Budgeting - How do you do it?

ewal

I'm 50, reasonably intelligent and organised, with one exception - personal finance.... I'm in a reasonably paid job (I think), and have never had a total financial disaster, but I still live from pay cheque to pay cheque, have a slowly increasing credit card bill, despite attempting to manage it by bouncing it to low interest deals. I have a very small amount saved which would be easily wiped out if I took the family on a modest weekend away let alone a summer holiday (credit card to the rescue...)

I would love to feel more in control. I'd love to know that the credit card bill was reducing in the long term. I'd love to think I'd have enough money for a decent holiday without using a credit card... I've worked all my adult life and still I feel I'm one big bill away from being broke...

Er... so does anyone have any budgeting tips?!

Bridgehouse

Delete your account on here, step away, and hope to god you don't accidentally click on the Classifieds section whilst doing the aforementioned..

CabbageCat

I don't "budget", I just live within my means. I have a cheap car and a small home. I don't buy the most expensive versions of things. I make a lot of stuff (homebrew wine, home grown food). I don't have satellite telly. I still seem to manage to do what people would consider luxuries (out to meals/drinks regularly, go abroad several times a year) while spending less than half of my take-home. I'm not paid all that much. At the end of the month whatever is left goes into savings. 

I'm sure if I saw something that I particularly wanted that costs a few grand I'd just buy it but I measure a thousand pounds as a decent month of quality retirement. Is a twelve grand car worth a year of retirement? Not even close.

mike_l

Pay the CC by direct debit.

Set up a standing order to save every month.

TTony

ewal said:

but I still live from pay cheque to pay cheque, have a slowly increasing credit card bill, despite attempting to manage it by bouncing it to low interest deals. 

That's not managing the problem - that's just trying to reduce the cost of the problem.

You earn £x.  Let's say that's £1000.  That's after all taxes are paid.

Then work out your priorities.  Some things *must* be spent (at least in the short-term).  Mortgage or rent, council tax, gas/elec/water.  Let's say that the must spends add up to £500.

That leaves you with £500 for the rest.

Again, prioritise.  Food is essential, but *what* food and hence how much of the £500 you spend on the essential is a matter of choice.  Eat in vs eat out.  Aldi vs Waitrose.  Readymade vs make it yourself.  

Go go through your bank statements / receipts and write down where the money goes.  Then decide whether each item is essential or choice, and whether you can cut the essentials bill.  If you're determined to save, put a savings amount in the "must" category so that it's effectively gone before you get chance to spend it.

Write it all down, and absolutely refuse to spend more.

And credit is not your Friend - if makes spending today easy, but you still have to pay tomorrow.  If you can't afford it today, it's unlikely you'll be able to afford it tomorrow, as your "slowly increasing" bill suggests.

\lecture_mode

thomasross20

Sort of similar to @CabbageCat although (!) I'd say sometimes you do need to splash out. Not to bang on about it but you might not reach retirement. Sheena wont and I regret not getting the house yonks ago and also, she wanted a Vauxhall Mokka for some time and I kept telling her to run in her current car. She's now got the Mokka. Gotta enjoy some of it (also hence my big guitar splurges). But in general... spend less, save more, avoid debt. I generally keep an eye on things but not to the penny or anything - if it gets to that stage you need to re-assess.

Jez6345789

OK I am reformed spendaholic. 
The fact that you have bother swapping card providers is a sign of hope for you and that you want to do stuff. 

My method was to simply grab a spreadsheet. and breakout the last years bank statements in to appropriate categorys.

probably app for this stuff these days with online bank account. 

Once I have got that I looked at where the economies could be made and also who incurred those costs. So is the real cause of the gas bill the teenage daughter who comes home and turns it up to 80 and walks around in just a tshirt. 

Once I have identified the culprits. 

I shopped all the costs around like changing energy providers, etc etc easily done with online stuff these days. 

I also divided up the work of getting the cost saving in place held a family meeting and despite much rolling of eyes and teenage groaning. 

got everybody onboard and slowly rung the changes. biggest bill after food and mortgage back in those days was booze and fags and heating. 

I did open a separate saving account and everything we saved as it came on line I had a standing order take it out on salary day so additional 150 we found per month back then did not just get lost on one of those cant be bothered takeaways when you find you have money the weekend before pay day. 

Sure you will get lots of better tips but that what we did and it got us turned around 

richardhomer

This might sound patronising - though it isn't meant to - but you need to spend less than you earn.

