Thursday, 15 April 2010

saving up

This is a picture of a large glass vase we acquired this week, and decided to use as a change jar to use for holiday spending money. We were very excited, put all the change from around the house in it (including a change jar with no purpose that has been full for ages), and it was filled to the brim. So of course we had to empty it out and count it - £24.70!

The vase is now empty again, and the money in the bank waiting for summer days and ice creams, but I wanted to write a bit about how I'm dealing with money at the minute, since it's rather different to how I used to deal with it in the past. In the past I've had more of an income than I have now (pretty much twice at one point!), and I also had a credit card and an overdraft, which I often went over the limit of, leading to bank charges and grumpy letters. I should make it clear, I've never been a big spender type, I've never seen 'shopping' as a leisure activity, I don't have fancy shoes and clothes, or buy food from Waitrose. I spent money without thinking on tea and cake, taxis from the train station, takeaways, clothes from the charity shop...

A few months before my PhD money was due to end, I realised I'd need to get a grip. I'd need to work, but still leave time for studying, which meant a fair drop in income. I didn't want to also be saddled with spiraling debts. I made a budget, and started a spending diary in a little cash book that I took everywhere with me. I sometimes look back on those cash books and cringe. My 'entertainment' budget for the month was £80, and I'd regularly spend over £200!

I got rid of that debt, and lived just about within my means ever since, although if I ever did any extra work, the money was just frittered away on nothing in particular.

I can't really remember when I changed. I think it was a gradual thing. I've written about budgeting before, but never in enough detail to track my own thought processes. One of the keys I think was these little cheery bags I made back in August. I've stuck entirely to my budget since I've been using those. Here's how it works out (bear with me, this is waffly, but I hope it makes sense!)...

I get paid fortnightly, and I usually get around £300 a fortnight after tax, although this is sometimes a bit less. I work on a monthly budget, but base it on having two pay days each month, so occasionally I get a spare one :) Normally though, each fortnight when I'm paid, I transfer £165 to my bills account. Over the month, this makes up:

£265 contribution to household
£40 van
£25 phone bill

Each week I draw out £50 in cash, and distribute between my little bags:

£20 food
£10 unnecessary spends
£5 emergency
£5 slimming world

The extra £10 is pilfered (£5 from the food budget, £5 from the unnecessary spends) as I'm trying to wean myself onto a little less. This £10 is kept separately, and if it doesn't get spent (which it usually doesn't at the minute), it carries over, and the next week I'll only get £40 out of the bank. It works well.

Contribution to household
I should probably explain a couple of things. £265 is what I paid as rent when I lived in a shared house, including all bills except the phone. When I moved into Peter's house, we decided for the time being I'd just pay the same. Now I have a new job, this will probably change - we'll sit down and review all the household bills this month and see what we can reduce.

The van money I used to spend all on diesel, zipping about for days out all over the place, and then there'd be a panic when it came to insurance and road tax time. Now I put £10 diesel in a month (Peter uses more for musical activities, but tops this up himself), and limit how much I drive. Much better, and the extra £30 goes into the savings account to save for the insurance, road tax etc. I've nearly got enough to cover all that for this year.

Phone bill
My mobile phone contract is for £20 a month - I use it a lot, but I don't get a free phone each year. I'm fine with that. I still can't believe I used to think it was necessary to have a £70 a month contract! The extra £5 is in case I go over, if not, that goes into the van fund too.

According to my little spending diary, I used to spend anything up to £250 a month on food, and that was only half of what we ate! And that wasn't extravagant food - more unplanned shopping, popping to the shops for milk every day, buying something for that night's tea, and maybe a few extras... Now we're down to around £40 a week. That's been a slow and gradual change - I spent about 3 months last summer listing everything we bought (and being shocked - 17 pints of milk in a week between two of us??). We changed our habits slowly. We now make all our own bread - we eat a lot of bread so this is a considerable saving. We cook from scratch. I've grown some things in the garden. But I think the biggest change has been that if something, say cheese, or eggs, runs out, we don't rush out to replace it, we make do and have something else. We don't have a big stockpile, but we've always got things like lentils, rice, onions etc, and are both adept at knocking up a quick soup from seemingly unpromising ingredients.

Unnecessary spends
The unnecessary spends budget came from an idea from someone on the moneysavingexpert forum. My mindset changed when I stopped thinking of it as an 'entertainment' budget, and started thinking of it as a fund for unnecessary things. It usually gets spent - this is what pays for tea and cakes at the Women's Institute each week, if I spot something in a charity shop, if I want potting compost for the garden, or fabric for sewing or something. But only having this small amount makes me much more careful about what I spend it on. I think before I spend it, and often go home to think about it first.

Emergency fund
The emergency fund, ahh... I've never really had one of these before, and it's very exciting! I've only been doing this properly this year, and at the minute it's got £55 in it. I had to dip into it when my phone bill was more than I expected due to too much excitable chatting about my new job... Not really an emergency you might say? But it was an unexpected expense that would otherwise have knocked out my budget, and I was pleased that I had the money there to use.

Slimming World
And now we come to the really unnecessary bit - Slimming World. Hmm. Now, I'm not hugely overweight, but I'd rather be a bit less, and more importantly, I've learned over the years that right now, without a bit of moral support, I can easily fall into unhealthy, and expensive, eating habits. Having this £5 a week spent on this saves a considerable amount more that used to be spent on cake. It's not quite £5 a week, so there's a small excess building up in there. I struggle to justify this to myself, but for the time being it works, so it's staying.

There'll be some changes soon. My new job starts in 6 weeks, and is paid monthly. It also pays more, so we'll be having a review of household bills, seeing what we can reduce, and maybe changing my contribution. Soon I'll have saved enough for this year's van expenses and I'll be able to spread out the savings over the coming year.

Overall though, I'm pleased with how it's working out. It's empowering to save up for something. It's empowering to be able to decide to work part time, and it's also empowering (although sometimes difficult) to make sacrifices to do it. I've learned how to make all sorts of things myself that I used to buy - yogurt, soap, washing powder, shampoo, face scrub, clothes, jam, bread, presents, dish cloths... I like the challenge, the activity, the feeling of self reliance and resilience it gives me. There's lots more I could say about it, and about the decisions I've made around it all. I'll be writing about this again I think...

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