Why? Why? Why can I not get my head around how money actually works?

[CorydonFrills]

In theory I get it...money comes IN...you pay your bills, rent/mortgage, buy food, etc...so money goes OUT...and anything left over goes into savings.

In practice it's a big fuzzy ball of confusion that I just cannot get my head around. We are ALWAYS behind. It feels like we are never in control and I just can't internalise the concept of needing to NOT spend in order to save.

The things that are automatic work well. For example:

We get paid fortnightly, and I have an automatic deduction set up so that half the rent money goes directly into a separate account every fortnight. Then the rent is automatically paid out of that account. We are never late, we never have to think about it, and we are never tempted to touch that money.

I think where it really falls apart is food and non-essentials. I don't have a fixed grocery budget and I find it really hard to predict how much we will spend on groceries, eating out, coffees, trips to the hardware store for tools or gardening equipment...

I know I sound really flighty. I don't want to live like this anymore. If we were rolling in it I wouldn't mind so much but we're not. On the other hand we are not so poor that every purchase is an agonising decision. So we can afford to be careless in the short term but in the long term it's really hurting us - can't afford to buy a house, pay for nice schools, go on holidays etc, but somehow we fritter away hundreds on coffees and one-off purchases.

Has anyone else started from a place of utter confusion around money and managed to get their head around it?

Make sure you know how much your bills are.
Spend today tracking them down, setting up your online logins to all your providers.
Switch to papereless bills, that saves few pounds every month.
Claim back any overpayments on utilities.

Another vote here for YNAB. Very addictive! I get a kick now out of saving pennies. It does all the calculations for you so you don't need to be good at figures. You will get good though, and it's something to teach your kids.

Good luck

You will never amass much in the way of savings with what is "left over" at the end of the month. Savings need to come out at the beginning of the month, as if they are another bill.

I've not read the whole thread but I can imagine a lot of people would recommend spreadsheets or some sort of money tracking app. Now, they're obviously useful tools but a lot of people won't go much past a month of using it properly before falling back into old habits.

Money is really really simple. Don't spend what you can't afford. You mention dropping 100s on coffee. ... Have less coffees? You seem to be well aware of what your spending issues are. That's a huge step already. Allow yourself a little slush fund of whatever you want to spend a fortnight and when it's gone, it's gone. It's as simple as that.

My boyfriend and I are very fortunate not to have any money issues and can live quite well, yet we still allow ourselves only X amount per month and we don't even spend that 80% of the time.

It's all discipline and savvy in the end. Not Excel spreadsheets

I'm on a very low income. So obviously have to keep a close eye on things. Plus of course have to save for xmas and dd's December birthday.

Re tracking expenditure if you can't trust yourself to track accurately or for long enough (tbh a month would be best) for a month you and oh get receipts for EVERYTHING! Track in the evening either on good old notepad or on a spreadsheet or memo app. At the end of the month use it to do an soa and go from there.

I have a spreadsheet as my income is spread unevenly over 4 weeks (benefits payments are weird). And pay certain bills according to the weeks it makes most sense to pay those bills. Complicated but I suspect will be much easier for you as your income is more even.

In addition all bills are dd. Everything else is cash, I know how much is in the budget for each category and they have different sections in my purse. Cash withdrawn beginning of week once it's gone its gone. When I do the grocery shop I use scan and shop so as not to go over its really helped resist 'offers' I don't really need!

I also do a standing order moving how much I've budgeted I can afford to save into a separate account so it goes out before I can spend it! This money is intended for both unexpected things like school trips but I try not to touch in 2nd half of year so as to save for xmas/dd's birthday.

Do you take advantage of loyalty cards? I have one for every shop I use even if only occasionally - again very handy this time of year. Plus there are sometimes special offers for loyalty club members.

I also shop around as much as possible (very small town) as supermarkets are not the cheapest for everything. I shop in the high Street first then the supermarket is for whatever I need that I can't get elsewhere if I'm honest.

Perhaps planning a treat to spend whatever you save on might help?

Watching with interest as you sound very like us op. We get by month to month absolutely fine but because we don't have that immediate money worries (like we used to) we tend to fritter money away. I did a spreadsheet just to see where the money went (so not a budget as such just a list of spending catagories) and it was very enlightening; I would never have guessed that we spent £117 in cafes in a month . We were very thorough for October and November but, typically, we've decided that December will be too horrendous so we've abandoned it.

I've never managed to stick to budgeting, personally. I get briefly excited, categorise all my spending, and I don't keep it up for more than a week.

