First direct current accounts are interest free up to £250 of arranged overdraft. (All of them to my knowledge, though perhaps some products aren't. So you aren't paying interest on that). It should still be your top priority to clear that though, as you can then use that £250 buffer in an emergency.
With the current interest rates the opportunity cost of an emergency fund is higher than paying it off and simply using credit if needed in emergency. However this relies on you being responsible and making an effort to cut down the debt as opposed to spending. I personally decided I didn't need an emergency fund as I have other ways to deal with an emergency which would cost less.
The other thing I've decided to do [which is working well] is I divert a weekly amount of 'spend' money to a secondary account, and ONLY use that account for spending on food etc. For me it's £100 a week. I then leave my main debit card at home, and only spend on the secondary account. If there's no money in it, I can't spend, as that's 'my' money now, as opposed to the main income account which has to pay off bills etc. This forces you to 'live on less' and teaches good habits. I also use a credit card if I need to buy online, but I have a golden rule of 'if I spend it, I must immediately transfer the cash to pay it.'
The other thing I'd say is cancel paypal credit. It's far too easy to spend on, and if you mess it up it's not eligible for a balance transfer so you'll be stuck paying the interest.
You could also start a weekly/monthly diary here, just keeping track of what's in both accounts and how much debt you paid in that period. This helps self accountability.
Good luck with it! The income and fundamentals are there, you just need to get it done.
I just looked at my bank statement for last month. I have been deluding myself and am spending uncontrollably. £70 on mcdonalds, £1011 on various amazon and paypal purchases plus other smaller items here and there. I am very compulsive when it comes to spending. I had a weekend in blackpool start of the month and thought i did good only spending £200 cash (£170 i estimate on gambling) I usually waste a hell of alot more on the gambling, but for the past year gambling isnt my issue it is the buying of gadgets.
I have to admit I dont have control on my spending, I really dont know what to do. I know that simply paying off my debts is not going to fix my problems. Like a few have said I dont have control of my budget and I do see that now. Having a spreadsheet i look at every day isn't getting me anywhere.
It does appear that you don’t have a great deal of willpower when it comes to spending. Whether it is gambling, gadgets or McDonald’s you need to realise how much of your money is going out on wasteful spends and if you really want to set yourself up better financially prioritising saving and paying off debt needs to be addressed. When you get paid do you see this as spare money to be spent? You have had some good advice, you have a lot of spare income. The only thing that needs to change is your attitude to paying off debt/saving and spending and getting the balance right. Gambling throws up huge red flags as that is often a reason for getting into debt and people think eventually they will make enough to clear it. It never does. I would suggest you knock all that on the head and stop. Contact GA for help. That £170 could have paid off some of the debt.
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Thanks again for all the comments I do appreciate you taking time out of our day to give me all this help. I will go through every one of them this weekend and consolidate into a to do list. I get paid today so thought I would get on top of the allocation of all the wages immediately.
I have made some immediate changes:
I will only be taking my bank card on my journey to and from work when i need fuel and I usually top up fridays on way home. Will completely remove any chance of me getting a mcdonalds.
All my monthly bills and income go in and out of my first direct account so I am going to stop spending in this account other than the monthly direct debits and the following transfers i have setup.
I have a halifax account I just realised I can create upto 5 savings accounts in so I have created two extra savings accounts. One account is for my yearly expenses car insurance, tax, service, mot, christmas, birthdays etc.. I am putting in what I estimate I need +20% on the 1st of the month. The other account is for savings/emergency. I am putting £200 /month into this.
The current account I hold with halifax will be used for all the random spending I seem not to be keeping track of. I will be using this for Fuel £107.50, Food £200 and giving myself £200 budget per month for anything else. I also aim to cut down my spending on unnecesary
I always got overwhelmed with all the stuff going out so took the advice to automate the money management. I will review all outgoings weekly because I am sure for the next week or so there will be stuff I have bought in last few weeks that has not yet come out of my account.
Debt Free April 2023 and now a mortgage free Wannabe
Well done - that's a great start! Automated money management is definitely the way forwards - particularly if you have a lot of stuff moving about and it all gets a bit overwhelming.
