Personal Finance

[Will]

I’ve always tried to be good with money and for the most part have managed to manage it quite well. I really started to manage my finances at the end of last year due to changes in family circumstances, and this really saved me when covid hit and I was without work for over three months. I thought it would be helpful to share things I’ve learnt and for us all to discuss and help each other out more. I think everyone should try to manage their personal finances to some degree.

How I manage my finances
These won’t work for everyone but picking a good set of rules to manage your finances with is essential imo.

1. All of my income is budgeted at the start of the month
   At the start of the month I make sure all of my money has a place to be and a job to do. All of my money is accounted for.
2. I track all of my spending through the month
   Everything gets accounted for and traced back to the original budget in part one. I’m not super strict about it.
3. I review 1&2 every month.
   If I always spend too much in one area I mostly don’t stress about it, I just adjust the budget accordingly. Some things I review why I’m spending too much and adjust my lifestyle accordingly. Generally this is more important at the start of budgeting. I’m now very stable and don’t change much month to month.

Good things to do
In addition to the basic management I find the following are good things to do dependent on how long you’ve been properly budgeting for.

1. Create an emergency fund
   This will be a different amount and calculation for everyone. For me, the target is to have six months of survival money available in cash at any point in time. This is basically enough to keep a roof over our heads and eat - this was essential to getting through the period with no job.
2. Pay off all short term debt
   By this I mean anything like credit cards, personal loans etc. These things are expensive and you lose a ton of money just to have them. Pay off the most expensive first.
3. Buy EVERYTHING on credit card
   Or as much as you can. This builds up your credit rating and gives you access to more beneficial financial products. Things you buy are insured. You may get rewards from your card. In Singapore they offer crazy rewards, I get at least $100 cashback every month and if we buy some big things like flights it can be up to $250 or $300 - that’s a lot of money for free! It also means you hold on to your cash for longer.
4. Pay off your credit card in full every month
   The benefits of a card are all to entice you in, you have to play the system to win. Don’t miss a payment and end up paying a ton of interest. Only spend the money you’ve budgeted and have the cash to pay off.
5. Allocate savings
   All of my savings are allocated to a category, and save towards a target. When I have the money for something I want and the rest of my finances are in order - I buy it!
6. Invest excess cash
   Cash is losing you money, if you have any spare then invest it as soon as you can - let it grow and work for you.
7. Use software to manage it all
   There are plenty of online tools to manage your money, if you’re good with excel then make your own dashboard to manage everything.

How about you guys? Anything you do to manage your money? Would be good to hear other peoples tips and comments on how I do things.

[DuD]

I'm pretty stable with money, however I'm looking at leaving my (very secure) job in the next couple of years to do something I will enjoy more.

I like to sit on an emergency fund, which was depleted (in an emergency) last year. I've nearly built it back up, and was planning to start pushing the extra money into the mortgage.

A recent illness in the family has changed my outlook though and I feel we should enjoy the extra money now.

I'm interested in your monthly budgeting as my approach is not organised at all. I just chuck everything left over at the end of the month into the emergency fund and then annual payments throughout the year (MOTs, Insurances etc) all come from that fund.

Do you use seperate accounts to save for different things? or everything in one account and the money accounted for on a spreadsheet or something?

In regards to no 6 (investing), would you prioritise extra mortgage payments or other investments?

[Will]

45 minutes ago, DuD said:

I'm interested in your monthly budgeting as my approach is not organised at all. I just chuck everything left over at the end of the month into the emergency fund and then annual payments throughout the year (MOTs, Insurances etc) all come from that fund.

With my approach I do it the opposite way round. Savings are set aside at the start of the month and what is left over is used on my spending. Since I became very strict about it this has become much easier as I know exactly what I need for each pot of spending.

47 minutes ago, DuD said:

Do you use seperate accounts to save for different things? or everything in one account and the money accounted for on a spreadsheet or something?

I use different accounts but not necessarily for different things. I move my money around dependent on what will give me the biggest rewards and centralize what that money is for in my spreadsheet. At the moment one of my bank accounts gives 6% interest + a few other things, so I have moved all of my money into that account. The spreadsheet then has that amount split out over what it’s set aside for.

50 minutes ago, DuD said:

In regards to no 6 (investing), would you prioritise extra mortgage payments or other investments?

I think this will be different for everybody dependent on how OK they are with risk. IMO mortgages are so cheap at the moment it really doesn’t hurt at all to hold that debt. I’d be putting extra money into investments over extra mortgage payments as the potential return over the life of the mortgage will be way above the cost of the mortgage. 

