Budgeting - Emergency Fund & Emergency Fund - Advise Request

jimjames

If you have £14k in savings it's crazy in my view to have any loans or credit card debts. Likely that you're getting under 1% on savings and paying out 20% plus on debts so not at all MSE.

Pay credit card every month to clear the balance and you'll pay no interest.

It's normally suggested to have 3-6 months worth of spending available as your emergency fund but you may find some of the discussions on the Savings board of use. Beyond that then investing and pensions are worth looking at but as you've spotted already it's best to avoid the get rich quick schemes. The one thing with investing is patience, it's a get rich slowly but compounded returns over time will really add up

eskbanker

matt.j_3 said:

After the comments to my post and looking at the basic budgeting sheet on the MSE website, it seems that where we seriously lack an understanding is in the day to day expenditure and not equating money to bills that we know will come up some day, but don't know when.

So, whilst my spread sheet gives a high level overview of the obvious DD bills, it doesn't give us a clue on what the food, fuel, other daily expenses is so we 'think' we spend £X a month of fuel, or coffee shop, or main food shop etc.

That's a classic mistake made when trying to establish a budget - looking at expenditure top-down, in terms of big-ticket items you can easily identify, instead of bottom-up, i.e. looking at every penny you actually spend and what it goes on.

The only realistic way to get a handle on this is to spend the time analysing everything, perhaps with the assistance of tools such as those already highlighted, to understand exactly where the money is going, before thinking about where it ought to be going....

matt.j_3

jimjames said:

If you have £14k in savings it's crazy in my view to have any loans or credit card debts. Likely that you're getting under 1% on savings and paying out 20% plus on debts so not at all MSE.

Yes, it seems that way

I think it comes down to credit cards are just used as a purchase online then paid off, but we pay them off at the end of the month instead of straight away, i.e. we have budgeted for X and bought it online, or it's an unplanned expense and we bought it online. We don't use CC for in shop purchases unless it is a big ticket item where we want the insurance of the CC and have the money to pay it off.

In terms of the personal loan, this comes from a mentally of it's budgeted in the monthly expenditure so we can forget about it as it will pay off over time. Yes, I know this is a poor mindset as we are giving money away in interest for the fact we had to borrow the original sum.

Our focus was to build up some savings 'in case' something happened, but ignoring the fact that if something did happen we would still be lumbered with a month expense to cover. The value just shrank over time to a much lower number so it just got lost in the normal monthly outgoings.

In hindsight we needed to balance over payments of the loan and savings to clear it quicker whilst still putting some money aside as a just in case emergency.

Eco_Miser

All your daily spending would either be by card, in which case analysing a few months of statements (copy to spreadsheet and categorise) should enable you to accurately estimate future daily spending, or it would be by cash in which case your bank statements would record when you drew the cash at ATM, bank counter of cashback at supermarket. Alway keep your receipts until you have recorded the spend.  (I say spreadsheet above, because that's the way I do it, but the money management programs mentioned above should also be able to work of your card/bank statements.

Are you getting interest on your current accounts or cashback on your bills spending?  It's not much these days, but a few quid a month all helps. 

Used right a credit card can be very useful. This means paying it off IN FULL every month. Meanwhile you have time to get the money you need to pay it off from an easy but not instant access account, such as Premium Bonds if needed.