Basic Budgeting & Life Advice

TurnItAround

Hey guys I'll try to keep it short and I don't know if this is the right place to post but here goes. I'm 30 now and I've never particularly been good with money, I should have 10s of thousands in my account but I only have a mere 5k. I've always "wanted" to make changes and envision a different life but Ive never put in the effort properly and made it happen to be quite frank. This time I'm extra bothered as I've got talking to a girl and I'm too ashamed to tell her I live at my parents at this age and knowing deep down I live here and barely save anything despite paying hardly any rent at all. What really put the nail in the coffin is I realized I earned £28k after tax in this last year gone and I only have £4k in my account, it's pathetic I feel so bad about this. I should have 15-20k clean in my account. But I spend recklessly it seems. 

Sorry for the long post but here is my question - what is the basics of budgeting? what is the process I need to put in place to get budgeting so I can actually save more? Also how can I open a saving account, do I just make one with my current bank Natwest? 

Thank any help is appreciated. 

jay1804

TurnItAround said:

Hey guys I'll try to keep it short and I don't know if this is the right place to post but here goes. I'm 30 now and I've never particularly been good with money, I should have 10s of thousands in my account but I only have a mere 5k. I've always "wanted" to make changes and envision a different life but Ive never put in the effort properly and made it happen to be quite frank. This time I'm extra bothered as I've got talking to a girl and I'm too ashamed to tell her I live at my parents at this age and knowing deep down I live here and barely save anything despite paying hardly any rent at all. What really put the nail in the coffin is I realized I earned £28k after tax in this last year gone and I only have £4k in my account, it's pathetic I feel so bad about this. I should have 15-20k clean in my account. But I spend recklessly it seems. 

Sorry for the long post but here is my question - what is the basics of budgeting? what is the process I need to put in place to get budgeting so I can actually save more? Also how can I open a saving account, do I just make one with my current bank Natwest? 

Thank any help is appreciated. 

You should look over your last year of statements a see were you have spent money. (pre- covid times maybe be better 2020/ 2019/2018) Look at where you have spent and work out the essential purchases such as bills, groceries, travel cost, etc. Then you should try to cut down on any of the essentials. (Expensive phone contract > cheap sim only deal , Netflix and prime video > one of them etc.) Once you have your committed spending down and you know what it is, then you can create a Budget (plan of where your money going). If you have any consumer debt (credit card balance, loan, car finance etc ) it a good idea to pay it off first before saving an house or investing. 

Below is just a basic budget 
Income p/m £2300 
-
monthly committed spend £500
(Phone bill - 20, travel - 200, groceries - 200 ,Insurance - 80)
=
Save/invest/pay debt or enjoy £1800 (How you spend or save your money is up to you)
(enjoy - 300, save - 1200, invest - 300)

For your questions
If you want to save more treat savings as a bill, once it's in your savings account it's gone you can't use it. Yes you can open a a savings account with Natwest, most saving accounts have bad rates at the moment, so your savings won't grow more then the amount you're putting in

TurnItAround

Thank you for the response, this gives me a bit of an idea. As for what I spend on, it's just food and just indulgences basically not being grown up. I don't have expensive phone, netflix or anything. I have a loan which I pay £150 a month and has £6.8k remaining and my phone bill is £15 and my rent is £150. I do buy my own food but realistically if I didn't eat from takeaways it could be a lot cheaper than what it is. of course travel to work too. 

Tbh the saving rates not being good isn't an issue for me, just the money being there is enough in my current situation. 

tacpot12

The way that I budget is not dissimilar to jay1804's method, but I transfer money out of my current account and into savings accounts to cover anything that I don't need to spend that month. So say I have £2000 coming into my account each month - I might transfer £600 to my savings accounts immediately, and I know that I have regular monthly bills of £800, so that leaves me £600. I allow myself £200 of spending money, leaving me with £400 spare. To ensure I don't spend this, I invest this amount the moment I get paid. So I get paid £2000, but £600 goes straight to savings and £400 goes straight to be invested leaving me with £1000 in my bank account and I know that £800 will go out over the month, so I just need to keep a tight rein on my spending until all the bills have gone out, then I can spend more freely. If I have anything left over in the month, I roll it forward into the next month and might spend it, but during lockdown, I've built up so much surplus that I've been able to transfer some more to my savings. 

I hope this helps. Don't be too hard on yourself, it takes quite a while to get the hang of budgeting.     

Murmansk

You are in a very fortunate position financially - I suspect many people with a partner and children survive on less than you get paid and have to pay a mortgage or significant rent  too.