[Eenuh]

I'm really interested in seeing people's tips on how to budget and save more money, maybe even tips on investing!  

As we have our wedding coming up next year, we've been trying to save up for that to create a decent budget for it. We did the same when we were renting and trying to save up for our house. I started budgetting with spreadsheets where I would keep track of what money we were spending every month, but I found it very tedious and at times would forget to put things in it. 

I then found a website which basically does it all for me, and I think it's absolutely brilliant!  
You basically link it to your bank accounts and it keeps track of what comes in and goes out for each account. You can set different budgets, there's graphs that show you what you are spending per category etc.

But the best part for me personally is the Planner. You can basically tell it what money you've got coming in (like wages) and what is going out. So you can set (repeating) predictions for things like your rent/mortgage, food shopping, one off purchases etc. You can then see what your balance is expected look like over the next 12 months. I find it so useful to plan how much money we might have left by the end of the month and what things we can afford. It also shows it as a linear graph which really helps me, as I like to visualise things.
Anyway it has really helped me with our finances I think. I know roughly how much we will be able to save over the next year, which helps me budget for our wedding stuff. 

For anyone interested, the website is called Moneydashboard and if you join by clicking this link, we can both get a share in the company (whatever that means haha): https://share.moneydashboard.com/VS281LR9
By the way, I personally prefer the website version over the smartphone app, but that might just be me. 

Just like @will', I also have different bank accounts I use to try and maximise the interest we earn. I have one main account which I use to receive my wages and pay the main bills, then I have one separate account which I use to switch to different banks, depending on where I can get a good offer or a switching deal. I've done the same for @Fierce_LiNk, so we have 4 current accounts between us. And every month I try and put some money away into a savings account or monthly saver, which I do as soon as we receive our wages. 

We've got a few credit card accounts at the moment which we still need to pay off, but they are 0% interest so there is no rush. If the deal runs out before it's paid off, I tend to do a balance transfer to another 0% card. I just try and make sure the debt on these cards is never more than the money we actually have saved. 

Edited July 11, 2020 by Eenuh

[MoogleViper]

I've never found saving to be difficult. I don't actually save, and I've never had a budget. However I am pretty frugal. I'll always make sure I shop around for the best deal, try not to waste money. Any purchase that's reasonably large I always give myself at least a few days to think about it. Often after a day or two you realise you actually don't care about it so it stops you wasting money on impulses. I'm always surprised by how much money people waste on things like phone contracts, car insurance etc. just because they didn't do some research.

Pretty much a "look after the pennies and the pounds will look after themselves" approach.

[Will]

7 hours ago, Eenuh said:

https://share.moneydashboard.com/VS281LR9

I remember considering switching to this when it launched. It’s a great tool. Others that I like are:

• You Need A Budget
• Every Dollar

You Need A Budget seems to be the most popular, but is a paid service. Personally I used Every Dollar until I started to want to customize things and realized I could make something better for myself so I now do it all in Google Sheets.

7 hours ago, Eenuh said:

We've got a few credit card accounts at the moment which we still need to pay off, but they are 0% interest so there is no rush. If the deal runs out before it's paid off, I tend to do a balance transfer to another 0% card. I just try and make sure the debt on these cards is never more than the money we actually have saved. 

Good call, as long as you have the 0% deal running you should pay off as little as possible.

7 hours ago, Eenuh said:

I'm really interested in seeing people's tips on how to budget and save more money, maybe even tips on investing!

For investments I’d say the most important thing is do your research on what you’re investing in, and don’t get caught up in any get rich quick looking deals. Either decide on what type of companies you want to invest in and set a plan around that, or research funds and simply put everything into one or two of them.

With budgeting this is (roughly) how my monthly budget sits:

Housing (35%)
This includes rent and everything we MUST pay each month like electric, internet, water, phones etc. The MUST part is a little subjective, but I consider things in here to be essential.

Joint Expenses (15%)
This is our monthly variable expenses, food, dining out, trains, taxi etc. We will always need to spend money on them but can drastically reduce them if needed. When I wasn’t working this was about 6% and we still had some room to drop if needed.

Spending Money (10%)
This is free money to spend on whatever we want, 5% for me 5% for my wife. I usually spend 3/4 of mine and my wife about half, leftovers we account for and save for individual big purchases.

Savings (40%)
We allocate these differently dependent on current situation. At the moment it’s as follows:

• Emergency fund 20%
• Child fund 5%
• Personal funds 5%
• Christmas 10%

Of that I’ll hold a certain amount in cash and the rest gets invested. The cash is available anytime we need it for emergencies, buying personal big items etc. and the investments are long term savings we don’t touch.

