Starting to budget after years of wishful thinking

enthusiasticsaver

Well done on making a  start on getting a realistic budget together and setting up a pots system.  Using this as a diary may help you keep accountable and motivate you to  reduce the debt and show your progress.  Do you want me to move this thread to the diaries section? 

LegoHead

EssexHebridean said:

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. 

Imbalance is because of the overdraft I dipped into at the start and the unknown costs for my remortgage, I will however be adding the costs of the remortgage to the new mortgage as I am saving overall. 

I think the magic change that was suggested is splitting all the pots. I have one account I can essentially let run itself with the wages going in and the monthly bills going out. next month I will be all in budget in this account. The one off costs I am trying to estimate as best as I can and I have now readjusted this to needing to saving £250/month into my yearly costs account. I know I wont get it absolutely perfect, but I never ever saved for anything before I always just hoped there would be enough money or overdraft left to be able to cover these yearly cost. All that hoping so far has left me miserable so far. 

I am going to read all the posts today and see what other bits of advice I can action and will update with my plan. I always try and over complicate things too as someone observed so will be keeping as simple as possible.

I am also thinking in a few months I will have my lodgers rent paid into savings and not rely on it for my monthly budget, that way if they ever leave I wont be in trouble.

kimwp

This all sounds great - I'd add to your plan to quickly check your account with your wage and bills going in and out once a month and keep a buffer (£100 at least) in there in case the bill amounts change. Also, someone on here had some issues when a company didn't take some direct debit payments, even though it was the company's fault, so I now quickly scan through to make sure everything has gone out. Once a month would be fine - on payday means that you know your pay has gone in and everything is covered.

Naomim

I'm a Monzo cheerleader. The pot system was a game changer for me and my budget. Wages go into my regular bank account and I transfer over money to the pots at the start of the month. I have loads of them. I save for car maintenance, haircuts, Christmas, birthdays, petrol, clothing, home insurance, meals out, days out, 12yo's scouts plus a couple of other bits. 

Good luck

Naomim 

theoretica

LegoHead said:

I think the magic change that was suggested is splitting all the pots. I have one account I can essentially let run itself with the wages going in and the monthly bills going out. next month I will be all in budget in this account. The one off costs I am trying to estimate as best as I can and I have now readjusted this to needing to saving £250/month into my yearly costs account. I know I wont get it absolutely perfect, but I never ever saved for anything before I always just hoped there would be enough money or overdraft left to be able to cover these yearly cost. All that hoping so far has left me miserable so far. 

I think you have hit the nail on the head - hoping and not actually doing anything about money is common and doesn't really work.  It's like hoping to be good at anything else (music, sport, DIY) - hoping doesn't work nearly as well as a little time actually doing it.  Actually moving money into pots for specific purposes, actually noting and adding up your spending and checking it against your plans, actually working out the cost of something and if it is in or out of your budget.  A few minutes a day can really pay off.

Also, there can be a problem with having one card - that you need to buy food and petrol, and want to buy the affordable things that are in your budget.  Problem is it also gives you access too all your money, and the bank's money as an overdraft or credit with nothing but your budgeting to stop you spending more.  So it can really help to move away from this - either a card with just the money you are happy to spend available, or a fuel card and a supermarket card.  Take your main card and either leave it at home or just seal it up in an envelope with a firm note on the outside reminding yourself to think!

enthusiasticsaver

I think keeping things simple works best.  

On monthly budget day (tomorrow for us) I work out the figures, anticipated expenditure for the month ahead and do the transfers to  various savings/current accounts. 

So I allow for monthly direct debits (in our case £550).  I leave that in the current account and they all come out around 1st or 2nd of the month so bills are paid before we have a chance to spend the income.  I also transfer £1000 to our savings account to cover holidays, cars, house expenses and gifts. That is attached to our joint current account so can be transferred easily if we have car repairs/services or christmas gifts to pay for.  

