Money : Organising - Part 1

Hey! Dirty! Baby I gotcha money...

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Ha Ha. I was inspired to write a blog about money more so how to save it and be money wise for a few reasons;

I honestly believe that this should be something that is taught in school along with all that great stuff we sat exams for that we don't use day to day. Nobody really encourages you to save as a child or teenager, you're not taught how to get a mortgage or the importance of keeping a good credit score. There is no education on the type of bills you will need to pay should you leave home. It is kind of a taboo subject, why? 

We all earn and spend money in some way for the majority of our lives, why is it that people are so secretive and ashamed when it comes to money?! I digress.

I have had some bad money handling moments in the past and have witnessed some of my friends really struggle to get to grips with handling their money. This is something I have only taken the time to focus on putting right for myself in the last few years. My turning point was when I was going through my paperwork when moving house and I stumbled across a plastic folder I kept all my payslips in since my first job at 17. I decided to add up my total earnings thus far… I nearly fell off my chair because when I saw the number and thought back as I couldn’t actually recall anything of great significance I had spent that much money on in my 10+ years of working life. This was one of the main things that spurred me to want to change how I spend my money. I am not the best. I am still a work in financial progress but I’m in a better place than I was 2/3 years ago financially due to a few little tweaks I have made.

I don't say this because I think everybody should save every penny they ever earn and never spend it, I just think it can be used more wisely.

I warn you now this post won’t be short and some light maths on my part are involved but it will make you think. If you are on the journey or want to start I will provide the tools I have used to become better so far. Some of the advice I will provide may not suit your needs or might be something you can adapt a little. This is from what I know from my experience and discussions I have had with friends, family and peers. I am not a trained financial adviser and i’ve not studied finance or anything of that nature. I just got fed up of not being able to treat myself to nice things and not knowing where my money was going.

Any numbers used are just random numbers I have conjured up while writing this up to give you a rough idea.

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Get Started: Step 1 - The first thing that I would advise everybody to do is take some time to get together your latest bills, a recent bank statement or if you have Internet banking you can utilise this. You should be able to check your direct debits, credit card balances and phone bill with the use of apps alone.

What you are going to do is make a spreadsheet of two columns (see example below) you can do this on excel if you have it available or on paper. Down the left hand side list everything you have to spend money on every month without fail (rent/mortgage, petrol, council tax, water, phone) then start a separate section just below it for things you can give or take include everything. I have included in mine nails, socialising, Netflix.. EVERYTHING! Now down the right hand side you will add how much each one of these things costs, be as specific and honest as possible (if you don’t know to the penny put an average, you can always update this when you get the bill).

Once that is in place add all of those numbers together (or use a formula if you are using a spreadsheet) then subtract this number from whatever your total monthly wage is, welcome to the golden number of money that is vanishing monthly. 

As long as you have added absolutely everything to your spreadsheet you can now work on using that 'spare money' more wisely by adding in a extra box for the month of what you are going to use the money for. So you can add ' Make up - £25" 'Save for Holiday - £100'. I honesty can't express in words how useful this is when you put it fully into practise, once you get used to doing it you can get more advanced with it mine is colour coded and all sorts.

Example of a spread sheet:

This alone has been one of the best tools I have shared with people, so simple but will really make you evaluate where your money is going and show you where you need to make adjustments.

You can do this for months ahead or do it each month ahead of pay day, I personally have a 12 month running spreadsheet going at all times so I know that if something comes up I can plan for it months in advance.

If you are still not sure where your money goes simply take a look at a months worth of transactions and see where you tend to be spending the most at. My banking app (lloyds) actually has a pie chart online where it divides it up for you on what type of things you are spending your money on. 

Banking and Direct Debits: Step 2 - Another thing that I do personally and always advise my friends to do if they get confused with money easily is have multiple bank accounts, for example I personally have three accounts one for bills, an ISA/savings account and my main/day to day account.

On payday all my wages are paid into one of my accounts. Before I do any other shopping, go to work or anything I transfer my total amount for bills (The top part of the spreadsheet) straight over to my bills account which is the account that all of my direct debits are attached to. Doing this means I know no matter what I do with the rest of my money all my bills are sorted and I don't carry the card for this account with me or know the pin code.

Then with the remaining money in line with the 50/30/20 rule which I will go into further I transfer a small amount into my main account which is my card I carry with me to pay for the other things from the bottom of the spreadsheet and misc purchases leaving the rest in my savings account to build up.

It is wise to contact all the companies you pay direct debits to and discuss changing it so that all of your direct debits come out on the same day or within a few days of each other. A few days after payday is best to take into account bank holidays and weekends.

The 50/30/20 Rule: So from searching the Internet for tips for money and saving I saw this ‘rule’ keep poping up which states you should divide your monthly income into these three amounts.

50% - Living costs/Essentials: Housing, Food, Transport and Utilities.

