Monthly Budget 2020

A while ago I did a breakdown of what an average month looks like for me and thought it would be interesting to compare how things look today. My life several years ago was pretty extreme. I was sharing a sofa-bed with my ex in someone else's lounge at one point - not something I'd recommend! Things have improved quite a bit since then. But I haven't done a comparison for a while, so this will be interesting for me too...

INCOME

£1943 (Salary after tax and pension contributions)

EXPENSES
 
£600 (Rent, utilities and other household bills - I pay a lump sum for a room in a houseshare)
£10 (Travel - my commuting costs have almost disappeared since getting a job close to home)
£12 (Phone/Internet)
£15 (Clothes/Accessories/Toilettries - I generally either raid charity shops and adjust the items or just make my own from scratch if I need clothes. Slow or non-perishable toilettries I buy in bulk at the start of the year as this gives me a huge discount)
£20 (Work expenses - things like batteries for my keyboard/mouse, a new phone charger)
£0 (Debt / University fees - I paid off everything a few years ago and have paid for any qualifications since then in cash)
£50 (Gifts - Christmas / Birthday presents, socialising and other random expenses - the majority of this goes on presents)

£1943 - £707 = £1236 left for saving / investment

So that's roughly where my money goes each month. I've cut back on a lot of things and have tried to simplify everything else. Being single has helped, as it meant I could easily downsize my living arrangements. And I work within walking distance of my home, so unless it's torrential rain outside then I can walk to and from work (although during lockdown I haven't even needed to do that).

My biggest expense after rent are gifts or social events that I'm expected to attend (birthdays, weddings, etc). I now keep a seperate savings account for these and just siphon away a bit of money each month to cover any random expenses. Anything I don't spend during the year gets reinvested into other assets.

I would still like to increase my salary. I earn an income from investments, but that gets spun back into other assets so I consider that seperate to 'living' money. I have a small hobby company now, but that will take a few years to monetise. So I'm looking into other avenues for extra income in the meantime. If anyone can suggest any (legal) methods then I would love to hear them!

Spent (Game Review)

Thank you to the person who sent me this game originally. As promised, I sat down and played it a few times, but still have to strongly disagree with you on its premise of poverty (at least in the west) being completely outside of an individual's control.

Every time I play this game, I end up in profit.

If the point of this game is to highlight how difficult it is for an individual in low paid work to survive (or even save money), then it fails spectacularly. In fact, to me it only emphasises the effects of an individual's bad choices. Sorry, not sorry.

Some of the scenarios it includes just forgo any basic common sense:


"Your family pet is sick and won’t get better without treatment. What do you want to do?"

Who on earth has pets while on low paid, insecure work? Especially when you already have a child to take care of (also a stupid decision to make if you can't afford to look after them). I didn't think of getting another cat or dog until I was on a decent salary, with enough savings to cover long term unemployment, had secure housing, and knew I could afford to take care of said animal even if my financial situation dramatically changed for the worse. I certainly couldn't have afforded to raise a child. You plan ahead for these things or simply don't do them. Having a pet or a child is not a necessity in life. You may really reeeeeally want one (I would have loved to come home to a cute, furry creature after a hard day at work), but adults are supposed to have this thing called self control that stops them acting like self entitled brats after puberty ends! If you can barely afford to take care of yourself, you have no right to be demanding that another living creature be dependent on you.

"Your child’s sneakers are falling apart and it’s time to buy new ones. Name brands are important, but they don’t come cheap."

Why the hell are "name brands" important? Even if I was a super rich parent, I would refuse to waste money on fashion labels. I have money to waste on fashion labels now and still don't. You teach your child how advertising works, how and why so many things are over-priced junk, and why they should save their money for more important things in life than impressing shallow idiots.

"Your credit card kept you afloat while you were trying to hold onto your home. But even though the house is gone, the balance isn’t."

If you over-leveraged yourself on a house purchase (a stupid thing to do in the first place), you should have downsized the moment you realised you were struggling to pay the bills rather than dragging it out and using credit cards to continue living a lifestyle above your means.

"Your payment of $500 for your car loan is due..."