I keep track of everything I spend - as in cash withdrawals, petrol, groceries, etc in the back of an old Filofax (they do a 'Personal Finances' refill). I write in all income and out-goings and know exactly where I stand financially on a daily basis. You could set up an Excel spreadsheet to do the same.

Check the cost of insurances/utilities - you will almost certainly be able to make savings. 

I don't finance anyyhing on credit cards - I just use one (which gives me cash-back) as a method of payment. You might be best cutting yours up - I only buy things I have the money to pay - dull but my only debt is my mortgage.

None of it is difficult - its just about having a mindset that you are in control.

CabbageCat

If you are half-way intelligent there must be a little voice that points out when a purchase is silly. Someone with mounting debt deciding to treat themselves to a new iPhone on a more expensive contract is obviously a silly idea from a financial perspective.

I think the main difference between successful savers (or dieters or exercisers) and the failures is not the existence of the Fucking Obvious Voice, but simply that the former have decided to actually pay attention to it.

Drew_TNBD

TTony said:

ewal said:

but I still live from pay cheque to pay cheque, have a slowly increasing credit card bill, despite attempting to manage it by bouncing it to low interest deals. 

That's not managing the problem - that's just trying to reduce the cost of the problem.

You earn £x.  Let's say that's £1000.  That's after all taxes are paid.

Then work out your priorities.  Some things *must* be spent (at least in the short-term).  Mortgage or rent, council tax, gas/elec/water.  Let's say that the must spends add up to £500.

That leaves you with £500 for the rest.

Again, prioritise.  Food is essential, but *what* food and hence how much of the £500 you spend on the essential is a matter of choice.  Eat in vs eat out.  Aldi vs Waitrose.  Readymade vs make it yourself.  

Go go through your bank statements / receipts and write down where the money goes.  Then decide whether each item is essential or choice, and whether you can cut the essentials bill.  If you're determined to save, put a savings amount in the "must" category so that it's effectively gone before you get chance to spend it.

Write it all down, and absolutely refuse to spend more.

And credit is not your Friend - if makes spending today easy, but you still have to pay tomorrow.  If you can't afford it today, it's unlikely you'll be able to afford it tomorrow, as your "slowly increasing" bill suggests.

\lecture_mode

Me and the missus definitely prefer to eat out.

ArchtopDave

I agree with @TTony  - work out what the basic necessities are. Even though I find myself in a position, that I feel to be rather odd in recent years, with more income than regular expenditure, I still only buy life's little luxuries for myself with cash, that I know is spare. You do need to work out a plan to cut the credit card  down, and reach the situation, where you pay it off fully every month.

octatonic

I've been there in the past but I fixed it by doing the math and realising that a little incidental spending was costing a whole lot.
You just have to start saying no to yourself for things that are not important.

Trips to the shop for coffee or sweets will add up over the course of a year.
A lot of people have a coffee on their way to work.
A large cappuccino might be £3 and you might have a muffin or a biscuit- another £2.
That £5 a day, plus let's say £7 for lunch adds up to about £3k a year.

At one point I was having a coffee at the station in the morning, going out to lunch twice a week and eating takeaway sandwiches 3 times a week, having an afternoon snack and then something on the way home from work- it was probably costing me £25 a day all up- or £6k a year.
I knocked that on the head- started taking my lunch and making coffee at work, rather than going to a cafe and I saved enough in a year to buy myself a Protools HD rig.

I work from home now so it isn't an issue but I still buy stuff in bulk- we get an Ocado delivery twice a week, everything is set up to do take advantage of discount buys. The only things I buy from shops now are some speciality items I can't get online (such as proper coconut milk for Thai cooking, Korean Kimchi etc) plus fresh fruit and vegetables (as I don't trust the online folks to choose it for us).