I manage our monthly spending, saving funds, and cash flow via one combined sheet in google docs so that I know where we hold everything and what the money has been allocated to.

[Ashley]

I'm pretty good at living within my means but I'm pretty bad at being smarter with money (i.e. investing). Particularly as at the moment it feels very much like "what's the point" as interest rates are pants.

[soag]

I'm awful with saving and I mean just awful. As soon as i get paid I'm usually like OK what can I waste this on... It just burns a hole in my pocket. 

But a few years ago I started buying shares every week in my companys share scheme, that way I can't touch it so easily. Just checked it this morning and I currently have £10,804.92 saved up. Which I'm extremely pleased with :). 

[Happenstance]

59 minutes ago, soag said:

I'm awful with saving and I mean just awful. As soon as i get paid I'm usually like OK what can I waste this on... It just burns a hole in my pocket. 

But a few years ago I started buying shares every week in my companys share scheme, that way I can't touch it so easily. Just checked it this morning and I currently have £10,804.92 saved up. Which I'm extremely pleased with :). 

Any chance I could borrow some money?

[Will]

1 hour ago, Ashley said:

I'm pretty good at living within my means but I'm pretty bad at being smarter with money (i.e. investing). Particularly as at the moment it feels very much like "what's the point" as interest rates are pants.

Properly investing your money will grow much faster than the interest you’ll earn on cash. Really you should only keep your emergency savings as cash so that you can access them as soon as you need them.

1 hour ago, soag said:

But a few years ago I started buying shares every week in my companys share scheme, that way I can't touch it so easily. Just checked it this morning and I currently have £10,804.92 saved up. Which I'm extremely pleased with :). 

That’s awesome, nice work! This was the first benefit I checked with my new role and on the plus side the share scheme they have is great, on the negative side I’ve just missed enrolling in it for this year so will have to wait 12 months to get involved.

A company share scheme is something everyone should check on, it’s a very easy way to invest and will almost always be advantageous to you.

[soag]

2 hours ago, Happenstance said:

Any chance I could borrow some money?

I wish I could spend it myself lol. 

With the economy down it would be a crazy time to sell the shares. 

Shares are down about £8 compared to this time last year. So trying to snap up as much cheap shares as I can, then when the economy gets back to normal... Boom lotsa money. 

So def try to invest in stocks and shares its well worth the investment if done correctly. 

[soag]

2 hours ago, will' said:

Properly investing your money will grow much faster than the interest you’ll earn on cash. Really you should only keep your emergency savings as cash so that you can access them as soon as you need them.

That’s awesome, nice work! This was the first benefit I checked with my new role and on the plus side the share scheme they have is great, on the negative side I’ve just missed enrolling in it for this year so will have to wait 12 months to get involved.

A company share scheme is something everyone should check on, it’s a very easy way to invest and will almost always be advantageous to you.

I was a idiot for years and didn't join. Was like meh can't afford it... Really wish I joined sooner as I would of had about 30k instead of 10k...but better late than never

[Will]

2 minutes ago, soag said:

I was a idiot for years and didn't join. Was like meh can't afford it... Really wish I joined sooner as I would of had about 30k instead of 10k...but better late than never

I think the majority of people are like that until they take an interest in it a bit later on. The important thinkg is to keep doing it now and maxing those benefits!

[bob]

My wife and I lived like students for years (because we were) and so got into some pretty frugal habits.

We've since both got above average paying jobs, but haven't changed our lifestyle all that much. We bought a house that was well within our means, and therefore end up with a sizable chunk of our what's left over at the end of each month. However, we've just been chucking it all into ISAs which are better than nothing, but not really properly investing it.

I keep thinking I should increase my pension percentage each month, because I can easily afford it, but it's far more exciting having a pot of potentially spendable money to look at.

[nightwolf]

*cracks fingers*. Ho boy is this my thread.

Let's start with the not so good. 

In 2016, I was more thousands of pounds in debt than I care to share here. It wasn't enough to be a true cause for concern, but it kept me awake at night and didn't allow for much "fun" at all. It took me until 2017 to start really getting my butt into gear and take control of my finances. Both in my accounts and for the future (aka pensions and the like)

As of today, as my accounts stand:

1. £20,000 in a house saving account

2. £5,000 in my personal savings account.

I earn nearly £40,000 a year. 

I'm now very open about money and/or pay with those who are willing to ask. For two reasons: It holds me accountable to my own actions and it also allows others to see their worth. Half of the pay rises I've asked for never would have happened if it hadn't been for lovely folk sharing their own pay/experiences with me. I'm very grateful for it! 

