How to budget

[wonderwoo]

I am fairly good at budgeting (at least I thought I was). I have many things sorted: I put money aside for bills, save monthly for things like christmas, birthdays, holiday, car bills, and put money aside each month for things like clothes, hair cuts, dentist bills etc. I also try to be fairly careful and do things like change utilities provider and don't pay monthly bills for things like gym/tv that we don't need.

On paper it all works out, but in practise we are overspending every single month. This has gone on for a while, and I have buried my head in the sand, but now realise I need to sort it out. I just don't know how.

I think that there are numerous problems with my money management, such as not budgeting enough for certain things, combined with buying things that we could do without. In addition, I have an idea that there are two main problems:

1. I buy most things online, and so pay by credit card, and sort it all out monthly - giving an ability to over-spend because it distances me from the act of spending money, and so I have slowly over time got into the habit of buying now, working it out later. (the benefit of the credit card is that I get some protection from online fraud and I do at least get cash back from it)

1. I do not have a plan for occasional or unexpected expenses. Silly things like batteries, books, school trips, school photos, postage etc etc. They really do add up! I am going to try and make up a small budget for school things (just estimate a reasonable amount) and with other things, I will try and write a list of what I need/want and only buy once a month once I have calculated a total cost, and prioritised the most important. Does this sound reasonable? What do you do?

I have just written all this out, in the hope of getting some advice on how to fix it, but I realise I do actually have some of the answers already.
Maybe more than anything I need some encouragement and a bit of a hand-hold. I do find it somewhat overwhelming and am filled with regret for how I have let this happen for so long. We are not in debt, but I have bled dry any money we did have and for that I feel terrible.

Can anyone help me out with how they manage these issues?

Anything you need protection from via a credit card is something you're unlikely to need? Maybe cancel the credit card and most of these purchases?

A lot of the rest of it makes clear sense, however!

Don't feel 'terrible'. You realised that things could be improved before you got into debt so now you can start again on those savings.

I'm afraid I don't have any advice but have similar struggles that I need to get on top of too. Well done for trying to get things back on track

There is a really useful app that I used for only a month to get a true idea of where I was spending on what. It was a free app on app store (android) call "Spending Tracker", I spent ages entering everything in and then for a full month I recorded everything I spent and classified it (groceries, kids, eating out, entertainment, Luxuries etc...). Turns out my biggest overspend goes on eating out. I also realised exactly what proportion of my money was being spent on debt repayment, that was very eye opening (about a third of my income!). All of a sudden it wasn't a big effort to make sandwiches for lunch and spend a bit more repaying debts faster.

I buy most things online, and so pay by credit card, and sort it all out monthly - giving an ability to over-spend because it distances me from the act of spending money, and so I have slowly over time got into the habit of buying now, working it out later. (the benefit of the credit card is that I get some protection from online fraud and I do at least get cash back from it)

These things should still be budgeted for in advance though. For instance, I have a monthly amount budgeted for clothing. It then doesn't matter whether I pay for my clothes with cash or with debit or credit card, once that budgeted amount has gone - its gone.

I use YNAB to keep track of my budget but there are other apps available that will do the same thing, even a spreadsheet will do.

Thank you all for posting. I will check out those apps. I find it hard to keep track of what money in have available for what, and how much I have spent. I write it down, but to have an app present it to me in an easy to assess way, would be very useful.

I am trying to keep a positive attitude, focusing on making changes rather than what I haven't done right up until now.

Good luck magstermay, hope you get on top of your finances too.

I buy a lot of those bits and pieces from amazon.

Ive started putting 100gbp on an amazon got card to my account at the start of the month for it, and also birthday pressies for parties etc. It is def helping me think about how much I spend on junk.

My instinct is that the really critical thing is 'not to spend on things you don't need'. At all.

(Assuming you've already been through expenditure and achieved the best deals you can on things like power, insurance, comms etc.)

Yes cozietoesie, that is exactly what I need to do, first most importantly. And I also learn to distinguish "want" from "need", because I have a habit of justifying the purchase of things that I do not really need, but I manage to convince myself that I do.

Why do you think you want to buy things?

That's a good question. I actually don't know the answer at the moment... I need to think about it. Thank you for asking.

I was in a similar situation to you, so what I did was review all spends at the end of each month. I set up a spreadsheet, copied my bank statement and credit card statement over and categorized everything (e.g. food, petrol, DIY etc).
I could then see where my money was going as we were exceeding the budget I'd set for food by over 50% and I was buying too many clothes (online shopping, like you - in the end I added the cc to the monthly analysis). It really really helped to see what the money actually went on.

Well done, lion. Did you manage to bring things more under your control?

I would have a look at the YNAB website at the training material. You don't have to use their app, but the method is really good for understanding how to plan your spending.

Specifically on credit cards, you can pay them off daily if you want to. Instead of letting the money accrue til the next payment date (which can be weeks away, depending on when you make the purchase), pay it off straight away. This shouldn't be necessary if you treat the money as spent as soon as the purchase happens, but requires more discipline.

