How do you organise your finances?

[Teenmam]

Just looking for tips really. In theory we have enough money coming in, but in reality we are always on the back foot scrambling around to pay for unexpected expenses ( not that unexpected really- car repairs/ weddings etc). Bills are always paid. We have modest savings that often need to be dipped into for something or other. I try to forward plan but there's always something to pay for that stops the forward planning ifswim? How do you do it?

Since having a child and moving to a mix of part-time, we pool everything, subtract money for bills/food (leave in joint account) and savings for our daughter and our next car (we start saving for it as soon as we’ve bought one so we don’t have to do finance next time).

Then we each take half of what’s left. I save about half of that in a mix of accounts for short term (Christmas/hobby/holidays) and long term (emergencies/buffer, lifetime ISA, small investments). My partner does the same but they have their own interests to save for.

What’s left is there to spend over the month. No restrictions.

I was in your situation a couple of years ago. I wasn't planning for costs which aren't surprises (christmas, birthday, car service/mot, annual insurances, annual vet costs etc) And I didn't have a handle on the absolute fact that there's always a few hundred quid a month in surprise costs (tumble dryer breaks, fence needs mending, DD cracks her phone screen, etc)

So I set up a sinking fund for the expected costs and
A 'when life happens' sinking fund for the surprise costs, which I aim to keep at between 500 and 1k
This stops me needing to dip into proper savings

You need to give every penny a job. If your car tax is say 120 for the year then each month you put 10 into the car tax sinking fund. It’s not for anything else only car tax. You need to do this for everything. Some people find it easier to start off doing this with cash. You could make pots in monzo etc too.

We have a spreadsheet which lists all bills and a roughly allocated amount for food, petrol. We then have an amount for general spends each. What’s left goes in savings, savings are used for unexpected bills.

I have pots in Plum which pay interest. On payday I allocate money into the pots; house bills, holiday, Christmas / birthday ; vet bills , savings.

I have a rolling spreadsheet showing all the regular ins and outs. I also have pots for car, house, insurance, Christmas, treats, kids stuff and holiday and put amounts aside each month as soon as I get paid. I find this much easier than having one pot of money that then needs to be used when car ins etc comes up.

We also have a set amount of spends each for ourselves and when it's gone it's gone, I never dip into another pot of I want something.

We use YNAB - they have a free 34 day trial, then it's about £85 per year. Every expense is put into categories. Assign your money to the categories. Be honest about true costs - the MOT might be once per year, but you need £5 per month set aside for it so you don't end up with an extra £60 going out of your account in month 12. Christmas happens every year. If you spend £600 on Christmas, you need £60 towards Christmas every month, so that in October you have £600 sitting in your account, waiting to be spent.

Have a category for saving. It doesn't matter how you do it. You can put aside a regular sum, or if you budget £400 for groceries but only spend £385, move the other £15 into savings...just make sure you have it.

Once you have all your true expenses covered, you'll have a much better idea of how much you have for discretionary spending.

This really. £25 a month for Christmas etc. Get 12 months of bank statements and work out where the money went and budget for the next 12 months, £100 a month for car £100 a month for takeaways, £100 a month for holidays £x a month savings. You all need to be on the same page,but play to your strengths. It also help you to work out where to ecomise without life becoming a drudge.

moneysavingexpert website is a great resource.

Now that I've been using YNAB for years, I don't really need to look at my categories much - I can glance at my bank balance and I know if we're doing ok for that time of month. I also have a Starling account with a bills space, so at the beginning of the month, an amount that covers all of the bills for the entire month gets moved across into the bills space, so I don't even think about the direct debits because they're covered.

YNAB has made everything clearer for me. Well worth the money tbh. I decided I could do without it a while back and soon realised my mistake 🤣🤣

Accounts where its easy to set up different pots, we use Monzo

Holidays
Car
Christmas
House
Annual bills (tv license, home insurance, etc)
Pets (old and no longer insured)
Slush (little extra if you have any expensive month, so something like a wedding)

Bills go out of one joint account so always enough in there. Day to day spending out of another joint account.

Pay yourself first, so savings for the pots, ISAs and investments come out on payday.

Every penny has a job, right now everyone is doing their annual price increases so I update my spreadsheet to check that can all be covered.

I use the citizen advise budget planner ( as you can put in yearly amounts, weekly amounts but it will make everything monthly)

then use pocket accounts, so on payday the money for annual bills goes to the pocket accounts by standing order ( totally different bank, plus the accounts pay 2.5% interest) and monthly DD get paid on pay day

house insurance £22
Car insurance £17
car MOT & service £20
xmas presents £40
xmas grocery shop £15
birthday presents £15
holiday £300

what is left in the account is mine to spend, I divided into 4.5 and just take one week or half a week at a time

https://www.moneyhelper.org.uk/en/everyday-money/budgeting/budget-planner

here is the link to the free planner - I use it annually to check figures are correct, as council tax, utilities etc increase in price

Annual budget
Columns represent pots
Some of the columns/pots extrapolate to savings accounts.