However, I do have a standing order to savings that goes out each month just after I've been paid. If you do this with rent you can do it with savings.

That way there's no temptation to spend and find out at the end of the month there's nothing left.

I also have two types of savings, in different accounts: the long-term house deposit / cushion / business start-up / whatever you have long-term goals for account, and the 'fun' account, for holidays / Christmas whatever. I never transfer money from the serious to the fun account: I do occasionally go the other way around if I found I haven't used as much as I've saved. I can feel guilt-free about spending savings on things like holidays, because I know that the serious savings are still there, untouched. So the cost of one-offs is spread across the months, rather than having an 'expensive month' because of a particular event.

Every time I get a pay-rise, I increase the amount of the savings standing order by half of the after-tax increase. So I feel some of the benefit of the pay rise in lifestyle, but also increase saving along with it. This means I am now saving a sizeable amount each month, without ever having felt like I've suffered to do so, as I was used to living on a certain amount, and still got to increase this as my career advanced.

To me it's all about tricking yourself into habits so that you never even have to think about 'being good'. There's no ongoing action or willpower needed: you set up the standing order and forget about it.

It is good to be aware of what you're spending and where, but don't go overboard on the self-denial, or you won't stick to it. If having a coffee out is a treat that you enjoy, because of the atmosphere, or as a break from what you're doing, go ahead. Allow yourself enough enjoyable things that you're not tempted to break promises to yourself: you'll feel bad about it, and possibly go too far with the 'I've broken it once, might as well again' line of thinking. But maybe think about how often you're doing it, or what you might do instead that met the same desire but cost less.

Obviously advice would be different if you were in severe financial trouble, but that doesn't sound like the case here.

", eating out, coffees, trips to the hardware store for tools or gardening equipment..."

Sounds like a source of the problem. As Nickeyeds points out, she has been spending £1200 a year in cafes.

Either take a coffee from home or a snack and water.

"When I do the grocery shop I use scan and shop so as not to go over its really helped resist 'offers' I don't really need! "

Online groceries are also good for this: no getting to the checkout and thinking 'I've spent HOW much?' You can see the total as you order things, and it's a lot easier to remove things from the online basket than put things back on shelves.

Also better variety, so more chance of finding cheaper alternatives.

you said On the other hand we are not so poor that every purchase is an agonising decision. So we can afford to be careless in the short term

you need to change your thinking - you are poor - you yourself have said you cant afford things - you cannot afford to be careless in the short term never mind the long term. think of every penny as a prisoner - don't spend anything if you don't need to - stop things like going for coffee all the time - its just a complete waste of money and you don't need them.

peggy I agree. Although it's not an agonising decision to buy a coffee, I just see it as usually a complete waste of money. Same with magazines and other completely silly stuff.

Pennies are our friends, and is where provident thinking begins.

"Although it's not an agonising decision to buy a coffee, I just see it as usually a complete waste of money. Same with magazines and other completely silly stuff."

Enjoying yourself with your own money is not silly. For most people it's bad enough spending a third of your life earning money: we do it to make the other two thirds better, not miserable.

To you coffee out is frippery: to the OP it might be a chance to take a mental break in the middle of a busy day.

Equally, it might be something that is easily cut. It's not for us to tell the OP what make their life better, only to encourage them to examine it themselves and decide what really does enhance their life, and what is simply habit.

Any plan which involves constant self-vigilance is exhausting and likely to fail. Make structural changes that are easy to keep up. Form new habits. Replace existing enjoyments with cheaper ones which do the same thing, if possible. Don't put yourself in a position to have to keep on exercising willpower.

You can quite cheaply get a computer programme (I use Money for mac) which will import your bank statements from online banking and then all you have to do is assign categories to each transaction. It doesn't track cash unless you enter those manually, but we mainly use cash for the same few things so it's obvious where that goes.

It's a lot less drudge than trawling through receipts and typing into a spreadsheet.

Wuffleflump can I remind you of what the OP is actually saying?

"We are always behind, we are never in control- I don't want to live like this anymore. it's really hurting us - can't afford to buy a house, pay for nice schools, go on holidays etc, but somehow we fritter away hundreds on coffees and one-off purchases."

You question my suggestion that spending a great deal of money on regular expensive coffee is a waste of money?

I would suggest that living in a nice home gives a great deal more pleasure than a cup of coffee in a cardboard carton that is drunk in 10 minutes.

Yo ucould set yourself some rules. For example I don't use coffee shops (I drink tap water) and rarely eat out. That ight be simpler than writing a spreadsheet with things on.