Our February 2018 Budget Report

Candle in heart-shaped case - February monthly budget report

It’s time for me to share with you our February 2018 budget report. How can March be here already?!

Things may have been easier for you in February, compared to last month. What do you think? Have you recovered from Christmas? Maybe you organise your money so you’re saving for Christmas throughout the year? Perhaps you don’t go over a set Christmas budget either? Let me know. If you’re not doing these things, why not start now? Continue reading “Our February 2018 Budget Report”

The Difference between ‘Saving’ and SAVING – How We Lie to Ourselves

Man's hands holding money and cigarette - The Difference Between Saving and SAVING

OK, so what IS the difference between ‘saving’ and SAVING?

You might ask yourself ‘What’s the difference between the two and what does this woman mean we lie to ourselves?’

‘Saving’ money (definition No 1)

There are lots of ways we can ‘save’ money, and by that, I mean reducing how much money we spend on purchases. Continue reading “The Difference between ‘Saving’ and SAVING – How We Lie to Ourselves”

Our November 2017 Budget – How Did We Do?

Our November 2017 Budget - How Did We Do?

It’s a little late, but I said I’d show you how our November budget went and how we did, so here it is!

November was an unusual month. We’ve been looking after a neighbourhood cat whose owners were unable to pay his vet bills. The poor cat had been wanting to spend a lot of time at ours. With me being a qualified Veterinary Nurse, I was quick to see that something was wrong with him. Three vet visits, medications, sedation, and blood tests revealed that he was F.I.V positive. and he had to be euthanised at the beginning of December. It broke our hearts, but we don’t begrudge paying the bills. Continue reading “Our November 2017 Budget – How Did We Do?”

What Are Sinking Funds and Why Do I Need Them?

Piggy bank - What Are Sinking Funds and Why Do I Need Them?

Have you ever heard of ‘Sinking Funds‘? If not, then you may be wondering what are sinking funds? Your next question may be whether you need them.

What Are Sinking Funds and Why Do I Need Them?

Sinking funds are savings for expenses you expect to encounter, but don’t know when. They may also cover infrequent events that don’t occur each pay period, such as Easter.

When setting up your Sinking Funds, you have various choices:

Continue reading “What Are Sinking Funds and Why Do I Need Them?”

A Peek into Our Monthly Budget

A Peek into Our Monthly Budget

Last month I wrote a post called ‘Are You Within The Recommended Guidelines For Your Monthly Expenses?‘. It covered advice on the ideal allocation of income within a budget, as percentages. E.g. How much of your income to spend on housing, etc.

I thought you guys might find it interesting to see how we divide our money month to month.

Continue reading “A Peek into Our Monthly Budget”

Why Having an Emergency Fund Will Help You to Sleep Better

Why Having an Emergency Fund Will Help You to Sleep Better

What almost all experts will tell you is that before you decide upon any other saving goals, you must first be working towards building an emergency fund (sometimes known as a ‘rainy day’ fund).

What Are Emergency Funds?

Emergency funds are predominantly a way of protecting yourself against a loss of income; which for most people will be a job loss. Of course, there may be other circumstances that will necessitate tapping into your emergency savings, such as unexpected and expensive car repairs that your usual monthly budget cannot cover.

Is an Emergency Fund worth Having?

Living ‘paycheck to paycheck‘ is a stressful existence and if using debt is your only option for dealing with a major financial incident, then anxiety levels can begin to creep up and affect your quality of life. Nobody wants to be lying awake at night worrying if a cheque is going to bounce.

Over the past two months, we’ve had to dip into our emergency savings for major and unexpected car expenses. It’s been a pretty stressful time, and although we hadn’t quite reached our goal of what we wanted to have saved in our emergency fund, the car debacle was a hell of a lot less stressful than it would’ve been had we not had some money in the bank to pay for not only the extensive gear-box work we had done but eventually a new (used) car!

What Constitutes an ‘Emergency’?

Generally, something is an emergency expense if it’s:

a) unplanned

b) necessary and

c) urgent.

So your child’s birthday wouldn’t be classed as a good reason to take from your emergency fund, as you know exactly when it’s going to occur each year!

How Much Do I Need to Have in My Emergency Fund?

Some finance specialists advise that you have an emergency fund equal to three to six months’ worth of your usual INCOME, whereas some recommend that you have three to six months’ worth of your usual monthly EXPENSES (or outgoings) saved.

If you’re going to use your expenses to calculate your emergency fund savings goal, then you may want to know that some professionals recommend that you include only vital expenses (so this wouldn’t include any of your usual recreational or discretionary spendings unless you’d end up with a penalty that would cost you more than what you’d save by cancelling it – such as a mobile phone contract).

You may also want to consider if, during whatever financial emergency you’re going through, you’ll want to temporarily pause saving, making additional debt repayments and any investing towards retirement.