It isn't the non negotiable basics: utilities, council tax, water rates, insurance, food, etc., it's also: petrol, birthdays, house maintenance, clothes, hairdressing, make-up, dentist, Christmas, car servicing, other emergencies.

We use YNAB too. It can take a while to get your head around it but it’s worth persevering with. Since I started using it about 10 years ago I have a much better idea of our budget. Everything, literally everything goes into it. Monthly subscriptions, once yearly costs, saving etc and now I’m able to forward plan pretty well. You can also move money around and have a clear picture of where your money is going/what you still need to save for etc.

On a practical level we pool all income, pay the bills incl savings and have an agreed amount each which we transfer to our own accounts.

I think a lot of people look at their finances and think they are fine because their budget is based on a perfect month that never actually happens.

That month where there's no birthdays, no parking tickets, nothing breaks, there are no school trips to pay for. Budgets that assume the gas/phone/elec bill never rises between payrises, and everything's always on deal at the supermarket. In reality, those months are rare. Lots of people look at their finances in this way and conclude they can afford more than they really can.

Budget based on a "bad" month. Include amounts for things like birthday gifts, emergency shoe repairs, and occasional home maintenance tasks as standard. Have a sinking fund for things like car MOTs and annual boiler services.

Unfortunately this can be disappointing, you will probably find your finances are tighter than you thought, and you have less to spend on luxuries like hair/beauty, gym memberships, tv subscriptions etc than you hoped, if you want to save or get on the front foot.

Forgot I posted this! Came on to hunt for advice and found all this lovely advice waiting for me, so thanks to all. So, coming up this year we have family weddings, college fees, a very large orthodontist bill, an unexpected expensive school trip, that haven't been budgeted for. So if I now budget for those, there is just no money for budgeting for car repairs, birthdays etc. Then, how do you budget for unexpected non essentials? Eg already since payday 2 days ago I've gone for lunch and had to buy dd a new competition swimsuit. So my pots for the weddings etc will most likely have to be dipped into. This is where the whole thing falls apart and I go back to reckless spending..
As a pp wisely said, when everything is budgeted for, I think the reality is we have less disposable income than we think.

The comp suit was necessary but was the lunch?

Of course not, and this is what I have to accept I suppose. Instead of thinking its a small amount, I suppose I'll have to prioritise. But it's life isn't it? A last minute lunch invite should be ok on our income. But this type of spending is where the leak is, I'll have to figure a way to plug that.

In your budget you should have some fun money to do things like lunches out. End of the day tho, we all have to budget (unless you’re super wealthy). Most people have to make decisions on where to spend their money. If you have X income and Y going out it’s never going to work. You need to work out the budget and the priorities for the money and accept that somethings will have to go on the back burner for now. It won’t always been the case but at the moment the wedding, school trip etc take priority.

We have a joint account and a personal account each.

The joint account is used for everything we need during the year - bills, food, holidays, days out, Christmas, birthdays. We use our personal accounts for anything just for ourselves. We manage our own savings. This makes it very clear that anything in my personal account is free for spending and the joint account looks after itself. We periodically review usually every ~3 months. We have a lot of annual costs at this time of year, then before and after summer as we have more holidays and day trips in the summer months and before Christmas.

Go through your accounts and get a detailed budgets. Budgets generally fail when you've missed essentials of the list and we estimate the annual costs in order to see what we need to account for over a 12 month period. For example under my partners commuting cost part of budget spreadsheet
*Fuel
*Car tax
*Car insurance
*Breakdown cover
*Parking
*MOT
*Tyres/brakes
*Service

There is a £500 difference between our monthly budget of things we pay for week in /week out and the one that includes our annual costs split over the 12 months.

How much we put into the joint account each depends on our relative incomes. When it's even we pay the same, when there's a difference we work out a fair division which gives us a similar proportion of our money for savings and spending as we please. I was working 4 days a week and our relative income was 45:55 and the split into the joint account was 47:53. I'm now unemployed on maternity allowance and that goes into the joint account and my partner pays for the rest. I am using the joint account for more of my personal spending and am paying into my pension and a regular saver from the joint account.

If you are living according to what you feel you "should" be able to do this might be where you find you are constantly chasing your tail. The way costs have spiralled over the last 5 years and the fiscal drag of freezing tax bands means that we need to reassess what lifestyle is actually affordable on a particular salary.

