How to learn to live within your means

[storypushers]

I know this sounds pathetic but I've never really been taught any money management skills. I was brought up very poor so when I started earning and had credit available etc I wanted to enjoy it. I'm not in huge debt but am usually about a months wage into my overdraft. I know it is of my own making but does anyone have any tips or hints. My mindset is clearly all wrong.

Get an A4 piece of paper, draw a line down the middle. Money in on the left, money out in the right, take the right figure from the left and see what you are left with.
Then look at what you can get rid of.

What are you spending it on? Look over a couple of months of statements and see where you are spending. Add up all
your essential costs - housing, bills, food, transport, childcare, pet stuff etc. Work out how much is left and that is how much you can spend on discretionary spending like food/coffee out, beauty treatments, clothes, holidays etc. Depending how much you earn, try to subtract a chunk from this that you put into paying off debt/into savings immediately once you get paid.

I was always taught if you can't pay for it you can't afford, borrowing was strictly mortgages only. Everything else was saved for. I realise that's old fashioned now, but I do think it's an attitude that is largely responsible for the secure financial position I'm in now.

In your shoes I would reduce the overdraft by 10% each month until it's clear and then put that 10% in savings for bigger purchases in the future (more if you can). Then only spend what you have and never borrow anything again.

Starting with week 1, try not to spend any money on non-essentials at all. No coffees, sweets, wine, bottles of water, lunches, manicures. Take a water bottle & a packed lunch to work.

At the end of the week, look at how much more you have left than normal. Put 75% in a savings account, take 25% out in cash. This is treat money for the next week - coffee, a bar of chocolate etc.

Do the same each week until you clear your overdraft. Only spend your 25% treat money from the previous week on non-essentials.

Then carry on but set an objective - a lovely new winter coat or a weekend away somewhere.

I’ve never earned enough to live within my means.
😉😁😁

Yes as above. If you can't afford it, you can't have it. Never use credit except for a mortgage or if you can trust yourself to put on a credit card for cashback, which you pay off in full each month. Save something every single month even if only £10

As a previous poster said. A piece of paper or spreadsheet where you put all monthly income one side and get a total then all fixed costs on the other. A good list should not just include rent/mortgage, gas electric etc but divide your home and car insurance down to monthly costs, money for Xmas etc. then what you are left with is disposable income after ALL life’s costs are considered. I personally would put 100% of that into getting out of your overdraft. Once that’s paid off put 75% a month into savings and 25% for frivolous spends which includes all beauty treatments, coffees out, soft play, etc etc.

this way you know all things you must buy/pay are covered and you have a good grip on what’s available.

prudent financial management includes savings. Even on a low income if you can save it can help if you need expensive dental work, something in the house breaks but also for more fun stuff like a prom dress for your child or a special trip out. It also covers you if you become I’ll and cannot work.

it’s great you have realised that you don’t have a lot of skills in this area as now you can learn them.

I would look at what you are paying for a month and see what you can reduce. How to cut costs is on the cost of living board here and also Money saving expert websites etc

When I wanted to pay off my overdraft I opened a separate account and saved money in that. Then I paid it off in one go and reduced my o/d limit to £100.

We have two separate accounts- one for all bills and regular payments (including a direct debit to our savings account) and one for spending/variable costs (food, petrol, days out). On payday I make sure there’s enough in the bills account to cover everything for the month, then transfer what’s left to the second account. Then we can see exactly how much we have available to spend.

There are only three debts that may be necessary, a mortgage, a car, and education. Anything else, if you don’t have the money, don’t spend it.

learn to keep a buffer in your account. Instead of zero, your floor should be some other number. Don’t go below that unless it is truly an emergency. As your means increase, raise that floor.

If you are making a budget, write it for a year, not for a month. Too many expenses are only once a year.

How much are you paying in interest???

That's lost money that you could have had to spend on other stuff and make your life more pleasant.....

Write down everything you spend for a month, even a bar of chocolate. Then put into different categories, eg. Petrol, food, pet supplies, coffees out. Then you'll see how much you're spending on what. The first time I did it I was horrified! I still do it occasionally to keep myself in check. I don't put Direct debits on there as they're usually the same every month. I found the worst category was miscellaneous!
Hope that helps

I use YNAB budgeting software even though I'm pretty good with money (qualified accountant), as the concepts make you plan for irregular and infrequent expenses.
They have a 34 day free trial so you can give it a go.

