Becoming more financially astute

Got a bit of a shock when checked my bank statement this morning – with the roll out of the new Scottish tax codes, the HMRC managed to screw up quite spectatuarly and resulted in taking a quarter of my take home pay in extra tax.

All now sorted with HMRC and I will get a refund next month. However this prompted me to look into my finances over the past few months, download all transactions and review my spending.

As a result I can conclude that I am spectacularly wastefull.

So, I’m looking for some advice from more succsessful adultier adults on how best to be looking after my finances and becoming more financially astute.

Thanks

What do you waste it on? Understanding that has gotta be the first step.

I just have a spreadsheet that lists everything that should go out, when it goes out and how much it is.

Some simple maths around money in and money out around that can often highlight what I need to cut down on.

I also have an app on my phone that i use when money is tight to log everything I spend, that way I can track things I’m spending too much on in a month without thinking about it.

I’d suggest budget, plan & monitor.

take an amount out to cover mortgage / bills etc and move to an account that is only used for this.
take a smaller amount and move to an ISA for a “just in case” account

The remainder is yours to do as you please each month.

you can reduce costs by making your own lunches, not buying spare bike parts on a whim and cutting back on those little extras.

but at the end of the day as long as you have covered your rent n bills and a little more to cover any emergencies then fill yer boots (we only live once apparently)

Do you spend much cash? What I mean by that is that if you’re looking at your statements that will only show so much, I was shocked at home much I wasted a month on little crap things like Coffee and such – used an app to record every single thing I bought for a month, it was boring but it helped a lot.

For the rest Money Saving Expert is your friend really.

If you’ve got any debt, you can usually save some cash-flow, or some interest or even both.

Yeah I’ve got one of those spreadsheets, then I go out and spend a shit load of money on I don’t know what and it’s all gone to rat shit. Every month.

Send it all to me. I’ll send you an allowance each week and keep the rest nice and safe for you.

I am spectacularly wastefull.

Well, you’ve already obviously done the first step, identify that some of it is wasteful. Step 2 is stop doing that.

That may sound overly simplistic but it’s true, identify where/what you spend money on and then investigate and decide:

A> it’s totally un-necessary = stop it
B> it’s necessary but more economical** options available = swap to the more economical option
C> it’s necessary and there are no alternatives = tough luck

You’ll find there are a few A’s that are quick wins so deal with them first, then the vast majority will be B’s and it’s time to start research. Some that you think are Cs might actually be B’s with a bit more work.

*There is a hidden D

D> it’s totally un-necessary but you WANT to spend that money = hard decision, and depends if you’re just want to save a bit of money, or if you actually need to save the money as to whether you stop those outgoings or not.

**There’s always a scale here, you don’t always have to go for the cheapest option, but look at where you want be on the scale.

It’s quite normal and not unusual to get a bit slack when you have decent wage coming in, but if you’ve ever been through proper hard times you have to get good at managing money to stay afloat, and once you’ve done that once you’ll find it easier later.

Do you spend much cash? What I mean by that is that if you’re looking at your statements that will only show so much, I was shocked at home much I wasted a month on little crap things like Coffee and such – used an app to record every single thing I bought for a month, it was boring but it helped a lot.

Buy everything on a credit card and keep the receipts. Then reconcile the receipts against your statement.

Not only should you always do this but it also gives you an easy way of seeing the spend/waste. Then decide what is waste and don’t do it, or at least do it by meaning to do it.

But the simplest way to be better off is to just earn more, and tbh I’ve always found it’s a better place to put the ‘energy’ than trying to be constantly Scrooge.

Writing everything down is a good start. Once you see what goes where you can trim some fat. Some people are just rubbish though. Visited a friend, it was too warm so she opened a window rather than turn the heating off. Turns out their mortgage deal ended over a year ago and they still haven’t bothered to move from the rubbish rate.

Turns out their mortgage deal ended over a year ago and they still haven’t bothered to move from the rubbish rate.