So how I guess? 

I use a spreadsheet that I customised to myself. Each month as soon as I get paid, I make a new monthly sheet:

1. All my bills, including rent get moved out of my current account into my savings account. These get moved into my current account when a bill is paid OR needs to be paid. Its a little odd system, but it means I don't spend that money until its needed. 

2. My savings, roughly £650 for my personal account and £250-500 go into my house saving account. No exceptions. Money HAS to go into these two accounts, it does vary, but I try to keep it as close to those numbers as possible. 

3. Anything over a certain amount of money that I spend gets logged into that sheet for the month. At the moment its £30. This doesn't include food/petrol as that's relatively light and consistent. This might seem odd, but in 2016 I was frequently spending on things i did NOT need. This allows me to recap and ensure I'm able to have fun without going over the top.

4. I don't religiously track everything I spend, so if I spend £11 at a shop somewhere, it doesn't get logged. However, I do check my bank once a day, simply to ensure things are hunky dory and I've not missed something (like car tax that is on DD sometimes slips me up.)

So this got a bit long! What are my tips:

1. Credit cards are friends, not something to be scared of. They keep you protected (section 75) and allow you to build a good credit. Allow yourself to use it, but pay it off frequently. Take advantage of 0% and good god if you struggle with this - TALK WITH YOUR BANK. I can't count the times I've had this conversation. Most banks will try to work with you, but don't let it get so bad that they struggle with that.

2. Keep an eye on your balance and what you're doing with it. Money is to be enjoyed, so don't become a dragon. 

3. Keep an eye on studentloans and your pension. Especially your pension! My word, I was so blind to that stuff and its really easy to check most of them if you just check who you are with (especially a work pension). Perhaps ask your work to match your contribution if you feel you have enough spare enough month. 

4. Chat with friends! Honestly this thread is so good, add this to your social groups. I have a couple of friends that we share spreadsheets with and chat money/pensions/payrises etc. Its really useful and gave me a bit of confidence. This applies to coworkers as well, a reminder that whilst some companies will try to stop you chatting about money, in the UK they legally cannot stop you from doing so. There is NO logical reason to not talk about it, as it only benefits the employer, not the employee. 

I haven't named things like investing and shares as @will' covered that, but I 110% agree. The company I was taken over by last year enabled me to get nearly a large sum payout in the end. Simply because I said yes. 

I'm going to stop waffling, but if you've got any questions let me know. 

 

ps. @bob increase that pension! 

[Will]

@nightwolf, that is great stuff, glad I have a fellow fan of budgeting.

33 minutes ago, nightwolf said:

I'm now very open about money and/or pay with those who are willing to ask. For two reasons: It holds me accountable to my own actions and it also allows others to see their worth. Half of the pay rises I've asked for never would have happened if it hadn't been for lovely folk sharing their own pay/experiences with me. I'm very grateful for it! 

36 minutes ago, nightwolf said:

This applies to coworkers as well, a reminder that whilst some companies will try to stop you chatting about money, in the UK they legally cannot stop you from doing so. There is NO logical reason to not talk about it, as it only benefits the employer, not the employee. 

100% this, there is no reason not to share information with friends and help each other out. As someone that’s been on the other side of it I can absolutely assure everyone that companies will not pay everybody fairly if they don’t have to and it will save them money. Personally it’s not a practice I agree with.

It’s all good to share salaries and increments.

Your budgeting system sounds interesting and I’m glad it works for you. I’m not sure I could handle not having 100% accuracy but it’s far more important to have a system that works for you and generally that’s going to be different for everyone.

39 minutes ago, nightwolf said:

The company I was taken over by last year enabled me to get nearly a large sum payout in the end. Simply because I said yes.

You can really do well with this stuff. It’s probably a viable strategy to pick roles based on stock allocations and see where they go over a couple of years. You only need one thing to do well and you can be very well off from it.

Your house saving account is pretty self-explanatory, but do you have anything in mind for the personal savings?

[nightwolf]

Just now, will' said:

@nightwolf, that is great stuff, glad I have a fellow fan of budgeting.

Your house saving account is pretty self-explanatory, but do you have anything in mind for the personal savings?

So there's two things for the personal savings account: 

1. Wedding
2. Emergency fund.

Our wedding has been reduced quite significantly, we spent about £3000 on just food (it was mostly a food/drinks party, than a venue price), but we got a refund on that and won't be doing the same again. But we'd still like to take our immediate family out for food and pay for a decent chunk of the honeymoon. 

