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Please help me figure out my finances!!

6 replies

learninghowtomanagemoney · 16/09/2017 12:22

My partner of ten years and I separated a couple of years ago, since then I've been renting a room from a family member and basically trying to pick up the pieces of my life. I've recently rented a one bed flat and for the first time am trying to take responsibility for setting up my finances properly and learn how to function (my ex partner was very controlling and wouldn't let me be involved with household finance).

This is my plan and ideas and questions, would be so grateful for input/ideas!

Current Account - living expenses - all direct debits for rent, utilities, bills etc paid from here (Currently First Direct)

Savings account - 20% of earnings paid via Direct Debit to savings account (Currently First Direct)

Considering doing the following:

Money allocated to ‘Pots’ - multiple interest paying current accounts for different things ie holidays, Christmas, car maintenance, household etc - good idea or pointless?

Cash ISA for medium/longer term personal savings (instant access or fixed)? Do you review every year and change if better interest is offered elsewhere?

Cash back credit card - buy everything on it and pay off in full every month?

Credit cards old and paid off - keep open for good credit

Do I need to track every individual personal expense in a spreadsheet i.e 20.06.18 Petrol station £1.50 Newspaper?

Pension contribution - how much, how often?

Annually check energy tariffs, insurances etc - compare and change where necessary.

OP posts:
learninghowtomanagemoney · 16/09/2017 13:12

Oh and should I have a separate account/ISA containing 3-4 months savings as a contingency/emergency fund?

OP posts:
nannynick · 16/09/2017 16:23

Current Account - living expenses - all direct debits for rent, utilities, bills etc paid from here (Currently First Direct)

Yes, good idea.

Savings account - 20% of earnings paid via Direct Debit to savings account (Currently First Direct)

Consider an interest paying current account if you can meet the eligibility criteria, such as TSB Classic Plus. It can pay around 3% on first £1500.

How much do you plan on having in this account? Three months of expenses, six months, more?

Considering doing the following:
Money allocated to ‘Pots’ - multiple interest paying current accounts for different things ie holidays, Christmas, car maintenance, household etc - good idea or pointless?

Good idea but you could do it on paper (literally in a notebook) or use a spreadsheet to track the pots. Some savings accounts let you have multiple pots within them... not sure which ones, with luck someone will read this and know more about that.

Cash ISA for medium/longer term personal savings (instant access or fixed)? Do you review every year and change if better interest is offered elsewhere?

I would not bother with a cash ISA. The interest paying current accounts pay more interest. You don't pay tax on interest now until it reaches £1000 (£500 if higher rate tax payer), so given the low rates it could be a while until you get that much interest in a year.

www.gov.uk/apply-tax-free-interest-on-savings

Look at Stocks & Shares ISA - you could invest in a couple of index tracker funds which would be fairly safe... though of course everything does go up and down but you did say Long Term so I presume you are talking 5 years+.

You could also try some fixed term products such as those from ATOM bank, NS&I, where you put in an amount and leave it there for a fixed period of time.

Cash back credit card - buy everything on it and pay off in full every month?

I would avoid the temptation of using credit. Just use debit cards. If you have to have one, then just have ONE.

Credit cards old and paid off - keep open for good credit
No, close them.

I would still keep things like a mobile phone contract. Utility bills and council tax in your name, on electoral role and be saving for buying a home with a mortgage (payment around 25% of your take home pay).

Do I need to track every individual personal expense in a spreadsheet i.e 20.06.18 Petrol station £1.50 Newspaper?

YES. It can really help to start with. I was spending over £400 a year at Starbucks. Tracking spending for a month, or two, can help you identify things you spend money on which you don't need to be doing. You can then put that money to better use, such as your savings, investment and pension.

Pension contribution - how much, how often?
Does your employer offer a workplace scheme - most do now.

I would join that scheme and contribute up to the amount the employer matches. That may be quite low now, around 1% of earnings for small employers but it does go up over the next couple of years. I would aim for putting in 15% of your gross income (ignoring any employer contribution) however I would only do that after you have cleared any existing debts and have a good 3-6 months of savings (for a rainy day).

My strategy is based on the Baby Steps by Dave Ramsey.

If you like that idea and wish to do it, then there is a UK support group on Facebook www.facebook.com/groups/1625701281083011/ and you can buy the book, borrow it from some libraries, listen to it on Audible. As Dave says in the video, read books about money - anyone's books. The more you learn the more you will be in control of your money.
learninghowtomanagemoney · 16/09/2017 17:16

NannyNick This is so incredibly helpful NannyNick, thank you so much for taking the time to give your insights, I'm really grateful Smile

OP posts:
JoJoSM2 · 17/09/2017 20:53

In terma of long term savings, pensions are the best as they go out of your gross salary so you save on the tax bill. If you're in a pension scheme at work, check if the employer might match your higher contributions as that's often the case.

Unfortunately, you can't make use of your pension pot until you're old enough so it's important to have more accessible mid to long term savings, e.g. ISAs. Stock and shares funds are the way forward - you can choose the level of risk you're happy with and would need to spend your money to avoid putting eggs in one basket.

With regards to all the different pots, it might not be necessary. E.g. we've worked out roughly what we'd need to spend throughout the year on things like presents, car insurance, holidays etc. However, all that money is saved into an account linked to our current account. There's no need for a number of smaller pots as we're reasonably frugal and don't tend to overspend.

In terms of 'pocket money' for things like snacks, magazines or clothes, getting nails done etc that's kept separate from the main account. I also have a separate debit card for that to avoid getting carried away with treatments and clothes.

JoJoSM2 · 17/09/2017 20:55

*spread not spend your ISAs

Brittbugs80 · 20/09/2017 15:44

Credit cards old and paid off - keep open for good credit

Unused credit cards are actually bad for your credit rating, it's best to close them if not being used.

I had one unused that I thought was good. When I closed it and it was removed from my name, my credit score went up.

I put petrol on my credit card, waxing and phone on my credit card each month and clear it each month which helped to build my rating up.

I have 3 bank accounts in my name. Wages go into one on 26th, all debits come out in 1st which I leave the money in there for and transfer the rest to my second account. My third account has my equivalent of life and critical care insurance in. I pay in £50 a month and have done since I was 18. If anything happens that renders me unable to work I have that. When I turn 50 I intend to take out a funeral plan.

I divide the money in my second account by the number of weeks until payday e.g £336 left divided by 5 weeks which is £67 per week. I'd then transfer £35 into ISA (£7 per week x 5) leaving me £60 spare to spend as I wish.

I pay £100 a month into my LISA and my pension is 1% from me and 2% from my employer. My ISA is my savings.

I have a joint bank account with DH that has house.money in, so that covers any repairs, replacements of products or decorating in and always has a minimum of 4 months of DH salary in. We have a separate holiday account too that pays for just holidays.

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