Would they not be on the standard variable rate which will be cheaper than a fixed rate?

But as above track your spending on a spreadsheet.

I just have a spreadsheet that lists everything that should go out, when it goes out and how much it is.

Jeez….who has time for that? 😯 Other ideas are similarly time consuming and boring to continue for more than a few days. (no offence! :-))

What works for me, is when your salary hits your account, you immediately transfer more than is sensible into an adjacent savings account…..the idea being that you can shuffle some of it back when your current account is drying up. This works for me as I partition that money I see in my savings account and try and avoid touching it, so I continue to build up my savings. Clearly its a bit of a psychological thing…but its always worked for me.

Jeez….who has time for that? Other ideas are similarly time consuming and boring to continue for more than a few days. (no offence! :-))

You only need to do it once to figure out your regular outgoings – it does help you to understand how you’re spending your money.

All bills and the mortgage get paid by DD a day or so after I get paid which helps you budget.

If you want the assistance of modern technology to cajole you into better spending habits, then I highly recommend a software and phone app called YNAB. I was previously managing to fritter away thousands of pounds a year and had no idea what it was on (still don’t actually). But since getting YNAB I’ve managed to save massive amounts per month. Gone from spending all my monthly pay, to saving £1000 each month – and this didn’t take time either, it started from day #1.

The software has a fee. I might find a referral link if you want to try. Not that I am in any way linked to this company by the way. Other software exists; I tried a few before settling in this one.

Jeez….who has time for that?

Well I guess it depends how much spending you do on a daily basis but it takes me about 30 seconds a day to update the spreadsheet and reconcile with online banking so I know what’s come off.

Oh the irony of buying a software package that tells you how to save money!

Jeez….who has time for that? Other ideas are similarly time consuming and boring to continue for more than a few days. (no offence! :-))

Once you’ve set it up, it takes minutes to update and keep an eye on.

Spreadsheet.

I’ve stopped
A) buying uneccecary bike parts, I was spending a fortune on bike/camera/boat gear that wasn’t strictly nececary and I could have lived without. Just little things like filters, adapters, widgets etc. Things that half the time I already had but either couldn’t be bothered to find or being OCD and wanting a matched set rather than just throwing any old rotors on the bike for example.

B) Eating out, coffee and lunches. 5% of my net pay went straight out on lunches and coffee in the office! Another 5% to takeaways. Cut those out by being a bit more organised with the food shop so there’s always something to cook a meal and a stash of dried noodles, and pasta type meals in my desk for days I’m in a hurry.

So that’s pretty much cut my bike spending down to a minimum. And given me 10% more in the bank each month too.

Riding to work helps too, not put petrol in the car since March!

I like having a few accounts so I can move money between them to tuck funds away. There is something psychological about seeing less money in an account than you would like, it slows your spending down, even though you know you have emergency money in place

Works for me anyway

I’ve run a virtual budget for years and it forces me to be quite disciplined. I started out with simple lists in spreadsheets but switched to an iphone app called “ace budget” on more recently to Goodbudget which is a webpage and app – the free version works well enough.

Goodbudget and Acebudget both allow you to set up a series of simple envelopes for different types of spending. Once you’ve figured out how much you can afford to spend you can set them up to add money weekly, monthly or yearly.

After that, you just need to record what you spend. The apps tell you visually whether you are underspent or overspent. If you don’t spend all of the weekly amount you can set it to roll over any surplus so you can spend more the following week and be confident that it’s within your budget. Both of the apps record the names of what you type in so after a week or two it just takes a few seconds to write down what you’ve spent in a whole day and it will automatically post the item to the right envelope.

With this system it’s quite hard to overspend as long as you’re disciplined about writing down what you spend. What’s nice is that you can spend without worrying and any additional income e.g. selling bike parts, just goes back in to the bike envelope as additional spending for later.

The image below is from the Goodbudget app and gives an idea of what you see when you use it for a while for a household budget – the envelopes are all underspent apart from clothes so some reigning in is required on that one for a while.