Why on earth do you have a car loan that is a third of your take home pay? Why on earth do you have a car loan at all? If you're broke, you either get up earlier in the morning and take the bus/train (yeah it's rubbish to do, but most of us had to at some point) and/or save up cash for a low end second hand car. And even if you do earn enough money to easily cover a $500 a month car loan, it's far more sensible to just pay in cash so you don't have a debt hanging over you if your situation changes. You certainly don't waste money that's not even yours just to get something 'nicer'. "Oh my god, the stupid, it burns!"

"Everyone is pitching in for a lottery pool. What do you want to do?"

Point out the odds of ever winning a significant amount on the lottery are even less than the odds of becoming a movie star or death by falling out of bed. Basically, too low to worry about.

"A bunch of friends are going to a free concert tonight, and you want to go – but you’ve got a kid to worry about."

Yeah, it's not fun being a parent when you didn't bother to consider if you could actually afford to raise a child. Maybe avoid doing that again and make sure you teach your son/daughter to think about the long term impact of their behaviour.

"Your stress level is through the roof these days. A friend who hears you venting offers you a cigarette to take the edge off. What do you want to do?"

(facepalm)

"Your new apartment is too small for your stuff. Do you want to spend $45 to rent a storage unit?"

Yeah, why the hell not. Fill it with those $100 shoes, lottery tickets, cigarettes and cute outfits for your dog (because you probably waste money on those too)!


For anyone who wants to try for themselves, the game is at: www.playspent.org

Buy All The Things, All At Once!

Ok, not literally. But I mentioned in previous posts that I've made a habit of buying everything I need for the year (or more) en masse in the January sales. Bulk purchasing items can save you a lot of money in the long run, assuming you follow some simple rules. Failure to adhere to these rules will result in you wasting money, so don't just rush in with your wallet before thinking ahead.

Try before you buy!

This may sound incredibly obvious, but don't buy any items that you haven't already tried and know you like. Splashing out £500 on 30 boxes of random deodorant, only to discover a day later that it leaves the underarms of your t-shirts looking like a bottle of Tippex exploded in the wash is a quick way to lose £500! Only buy products that you have tried in the past and know will be put to good use.

Avoid perishable goods

Another seemingly obvious one, but don't bulk buy anything that will go off long before you get round to using it. 10 crates of blueberries for £20 is a bargain only if you plan to eat, freeze or preserve them immediately. I tend to keep bulk purchases of most food items to a maximum of a few months supply and only do yearly stock ups of items that I know will last a long time. Also, a year of eating the same food can get pretty boring after a while if, like me, you prefer to change things up every now and then. Plan ahead and make sure you can either store or eat anything that could go rotten. Sometimes the amount of time and work needed to properly store it just isn't worth the money you save.

Check you have storage space

Following on from the above rule... if you do plan to store either perishable or non-perishable items, then check you actually have the space to fit it all somewhere. If you live in a tiny bedsit and only have one plastic container and a few empty gaps under the bed, then don't go crazy and fill up the entire place with 1000 loo rolls. Unless you enjoy living in a pretend fortress and want to relive the excitement of hiding in the supermarket stacks as a child (which is entirely understandable). If you're more of a minimalist type that recoils in horror at having a single ornament littering the perfect lines of your otherwise empty home, then make sure you know where all of your supplies will go before buying anything. Having to pay therapist fees for a psychological meltdown will quickly eat up any money you saved!

Shop around or wait for bargains

Buying things in bulk will usually save money anyway, but ideally you want to save additional money buy waiting until the items you need are on offer. Look around for deals before you bulk buy anything. Haggle further if you can, as some suppliers are happy to give you a better deal if you are willing to take a large amount of stock in one go. There are a couple of markets that I frequent where the traders will offer extra reductions if I pay in cash.

The January sales are a good time to pick up a lot of good bargains. Although check you are actually getting a good rate, as some shops will offer 'discounts' that really aren't. Just because the item is included under a big 'SALE' sign, doesn't necessarily mean it's worth buying. Check the price per item first.

For the less mathematically able among us, to calculate the price per item you just take the total price and divide it by the number of items included. For example, if a shop is selling a crate of 80 oranges for £12, then you would divide £12 by 80 to get a cost per individual orange of 15p.

