - which current account is giving you 3% interest - thanks!:money:

Mnd

Answer to ramble ham, I think Tsb and tesco pay 3% on current account

Sharon87

Mnd wrote: »

Answer to ramble ham, I think Tsb and tesco pay 3% on current account

Tesco current account. I got it before you needed direct debits set up. My HTB ISA is at 2%, which is pretty decent at the moment!

stoozie1

You can get 5% interest on a nationwide current account for a year, if that helps.

System

Thanks all. Wow 5% need to look into That!!

tori.k

The Statement of affairs really is the key, it took us 6 months of rejigging each category to finally find the right balance.
We are on similar paths and our process has been the same, we complete on our house on Tuesday so it's back to the debt busting for us also.
You will get there and sooner than you think, just got to keep on trucking
Good luck