You Need a Budget app. It’s basically envelopes:

imagine you got your monthly salary in cash, and you’ve got a stack of envelopes. You have envelopes for:

Rent/mortgage
Transport (public or petrol)
Savings (for emergencies)
Savings (for specifics eg annual MOT and car stuff if that applies and you know you won’t have it in one paycheque)
Food
Gas
Electricity
Water
Council tax
Internet
Phone
Contact lenses or other subscriptions
Insurance
Toiletries
Going out (including birthday cards, gifts)
Christmas (easier to save a little each month)
Free spending

Divide up your cash salary into the envelopes, starting with the “you’d lose your home or go to prison” ones – roof over your head and council tax. Then cash into the gas, electricity and food ones. Then into internet, phone, insurance and subs. Then savings for annual things like TV licence, MOT, etc. Then anything left split as you will into an emergency savings pot, going out or hobbies or things you know you will want to spend on. Anything left (unlikely) goes into free spending: the coffees and chocolate bars and top-up shops and snacks and taxis and stuff that bugger up most budgets. You’ll realise in this envelope exercise you have very little to spend here once the real bills are paid, but in life most people free spend and then consider the real bills afterwards. And then turn to credit.

Obviously these are metaphorical envelopes but loads of apps will help you do it.

Finally, consider: no spend September and other social media thingies that hold you accountable, library instead of bookshop, free hobby like walking instead of the pub, etc. Go for a night out with only the cash you have, not a card (assuming you have a safe means to get home): stops you going on to dinner or karaoke or the club you can’t afford. Set a savings goal. Take Apple Pay and Shopify off your phone, delete Klarna, lose your PayPal password, change your Amazon one then forget it or delete your account, make it hard to buy shit online.

I think you have taken the first step of recognising there is a problem. This isn't something that is taught, but more being self aware. For what it is worth, DH was very poor growing up and he didn't like to get into any debt or spend anything.

Have a look at budgetting concepts like envelope budgetting. I used to use you need a budget but it's now subscription based and I wouldn't not recommend it. But learn the concept and there are a lot of bank accounts that allow you to use the envelope method. (I have Starling and they have spaces for savings). Put aside money for big purchases regularly into your envelopes. If you want to be saving for the long term, transfer money to a savings account. Work out what you need to survive on first however and make sure you have enough to pay your bills. MIL was terrible at budgetting and I knew she regularly ended up in overdraft with money in savings. This is no good because you pay the bank interests for no good reasons.

If you want to invest your savings, then have a look at the shares, funds and ETFs. Also, your pensions too.

This.

Remember to budget amounts for short term contingencies and long term savings, even if they're small sums.

If necessary, close credit card accounts and cancel your OD.

Buy and read a copy of "Your money or your life" by Vicky Robin and Joe Doninguez.

Write down or better use an spreadsheet to list all your fixed non negotiable outgoings, ie rent, mortgage, car insurance, bills, loans etc.

Then write down other annual costs you have yearly like car repairs, service, buying a car, holidays, birthdays, christmas, hairdressers etc. Work out the annual costs and divide by 12 and set up a separate bank account where this amount gets sent monthly. That way you are covered for larger expenses.

The sum you are left with after your essential bills and large personal expenses is what you have to spend per month. Set up another separate bank account for your monthly spending only where that amount is auto transferred. You only spend this money. You can do this all with your same bank, online.

No loans, except a mortgage, definitely not for cars, cash or you can't afford it. Good luck, this is a great step in the right direction.

Also recommend YNAB as well as reading one of Dave ramseys books - like the total money makeover.

I have pots of money that cover everything - food shopping, fuel, utilities, holiday, car maintenance, clothes, birthdays, house renovation, mortgage over payments, bills. After all of that I allow myself around £50 a week for what I like (takeaways, makeup etc) and I stick to it. I have found that when you have more you just think sod it I can afford it but by putting into pots it feels more restrictive which isn't a bad thing.

3 accounts:

• Main acct - STOs to bills acct and savings
• bills - STO from main account covers all bills including annual ones like insurance
• savings - STO from main acct.

The STOs go out after payday and what is left is your discretionary spending money for the month.

In your case you also need a monthly repayment to repay the debt.