Please help me stop being sh*t at money

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This year I will earn 130k or more, but I don’t have a grip on my finances.I often run out and dip into my savings (60kish but going down)

Is there anyone out there that’s good at managing day to day money who will advise and cheer me on?

First up, please go east with me. I am aware that I am very fortunate, and I know listening to fortunate people say they can’t manage their affairs can be really enraging. Sorry in advance. I think I am that person, but I am trying to learn.

Background. I am high functioning but I have dyslexia and dyscalculia (numbers don’t stick in my head, I make errors, and I don’t know my times tables, struggle with percentages, to read a clock face etc) BUT I am very good at some other things, and as such, have had some professional success.

I’m Self employed so I can avoid the things I’m bad at and just do the things I’m strong at.

When I was married (to a much older man) he managed our mortgage, bills etc, and I paid for all discretionary spend, but divorced a few years ago. And I have been trying to step up.

I live in the south.

I’m too impulsive and tend to throw money at things to solve problems or make social situations go well.

I lost all my work during covid, it was a very frightening couple of years and I have only just got my earning back to a good level. I get scared of losing work again.

I am single mum, but my children go to their dad nearly half time. He’s a good dad.

I have an 150k mortgage in a small flat worth about 580k

I own a rental property worth 260k. It has a 140k interest only mortgage. I rent to cover the mortgage payments. I would like to move it to a repayment mortgage in a couple of years.

My parents have passed, I don't have a backstop, I have earned all My own money since I was 17 - though have been very lucky with property.

I have never had a bad debt, and I currently have no debt but the mortgages.

I don’t have much spare time because of kids and work.

Where would you start?

It's interesting you compare it to dieting as I was going to suggest something along those lines. Are there other areas in your life where you are better with discipline - going to the gym regularly for eg or resisting the snack table at work? If you can work towards goals with planning and discipline in other areas, you can apply similar approaches here.
Full disclosure, I'm the opposite! Great with money, terrible with food impulses. So I've tried to transpose some of my good thinking around savings etc over to my bad thinking about binging and other bad food habits.

Another vote for this. I think it would be perfect for your situation - it’s very visual.

https://www.ynab.com/

I was also going to suggest paying someone to help you as it sounds like a good solution for someone with a good income, who is also time poor, overwhelmed by the task and struggles with this sort of thing.

Your accountant might be able to do this as an add on, or the Octopus Money Coach service might be suitable (no connection, when I heard about it, I was intrigued as to who would pay for such a service, where probably 90% of the help they offer could be found by looking on Moneysaving Expert, but it's probably worth it for someone in your situation).

If you don't already, I'd suggest treating your income as a 'pot' to pay a regular salary from rather than using it directly. So all your income goes into one account, which pays any business expenses, standing order to a savings account to pay your tax and possibly the mortgage for the rental property.

If you have spare money, I'd consider putting money into a pension, if you can afford it, possibly even to take your income below £100k as the marginal tax above £100k is relatively high.

Then pay yourself a regular monthly 'wage' from your total income, which makes it easier to budget day to day. Obviously you need to cover your living expenses, but if you do this, it will build in resilience to cope with ups and downs in income.

I'd then suggest aiming to get into a position where as much as possible is automated by setting up standing orders to move money into separate accounts to pay for bills, day to day essentials, day to day non essentials, annual and irregular expenses like Christmas, holidays, car replacement etc etc But before you do this, you need an idea how much you spend on these things, so you'll need to work out a budget.

Once the above system is set up, it pretty much runs itself and just needs periodic checks eg every month, to make sure the money going into each account is the right amount and you're not running out of money or building up a surplus.

Then you just spend from the right pot for each type of spend. There's a few app based banks that are really easy to set up and if you don't have an approved overdraft, you can't spend money you don't have. You could use one for essentials and one for non essentials and then all you have to remember is that it's the green card (Starling) for groceries and the red card (Monzo) for fun stuff, for example.

I'd also suggest getting on top of your pension - where is the £340k you have invested? Whether you invest in lower or higher risk funds etc can make a big difference to what you end up with.