Online cashback or coupon sites

If you prefer to shop online for most things, get into the habit of checking for extra discounts or coupons via sites like Top Cashback rather than going directly to the shop website. Obviously don't buy things just for the cash back, as that defeats the whole purpose. But if you are planning to stock up on an item anyway, then check if you can get a better deal. It's also worth asking around your friends and family in case they have coupons for items they don't use. Sometimes you can swap them for something you won't use. Which leads to...

Network, network, network!

Do you know others in your social circle that are trying to save a bit more money? If so, it might be worth teaming up and buying even bigger stacks of items in one go. You may find you get an even bigger discount if you purchase 40 boxes of something together rather than 20 boxes each as two separate customers. Or perhaps there is an item that both of you use, but you can't justify buying enough of in one go to get any discount. Teaming up with a housemate/colleague/friend/relative could mean that the total purchase qualifies for 5% off, which benefits you both. Just ensure you live close enough that you don't waste all of the money you save on delivering their shopping!

Buying things in en masse can save you quite a bit of money if done right. Just make sure you plan ahead and avoid any hidden costs.

When Everyone Decides To Gets Married

I began Monday morning by looking over my accounts for the last few years and congratulating myself on managing to pay off all my debts and save £18k during the worst economic period since the great depression, while on minimum wage (or no wage) jobs, and with zero help. That was an excellent learning experience to have at the very start of my working life and something that will likely influence my financial behaviour for decades to come.

Ok, so I'm miles away from my millionaire goal after a decade of living like a Dickensian pauper, but I know of at least two of my peers that are no longer with us due to the toll that the recession took on my generation. So in comparison I think I'm in a pretty good place and can't complain. There were many times where I came incredibly close to joining them, so I'm glad to at least be alive today.

However, since that morning of congratulation I have received invites or notifications of not one, not two, but six major events (so far) that will undo a lot of that hard work. First of all, my sister got married last November. I was just getting back on my feet after another short period of unemployment between contracts (trying to start a proper career at 30 after a series of McJobs is difficult) and it took a while to repay the favours I had to get from family to attend. Following that, I had two 30th birthdays of close relatives, an 80th, and a 21st (all requiring big gifts - my family love big events and presents). Fortunately, since January I've had a break from using up gift money so I've had time to restock my gift account (yep, I have a savings account just for presents). I have another big wedding in the summer for my cousin, which I've had time to plan for. However, I've now discovered that I need funds for two more weddings, a new baby, a 21st, as well as a 30th and two 60th birthdays. And these are all close family members (yay for huge dynasties), so I can't avoid the parties and gifts without being a social pariah forevermore.

But having so many big events so close together is going to hammer my bank account! I don't earn much above minimum wage, so it takes forever to save up. And my family all earn significantly more than me (or have married wealth), and have homes, cars, all the basics already covered (unlike me). So keeping up with them is incredibly difficult yet expected by everyone. I can't count the number of times I've got into rows over non-attendance at 'important' events or have been accused of being cheap because I couldn't afford to go to some party or dinner. It's a difficult balancing act. I'm hoping after the next 18 months is up, that will be it for weddings, babies and milestone birthdays. Either that or I'll have to emigrate!

My Current Budget

I always like to see the exact figures that people use when budgeting their income. So for the sake of fairness, here's mine for an average month (I put money into seperate accounts for the month and if it isn't spent by the end of the year then it goes into investments) :

Take home pay after tax/NI: £1330

Private SIPP: £40
Other pension: £30
Rent (main bills included) for room in houseshare: £400
Commuting costs: £290
Phone/Internet: £12
Food/Household: £100
Clothing: £10 (if that)
Gifts/Charity: £50
Social (weddings/birthdays, etc): £30
Emergency Fund: £25

The remaining £343 goes into savings/investments.

I'm sure that might seem a bit extreme to some people. I don't have holidays or go out unless it's a big family event. Any clothes I get from charity shops if I can't mend existing ones. I have a very basic package phone/internet on a very old second hand model. I also don't own a car. It's difficult, but I want my own home at some point before I turn 40, so I have to make sacrifices now. That's life.