Factor in the small things too. Some useful scales are
x365 for something daily
x250 for working days (5days/week)
x120 for twice a week
x52 for weekly
x12 for monthly
x13 for every 4 weeks

Work out the annual costs of the little extras and divide by 12 to see how much you need to account for these items in your monthly budget. It's also a good moment to stop and pause to see if it's worth the current frequency. I used to pick up a pastry on the way to work after the school run 3 or 4 times a week. I dropped it to once a week and didn't feel like I was missing out at all.

I’m finding this thread really interesting, as we’ve never actually budgeted. We cut back when we need to. But I really want to have a much clearer idea of exactly where we’re at.
YNAB sounds interesting, as well as the accounts that use pots. Can all bank accounts do these things? Presuming there’s a UK version of YNAB? Is it really worth the £85 per year?
Sorry to sound so gormless, but genuinely interested and want to do things differently.

Yes, I think at the end of the day, if you've added up all your 'expected' essential expenses including annual/one off ones like insurances and car servicing and repairs and white good replacements and so on, and you're then finding there's not enough for your day to day or discretionary spending, you've either not got enough money coming in for the lifestyle you want to lead, or you are wasting money somewhere else in the budget, or a little of both.

I'd set aside some time to do a really honest budget, starting with the definite essentials (including as above annual/one-off ones, and be realistic or even pessimistic, if you drive an older car include it needing some work done, unless all your appliances are brand new assume one at least will break every year). Then once you know how much you have remaining, allocate some to genuine, long-term savings goals (not to dip into to meet essential living expenses or for 'wants' like holidays or Christmas, this is going to come later). How much this is varies on your income and stage of life and goals, it might need to be a lot if you are aiming to move house or other big expense, or only a little if you already have a reasonable emergency fund and no other pressing goals.

Only once these things are fully accounted for can you allocate other discretionary spending. This includes everything other than essentials, i.e. children's activities and ancillary items like costumes/kit, gifts, eating out, days out, holidays, personal spends for you and DH/DP. If you're lucky enough to have plenty of discretionary spending you can leave all of it in one big pot and just spend as you like but for most of us we need to do some kind of prioritisation exercise. E.g. if we want an annual holiday abroad we then need to keep other days out fairly cheap and local. If your child wants to go on the expensive school ski trip they can't also have a new iPhone, and so on. Personally I'd really look at things like subscriptions, casual eating out, small treats for yourself and the DC, frittery type of spending that isn't very much in itself but adds up over time. I think like other people say I utilize a bank account with pots for bigger things like holidays, birthdays, Christmas, then divide remaining discretionary spending 4 ways, not entirely equally although DH and I have the same for ourselves, 1. Children's costs (activities, friends birthdays, clothes, haircuts, school stuff) 2. Family costs (takeaways, eating out, subscriptions, days out) 3. My personal spends (clothes, beauty, hobbies, gifts for DH and my friends/family, occasional coffees or lunches at work) 4. DH's personal spends (ditto). These are allocated monthly and once they're gone they're gone, so if for e.g. I'd bought some expensive clothes and a nice gift for a friend from my personal account as well as my regular standing payments for the gym etc, I probably wouldn't have enough left for lunch out at work by the end of the month so would have to bring sandwiches from home, but it's a lot easier to know that's the case compared to having everything in one big pot, because I can see my account is empty rather than it looking like I have lots of money left (but in reality this is needed to pay DD's terms fees for dance and the car's MOT and the gas bill and so on)...

Not all bank accounts have this feature, it tends to be the more app-based ones like Monzo. It's very easy to open accounts with these though (takes a matter of minutes and all done online) and you can either switch everything over using the account switch service that again is very easy, or it's quite ok to keep your current main account with a traditional bank to receive your salary into (and leave enough in there to cover mortgage and bills and savings if you like) then transfer your discretionary spending to Monzo or similar, then sort that money into pots from there (sounds like loads of work but you can set it up once then automate it to do it every month).

Yes there's definitely a UK YNAB and plenty of people do find it worth the subscription costs while you get the hang of budgeting. Personally I have my systems sorted so well I don't need it but I've been on this for years and actually in a weird way quite enjoy tracking our spending so don't mind spending a bit of time on it per month. But if you're very pushed for time an app does really help...

Thank you for your comprehensive advice, much appreciated.
DH isn’t keen on paying so much for an app, and is a bit reluctant to do things differently, but I really want to have a clearer idea of where we’re at. I guess I need to sit down with all the numbers from the last year, to find it where we’re at, then work out where needs change.