I use Monzo and use its pots facility to budget monthly for more infrequent things - so I have a pot for vlorges buying, one for car maintenance and insurance, one for cat vet costs, Dental, Christmas etc. It makes it easier to spend roughly equal amounts each month and know if you have money available for that new coat etc.

I never use cash...too hard to tell where it has gone after the event and too much of my spending is inevitably card eg travel (in London). Although I get why some prefer it.

Another vote for YNAB

When I lost control of my finances, I did two things. I opened a separate bank account (with the same bank) and I got busy with Excel.

I wrote down all my non negotiable expenses (mortgage, utilities etc), even subscriptions and yes, even the 99p I pay to Apple for extra storage, the £10 dd to a charity, everything. Then I added to the list the amount I was comfortable saving. Also add into that money for a haircut, uniforms, stuff you really will need.

And everything else/leftover was 'spends'. Use one bank account for your non negotiable expenses and the other account for 'spends'.

When 'spends' is running low, that's it, train your brain into knowing there's nothing else to use and I made a commitment to not touch savings for 3 consecutive months. Then before I knew it, it was a habit and I now live from 'spends' and nothing else, if that makes sense.

You're in a very fortunate position (which you've stated) and if you adopt the simple idea of 'make hay while the sun shines', you should be able to get yourself into a comfortable position should your income decrease again.

See others have beat me to suggesting You Need a Budget - it's honestly game changing.
Particularly if you have a habit of not really thinking about spending things - YNAB broke is definitely a thing - we can have money in the bank but because we know we've spent everything allocated to a specific area it makes you really think about what other area you'd be 'raiding' to get that impulse buy. Do you take it from an emergency fund, from saving for a holiday etc? Really makes you prioritise what's important and align your finances to that.

Money saving expert has a budget sheet you can find easily in the website.
have a good look on the website for lots of other ideas to help budget.
their Statement of Affairs is also useful

it is a good place to start.

sounds to me like you need lots of bank accounts for lot of different things, as a starting point

DH has dyscalculia. His strategy is to trust me and to avoid spending money. It’s a real challenge for him so you have my sympathy.

You need to find a human being to help you on a regular basis. Do you have an accountant who would take on your personal budgeting and spending too, and have a monthly meeting with them? if you are self employed is that £130k income or turnover?

you’re in a good position and have recognised the problem but I think investment in human help is going to save you loads.

I'd love to organise this for you, I love doing this.

I think it is really difficult to manage finances from 1 account, particularly with DDs going out throughout the month.

Simplify it.

Separate out the DDs to a new account and have them go out on the same day, preferably a week after you get paid.
Transfer the bills money to cover it, with a £100 buffer and then you can forget about that for another month, this can be a standing order so it is automated.

Then what's left is day to day spending and savings. I do all of my spending on a cashback credit card (but pay in full) so I have 1 payment go out of the bank. I have this DD come out of my current account a week after payday and then transfer the rest to savings.

I have the Money Dashboard app and I’m dismayed to learn it’s being cancelled at the end of October so I’ll have to set up another budgeting app. I can’t live without an app that tells me how much we’ve spent, on what, and how much is in our accounts etc. This is def a first place to start and it will make you feel in control.

Secondly, you will be paying a huge tax rate over 100k as you lose your personal allowance between 100-125k, so you’ll only take home something like 40%. Not sure how it works if self-employed but I would put that higher amount straight into your pension and save the tax (we do salary sacrifice but you’ll prob have to reclaim some of this in your self-assessment). Then if you can afford it you just use the new take-home amount each month and go from there, using the budgeting app to review spending and saving. But I’m envious of your big pension pot already! :)

Oh, and I would also fill out a budgeting spreadsheet like the one mentioned on the Money Saving Expert website that estimates every expense over a year and calculates a monthly figure. Until you know how much your essential outgoings are per month / year you don’t know how much you can use for fun money, how much to save, how much you can put into your pension etc

If your rental property is only bringing in enough money to cover interest, and you aren't saving extra from it or paying off equity, what is the point of having it? Are you hoping that the equity goes up over time? I have never had a second property, so may be missing the point, it just seems like a lot of extra hassle managing it if there isn't a return.