The suggestion for keeping a diary on the boards here is a great one for maintaining accountability as well - I'm Debt Free now but use a diary on here just for keeping track and keeping a focus on the day to day MSE stuff that helps to ensure we stay that way. This is the thing - you do the work to GET debt free in the first place, but that's not the end of it. It's a bit like people who go on a diet, lose weight, then return to eating as they did before and are surprised that the weight goes back on. The trick is to let the process of becoming debt free (or indeed losing weight) teach you the lessons you need to make the whole thing sustainable longer term. If you do that, then maintaining that debt free status is less of a problem as you understand about budgeting, saving etc.
Well done - that's a great start! Automated money management is definitely the way forwards - particularly if you have a lot of stuff moving about and it all gets a bit overwhelming.
The suggestion for keeping a diary on the boards here is a great one for maintaining accountability as well - I'm Debt Free now but use a diary on here just for keeping track and keeping a focus on the day to day MSE stuff that helps to ensure we stay that way. This is the thing - you do the work to GET debt free in the first place, but that's not the end of it. It's a bit like people who go on a diet, lose weight, then return to eating as they did before and are surprised that the weight goes back on. The trick is to let the process of becoming debt free (or indeed losing weight) teach you the lessons you need to make the whole thing sustainable longer term. If you do that, then maintaining that debt free status is less of a problem as you understand about budgeting, saving etc.
thankyou
I have been using the bullet journal method for getting all my other stuff done and have been amazed at how much I have achieved using it. I will put any tasks that have been suggested into this. For the budgeting log I downloaded an app on my phone just to start tracking any cash spends and any spending I make on my spending card.
Also changed my spending budget to be paid into my account weekly rather than monthly as I try and fill up fuel and do weekly shop on friday after work. So I have £117 going into my account each friday. I really should know that automation is the best way, as I am a software engineer... but have buried my head in the sand hoping for the best until now.
I will update on here regularly.
As is stands my budget for this month is about £381.88 over. I have set all the automated transfers up so dont really want to adjust these amounts. My first plan is to find something to sell in the next week. I have a simpsons lego kwik e mart sealed that should sort this or something else, otherwise in a week I will have to dip into the savings pot to balance the budget for the month. I need to get to next payday without going into my over draft.
Debt Free April 2023 and now a mortgage free Wannabe
I also reduced my budget by 11.99 by cancelling youtube premium subscription. Also going to cancel cineworld card at 15.99 a month as soon as they let me.
Debt Free April 2023 and now a mortgage free Wannabe
Congratulations LegoHead - I do believe you've got it!
Is the reason for the budget imbalance at this stage because you have already committed surplus to paying off debt, or simply that with it being right at the start of proper budgeting, things haven't quite leveled themselves out from previous spending yet? In either case, it's understandable and expected - and yes, having to dip into the savings isn't ideal, but it IS better than using credit. If you can offset as much as possible from selling things/cutting expenditure though, that would be great.
One thing I do periodically is go through my PayPal and/or bank account to remove any standing orders/direct debits for things that are now redundant. One thing was my Google Drive account - I have forgotten the password, Google won't let me in despite repeated security checks etc so I have cancelled it. I don't know how much it was a month - a couple of quid maybe but still 24 pounds wasted at least. If you do this you might find some other things to get rid of.
Don't get disheartened if it takes a while to figure out budgeting, it's actually pretty hard to do (I did a short diary on an attempt and noted the lessons learned, you can find it in my history) and you need to find an approach that works for you.
I look at my spend once a month unless I'm bored. Sometimes I'm well over my "free spend" (food, clothes, going out, purchases) by quite a bit, so I make sure to look at my spend more frequently and spend less in the months after. I can do it this because I have money going into savings which is more than I have planned to spend (basically a buffer), so I can be fairly relaxed.....as long as I don't consistently overspend ☺️
If you do zero based budgeting where every pound is allocated, you need to know everything you are going to spend and be willing to to cut back on something if you do overspend in one area. It takes a lot more effort, but really works for some people.
