General Budgeting

Matthew1892

Hi, 

I am now finally debt free after clearing around 10k credit card debt. 

I have an after tax salary of £2080.00 per month. I currently hold £750.00 in savings and want to start saving toward a house deposit. 

I have put a break down of my bills below: 

Income: 

Aviva Insurance  - £52.83 

EE - £37.00

Lloyds (small loan) - £44.93 

Contact Lenses (essential) - £36.00

Car Lease - £260.00

Rent - £125.00

Remaining: 

£1525.00 

The last month I planned to save £750.00 which I have done however my current account is sitting at £50.00. 

My main question is, do I build my current account to a substantial amount so I am not chasing the next pay day which I have done for the last 3+ years? Or do I begin saving without any capital in my current account and budget things such as fuel, weekly spending amounts? I think the budget planner works but I seem to always have an expensive event / outgoing each month which puts me off track. 

Any help would be much appreciated 

bargainbetty

Hi, 

Your budget doesn't include groceries, utilities (may be included in rent etc) haircuts, clothing, petrol or other costs. It might be worth you doing a proper budget using the tools on here, and include the sum you spend on the big event each month - if you budget for it, then it's not going to be a shocker. 

Take some time and fill it in properly - go through each category and put in real numbers, not idealised ones - if you spend £200, say so!

That will give you a much stronger idea of what you can put aside each month. 

Good luck

bargainbetty

https://www.moneysavingexpert.com/banking/budget-planning/

kuratowski

Well done on being debt free

In your current account, it's a good idea to have a bit of a buffer, but if your savings are instant access - and they should be, at least until you have an established emergency fund - you don't need to keep masses in your current account.  Keep enough in there to cover the maximum that would go out in one week.  Depending on your bank you might get interest on your current account balance - look at virgin money for this.

Do remember to budget for the "expensive events" / "one offs".  So perhaps £750 a month savings is a bit too eager for you at the moment, as its not leaving you with anything for the less frequent spends?

Save up and then keep £6000 (i.e. roughly 3 months' income) in your emergency fund, instant access.  This will help to avoid you getting back into debt.

After that, if saving towards a house, start a Lifetime ISA, if you are under age 40.  And if your 40th birthday is near, open it today and pay in £1, but then leave it until you have your emergency fund.

WilfredB

Good job on being debt free.

My advice would always be to budget but like you said it's easier said than done. 

The best thing to do is to prioritise your expenses so if your expensive event each month is a priority then try to cut back elsewhere (subscriptions/food shops etc).

I would also recommend starting small when it comes to budgeting. Don't go completely strict on yourself straight away, do it bit by bit to get you into a habit of a cheaper lifestyle without cutting out everything and risk being miserable. 

Robin9

@Matthew1892 Do complete the budget planner that Betty has given .  You have a car - but no petrol/ insurance/repairs ..............   never go out, take holidays ..........   £125 rent - is that weekly/ monthly.......... TV licence (and all those things which only occur once a year like insurances ...........   council tax ...........  water rates      ...........

Keep a record of everything you spend -  the coffees, newspapers , corner shop spends ... those £2 here, £2 there really add up..   You really drive out the unnecessary expenses

blue.peter

You might find it helpful to use a personal finance management program. I favour AceMoney, but other similar programs are available. Money Manager EX, for example, has similar functionality, and is free.

I set up my regular payments and expected one-offs (both incoming and outgoing) as scheduled payments. This allows me to look ahead and see how much money I can expect to have each month. Then, as I receive my income, I know how much is available to pay into my savings account, after leaving some for contingencies.

Another thing that I find helpful is to pay pretty much everything apart from my council tax/energy/water/telecomms by credit card. This includes food, petrol, entertainment etc. Importantly, I have direct debits set up to collect the full amount due each month. The statement dates are set so that I receive the statements a few days before I get paid and then the payments are collected a few days after I get paid. This means that almost all of my payments are not only deferred to the next month, but can be included in my monthly planning. I then only leave a fairly small additional amount in my current account. If I've spent a lot on my credit cards in the month, I might have to transfer a bit from savings to cover it, but this is very unusual.

