Starting to budget after years of wishful thinking 1 December 2020 at 2:27PM edited 4 November 2021 at 12:43PM in Debt free diaries 228 replies 21.6K views

kimwp

You plan sounds great, very thorough and effective! If you can (and only if you can) treat your credit card as only to be used for this purpose (rather than to carry a permanent balance), it's worth having a credit limit for protection on purchases, rather than reducing the limit. You can get this protection if you pay a small amount on a credit card regardless of how you pay the rest, but it's easiest to pay the whole thing on a credit card (paying off the next month with the money you've saved for the purchase). I personally have a credit card with a reasonably high limit that I use for internet purchases and petrol, that I pay off in full each month. I get cashback on my spend and I have the higher limit if I want to make a larger purchase with credit protection eg car, new bathroom suite.

I'm going to unfollow this thread now, but best of luck, I have every faith that you've got this.

LegoHead

LegoHead said:

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.

First Proper Review of finances for month using my to do list as a guide. Went through previous bank statements to look for extra costs I had not considered. Noticed that Gas and Electric haven't been going out because company went bust and waiting for British Gas to set up my new account. Was paying just under £100 for old account so going to pay this into Yearly account until British Gas sort me out.

If I have allocated budget correctly I will have £32.44 in my main account on the 27th November. I am aiming for a zero based budget and allocating every pound. I intend on keeping a £100 buffer in main account from next month when things settle down. This is my first month of actually dealing with my finances after being given a good bit of advice from others on the forum.

Going to use Monzo for my other stuff funds as someone mentioned probably not a good idea to group food, fuel and random spending in same account. 

Debt Now Total = £19,213.42
Paypal Pay In 3 = 60.58x 2 months = £121.16
Sainsburys Credit Card 0% till January = £1000
Sainsburys Loan 9.2% = £6032.90
HSBC Loan 3.2% = £12059.36

Savings Pots Total = £640.14
Spending account (food, fuel, other stuff) = £68.24
Emergency Fund in NS&I = £25
Savings = £200.00
Yearlies = £346.90

thanks for reading.

LegoHead

I have been thinking today that I want to clear all this debt as soon as possible. I will keep budgeting anyway so not looking for a quick fix, I am here to learn how to manage finances correctly. 

I have a car potentially worth £9900 to sell via motorway.co.uk. If they don't offer me enough going to try selling privately. It cost me £10,500 nearly 2 years ago and the prices seem to have gone up. I have another cheap car and bicycle so transport not a problem.

If I sell the car along with £3300 worth of stuff around the house and pay extra £200/month starting Feb I can be debt free theoretically in May 2022. Haven't fully convinced myself this is a great idea yet. Will depend on how my finances are looking next month and whether my car sold or not. 

Also an update on my spending. I have stuck to my budgets although I have run out of money with only £5.31 left until I reset my allowance on friday. I am going to try and keep this cash and transfer to savings as it feels like a bit of victory having stuck below my budget for the week with even just a small amount to spare.

LegoHead

Just done a calculation on clearing my cheaper HSBC loan. I have 46 payments left at £262.16 per month
I have a cashback bonus if I dont make any overpayments or settle early on this loan.
To clear the loan is £11,388 effectively saving me £548 interest. I worked out if I got a loan for this amount today it would be approx 2.4% 

So should I even try and clear this loan or should I put the money into a savings pot. I think I would value having say 6 months of bill money in emergency pot. It would have to be a pot I cant easily access.

What would others do? It looks like my car is on its way to being sold too. After it is sold I will have cleared all my debt apart from this HSBC loan. I will have about £3000 left over. I think I will be banking these for emergency fund until I have made my mind up about this loan.

vampirotoothus

Hi, well done on getting to where you are now. I would settle the most expensive loan, unless there is a cost to doing that (there shouldn't be, most interest is front loaded, so you may find your settlement figure is less than you think). I would then put £1000 in an emergency fund (such as premium bonds). Then I would settle the small outstanding Paypal debt. You could then think about refinancing the Halifax debt, but taking less, because you still have some cash left from the sale. 
I know it's all a bit unexciting in a way, but there is nothing quite like knowing every penny that goes into your bank account is yours (living costs excepted). Good luck.