The downside of this approach is that you can get a little OCD about not spending when you’re overspent but the upside is that you never blow the overdraft limit.

Would they not be on the standard variable rate which will be cheaper than a fixed rate?

Definitely not always the case and best not to assume it is.

The option I had after roll off from fixed would have been more expensive than the new fixed deal I’ve just agreed.

Back to the OP, work out all your rent/mortgage and bills – ship that into an account, give yourself a rough budget to live on (say £100 per week) leave that accessible, stuff the rest into another account and go from there.

I’ve been running a budget spreadsheet since I was in uni (so 15ish years now), Without it I’d never have saved for my wedding, saved for a house deposit, cleared my student loans, cleared my overdraft and had plenty of holidays. I like to spend, but I also like not paying credit card interest or loan interest.

I also use YNAB – I was put off a bit when I started because I didn’t feel like I “needed” a budget – I could cover all my bills fine, it was just that I wasn’t saving as much as I’d have liked. But it really has helped and I’ve saved so much more in the 12 months I’ve been using it than I used to – despite buying 2 new bikes in that period ( 😳 )

Just to reinforce the point above (and my recommendation for YNAB). These systems rely on the same ‘envelope’ budget system. It’s a basic principle, i.e. separate your monthly income into seperate ‘envelopes’ for each category of spending. Then try and only spend each month what money you have in those envelopes. It does require some discipline to log which envelope you are taking money from each time you make a transaction, hence the app. But once you’ve got your spending under control you can let it slip a bit and assign the transactions once or twice a month.

If you don’t want to bother with a spreadsheet for the small ‘cash’ item, how about opening another current account as a Pocket money account?

Pay all the known bills etc. from the main account and do a monthly standing order across to your ‘cash’ account. Then you’ll know the bills are okay and maybe a better understanding of the more wasteful things.

I use a spreadsheet with all my regular expenses allocated for every day, which is easier to update if you sit at a desk all day, I update it every few days, which is as simple as updating current balance, adjusting if I need to pay off the credit card, etc. then delete the rows above, example below, numbers changed to protect the innocent! There are some more linked columns off to the side with balances for savings, cards and line of credit, so I can project how long it’ll take to pay them off and how much I will allocate from each pay.

Would they not be on the standard variable rate which will be cheaper than a fixed rate?

No. Svr is typically 4%. Most deals are around 2-3% so that’s about £100 a month on a £500 mortgage for nothing.

Cut down on coke. And hookers.

beefheart – with some careful cost control elsewhere there’s plenty left over for the essentials!

o she opened a window rather than turn the heating off. Turns out their mortgage deal ended over a year ago and they still haven’t bothered to move from the rubbish rate.

My mortgage ‘deal’ ended 6 yrs ago. Been on nationwide SVR which is base + 2 %. Been saving a fortune for years.

Best way we’ve found to manage bills is to have several accounts. Joint bills that covers all fixed DD’s and savings. Another account for food &fuel & extras. Individual accounts for whatever is leftover spending.

My mortgage ‘deal’ ended 6 yrs ago. Been on nationwide SVR which is base + 2 %. Been saving a fortune for years.

Are you sure that is svr? Current nationwide rate is 3.99% Sounds more like you are on a lifetime tracker (which you could get base plus 1.5% if you fancied a switch)

Sorry. Base rate mortgage. It’s a promise they made in 2007 to never be more than 2% above base. My tracker deal expired in 2009. They keep trying to get me off it. Has almost made up for buying on the peak of the market.

Cut down on coke. And hookers

are you mad man?!

Thanks all for your tips, I’ll have a wee play at knocking together an excel sheet. Also due to house price inflation my LTV looks to be in a better band than when I bought a few years ago so booked an appointment with the bank – should be able to take mortgage from 3.6% to 1.99%!

Hopefully should be able to go from being broke at end of month to considerable savings!