Otherwise, its simply money to keep us safe. We've had instances in the last couple of years where I have need a decent amount of cash on hand. For instance, my partner had a company car, so we removed his personal car/sold it off. We assumed (wrongly) that his company would give him a few weeks notice if they took away the company car, so we could plan around that. Instead they gave him 4 days, so I had to use my personal fund to help get him a new car. We didn't spend mega-bucks, but for the quick turn around, I had a few thousand come out. 

It makes me feel a little safer that way, especially with also living in rented housing. At any given time, we have enough money in our accounts (as my partner has his own emergency fund also) to ensure we can move at a moments notice or pay for things we might need to replace. 

 

[Will]

Yeah that totally makes sense. Our wedding cost a fortune despite only having close family there because we had no choice but to travel for it. Of course it was well worth it but I do think about other things we could have used that money for.

I also totally agree that it’s very comforting to have an emergency fund available to you. Having just lost most of mine through unemployment and paying to have a baby (no NHS type service here) I’ve had a few moments of dread. Hopefully we’ll have it back quite soon and I can relax.

[martinist]

I went to Las Vegas in 2018 and i'm still trying to recover. I had over £10,000 and i've been languishing between £3000 and £4000 ever since.

I'm still able ot get by pretty well though. My home insurance came off a few days ago, so that kinda put a dent in my account but it's not too bad.

[Will]

9 minutes ago, martinist said:

I went to Las Vegas in 2018 and i'm still trying to recover. I had over £10,000 and i've been languishing between £3000 and £4000 ever since.

I'm still able ot get by pretty well though. My home insurance came off a few days ago, so that kinda put a dent in my account but it's not too bad.

That must have been one hell of a trip! Hope you didn’t spend it all gambling!

1 hour ago, nightwolf said:

I use a spreadsheet that I customised to myself. Each month as soon as I get paid, I make a new monthly sheet:

Forgot to say earlier, would love to see your sheet if you’re ok sharing it. I’ll put some notes on mine and post it up tomorrow too.

[Will]

This is my dashboard:

I then have the breakdown for each of the main categories below this so I can see everything in detail. The other major tabs I have are a net worth tracker and then a inflows/outflows tab that everything is populated by.

[Jimbob]

I've learned since moving out from my parents house to manage my finances more responsibly.  I had savings when living with them, which i used some towards an apartment with my partner (i say used, we had to furnish the place and put a bond down).  Still have the bulk of savings left.  Credit card isn't too bad, and by not bad i mean it's about £50 in credit which i can clear at a moments notice.  It's just hit into the interest period, so i try to keep it as low as possible so the interest isn't stupid on paying it back.  Probably need to use it more to improve my credit score, most of my purchases are on debit card and i tend to use the credit for more bigger purchases and holidays (this was mostly for insurance in case the company folded).

Never been overdrawn, always lived within my means each month.  And i put a little away each month, not that it's making much with low interest rates.

[Will]

You should get that credit card cleared! Even if it’s only a small amount of interest you pay it’s still money that you could use on something else.

[Raining_again]

I use a bullet journal to track my finances but ive been extreeeeeeemely lazy about keeping it up since covid hit.

I've got just short of 60k in debt (house and car)  Automatic bank transfers to savings accounts, 90% of my banking takes care of itself i just have to not overspend lol

Edited July 14, 2020 by Raining_again

[Mr_Odwin]

I am pushing for FIRE - Financial Independence Retire early

You might have seen people on talk about this in news articles under the scenario that they retire at age 30, or something else like that. I have lower goals (especially given that I am already 41).

The principle of it is that you save as hard as you can and then live off the savings - studies have shown that a 4% withdrawal rate should see you through a long period if you invest in a certain way (5% risk of failure). So if you want to live on £25000 per year then you need to save up a pot of £625000. That sounds massive, but in the UK at least you also need to take into account that you (and maybe your partner) will have access to the state pension (if it still exists) at a certain point.

Each month the wife and I are saving about 50% of our net income (me via a company pension scheme, and an ISA). I'm lucky that the company I work for have a decent pension scheme - they double my contribution up to a 5%/10% split. I'm currently at 12.5% from me, and 10% from them.

Long term plan is to retire at 53, live off the ISA for a few years, until I can access the private pension pot (at 58), and then the state pension will top that up when i hit the right age.

All my investments are in global equity index trackers weighted appropriately. I did have some bonds, but I decided to live on the edge, and I've got 10 years so it'll probably be fine. If you're just chucking stuff into an ISA, make it a stocks and shares ISA, and find a cheap tracker fund - Vanguard Life Strategy is well regarded, and you can easily go for the bond options to bring in some bond stability.