ToneControl

I used to have big card debts years ago, when I was freelancing on a high salary
When our firstborn arrived, I took a permie job on less cash, and I've been fine ever since

I think it's like losing weight, you don't actually need to watch the budget (which I tried at first), you just need to change your habits:

• stop buying takeaways, cook from scratch when possible
• take a packed lunch to work
• don't use taxis (I never did)
• stop buying £3 coffees
• stop having "because I'm worth it moments"
• sell all your unused stuff on ebay, and buy a really classy guitar/camera/whatever with the cash raised (or pay off a card)
• I used to buy loads of CDs and books, I cut back on that
• Aldi sells better meat than Waitrose, I use it 50% of the time
• drive a comfy but efficient cheap car
• be smart with mortgages
• keep shopping around for all bills, utilities, etc
• cancel sky
• use quidco, we've had £1600 back
• I used to use Tesco clubcard, we had thousands back on that
• I'm assuming anyone wanting to save cash does not smoke

occasionally buy that expensive guitar or pedal, but don't buy lots of little treats all the time
I know people who spend £15 a day on coffees at work, and another £6 on their lunch, that's over £20 a day:
£20 x 220 = £4400 a year, that's £7586 gone a year of a higher-rate gross salary

Grunfeld

ewal said:

Er... so does anyone have any budgeting tips?!

Doing your sums is a foregone conclusion.
But in addition, best practical thing that I found was getting a second bank account and you put the excess into at as soon as you get your pay cheque.
E.g 
You get £1000 a month;
Your absolute essential expenses are £900 a month.
Put £100 in the second bank account.  At that moment you blank it from your mind and you make sure you live on the £900 till the next pay cheque arrives.

ewal

Lots of sensible advice and lots that I do already. Over the years I've tried the snowball debt payment plan and I've read the Dave Ramsey book. But still things are not shifting in the right direction.

The suggestion of a family meeting is interesting. I suspect my situation is fairly common in that I deal with nearly all the household bills (except groceries). If I decide to cut up my credit cards, my wife will have to agree to cut up hers too...

spark240

Tricky, but I like to think I'm prettygood at managing my money, I have a cash back credit card which I use for everything possible, then pay it in full each month by DD, this is a must.

you usually build debt slowly in small bits which mount up....building savings is exactly the same, I save as much if not more than possible in a separate account, then if o need to move a bit back at the end of the month so be it. 

I save anything, small change, the odd bit left from a fiver spend, anything at all.

sell a few redundant odds and sods, stick the money straight in an account.

ewal

I already have a pretty frugal lifestyle honest! This month's excessive purchases were £75 for my daughter's glasses, a new pair of £25 shoes (to replace a 2 year old pair) and a fungal nail treatment (£20)! My wife was visiting family in London and put a meal on the credit card - seemed reasonable in the circumstances, but it all adds up to another month where we've spent more than we earned...

capo4th

Use your ISA allowance 

Teetonetal

The basics are easy.  Work out your weekly spend. Compare to weekly income. Look for areas where you can easily cut back.

A while ago we moved to a much bigger flat and needed to save a bit for the deposite.

We found we threw away a lot of food. So we got smarter with buying and freezing. Saved roughly £80 a week with no thought.

Even something as daft as never filling up on the motorway can make a reasonable difference. 

Lots of small savings quickly add up.

Or just move money to a savings account on day 1 and spend to your current acount. We do that for the kids and over years it's a tidy sum.

I've never been in debt for more than a week , had a credit card or taken a loan. That also helps.

Fretwired

ToneControl said:

I used to have big card debts years ago, when I was freelancing on a high salary
When our firstborn arrived, I took a permie job on less cash, and I've been fine ever since

I think it's like losing weight, you don't actually need to watch the budget (which I tried at first), you just need to change your habits:

• stop buying takeaways, cook from scratch when possible
• take a packed lunch to work
• don't use taxis (I never did)
• stop buying £3 coffees
• stop having "because I'm worth it moments"
• sell all your unused stuff on ebay, and buy a really classy guitar/camera/whatever with the cash raised (or pay off a card)
• I used to buy loads of CDs and books, I cut back on that
• Aldi sells better meat than Waitrose, I use it 50% of the time
• drive a comfy but efficient cheap car
• be smart with mortgages
• keep shopping around for all bills, utilities, etc
• cancel sky
• use quidco, we've had £1600 back
• I used to use Tesco clubcard, we had thousands back on that
• I'm assuming anyone wanting to save cash does not smoke

occasionally buy that expensive guitar or pedal, but don't buy lots of little treats all the time
I know people who spend £15 a day on coffees at work, and another £6 on their lunch, that's over £20 a day:
£20 x 220 = £4400 a year, that's £7586 gone a year of a higher-rate gross salary

A shame I can only give one wis ... I do most of this including shopping at Lidl and Aldi (great meat, wine, cheese and beer).

Fretwired

How do you budget?

I don't. My wife does. She uses Microsoft Money (which is now free) which is an excellent tool for budgeting and recording expenditure. She's used it since 1993 and reckons it's saved us over £50K.