Trying to manage variable monthly costs

[Lovinglifeagain]

Hi,

Despite earning a really good joint income, we aren't managing our money well. This has to change!!

I have scoured our bank statements and have calculated how much we spend on fixed monthyl costs - this is basically all of our household bills, food, fuel for the car etc. I have also included things like Sky, internet and all insurances.

After all of these things are paid out, we are left with a 'pot' of just over £3000

Out of this we need to allocate money for the following things -

Clothes
Haircuts
Days out/holidays
Birthday presents/parties
Christmas
School uniform
School trips
Pocket money for DS
meals out/nights out
coffee
take-aways
replacing household items/emergencies

We are a family of 3, Our DS is 14. Thankfully he not interested in fashion or brands ( thank god!!)

I am struggling to decide how to allocate the money to these pots. Can anyone offer any advice?

I have a separate account for emergency money, and only add to it if I have had to use it. we use for anything like dentist, unexpected larger costs like appliances or something. Its £1200 for all 4 of us.
I budget a certain amount as mad money, which covers coffees, take out, nights out, days out. That amount is smallish, on your budget you could spend a lot of what you have left. I would set aside an amount for holidays based on typical amount the family spends a year, what do you spend? School trips and uniform, that is usually set by the school.
I assume you'll be saving some of the £3000? I would save a third of that and you'd have plenty left.

What I did was work out total annual expenses divided by 12 and pay that into a separate account. All payments come out of that account so there is always credit to pay annual costs like insurance etc.

Have a look at YNAB (you need a budget). It's highly/frequently recommended on here! I've used it for about 10 years, we have quite a high household income and assets and find it so useful for being intentional with our money.

I use Monzo, and have pots set up for holidays, car expenses, Christmas, kids, hair and beauty treats, gifts etc etc. I whack about £50 a month in to each of these pots, then spend as I fancy. I also send myself £400 a month for lunch, coffee etc

For big holidays, house upgrades, bigger expenses etc I save in a medium termaccount that's not allocated to anything but is used as needed.

You sound like you're at risk of decision paralysis due to over thinking. It's more beneficial to save something than getting the amount precisely right.

Look at the budgeting section of Moneysavingexpert.com. They have a comprehensive spreadsheet of everything you might spend your money on so you can check you haven't forgotten anything.

You could also download a year's worth of transactions from your bank account and any credit cards.

But with a healthy surplus you should be able to manage most variable costs from income. We don't save for Christmas, holidays, insurance, car servicing etc we just pay for everything on credit card which is then paid off in full by direct debit, so the cost is spread a little. Our current account pays 3.5% interest so the money is earning a little while it's not being spent.

You could split your £3k into 3 as a starting point. Move £1k into a savings pot for emergencies and long term savings that is generally not touched unless you lose your income or need to replace a car.

Move another £1k pm into a savings account and use this money for larger irregular purchases like holidays and car insurance, servicing etc.

Then you have the remaining £1k which is to cover your day to day irregular spending like meals out, school uniforms etc. Move to a different account, possibly split into essential and non essential, whatever think will work for you.

Review after a few months and possibly tweak the amounts. Also consider whether you need to save more in your pension or over pay your mortgage. But how you split your money depends on your priorities - savings for retirement vs today's lifestyle for example.

The financial flow chart is good for helping you get your thoughts in order and seeing if you ate on track for your long term goals.

https://ukpersonal.finance/flowchart/

A monthly spreadsheet. It mostly stays the same each month, you just change the variables. Add a row for savings, a row for debt, a row for your personal spending and a row for dh personal spending. We combine all our money and divide what's left by 2, and that's our own money. I also have a couple of accounts and hold the grocery shopping money in one and transfer it to my bank account weekly.

I have another account that I hold money in:

Xmas 200
Petrol 100
Uniform 100

I keep a note on my phone of what each item is and the running total.

Work out how much you are prepared to spend on birthdays and Christmas and divide that by 12. The rest of the categories is just deciding what you think is reasonable, you could spend £200 a month on days out or £1500.
Fiddle around with the figures for a few months until you’re happy with the categories. Maybe have a look at what sort of days out you like to do and the rough cost to give you an idea of a figure

I do similar

I have about £80 a month for clothes for 3 - we are negative in that pot though! As I have spent too much!

I save £20 a child per month for birthdays plus another £10 for family birthdays.

£80 ish a month for Christmas.

£50 a month for boiler service / random small diy bits.

Spending I did have about £300 a month but that includes paying for 2 new phones at the moment and gym so actual spending is about £150 which tbh is a bit low. That's for takeaways, random odd bits etc. days out.

You have a decent amount of cash left over.
I'd do similar ta poster above - 1/3 for long term savings, 1/3 for medium term spends, a 1/3 for monthly splashing.

You can always move money if the split is wrong.

Ignore my clothes cost - completely wrong. It's about £160 a month for clothes and shoes (including school uniform)