Debt Based Slavery

Modern society is obsessed with debt. Our current economic system runs on the creation and movement of debt across the globe. It’s a modern form of slavery that is propped up by the myth that credit cards, loans and mortgages are an absolute necessity in life; unavoidable and even beneficial to the average person, company and government. We now send our children out into the world chained to £40k+ of student debt before they even start working! I personally find this immoral and pretty disgusting. It’s one thing for an adult (who understands the reality of having to work hard for money) to agree to take out a loan. But for parents, teachers, employers and the government to encourage young people who don’t yet understand the world to get into debt just to get a job is sickening to me. You have basically just sold that child to the loan company for however many years. And the actual return on most degrees is now minimal, so they aren’t even getting a decent rate for their life! Well done, society. Well done.

The Interest Snowball

As a collective, we love to perpetuate the lie that debt is a clever tool that savvy people can use to progress. Despite the risk that it brings relative to its potential leverage. Despite countless examples of people, companies and governments being crushed under the weight of spiralling interest. Despite all the historical evidence to the contrary. Despite all of this, we still pretend that taking on debt is absolutely fine. We grab that 0% car loan and jump on that shiny new credit card like a tramp on chips! We’ll pay it off later. Everyone else is doing it, aren’t they? Even kids! So debt must be okay. If debt was so bad then it wouldn’t be allowed, right?

So you sell your future time, energy and freedom for instant gratification. Your future self can deal with it! Screw them! Present You needs a brand new car. Present You needs a holiday. Present You wants a bunch of letters after their name to feel smarter than other people!

That arrangement would be bad enough, even if you managed to pay off the loan on time. Knowing you HAVE to keep working 40+ hours a week in a job you hate isn’t a nice feeling. Bonus FML Points if you’ve also got an expensive house to pay off miles away from where the better jobs are! Debt chains are invisible, but you still feel their weight.

But in many cases the original debt isn’t paid off in time. Humans on the whole aren’t great at planning ahead (or we wouldn’t need debt in the first place). One bump in the road and they miss a payment. More interest is added. The debt has grown. They miss another payment. A bit more interest is added. And the debt starts to snowball, picking up more interest as it rolls downhill. Lenders rely on this happening and humans rarely let them down.

The Cliff Edge Consequences

Once the debt has grown so big that the debtor is unable to keep up with even the interest payments, then you have reached the cliff edge. The snowball will keep falling straight down out of reach and you’ll never catch up. We used to reserve bankruptcy for this scenario - which was much nicer than the former solution of debtor’s prison, whereby debtors would be forced to pay back debts via hard labour (possibly a cheap kinetic energy solution in today’s world?). In bankruptcy the individual was blacklisted and prevented from taking on any more debts in future (for the good of both themselves and others). That was the idea anyway. For a company who reached the cliff edge, it would mean insolvency and the company being dismantled and sold off by administrators. Whatever value was left over in stock or anything else would be used to pay back staff, customers and anyone out of pocket due to the company’s financial mismanagement. Sounds fair.

In today’s debt-fetish society, the government has taken the approach of propping up certain companies, organisations and even themselves to avoid debtors having to experience any of the negative effects of their bad decisions. This doesn’t get rid of the debt. It simply passes it on to the rest of society via inflation. Innocent people are then punished for the stupid behaviour of others. Not so fair.

With young humans (and dogs), we tend to develop good versus bad behaviour patterns through the understanding of cause and effect. As an example, you learn fairly quickly in life that if you touch a hot flame then you will feel pain. That feeling of pain is generated to make you stop whatever you are doing to avoid damage to your body. Humans generally dislike feeling pain. So you modify your behaviour in future and avoid touching hot flames. You’ve learned a new behavioural pattern due to experiencing cause and effect. That behavioural pattern will prevent you damaging your body.

This is one of those universal laws that can be scaled up or down and used in other areas of life, other places and other eras of history. If you swap the human body for society and swap the flame for debt, then the process works the same way. Debt damages society. A nation will eventually collapse under the weight of debt if it is allowed to get out of control. Bankruptcy, debtor’s prison, business insolvency and other forms of pain used to act as a deterrent to other potential debtors. Everyone understood the cause and effect. In societies where debt has consequences, there is a strong desire to stay far far away from loans! If you want something, then you either save up or just don’t buy it. If it’s an absolute life or death necessity, then you ask family, friends or charity to help you out (and generally someone will, as most humans aren’t totally evil and prefer to keep the streets clear of dead bodies). This has the added effect of motivating people to not go around trashing their community, committing crimes and acting like general numpties, since they may need to ask for help one day.