30% - Lifestyle, non essentials: Clothes, Hobbies and Socialising

20% - Financial priorities: Debts, Saving and Retirement.

Now this is a rough guide, but a guide nonetheless. It’s a good place to start when you want to look at what you should be spending your money on and if you are living outside of your means. You can always adjust the % according to your needs as with everything but it's good to have a guideline to work from.

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Extra tips:

Contactless Payments: This is something to watch out for when paying for things. When the option first came out I though it was the best invention ever, I had an apple watch at the time so I was loving life not having to get my card out or even put my pin in. However the thing with those payments is they often don’t even get subtracted or appear in ‘pending transactions’ for a good while after you have made them so if you are not careful you can end up over spending on accident because your available balance is not accurate at that moment in time. So I would advise against using this where possible if you are trying to keep a good track of your spending.

Budgeting: If you have made your plan and set yourself a budget for something for example £10 a week on food for work. Consider leaving you card at home or in the car and only keep the £10 in your purse/wallet. This will stop you from pulling out your card for ease, going shopping after work, online shopping on breaks and the change you have left for that week you can either save or carry over to the next week.

You can apply this method to a night out, shopping trip or a meal with friends. If you don't have it with you, you cant spend it.

Clearing/ staying out of Debt: If you have debts that aren't already being taken out of your wage automatically. Two great ways to get rid of them are if you have a large sum of cash you have saved contact the debt recovery agency and discuss a discounted lump sum payment, they will either take it or offer you another option for a discount which you are free to decline and then continue with your monthly payments. So rather than paying £20 per month for the next 6000 years for an old phone bill (Guilty) they can give you a discount to just clear it there and then.

Also if for instance you are paying two debts/credit cards/catalogues off at £20 each per month and you clear one, instead of adding that £20 to your spending fund add that to the one you are still paying off and that will clear that one faster. So you would then be paying the second one at £40 per month and in half the time it would have taken you before it will be cleared.

If you don’t have any debt at present avoid getting things on credit where possible including car finance, credit cards, catalogues and furniture. I used to fall victim to taking out 24 month contracts to get the latest phone then a new one comes out two months later and your stuck with an old brick. When I did the maths it actually worked better for myself for me to buy the phone outright and get a sim only deal.

Example: For the latest phone they usually want about £50 upfront, then it's around £49 per month for 24 months providing you never go over any of your allowances bring that to a total of £1226.

Buying the phone outright is usually around £500 then you can choose a PAYG option or a monthly sim-only deal which are usually available from £10 per month and you have the option to change your tariff each month if something better comes along. This may not always be best for everybody if they are not good at saving a lump sum but it is an option nonetheless.

Similar methods apply to car finance, catalogues and credit cards. It's almost always better to buy the thing you want cash that get it on credit and end up paying for it two sometimes three times over.

Credit score: Your credit score is now available for you to check for free so it's worth getting a copy up, It wasn't until I got mine up around a year ago it was bought to my attention things were on there that had been cleared or that i'd never even heard of. Log story short I had a closed bank account on there from when I was 21 that had been accumulating overdrawn charges for years so I contacted them directly via email to advise this account had been closed and I wasn't told upon closing it that anything was due out or any charges would be taken. This was wiped from my history all together and the money I had paid to clear it in the meantime refunded back to me.

If you have defaults on your account don't apply for anything you don't have to, most credit checks you will do in the future for say a car or house will only look back a year or so start now don't apply for anything pay stuff on time now. In a years time your score is going to look fabulous compared to now.

If I'm looking for insurance quotes for my car for example I use faux details so it doesn't add on to my search history on my credit score at all.

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Things you can change: If you want to make tiny changes that will effect you in the long run and prepare you for the bigger life expenditures we make like having a family and buying houses. Try implementing things like:- 

• Living a more minimalist lifestyle. 
• Being a more organised person in general; which will in turn stop you buying things you have already or that you don’t need to stock up on just yet. 
• Spend wiser by buying cheap where possible or high quality is not required. 
• If you find yourself throwing half of something away on a regular basis get it in a smaller quantity. 
• Look for alternative or multi use products. 
• Shop used/second hand. 
• Meal planning before going shopping.
• Save big purchases for when the sales are on. 
• Don't buy things you have more than enough of already.
• Sell/donate things you no longer use anymore.
• Avoiding the ‘latest fashion’ as within a few months a cheap copy will usually be available and in turn you’ll end up throwing it away sooner.
• Look for dupes/inspired by.
• Make an online wish list to share with relatives/friends of things your hoping to accumulate. This saves them wasting money on something you don't really want, stressing about what to buy you for an occasion and saves you buying it yourself. Abit unconventional but worth a go. 

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If you have made it this far, thank you for taking the time to read this post and I hope that you have taken something useful away from it.

Part 2 of 2 will be about saving money.