Of course, you’ll be able to reach your savings goal of having a complete emergency fund much faster if you’re aiming for covering only vital expenses. However, for those on a low income who don’t have much left to spend on non-essentials each month, there may not be a lot of difference between six months of income and six months of expenses!

Consider Having an ‘Emergency Budget’

When we first decided what our absolutely vital minimal expenses were, we looked at our usual monthly budget and went through each category and expense and subtracted any budget item that we could easily cancel without penalty if Mr.B were to lose his job. By doing this, we developed our emergency budget and were quickly able to work out how much (or little) was required to hit our goal of six months of expenses in the bank.
If the proverbial hits the fan then we can follow that bare-bones budget.

If you hate the idea of tightening up on your spending habits during say, a job loss, you may prefer to have three to six months of expenses saved, but be aware that if you don’t reduce your spending during the period of unemployment (or going from two incomes down to one) and you still haven’t found another job at the end of those three or six months, you’ll face problems. By cutting right back, you’ll be able to make that emergency fund last as long as possible and furthermore, you’ll have less to put back into the emergency fund once the storm has passed.

Do you have an emergency fund? If so, how long did it take to save? How many months of income or expenses did you decide upon and why? If you don’t have an emergency fund, is it something you’d like to achieve? If not, how will you deal with large and unexpected expenses or a loss of income? I’d love to hear from you!

For more on saving, check out: Are You Within the Recommended Guidelines for Your Monthly Expenses?

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa a.k.a ‘Bunchy’

A Beginner’s Bite-Size Guide to the Differences between Savings and Investments

A Beginner's Bite-Size Guide to the Differences between Savings and Investments

If you’re just beginning to learn about how money really works and are wanting to take control of your finances, you may not be completely clear about the terms that are used in the financial sphere. Hopefully, I can clear up one common cause of confusion; the difference between saving and investing money.

Saving

Most people know what saving is, but it’s good to define the meaning so that you can see the difference between this and investing. So, to save means putting away money a bit at a time, usually to pay for something specific or for a ‘rainy day’ fund.

Savings are usually kept in a bank or building society account and your money is easily accessed when you need it. Some accounts may pay you interest on your savings, but this is more of a benefit rather the sole aim of the money.

Money kept in savings is generally at a very low risk of loss, but remember that savings are still at risk of losing value due to inflation (where the buying power of your money and any interest earned on it doesn’t keep up with the increased cost of living and therefore what your money can buy now will be less than what it can buy you in the future).

Investing

Investing is still a form of saving, but here you are taking some of your money with the aim of growing it by putting it into things that you think will increase in value e.g. investing in stocks, shares or rental property.

Money that is placed in such investments is at a higher risk of loss, as whatever you choose to invest your money into may not increase in value and may actually decrease in value. Usually, the higher the risk of an investment, the higher the amount of ‘return‘ (what you’ll get back on top the initial amount you put in) you could receive.

For more on saving and investing, you may like to read Are You Within The Recommended Guidelines For Your Monthly Expenses?

What other financial terms confuse you? If there’s anything I can clear up for you, please don’t hesitate to ask.

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa a.k.a ‘Bunchy’

Are You Within the Recommended Guidelines for Your Monthly Expenses?

Who is Bunchy the Budgeteer? Who is 'Bunchy'?

Are you confused by all the financial advice out there, telling you how much you need to be saving each month? I know that I used to be! Would it help to know if you are within the recommended guidelines for your monthly expenses?

 
Have you got into a spin about what percentage of your income you should be investing into a pension? You know, so that you’re not eating cold baked beans in your old age (unless that’s how you roll)?
Do you ever wonder if you’re spending far too much of your income on things you enjoy? Are you worrying that those items are costing you more than the actual price tag – like your financial health?
Stressed because you can’t save what (insert financial guru) recommends you save each month due to struggling to afford the basics? (I know, I’ve been there) Well, please read on, friend…
Let me first say that there is a no ‘one size fits all’ plan to personal finance. It’s personal finance after all! I DO believe that there are good rules of thumb that we can go by. Tweak them here and there to suit your particular circumstances. That means altering things to benefit your financial situation, not to satisfy your spending desires!
 
I’ve read a lot of advice on what percentage of ones’ income should go towards various categories. Some experts vary in how they split up the categories, but for the most part, they tend to fall into these areas:
 
Saving and Investing There’s a difference. Read ‘A Beginner’s Bite-Size Guide to the Differences between Savings and Investments‘.
Debt-repayment (over and above what must get paid each month. Things such as a mortgage payment and paying the minimum balance on a credit card).
Vital household and living expenses.
Recreational/discretionary spending.
 

