Becoming debt-free and staying debt-free; Top Tips

masterkay

Keeping_Motivated wrote: »

Can I ask what spreadsheets you use for monthly and yearly budgets please?

I often work with pen and paper initially as it's quicker if I'm not doing anything too fancy. If I'm keeping a spending diary and I do it in a spreadsheet I end up not counting things or forgetting by the time I get to the computer so would use a notebook or a notebook then spread sheet.

I use MS Exel (does google offer a free alternative?). It's not that difficult to pick up, there are online tutorials and more importantly you can create your own little formulas specific for what you want to work out.

I say most budgets don't need anything fancy.

WorkingHardDFW

Hi thanks for that Post Masterkay.
I must say that I agree with all your points wholeheartedly :T

We had our LBM 6 months ago but its taken us that long to get a real handle on how we were getting the debts in the first place. I know that sounds really weak but we've been lucky that circumstances have been on our side a few times. The down side of this has been that we've not faced up to how we are overspending hence our huge debt mountain today .

We are positive though and we've got a plan to tackle it.

One area of severe weakness for us was not keep a close enough eye on daily spending. The last few months have improved the situation but I'm now pulling together the budget for the next year - and I agree a budget needs to flex with your circumstances.

We have our joint sal's going into one account and we pay all the static bills from that. Our budget account pays all the variable ones (kids activities, school bills, trips, hairdressing etc etc). This is one the one that I need to get my head around since we've not been accounting for every penny. I've got two days off work now and my target is to get my system up and running in that time. I want to account for every penny and I wonder if using the good old fashioned 'cash' system is the way to do it as Little Pickles suggested?

debrag

masterkay wrote: »

Do not have savings if you are in debt. Lots of people I know keep savings for a rainy day yet are up to their necks in debt. Generally the interest on your savings will be less than you are paying on your debt unless you are stoozing.

I have a saving/emergency/tuition/debt account (or will have next month) if after a few months I haven't used it for an emergency I pay off more debt

masterkay

WorkingHardDFW wrote: »

Hi thanks for that Post Masterkay.
This is one the one that I need to get my head around since we've not been accounting for every penny. I've got two days off work now and my target is to get my system up and running in that time. I want to account for every penny and I wonder if using the good old fashioned 'cash' system is the way to do it as Little Pickles suggested?

Congrats on dealing with it.

Start a spending diary and quite literally account for every penny, you'll see where the money goes and you may be quite shocked at the results. It will really highlight your areas of weakness and places you can improve upon.

As for budgeting, I suggest pen and paper and do yearly, monthly, weekly, not necessarily in that order. I actually keep switching between the different scales to get a complete view.

I normally work on monthly to begin with as most things work on a monthly basis.

Idea is list everything, start with the things that must come out.
Rent/Mortgage
Phone
Electric
Loan payments
etc.

To work out the weekly amount I multiply by 12 and divide by 52. Obviously n months are four and a bit weeks long so you can work out exactly for each month but I use the weekly figures for the items that come out monthly to give me an idea what is going on as I will set aside the monthly amount at the start of the month rather than weekly.

Consider things like groceries, toiletries, haircuts, dentist, gifts, car tax, insurance, servicing, home repairs, emergencies, clothing etc. Some of these things especially home repairs, dentist, gifts etc are hard to calculate. Start with what you spent in the last year for an idea.

Thing is you won't be paying the dentist every month (unless you have a plan) so put money aside for it, same with car tax, gifts etc. I personally group these into one pot. This pot is for anything that does not come out in a regular way and there is no set value for what comes out. I work out what I need to put away each month for these, the best I can, and do so at the start of each month. Knowing when car servicing, tax, peoples' birthdays are help you plan for this. I have found that if the car servicing is less than expected or I save money on gifts I still keep that money in that pot as an unexpected repair or someone announces an engagement will take away money when you least expect it.

Things like petrol, groceries, toiletries, going out, eating out, fun stuff all should have a budget but this budget literally will vary each week depending on your life (though have a budget to stay under for each. For example, if you fill your car up with £25 of petrol and it is gone by Saturday do not fill it up again until you normally would. Any excess I would put into an emergency pot or into the gift/dentist/hairdressers etc pot or if I've been very good a planned treat but not spend all of it on a treat.

It's the flexible bits and unplanned things that can derail the best budgets but you can also use it to claw back what you can.

I hope that makes sense

louserendipity

masterkay wrote: »

Thanks little pickle,

Great tip. I do something similar.

Also having different accounts (I use savings accounts as my bank lets me have as many different pots/accounts as a I want) for different money for different items separate, so I know what must go out, where I'm saving money and I'm also earning interest on all cash before it comes out of accounts. When I put money in one big pot/account I lose track of it.

hi masterkay

i've been looking for an account like this for a while now. please could you tell me which one it is ?? :beer:

thankyou in advance :rotfl:

masterkay

Nationwide. I've a regular saver account and a couple of normal savings accounts attached to my flex account. They are identified by different account numbers, I hear some banks allow you to name them according to what you use them for, NW may well do that but I haven't. Transfer the money online between all the accounts. I'm sure other banks do it too.

Anyone else have any suggestions?

debrag

I have different accounts with Nationwide too

WorkingHardDFW

Thanks for that post you really explained how you do it. I guess its how it works best for you and I think that we need the discipline of lots of little pots of money.

As I said earlier we have a budget account which pays for all the childcare, activities, household bills like milk, window cleaning etc and birthdays. Between posting I've been working on the budget for next year and I've decided that I need birthdays pulled out seperately into another account. I've just worked out what we spent last year and I'll set up a s/o to pay the set amount over and take the appropriate cash out when required. I've rounded down the amount to allow for my spending thriftly and interest earned on the money in the post. I found this with my insurance accounts last year which was nice!

Since our LBM last year the budget account paid the main bills but the extra just got used as needed which isn't the right idea.

Petrol is more or less covered by my OH and my expenses and all the car bills are budgeted for and the money put aside each month.

Clothes is an area that again I think I'll have to put money aside for. OH and I don't spend much at all (not that I wouldn't like too!) but the kids need clothes and shoes etc. School uniform has been allowed for and I get lots of hand on's for my youngest but I think i need to seperate out a clothes amount as well.

I think the only trouble with having lots of pots of money is making sure that you track the spending correctly. I guess the spending diary is the process for doing that :rolleyes:

Job for tomorrow setting that one up.

masterkay

Good on you for working on it.

Different things work for different people.

Lots of pots, means lots of discipline and ensuring you transfer the money at right times. I go for a couple grouped as it is easier to keep track of.

It was the spending diary that highlighted how much my friends' coffee addictions cost me. I don't touch the stuff but would always be dragged in and end up getting an over-priced soft drink.

As terrible as it sounds you start to realise what other people cost you, from the petrol to act as personal taxi to your friends to splitting the bill in restaurants when all you ordered is a salad and a tap water while they had steak and wine.

That's another tip, stop funding other peoples' lifestyle. Just say no!

sunshine6650

Ive started setting different accounts as well. Ive just opened an internet saver account along side my TSB accounts. A diff account to keep money aside for car -MOT/TAX etc..they are the things that really sting you every few months.