enthusiasticsaver

I am not sure what you are asking?  As I understand it you  are considering selling your car so presumably will have a lump sum you can use to reduce the debt?  If that is the case then you should clear the more expensive loan which is the Sainsburys loan at 9.2%. Any additional money I would use to clear the Sainsburys credit card as the deal on that is due to finish anyway in a few months time and/or make an overpayment into the HSBC loan as long as there are no penalties.  I am not sure why you have said you have worked out a new loan would cost 2.4%.  Have you been offered another loan at that rate? Given the HSBC loan is a fairly low rate anyway I would focus on overpaying that once the other debts are sorted. 

LegoHead

enthusiasticsaver said:

I am not sure what you are asking?  As I understand it you  are considering selling your car so presumably will have a lump sum you can use to reduce the debt?  If that is the case then you should clear the more expensive loan which is the Sainsburys loan at 9.2%. Any additional money I would use to clear the Sainsburys credit card as the deal on that is due to finish anyway in a few months time and/or make an overpayment into the HSBC loan as long as there are no penalties.  I am not sure why you have said you have worked out a new loan would cost 2.4%.  Have you been offered another loan at that rate? Given the HSBC loan is a fairly low rate anyway I would focus on overpaying that once the other debts are sorted. 

It is my intention to clear the credit card and the 9.2% sainsburys loan as soon as I sell the car. Then all I will have is the HSBC loan. My thoughts are should I put that money into an emergency fund or just dump it straight into the other loan. I was just stating the 2.4% as an effective rate of what the remaining loan is costing me. As soon as I even make a £1 overpayment into the HSBC loan I will lose £123 cashback. I think I am probably over complicating things as usual. My end goal is just to get rid of the debt and my track history of having cash available means I will be constantly fighting temptation not to spend it.

After talking myself through this I have made my mind up. I am going to keep enough to top up my emergency fund to £1000 and then the rest will be overpaid onto the loan. All this of course is dependent on actually selling the car. I have given motorway.co.uk all the info and just waiting on offers to come through now. 

9500	estimated sale of car
-1000	Sainsburys 0% credit card
-6032.9	sainsburys 9.2% loan
-121.18	paypal
-975	emergency fund
1370.92	overpay HSBC Loan

LegoHead

Fridays update for my finance review. 

Pretty pleased with myself this week. Went to the cinema and instead of usually spending uncontrollably on fast food and then the arcades prior to the film I kept to my budget. I had just over £5 left to spend from my spending account  that night so just bought a chicken wrap for £3.99. Everyone else bought way too much food so I helped them all finish!

So a little victory I guess for me this week having put the £1.32 I had left into my savings. Also been exercising more this week. Aiming to do 30 minutes on the rower mon, wed, fri.

I have reviewed my main bank account for bills in, out and any surprises. Nothing to report although my calculations may have been slightly off last time, need to re-check. I will have £33.42 left in my account on the 27th. 

Have made an adjustment to managing the fuel, food and play money this week. My monzo card turned up so now all my play money goes into the monzo card and fuel and food come out of my halifax account. It was a forum member who suggested to separate these two pots. I am also going to start using the monzo account to save up for little things I want and plan for buying them rather than impulsively buying.

I am usually extremely anxious but today feel positive and happy. The exercise and feeling in control of my money again seems to be doing me some good. thanks all

enthusiasticsaver

I think you are over complicating things too re weighing up savings over debt.  You are never going to earn as much interest on savings as you will pay on debt.  However an emergency fund is good to have as long as you are not going to be tempted to dip into it to spend on unnecessary stuff.  I think given your history it is best to keep the debt at the front of your mind.  

Sounds like the budgeting is going well so keep that up. 

theoretica

LegoHead said:

I am usually extremely anxious but today feel positive and happy. The exercise and feeling in control of my money again seems to be doing me some good. thanks all

That is good to read - a bit more thinking about money can lead to a lot less worrying about money.  I am glad this seems to be the case for you.