How do I put this plan into practice?

Bumbelina

I have now made a financial plan which gives me £245.00 a month to put towards my debts, using the snowballing technique. I have separated my monthly outgoings from my annual or irregular ones by setting up a payment from my current account into a savings account to cover things that don't come out every month (car tax and insurance, MOT, Christmas etc) because previously when I tried to leave that money in my current account it just got swallowed up.

All well and good. But my difficulty is actually putting this plan into practice. The reality is that at present, because I'm only just starting this, I don't actually have the savings I need to pay for the expenses that are coming up (my husband's 40th, stepdaughter's birthday and Christmas, then after Christmas the car insurance will be due etc.etc.)

So if I put the £245.00 to paying off my debts, I won't have the money I need to meet the expenses that are coming and I'll have to use credit again. If I use the £245.00 to pay for the expenses, I can't implelement my plan.

There might be something really obvious here that I'm missing - how do I deal with this? I think this is where things have always gone pearshaped in the past when I tried to make financial plans except I never really identified the problem before.

mountainofdebt

Having learnt the hard way I can see exactly what you are trying to get and what you are trying to achieve.

There is going to be a transtition period so don't be too hard on yourself.

What I would do is open two savings accounts.

Put the money you have/will be saving each month into one of the savings accounts and pay off the bills as they arise this year using this money.

Straight after the bill has been paid arrange for a sum equivalent of 1/12th of the anticipated cost of paying that bill next year into the 2nd savings account. When that bill comes around next year, withdraw the money from this 2nd account to pay it.

Obviously you are going to get to a point where you can close the 1st account and pay that savings directly towards your debt.

Bumbelina

Not sure I understand how that would work in practical terms. Taking Christmas as an example - if that costs me £500 and comes out in December, that means I immediately put £42 in a separate savings account (one-twelfth of the total bill). Presumably I then have to do that every month, so it adds up to £500 after a year to pay for next Christmas. If that's right, why can't I just put the £42 (along with one-twelfth of all the other bills each month) back into the same savings account? Isn't that just the same as what I'm doing, except using two accounts instead of one?

I've added it up and worked out that I might be able to squeeze through anyway ie. I need to put away £250 a month to pay for these irregular bills and by doing that from next month I can just about meet them as they arise, apart from a sticky bit in March when I get three at once and it will leave me about £78 short, but I can make extra cutbacks to get round that.

Sadly, I miscalculated the amount I have available to pay for debts because put a weekly expense down as a monthly one by mistake. So it's not £245 a month, but only £103. Not quite as exciting, but never mind. In Jan. I should be a good bit better off anyway because of no more childminding.

robnye

as mentioned, when plans like this are put into place, there is always a transition period...... depending on the expenses that arise...... in my case its the cars...... just manage to get some money into the car fund account, when the service comes up or the mot....

just persevere, you'll get there in the end

bonnie_2

why dont you do your car tax weekly we get £5 car tax stamps and save this through out the year, car insurance pay monthly works out as £31 i think.how much do you spend on people at xmas can you not spend £10 a week throughout year and look out for bargains etc.i only spend £50 on my 3 kids each that is if nothing else comes up family i would say £10 each or £5 if you have their children to pay for or just buy them whole family like we do a box of chocolates or tin of biscuits. xmas dosent have to be expensive.its only one day after all

tattooed_lady

bonnie wrote:

why dont you do your car tax weekly we get £5 car tax stamps and save this through out the year, car insurance pay monthly works out as £31 i think.how much do you spend on people at xmas can you not spend £10 a week throughout year and look out for bargains etc.i only spend £50 on my 3 kids each that is if nothing else comes up family i would say £10 each or £5 if you have their children to pay for or just buy them whole family like we do a box of chocolates or tin of biscuits. xmas dosent have to be expensive.its only one day after all

bonnie

Do you know whether the stamps are refundable? Say if you didn't have a car anymore would you get your money back?

robnye

the car tax stamps have been dwindled out and replaced by post office stamps, which means you can use it for anything you purchase at the post office

Callisto

Hi Bumbelina,

Personally I would just start saving as much as I could now towards the irregular bills and (as you said), if don't quite have enough to cover them, then would need to cutback elsewhere (eg grocery shopping, going out etc).

As it's less than three months until Christmas, you're not really gonna get that much saved, so can you not reduce the amount you spend on presents? (as someone else said they only spend £50 each on kids and less on others) or spread the costs a little by starting present shopping now. Then in January start saving your one twelfth each month as you say you'll be better off then.