Reversing Our Debt-Based Economy

Avoiding debt benefits everyone in society. It keeps inflation to healthy levels, since the government isn’t constantly flooding the economy with extra printed money or basing so called ‘growth’ on increased debt interest. That stability enables people, companies and governments to plan ahead more effectively and grow as individuals and as a nation. If you aren’t chasing a snowball of debt all the time then you have the freedom to focus on other things and enjoy life. Everyone's happy!

Dogs are always happy because they don't have debt.
This dog is also carrying a potential asset.
See my previous post to learn how assets can make you happy!

A lot of people are starting to wake up to the fact that our economy (and that of nations across the globe) are in serious trouble and nearing that cliff edge at full speed. There is a lot of noise and debate over what national governments should do to fix the problem. I personally don’t think there is much they can do bar all agreeing to wipe eachother’s debt or everyone selling the global debt to one country and letting that country tank. But individuals can focus on getting themselves out of debt and companies can do the same. That will make anything that happens at government level much easier to deal with.

In the past I’ve been involved with think tanks in organisations that did just that. The same principles apply to individuals. It is hard work and requires a complete and permanent change in behaviour. But it can be done. And removing debt is the first step to building wealth. If ran the UK, I would introduce laws to gradually outlaw personal debt and then work my way up the hierarchy. I’m sure people would hate me and I’d be on at least 50 hit lists within a week! Addicts never react well to having their drug taken away. So the word ‘gradual’ is key here.

Scale Up Method

There are various debt-clearing methods out there. I’m for anything that gets people out of financial slavery and back in the black, so I’d support them all. But I personally like the Scale Up or Snowball method, since it deals with the psychological aspects of debt. Essentially, this method involves lining up all of your loans in order of size and then tackling the smallest one first. You aim to keep the other debts ‘frozen’ by just paying off the minimum monthly interest and begin chipping away at the core of the smallest debt until it’s completely wiped out.

Mathematically, it would make sense to deal with the largest one, but getting and staying out of debt is emotionally hard and the aim is to make the journey as psychologically easy as possible. If you view each loan/credit card/mortgage as a metal chain around your neck, then watching the first small chain fall off is a nice image. It boosts your self confidence. You’ve successfully broken the first chain, so you feel more motivated to start chipping away at a slightly bigger one.

Once the first loan is gone, you take the amount you were paying in interest plus the ‘chipping away’ amount from the first loan and start paying that to the second loan until that’s gone. Then keep going until all the debts are cleared. If you need help in getting the minimum interest payments down to an amount you can afford, then speak to a debt advisor for more detailed advice (National Debtline or Debt Advice Foundation in the UK are both good).

It may take several years and will mean making sacrifices, but the feeling when you get rid of that last £1 owed is amazing. I did this myself while on minimum wage and it was horrible at times, but I know from personal experience that it works and your future self will love you for it! If it helps, make a big colourful poster to stick on your wall and tick off or colour in a box for every £1k that you pay off. It’s a nice visual reminder to keep you focused. If you know anyone else in a similar situation, then team up and cheer each other on. If you have to live like a hermit, walk miles every day, take three jobs, plan every single expense to the last 1p, skip meals, sell everything that isn’t nailed down and shun society for a year or so, then that’s what you do! This is war!

Finally being in a position where you have all of your take home pay to work with each month changes everything! It’s worth the temporary pain! The sense of freedom will be euphoric! Once the debt is gone, you can start doing fun things like saving, investing or starting a business and that snowball begins to roll in the opposite direction collecting money! So throw yourself into this part. The more effort you put in now, the easier the rest of the process will be! DO IT, DO IT, DO IT!!!


n.b. One extra thing that helped me was to read Charles Dickens novels and pretend that I was a character living in one of his Victorian era stories. I also wrote my own mini-novels about people in the 1800s fighting their way out of poverty. Yeah, I’m weird like that. But I have no debt, so ha ha ha!

Monthly Budget

In my last post I mentioned I would be adding a breakdown of all my income and expenses for an average month. I was going to wait a couple of days, but I figured I should just get to work while I'm in the zone! So, here goes...