Jami74

Matthew1892 said:

Rent - £125.00

Where on earth do you live where rent is only £125 a month? It's a genuine question, I might come and join you!

I use more than one bank account to help with budgeting. Bills which are an exact amount every single month and do not differ all come out of one bank account. I put a set amount into the account on the 1st of the month to cover the direct debits and standing orders that will come out. It's slightly rounded up (less than £10) so over the course of time a buffer builds up which is useful when the bills increase (eg Netflix recently went up by £1 a month but I didn't have to increase payments in). This account pretty much looks after itself. The associated debit card is hidden away and not used.

Other accounts (savings or pots) are used for yearly bills. I have one for car costs, one for professional fees and subscriptions, one for Christmas. I divide the yearly amounts by 12 and deposit that much on the 1st of every month so that when the bill is due the money is already available. I don't think of these as savings because I'd be sad if I saved some money and then had to spend it all on car tax. As soon as I know there might be an expensive event I consider the cost, divide it by how many months I have and put that amount aside for it. If you don't get much notice, maybe look back over the last couple of years and estimate the yearly amount as a starting point. Even if you initially underestimate at least you'd have made a start.

Credit cards for weekly spends (food, petrol, clothes, going out). This means I know a month in advance how much I need to pay. If it's big one month then it prompts me to spend less that month. Plus, I earn rewards.

I would say once you've got your weekly, monthly and yearly budgets sorted out, then you'll know how much you genuinely have left for savings. Otherwise one month you'll think you've saved loads and the next month you'll have to spend it on an expensive event/outgoing.

ZeroSum

Jami74 said:

Matthew1892 said:

Rent - £125.00

Where on earth do you live where rent is only £125 a month? It's a genuine question, I might come and join you!

Board paid to parents?

enthusiasticsaver

Matthew1892 said:

Hi, 

I am now finally debt free after clearing around 10k credit card debt. 

I have an after tax salary of £2080.00 per month. I currently hold £750.00 in savings and want to start saving toward a house deposit. 

I have put a break down of my bills below: 

Income: 

Aviva Insurance  - £52.83 

EE - £37.00

Lloyds (small loan) - £44.93 

Contact Lenses (essential) - £36.00

Car Lease - £260.00

Rent - £125.00

Remaining: 

£1525.00 

The last month I planned to save £750.00 which I have done however my current account is sitting at £50.00. 

My main question is, do I build my current account to a substantial amount so I am not chasing the next pay day which I have done for the last 3+ years? Or do I begin saving without any capital in my current account and budget things such as fuel, weekly spending amounts? I think the budget planner works but I seem to always have an expensive event / outgoing each month which puts me off track. 

Any help would be much appreciated 

Well done on clearing the debt and I think your first task should be to build up some emergency savings.  Nothing to say you cannot start saving for a property too but getting used to budgeting, having a buffer if you have an unexpected expense and living within your income is a good habit to get into.  

A few suggestions.  

Work out how much you spend on groceries, entertainment, personal expenses like clothes etc  and running your car.  Maybe put a certain amount away each month in a different current account so you have separated your monthly disposable income from your essential outgoings like rent, services and car lease etc.  Maybe arrange for the bills all to be paid by monthly direct debit (except for insurances which are more expensive when paid monthly) a few days after your pay hits your account.  If you have an expensive outgoing each month then putting some money away each month to cover these is a good idea.  Same goes for annual bills like insurances, car service/tax/maintenance etc and things like birthdays, christmas and holidays. 

You cannot really decide how  much you can afford to save towards a house until you know what you are actually spending and not just the monthly bills.  A spending diary would be a good idea or maybe just look at the entries in your current account statement for the last few months and see where the money is actually going.  How much were you paying out monthly to clear the debt?