Making a budget (and sticking to it!)

Kat78MFW

Hello fellow savers!  I think this is the best board to post my new diary now that we are mortgage-free.  Having paid off the mortgage about a year ago, we thought we were saving towards early retirement for DH (he is 6 years older than me) but life threw us a curve ball and he has had to take a new job for the sake of his mental health (changing from being a highly paid experienced teacher to a school site manager ie caretaker).  This has resulted in a 40% drop in his take-home pay and the need to budget far more carefully than before. 

We have two daughters and the eldest is off to uni, for a four year course, in October.  Fortunately, we had been saving for them both to top up their student loans with the parental contribution (thanks, Martin!!) since they were about 10 and 13, in addition to their junior ISAs that they have had since birth. She will now get slightly more than the minimum loan now due to our drop in income but I spoke to Student Finance today and they said it's taking about 8 weeks to process the "in year income forms" so we won't know exactly what her loan will be until she actually starts.  Not sure if our younger daughter will go to uni but we wanted to make sure that we match the amount that we save for them both.

I work part-time (about 3 days per week) and can do an extra day of overtime when I can fit it in (about once a month).  I can't increase my hours as this would be detrimental to my mental health and our younger daughter still needs quite a bit of support.  Fortunately we don't have to worry about childcare now that they are older.

Will post more about my budgeting plans tomorrow.   

Skint_yet_Again

Congratulations on paying off your mortgage Kat.🤗  Look forward to hearing about your budgeting plans. 

Kat78MFW

Thanks @Skint_yet_Again. I have decided to give zero-based budgeting a try. In the past, it was sufficient to just have a bills account and make payments to multiple regular savers just after pay day. We lived carefully but still enjoyed occasional meals out, takeaways and live sporting events. Since it became apparent that DH was going to have to take a lower paid job, we have mostly cut out all those extras, and tried to save even more, apart from his football season ticket.

Now that he has secured his caretaker job and we know his monthly pay, my hope is that I can allocate some fun money each month for a meal out and other entertainment. I used to pay for everything with a rewards credit card, paid off in full each month. But I felt this was risky on a lower income, so since November I have been using a Chase debit card for nearly all our spends, keeping monthly spending money in a 4.1% Chase pot and transferring to the current account at the point of payment. As this is not a joint account, DH still uses the credit card but the monthly bill is now below £500 instead of £2000 plus. 

Last night I created a zero-based budget spreadsheet and allocated a set amount for each category. Our total income is still just under £4000 so you would think that we would be comfortable but cost of living is high. I feel so bad for people that have been hit by mortgage rises on top of increased food and fuel etc. I am so glad we made the choice when the kids were young to stay in our compact semi rather than moving to a larger detached. This has meant our eldest has had to manage in a small box room with a cabin bed and not even room for a wardrobe. But it has allowed us to both prioritise our mental health rather than our income as we have faced challenges along the way. Our daughter must be one of the few looking forward to heading to uni and getting a larger bedroom when she is in halls. 

Back to the budget - for some categories, I have included an allocation for the money I expect to spend in August, along with saving extra into Chase 4.1% pots for future expenses. I am hoping this will help us to know how much we have in savings in total as otherwise it's hard to separate out true savings from money that is saved for a specific future expense. I started these pots a few months ago so they are beginning to look pretty healthy. 

Kat78MFW

First August budget fail, after A level results day, I have promised DD1 a trip to IKEA to get kitted out for uni but haven't included this in the August spends. If she gets the grades for her first choice, she'll be in a catered college so less stuff needed. Maybe this can come from the money we have saved for her uni expenses as she will now get a slightly larger loan than expected due to our drop in income.

I have also budgeted more than usual for eating out, entertainment and refreshments as we have a five day holiday at the end of August. That is a big change for us this year as we usually go away for between 10 days and two weeks but that seems like too big an expense now, especially as DD1s boyfriend comes with us too so everything costs more with an extra adult. I plan to allocate a monthly amount from September to save for a holiday in 2025. 

Kat78MFW

Not quite an NSD - had to buy replacement toothbrush heads but managed to get them on eBay and pay for them with PayPal - using the balance from cashing out on Prolific. 

Very proud of DD1. When I told her about my zero budget spreadsheet, she wanted one too for planning her uni budget. So we worked together to tweak mine to suit her. She really is her mother's daughter! 

Skint_yet_Again

I would pay for ikea spends from uni savings rather than count it as a budget fail. Enjoy your holiday & glad to hear DD1 is following your budgeting advice. Definitely a life skill worth having. 

Kat78MFW

I got paid and got an extra £117 for additional hours that I'd forgotten I was getting. So I have put that as the IKEA spends budget. I'm trying to avoid spending anything from July wages until 1st August so that the budget runs as a calendar month rather than payday to payday. So I've put all our wages into my chase 5.1% savings until Thursday. 

DH had a day off on Friday so we went out for a lovely pub lunch. They had a deal of 8.49 for lunch with a side of fries and a drink. It was delicious and lovely to go back to the place we went on our second date 23 years ago. Then we walked the lunch off with a stroll along the canal. Now we are hooked on the Olympics so should be fairly easy to have three NSD as I don't think we'll be going out anywhere.

Kat78MFW

Did the money shuffle yesterday on the first of the month. I'm having to drip feed the regular savers from a matured saver now rather than saving fresh money each month, which is a bit of a change of mindset. 

We have the following RS accounts
NW £200 per month 8% (matures next month)
Co-op £250 per month 7%
Lloyd's £400 per month 6.25%
Lloyd's £250 per month 5.25% (DD1 uni savings - this is filled with fresh money, not drip fed)
FD £300 per month 7%
FD £25 per month 7%
Skipton £250 per month 7%
Halifax £100 per month (DD2 uni savings - fresh money)
We also add £40 per month to DD2 junior cash ISA
Additionally, we pay £10 per month into a Scottish Friendly investment account.

Kat78MFW

I also moved money into the Chase 4.1% pots for future car, opticians, dentist, Christmas, house insurance, music lessons and professional fees. 

Had a win on the Premium Bonds today! We have about £2000 in bonds and won £100 today. I have it set to reinvest our prizes so that is an unexpected boost. 

Skint_yet_Again

Your rs accounts are looking good Kat. Do you have to have current accounts for each of them? 

Well done on the pb win! 

Kat78MFW

Yes - we have current accounts for all the RS accounts, apart from Skipton - I think that one is a loyalty RS that I was able to access because I put £1.00 in a lifetime ISA (as advised by Martin Lewis) when I was about 39! I just have to remember to cycle £2000 in and out of the Lloyd's account to avoid charges. Our salaries go into the Co-op account and FD is our bills account.