INCOME

£955 (Salary after tax and pension contributions)

EXPENSES
 
£250 (Shared rent)
£100 (Income tax)
£130 (Bus fare commuting to office - This is the one thing I would change about my job, as I realise it eats into a large part of my salary)
£50 (Water, gas, electric, TV, internet, phone)
£10 (Clothes/Accessories/Toilettries - I can never buy highstreet clothes to fit properly and generally either raid charity shops and adjust the items or just make my own from scratch. Slow or non-perishable toilettries I buy in bulk at the start of the year as this gives me a huge discount)
£10 (Mobile PAYG)
£20 (Work expenses such as clothes, makeup, work socials, cakes on birthdays, etc - basically anything that I wouldn't otherwise spend money on)
£10 (University fees - 90% of my degree is paid for through grants due to my low salary, so I only pay a top-up amount. I dropped out of a regular 'brick' uni in London back in 2004 due to the massive costs. I couldn't work enough hours around my classes to cover the bills and back then you couldn't get a student loan to cover everything as they assumed your parents gave you money. So this time around I am distance studying with optional lectures so I can hold down a 9-5 job simultaneously)
£40 (Christmas and birthday presents, socialising and other random expenses - the majority of this goes on presents)

£955 - £620 = £335 left for savings

So that's an idea of where my money goes each month. There are obvious areas where I could cut back on expense, such as commuting costs to and from the office. If I didn't enjoy my job or work with such a great team, then it would be an easy decision to just look for somewhere closer. But I never wake up in the morning dreading my job, which is a big deal to me when most of the people I know have to drag themselves out of bed! Plus the organisation is very flexible about working hours (something I'm not used to) and that makes it easier to fit in any exams or projects I have to complete for uni. So for the time being, I'm content to deal with the longer days and just use the travel time to sleep or study.

I don't think I can cut back much more on rent without sacrificing security/privacy. I don't live in an expensive area (I could move closer to the city where I work to save on travelling, but rent would go up to rebalance that) and our flat is just big enough for the two of us not to feel claustraphobic.

We are getting rid of Sky when our contract runs out in October. We are both studying the harder parts of our degree now, so won't have much free time to sit and rot in front of the box in the evenings/weekends. We pick up enough channels on freeview to keep us entertained and have iPlayer, Youtube, etc to catch up online (not to mention the numerous DVDs, games and books in the flat that could be picked up and dusted off).

In a couple of years I will have graduated, so the monthly £10 (£120 a year) on university fees will go towards savings. Until then, I can't really decrease this.

The other major increase to my savings would be to maximise my income. I currently only work 4 longer days per week rather than 5 to save on bus fares, but I have requested more hours at work to bump this up enough to justify the extra day. I could then get a monthly or yearly ticket and save more money than the cost of commuting for an extra day. So I will wait to hear back on this. Until then, I will look into making additional income through other means. If anyone can suggest any (legal) methods then I would love to hear them!

New Beginnings

Well... one month and one pay day down and things are going pretty well. July's rent was already paid off, so I had the majority of this month's salary to put into savings. I put £900 away in a cash ISA and opened up a high interest savings account with HSBC. The ISA limit is £3600 per financial year, so I will need a good home for the rest of my savings.

I've had to make several changes to my lifestyle in order to save as much money as possible. Firstly, I sat down and drew up a list of income and expenditure for the year and then broke that down into a monthly list. The main thing to go was clothes shopping. I can easily blow £200 in one trip if I'm having a bad day - brings a smile to my face, but a makes a huge dent in my wallet! Next to go was online shopping for DVDs and books. Another £50-£100 gone! Takeaway meals are out too. I've dusted off all the cook books laying around the house and decided to teach myself to use an oven. It's about time I learnt to cook for myself anyway! Other than that, I'm now walking to and from work instead of getting a bus or taxi, taking my own lunch instead of visiting Starbuck's every day and money previously spent on after work drinking is now going into my savings account! I'm feeling pretty pleased with myself and it doesn't even feel like hard work!

I should point out the new 'motivational feature' I've added to this blog - the 'Fortunometer'. I find it helps having something visual to measure my ongoing progress, so I've created this little bar to track how much money I have saved and how far I have to go to reach my ultimate goal. Each month I will update the Fortunometer as a new post is added.

I'm sure my motivation won't last forever and there will be times when I'm tempted to go on a spending binge, but for now life is good, the sun is shining and that million isn't looking so scary after all!

Enjoy the summer and save hard!