You need to set up a standing order with your bank so that a significant sum goes out of your current account into a savings account on payday each month. Assuming you don't then spend that money it'll build up with no action on your part. 

You ask how to open a savings account. How do you order a takeway? You go into a kebab shop and order a large donner. So go into a bank and ask to open a savings account. I'm sorry if I sound sarcastic but really, get a grip. What job do you do as a matter of interest?

TurnItAround

tacpot12 said:

The way that I budget is not dissimilar to jay1804's method, but I transfer money out of my current account and into savings accounts to cover anything that I don't need to spend that month. So say I have £2000 coming into my account each month - I might transfer £600 to my savings accounts immediately, and I know that I have regular monthly bills of £800, so that leaves me £600. I allow myself £200 of spending money, leaving me with £400 spare. To ensure I don't spend this, I invest this amount the moment I get paid. So I get paid £2000, but £600 goes straight to savings and £400 goes straight to be invested leaving me with £1000 in my bank account and I know that £800 will go out over the month, so I just need to keep a tight rein on my spending until all the bills have gone out, then I can spend more freely. If I have anything left over in the month, I roll it forward into the next month and might spend it, but during lockdown, I've built up so much surplus that I've been able to transfer some more to my savings. 

I hope this helps. Don't be too hard on yourself, it takes quite a while to get the hang of budgeting.     

Great thank you, so it's more of a loose method? In my head when I think of budgeting I think of writing down numbers all day  or something, this seems more simple. Also I wanted to ask, what do you invest in? 

Murmansk said:

You are in a very fortunate position financially - I suspect many people with a partner and children survive on less than you get paid and have to pay a mortgage or significant rent  too.

You need to set up a standing order with your bank so that a significant sum goes out of your current account into a savings account on payday each month. Assuming you don't then spend that money it'll build up with no action on your part. 

You ask how to open a savings account. How do you order a takeway? You go into a kebab shop and order a large donner. So go into a bank and ask to open a savings account. I'm sorry if I sound sarcastic but really, get a grip. What job do you do as a matter of interest?

Thank you! I work as a security guard so it's not the best job or something I want to do forever but I clear about £2,400-2,600 a month after tax. 

Murmansk

You're the best paid security guard I've ever heard of! 

[Deleted User]

Open up another current account and use that for your spending budget each month.
Also, can you pay off your loan quicker assuming it's not interest free?

TurnItAround

Murmansk said:

You're the best paid security guard I've ever heard of! 

I defo count myself lucky, all the other jobs I had were' basically a tenner an hour and 11 for supervisor shifts. Even this job was £10 an hour and then they said we're getting a raise and it jumped to £12.50 an hour 12hr shifts. I thought I was being paid wrong for so many months so I'm very grateful for this and this is even more the reason why I feel bad about my terrible habits. 

Thank you all again!

TurnItAround

Deleted User said:

Open up another current account and use that for your spending budget each month.
Also, can you pay off your loan quicker assuming it's not interest free?

Why a current account and not a savings? It's not an interest free loan and yes I could probably pay it off within 2-3 months if I REALLY wanted to...hell I could have paid it off last year but my spending has been terrible. 

bluegoldie

TurnItAround said:

Deleted User said:

Open up another current account and use that for your spending budget each month.
Also, can you pay off your loan quicker assuming it's not interest free?

Why a current account and not a savings? It's not an interest free loan and yes I could probably pay it off within 2-3 months if I REALLY wanted to...hell I could have paid it off last year but my spending has been terrible. 

I have 3 accounts. Firstly my main current account; this is where my wages are paid and my bills are taken from. 
The second account is my spending money current account. And the third is my savings.
Each month on payday (I'm NHS and there can be some minor fluctuations in pay dates) I work out how much my actual outgoings are i.e mortgage; credit card, direct debits , subscriptions bills etc. 
After that I budget  for "spending" this is anything I would use my debit card for such as groceries and fuel. I'm a single mum of 2 so my spending will be higher. I transfer this money to another current account and only use this account with card spending . The debit card for the bills account is safely kept out of reach.
Whatever excess I have between the 2 accounts I put in to my savings account.
A year ago before doing this i had nothing in savings and regularly used my overdrafts; being on my own and relying solely on my wages ( I don't get maintenance or benefits) I really struggled to get on my feet financially! After hubby left a few years ago I found it hard to adjust to life with one income.

Fast forward a year later after compartmentalising my money in this way, I am over draft free and money in my savings account. I am better at knowing when to say "can I afford that?" Because I can actually see how much money I have. 

Hope this advice helps