How to Get Better with Money

[oldandbroke]

I am looking into getting a mortgage but I am not very good with money. On the one hand I have savings which I don't touch but I will need to start budgeting as I am dipping into another savings account each month.

I'm on a relatively low income but could just about afford the mortgage. I would have to cut down on takeaways and treats.

Have any of you become better at budgeting? Any tips?

Document all your income and out goings (spreadsheet) to understand where you are spending. Breakdown one off annual payments into monthly amounts - this helps even out peaks and troughs and gives an average monthly spend.

Why are you dipping into your savings? Is it because you put a sum into savings at the start of the month or is it you are having one off expenses etc.?

My approach is to have a separate bills current account (one that pays interest or benefits for having an ongoing balance). Each month I do a Standing Order that covers 1/12th of annual expenditure. All my DD and one off payments are funded from this account. I do not use these funds for anything else, if I build up a balance I transfer some to a savings acct, leaving sufficient to pay all future bills etc.

I also do a second standing order into my savings. Taking it out straight away means I discount this money.

Whats left is mine for food, travel (personal choice not to use the bills acct) and fun.

When I get a pay rise I immediately increase my savings/mortgage payment by a % of the increase e.g. £30 a month net pay rise increase savings/mortgage payment by £15-£20 so also get more fun money.

We budget. To help us do this we have two joint current accounts. One current account pays for all the standing orders/direct debits (gas/water/tv/etc.) The other one is for food/petrol/clothes/etc. By dividing the second account by four you get a rough weekly spend (bearing in mind there are more than four weeks in most months).

We also have three savings accounts. One for Christmas/birthdays, one for holidays, and a general savings account. These come from the standing order account.

I know this might seem complicated to many, but it works well for us.

What you need to do is find a system that works for you.

Stop dipping into savings and go cold turkey with regards to takeaways & treats.
See how that works for you (i.e. are you then living within your means?).