In the first week of the month after direct debits have come out standing orders for £300 each go into DH and I personal current accounts.  If it is just you then you do not need to worry about that. The credit card bill is also paid in full and that covers our food and fuel for the previous month.  The remaining income is split 50/50 and half goes to a savings account which holds our emergency savings, car replacement and long haul holiday/house improvement savings. The other half stays in the current account for non discretionary spending but as all the bills and transfers have gone out by about the 5th or 6th of the month we know that this has to last us until the end of the month unless we dip into savings or personal accounts. I have used this system for decades now and always worked for us but obviously the amounts change but never the percentages. 

LegoHead

I have spent a few hours today consolidating every bit of advice and come up with a plan I hope is not too difficult. Would have done it yesterday, but was taking advantage of sunshine and washed car so I could take pictures. Trying to sell it via motorway.co.uk. Have been offered a great price. I am planning on keeping my less reliable car as if it stops working I can live without and cycle to work and fix the car at my leisure as I can pretty much fix anything on it myself.

Stuff changed to gain control over my budget

• Stop Overthinking
• I am going to sell one of my cars
• I also now understand selling stuff is not the solution, it will be a bonus, but budgeting is the only real solution.
• Not going to eat at McDonalds on way to work anymore. leaving cards at home mon-thurs
• My Sainsburys credit card is due to be cleared last £500 payment in Jan 22. Will be keeping this as an emergency fund with £1000 limit until my actual emergency fund is up to £1000. Will reduce limit on it monthly. 
• My emergency fund I will build up via NS&I. Currently £25 per month and takes up to 3 days to get money. Happy to hear alternatives, but feel I have an incentive to leave money in this due to monthly prize draw. 
• I will overpay all my debts by £500 per month first sainsbury credit card, then sainsbury 9.2% loan then HSBC loan. I calculated my debt free date doing this will be August 2023.
• August 2023 : Once all debts are gone I will then start overpaying mortgage and looking at pensions.
• I will commit to no more debt (klarna, paypal, credit cards etc..) Credit card will be cancelled when I have emergency fund.
• All of my income and outgoings from main bank account now automated. No adhoc spending from this account.
• Savings account started
• Yearly one off stuff in spreadsheet. have calculated monthly average and transfer this into yearly account.
• Spending account - only account I can spend from. I have given myself a weekly allowance to cover food, fuel and other stuff. This has no overdraft so when it is gone it is gone.

First working day of month

• I will review budget and plan for zero. Every £ allocated.
• every spend logged in my budget tracker app and put onto spreadsheet. Will adjust weekly allowance if needed.
• I will review all bank statements from last month for any surprises
• Report back on the forum on progress.
• review paypal, google and direct debits for anything i dont want to be paying.
• check all my direct debits and standing orders have gone out correctly
• Whenever I have urge to buy something I will write it down in journal and review monthly to see if I can buy it yet or really need it. 
• Reduce credit card limit so emergency savings + limit = £1000
• plan any spends out of yearly account. car insurance etc.. 

Fridays

• Any spare money in spending account will be transferred to savings.
• check main account for surprises and ensure there is still enough to cover weekly allowance

To be honest these periodic checks will probably happen more often until I am completely comfortable and confident I have control over everything. Hope I have  covered everything. It is a long list, but I think I have made it as simple as I can for now. Very happy to hear any suggestions.

EssexHebridean

This makes truly joyful reading. Well done LegoHead, I look forward to celebrating your DF day with you on here in August 2023. 

theoretica

Good luck with it!  The one thing I would perhaps add is to keep track of the money you transfer into savings on Fridays where you haven't spent to your weekly limit.  You don't want to end up thinking you might as well spend it on Thursday as otherwise it will go into savings.

enthusiasticsaver

Sounds like an excellent plan to me.  I will move this thread to the diaries section as it is now getting long and as you plan to report back periodically it makes more sense for it to be there.