I'd try to delay all purchases by at least one day. So if you decide you need [x], wait until the day after or the day after that before making the purchase, to have time to reflect. When you go over budget in one category (say, clothes), think about which category that money will have to come out of in order to make the numbers add up again (this is a YNAB principle). So yes you can buy those shoes but you will have to forego a trip to the cinema, or whatever it is. You make informed choices rather than just hoping money will magically stretch across everything.

Budgeting is about planning, not just tracking. Have a think at the start of each month about how much you want to spend in each category, preferably based on how much you spent last month/what you know you've got coming up.

Thank you everyone. Some great advice. I will check out that website trib.

Cozie - I have been thinking about your question about why I buy things. Its very hard to answer. I don't think I am actually too bad, honestly. I am not constantly buying things we don't need on a whim, I do not trawl the shops for fun, I don't have piles of things we don't need or like, just because I got a thrill from the purchase. The problem is that we are living beyond our means (and our means is quite low, meaning that it does not take much extra spending to go over). I used to, years ago, find it very hard to spend any money at all, and was very frugal (too frugal really) and I think it changed when I had kids... I needed to buy things for baby whilst pregnant, and I think I got used to it.

My children are my weak points - I find it hard to resist if I think they need, or would benefit from something. But I have already resisted buying my son a christmas jumper this week when I saw a good one (I tried not to buy one last year, because I think it is a waste, but I gave in at the last minute, because school had a christmas jumper day, and I felt bad sending him without).

I also moved house a couple of years ago, and we decided to spend a bit of money to make it nice (money we had saved for such things), but I kept on spending beyond what I should have ,and that has also become a habit.

I did get into the habit a couple of months ago of not buying anything straight away, and to think about it for a day or two, and that has helped. I need to continue that, but also prioritise and keep on top of what I am spending.

I like the idea of paying my credit card as I go. The extra work involved will probably put me off spending too!

Thanks again for the responses. I have started working out where I am under-budgeting and where I can make cuts this week, so am feeling more empowered and less anxious about it all, and your tips are helping.

That's good. I reckon that actually thinking about things is a good part of the battle. Too many people just hurtle along and then end up in a bad place before they realise. You sound as if you're going to be improving.

I am in the process of clearing debt from over 20k from a businesss to about 5k now. It has been harsh but I'm determined to do it so what I did/do is I don't use a credit card I pay cash for everything if I don't have it I won't spend it, I also sell everything I don't/need want I got over £500 for Christmas by doing that, this summer I bought bags of clothes for £10 then did car boot sales with the clothes earning £100/£150 a Sunday, I have two free nights a week my son boards(on a bursary) that I am starting night work in a nursing home as well as my day work. It has singularity been the most painful thing I've ever done but got its focussed my mind

And now you have the finish line in sight.

Do you think it will have lasting effects on your spending patterns?

I think spending cash definitely is a good way forward for me, I spent willy nilly with no regard for what money I had. When I had a business I found it really hard to keep tabs on incomings and outgoings that I just gave up and overspent. I've found crawling out from debt very challenging but in a way creative I have a lot more respect for cash now

That's brilliant Parsley. You should be really proud of yourself.

Thanks I am and it's been a long slog. I am nearly there to be honest the last bit has been the hardest mentally I'm in such a hurry to get debt free and I feal an idiot for being so cavalier with money. It's made me respect money more but has made me very reticent about getting another business - on a bizarre note I wanted to give something back and thought I cd do debt advice after training. Sadly not - the debt charities here are all Christian based and because I am a humanist I can't encourage people to pray with me hence not able to train with them. Even the food bank and credit union are faith based you cdnt make it up !

Sometimes there's just not having enough money.
The prices are going up, the salaries haven't increased, we are getting poorer.

My solution is to work more hours. Maybe not the best solution, but I am grateful I can.

I pay myself (savings) first. Like you, I have a separate bills account, I overpay it so I have enough for insurances etc. Any new appliances etc are saved for. I go shopping with cash. I try not to spend the first week after being paid, I wait for all the direct debits to go first and then make a food budget.
Hope that helps.

I know its a plug but I really like my.pocketsmith.com it a great way too track your spending. You have to pay for it but I like the visibility it gives my of my finances.

Close amazon account. They are usually pricey, which is interesting given their tax status... Their packaging also sticks two fingers up to the next generation.

Online is often more expensive. If it isn't food or essential stuff, go buy in a physical shop! This will annoy you at wasting time shopping, so you are less.likely to go. Money saved!

Write all your income and expenses down on a piece of paper or start on your notes on your phone because they may amend every month.

Include all your income, yours, your partners, any benefits, child allowance, interest showing in your bank account.

Then right all your expenses down categorising them so it does not get too much recording everything.

Mortgage/Rent:

Council Tax:

Gas & Electricity:

Water:

Tel & Broadband:

Sky:
Mobiles:

TV Licence:

Groceries, toiletries
& cleaning:

Car Fuel:

Nursery/School:

Others:
Bank membership/fees including interest on credit cards
Credit cards
Clothes:

Dining out:

TOTAL:

Work out your disposable income

Obviously all of those don't take into account your one offs like insurance, car expenses etc

Having it all written down will make you spend less and give you some determination to clear your credit card debt
Once all cleared continue to use your credit card but pay it all off straight away

It's great having interest free credit cards but problem is you continue to spend and think oh no interest so will sort out later on... By the time later comes you have £5k on your credit card