Let’s Start with Savings

 
General advice tells us to aim to put 10-20% of our net income towards savings &/or investments each month. Net pay is our ‘take-home’ pay, after tax and National Insurance gets deducted. What most experts will tell you is that your first goal is to have an emergency fund. Check out Why Having an Emergency Fund Will Help You to Sleep Better‘.
Once you’ve saved/are saving your emergency fund, consider other savings:
Short-Term Savings
For expenses or purchases you expect to happen in less than five years. For example, a family holiday or Christmas.
Medium-Term Savings
For expenses or purchases you expect to happen within five to 10 years, e.g. a new car.
Longer-term Savings
For expenses expected to occur in ten years or more, such as saving up for a child’s university tuition.
You may decide that you instead want to invest long-term savings, to maximise its chance of growth. Due to not needing the money for several years, it has a better chance of weathering any fluctuations. For example, if invested in the stock market. There is always a chance of losing money in investments. If you’re not willing or able to risk this, then a savings vehicle may be a better option for you.
 

Have You Ever Heard of ‘Sinking Funds’?

 
Sinking funds are savings goals for specific purposes. Read my post ‘What Are Sinking Funds and Why Do I Need Them?‘ and then come back. Our sinking funds have saved our skins and our budget many a time!
One final note before moving on to the next category. Some financial experts say that you should forget having any type of savings until you’re out of debt. This doesn’t include your mortgage. Some suggest you have a safety net of one month worth of expenses saved. Others recommend that you build your emergency fund at the same time as paying off debts.
Whatever you decide is the best option for you will depend on several things, including:
 
  • How secure you feel that your jobs are.
  • How tolerant you are to risk.
  • During a period of unemployment or illness, how your debts would affect you if you hadn’t reduced them.

Investing

For most people, this will mean the money that they save into their pension plan. It could also include other investments such as:
 
Investing in the stock market.
Buying a second property.
As mentioned before, you may also want to invest money earmarked for long-term savings. It can grow more than it could in an easily accessible savings account, but there’s more risk.
Experts recommend putting 5-20% of your take-home pay into investments/retirement savings. Other experts advise beginning at half your age as a percentage.
Example:
 
You’re 40 and have never consistently contributed to a pension or investment. Therefore, you would invest 20% (half your age) of your income until you retire.
 
The younger you begin saving for retirement, the smaller the chunk taken from your budget! Yet it all depends on how much you want to live on in retirement and what your retirement goals are.
Investing is an extensive topic and you should get professional advice about. Use a regulated independent financial advisor when making such important and long-term decisions.
Debt repayment
 
The advice seems to indicate that we should be putting 5%-20% of our take-home pay towards debt each month.
 
This percentage doesn’t include:
 
  • Your usual monthly mortgage payment (if you have one.
  • Paying any minimum credit card balance – you ‘have‘ to pay or risk additional debt.
Instead, this means, for example:
 
  • Making additional payments towards a mortgage if you want to pay it off earlier. Some financial gurus advocate this. Others feel that there are better things to be doing with your money.
  • Clearing credit card debts or paying off a car finance agreement, etc.

Vital Household and Living Expenses

We’re advised to keep this category of spending between 50-70% of our take-home pay. Though not meant to be an exhaustive list, this category will include things such as:
 
  • Food & household groceries (the basics).
  • Mortgage or rent payment.
  • Council tax.
  • Gas, electricity, and water.
  • Fuel/public transport to get to and from work.
  • Clothing basics.
  • Life assurance.
  • Home (building &/or contents) insurance.
  • Car tax, new tyres, car insurance, and M.O.T.
  • Sight tests and glasses.
  • Prescriptions.
  • Dentistry.
  • Boiler servicing.
  • Necessary hair-cuts.

Recreational/Discretionary Spending

This is where you finally get to have some fun with your money and use it for entertainment purposes!
From my research, advice indicates we try to keep these non-vital expenses between 10-30% of our net pay.
Again, the list below isn’t intended to be an exhaustive list. What you chose to spend your ‘fun money‘ on will be different to what I like to spend mine on, but it may include such things as:
 
  • TV subscription services.
  • Sports equipment, toys, and gadgets.
  • Beauty salon treatments.
  • Restaurants/eating out.
  • Alcohol
  • Smoking and vaping.
  • Days out.
  • Non-essential home improvements.
  • Make-up.
  • Junk food and takeaways.
  • Luxury grocery items.
  • Clothing (above the basics to keep from getting arrested, etc.).
  • Jewellery.
Some financial specialists list the following as non-vital budget items:
 
  • Home internet, landline telephones, mobile phones (and their tariffs). Unless it’s used for business purposes.
I hope that by reading this, you now have a clearer picture of how your spending compares.
If you’re aware of the potential impact of where you allocate your money each month, then that’s great. Whatever you decide to do is going to be very personal to you and your circumstances.
Some people don’t have the luxury of choosing where they prioritise their spending. They may have cut back everywhere possible and still don’t have enough for the basics or for saving. In these situations, it’s not a spending issue that they have, but an income issue. Until that’s improved, they shouldn’t, for example, concern themselves with investing.

Have you calculated how much of your income goes into the categories above? Are you a natural saver or spender? What are your views on prioritising debt repayment over saving or vice versa? Do you have an emergency fund?

 

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa a.k.a ‘Bunchy’