The financial "sweet spot" thing was something I wish I'd realised. I went through a high-earning period and (like an idiot) spent far more than I should have because it didn't occur to me that it wouldn't last forever. I feel a bit foolish about that but hey ho, what's done is done.

I don't buy anything unless I really really need it, or if it's a treat it has to be something I absolutely love and will definitely use, and that it fits into my actual lifestyle rather than the lifestyle that exists in my imagination!

Pension pot is the most tax-effective way to save, and another word of advice I would give is to keep things simple.

It might be worth a look at Dave Ramsay as YNAB sits with this. You need to filter some stuff out but the 7 baby steps work

You are all amazing.

This is a lot to digest.
I'm going read it all again this weekend, but I think that cash isn't visible enough for me.

@BarbaraofSeville yes, it might just be that I need to work with an actual human, to set this up. I'm going to look at Octopus money coach. Thank you

Then maybe I can use YNAB going forward.

I have an accountant for the business and a separate bank account for that,

I use Monzo for my personal, and have started to use pots, I just need to stay consistent and not plunder them...

The 130k is wages, not turn over. Someone told me that there's not much point starting a pension at my age so I'd be better off paying off my mortgages. (Both properties in areas that increase in value) but the point about the tax rate over 100k is a good one. I need advice I think.

I need to go through everything like one of the posters said. I pay 60 per month internet, 40 per month phone - it's all too high but because I don't have much time, I put it off. I'm always working or with kids.

But I am in a good position, I worked hard to get here, now I need to make the most of it.

Oh- the pension pot. It's a civil service pension as my ex is ion that sector. I'm not allowed to add to it so I've just left it there.

I will keep this thread updated with my progress.

Thanks for the update OP! I definitely think it’s worth getting some professional advice on overpaying the mortgages vs paying into a pension. A few threads on it on Mumsnet but the general theme seems to be it’s never too late to pay into a pension and the tax benefits at your tax bracket would def be worth it. (I’m certainly no expert but 12 years of paying in 25k tax free and you’ve got a 300k pension sat there plus however much it will increase in value over that time). Personally we’ve decided to put quite a bit into pensions tax free (mid-30’s) and also put some money into savings to overpay our mortgage when the rate ends in 4 years as the interest rate is higher (5%) than our mortgage (1.59%). But we don’t have a clue about rental properties and we’ve never had the funds or knowledge to go down that route :)

https://www.mumsnet.com/talk/money-matters/4665610-thinking-about-pausing-pension-payments-to-overpay-mortgage

(And you can withdraw 25% of your pension tax free at 57 which could be used to pay off any remaining mortgages)

Mini update - octopus money coach is a model that sells in to employers, so not a I-2-1 offer.

The above thoughts on overpaying mortgages vs mortgage payments from my own company to bring income down to a more sensible level of taxation... seem very important. Getting that right could really impact on how I live when I am older.
Honestly I am intimidated by this. Maybe I will start with the trying to manage month to month and get control of spending... then once I'm across that, then work out the pension thing.

I'm
Not proud to admit it, but I really wish I just had a partner that was into all this, and I could go and be good at what i'm good at,

But onwards!

You're self employed but paying yourself a salary of £130k? That is almost certainly ridiculous in terms of tax efficiency. Please tell me you have a decent accountant and put enough aside for your taxes?

Mini update - octopus money coach is a model that sells in to employers, so not a I-2-1 offer.

If you’re interested in YNAB and think a personal coach would help, they do accredited coaches to help people. (Honestly I have no affiliation other than being a happy customer!)

@titchy
Yes- when I say salary, some of it is in dividends and stuff. I don't know much about that I just ask the accountant to make it it as efficient as pos.

My business acc is an app with pots, so every time I get paid by a client I put VAT in one, about a 5th in a corporation tax pot, about a 5th in a personal tax one. (I understand personal tax doesn't get paid from the business, I just got in the habit of keeping it there.)

@NoSquirrels thank you. I am building up to having a good look at this. I have a big deadline, but I'm going to really look once I have headspace.

Will keep updating.

Thank you for you the interest and advice