Also, another thing I have done this week for the first time:
My partner and I share the coffee/tea budget - there is a tea shop on the way to work - a whole week of coffee can cost equivalent of 12 quid (work abroad). I have been paying for it for a few weeks because it is something that I willingly spend and budget for. However partner paid for two weeks this week so the 20 quid saved I would have previously just seen as money I can spend/launch. This time however, I have deliberately saved it. Therefore if you have incidents like this, don't see it as free money, save it.
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I have made some immediate changes:
I will only be taking my bank card on my journey to and from work when i need fuel and I usually top up fridays on way home. Will completely remove any chance of me getting a mcdonalds.
All my monthly bills and income go in and out of my first direct account so I am going to stop spending in this account other than the monthly direct debits and the following transfers i have setup.
I have a halifax account I just realised I can create upto 5 savings accounts in so I have created two extra savings accounts. One account is for my yearly expenses car insurance, tax, service, mot, christmas, birthdays etc.. I am putting in what I estimate I need +20% on the 1st of the month. The other account is for savings/emergency. I am putting £200 /month into this.
The current account I hold with halifax will be used for all the random spending I seem not to be keeping track of. I will be using this for Fuel £107.50, Food £200 and giving myself £200 budget per month for anything else. I also aim to cut down my spending on unnecesary
I always got overwhelmed with all the stuff going out so took the advice to automate the money management. I will review all outgoings weekly because I am sure for the next week or so there will be stuff I have bought in last few weeks that has not yet come out of my account.
The suggestion for keeping a diary on the boards here is a great one for maintaining accountability as well - I'm Debt Free now but use a diary on here just for keeping track and keeping a focus on the day to day MSE stuff that helps to ensure we stay that way. This is the thing - you do the work to GET debt free in the first place, but that's not the end of it. It's a bit like people who go on a diet, lose weight, then return to eating as they did before and are surprised that the weight goes back on. The trick is to let the process of becoming debt free (or indeed losing weight) teach you the lessons you need to make the whole thing sustainable longer term. If you do that, then maintaining that debt free status is less of a problem as you understand about budgeting, saving etc.
I have been using the bullet journal method for getting all my other stuff done and have been amazed at how much I have achieved using it. I will put any tasks that have been suggested into this. For the budgeting log I downloaded an app on my phone just to start tracking any cash spends and any spending I make on my spending card.
Also changed my spending budget to be paid into my account weekly rather than monthly as I try and fill up fuel and do weekly shop on friday after work. So I have £117 going into my account each friday. I really should know that automation is the best way, as I am a software engineer... but have buried my head in the sand hoping for the best until now.
I will update on here regularly.
As is stands my budget for this month is about £381.88 over. I have set all the automated transfers up so dont really want to adjust these amounts. My first plan is to find something to sell in the next week. I have a simpsons lego kwik e mart sealed that should sort this or something else, otherwise in a week I will have to dip into the savings pot to balance the budget for the month. I need to get to next payday without going into my over draft.
Is the reason for the budget imbalance at this stage because you have already committed surplus to paying off debt, or simply that with it being right at the start of proper budgeting, things haven't quite leveled themselves out from previous spending yet? In either case, it's understandable and expected - and yes, having to dip into the savings isn't ideal, but it IS better than using credit. If you can offset as much as possible from selling things/cutting expenditure though, that would be great.
I look at my spend once a month unless I'm bored. Sometimes I'm well over my "free spend" (food, clothes, going out, purchases) by quite a bit, so I make sure to look at my spend more frequently and spend less in the months after. I can do it this because I have money going into savings which is more than I have planned to spend (basically a buffer), so I can be fairly relaxed.....as long as I don't consistently overspend ☺️
If you do zero based budgeting where every pound is allocated, you need to know everything you are going to spend and be willing to to cut back on something if you do overspend in one area. It takes a lot more effort, but really works for some people.
My partner and I share the coffee/tea budget - there is a tea shop on the way to work - a whole week of coffee can cost equivalent of 12 quid (work abroad). I have been paying for it for a few weeks because it is something that I willingly spend and budget for. However partner paid for two weeks this week so the 20 quid saved I would have previously just seen as money I can spend/launch. This time however, I have deliberately saved it. Therefore if you have incidents like this, don't see it as free money, save it.