Day to day spending

jamels2

I currently just have one current account.
I usually withdraw some cash and also do a few debit card transactions each week.
My spending is usually groceries, fuel, coffees, birthday presents, eating out.
Should I carry on as I am or try to be a bit more organised?
I am thinking one of the following:
1. Cash only, withdraw say £150 a week and that covers everything.
2. Second bank account and transfer £150 a week between accounts.
3. Credit card and pay it off every month?
Any thoughts on how to budget better welcome.

[Deleted User]

It depends on your approach to money.

The most financially rewarding way is to use a credit card and clear in full each month. However, some people can't handle them and overspend.

At the other extreme, you could take all your cash out and once you've spent that, you can't spend any more until you get paid again. However, financially, it's a very poor way to operate but for some people it's the only way not to get into debt.

You need to figure out where you are on the spectrum.

Either way, consider what you're spending your money on.

Ebe_Scrooge

I'd echo what ZX81 says. As long as you're disciplined, then a credit card can be a very useful tool. Perhaps the most important thing to remember is not to look upon it as "free money", and don't use it to buy things you can't afford or wouldn't ordinarily buy. Set up a Direct Debit to automatically pay the full balance every month. If you do this you won't pay any interest, and you'll have the added bonus of building up a favourable credit history which will stand you in good stead if you want to take out further credit in the future. Plus, if you buy something worth between £100 and £30,000, you'll automatically be covered by the S75 guarantee which can help if something goes wrong with the purchase.

Some cards also offer bonuses of some form - airmiles, cashback, Tesco clubcard points, etc. These will not usually amount to a huge amount, but can be a nice little bonus. Personally I use a Tesco card for the Clubcard points. It's probably (almost certainly) not one of the best reward cards out there, but it suits me. Airmiles are no use to me as I hardly every fly - but every quarter I get about £10 - £15 or so in Tesco vouchers. Like I say, it's not a huge amount, but it's free so I'm not complaining.

The danger that some people fall into is in not paying in full every month. If you don't pay in full, you'll be hit with some fairly hefty interest charges, and in some cases this can lead to a downwards spiral of debt.

So, as long as you're sensible and don't spend what you can't afford, then yes a credit card can be very useful. But just be aware of how it works, and be aware of the pitfalls if you don't use it responsibly.

Terry_Towelling

You could try a second current account - one that pays credit interest, preferably.

Once that is set up, use your credit card for everything that you would normally buy with cash/debit card. Each time you make a credit card transaction, transfer a like amount from your main current account to your new, interest-bearing current account.

Finally, ensure that you are set to pay your credit card in full by direct debit from your new current account.

You might want to put a buffer of cash into your new account to start with (just in case you forget to make a transfer) but, to be honest, it shouldn't be necessary as long as you use your card regularly and always transfer the cash to your new account in readiness for collection. In truth, if you are diligent with your transfers (preferably do them on the same day as the CC purchase) you will find that your new account creates it's own cash buffer as a result of the (usually) 25 day window between receiving a CC statement and the direct debit being collected.

Obviously, you don't need to have a second current account to make this work; you could use a savings account or just a single (interest-bearing) current account. However, this way will ensure you don't overspend by accident, and will avoid any problems that would be created if you forgot to transfer cash back from a savings account to your current account in time for the CC direct debit.

As with all cash-solutions it isn't magic, and you still need to be diligent with your money movements and keep an eye on things - especially until you are established with whatever solution you choose.

gionnetto

jamels2 wrote: »

Any thoughts on how to budget better welcome.

I'll tell you how I do it - it might give you some ideas

I have 2 current accounts, 2 credit cards and 2 savings accounts.

My wages get paid to my BOFI account at the end of the month.
On the first of each month, I move the money for the rent and the groceries to my secondary account with Halifax. I also transfer all I can to my regular saver with Virgin Money, plus another minimum transfer to my instant savings account (Marcus). Utilities and insurances are paid off from my BOFI account via DD through the month.
My secondary account is used for my rent (which I report to the Rental Exchange via open banking) and groceries, plus 2 DDs (mobile and Vanquis) so that I can avail of the rewards.

My credit cards are with Vanquis (which I use for a couple of small monthly subscriptions - around 15 GBP in total - paid off in full each month via DD) and Virgin Money 0% on purchases (which I use for bigger purchases - minimum payment via DD).

My savings account are with Virgin Money (regular saver - 250 GBP/mo, 3%) and Marcus (1.45%, 50 GBP/mo minimum via SO at the beginning of the month, plus any left over from the previous month the day after my wages are paid).

Unexpected expenses and leisure come out of BOFI account.

18cc

The 'safest' way is 1 or 2.

If 2, try Starling Bank - they have an overdraft slider you can set to zero and they won't let you go overdrawn ie if you try to then payments will be declined.