Wednesday, 29 January 2020

When The Penny Dropped: My Financial Frivolity & Learning To Budget

I decided to republish this article following some interest from my most recent post around the subject of budgeting and learning to control spending - I've linked to some new and more up to date articles of interest within it that I thought might be helpful.

For a long time now, I've found myself confused by my seemingly constant lack of cash.

I feel as though I'm always working. I earn a decent amount of money.
And even though my partner is currently out of work and I am the sole bread winner once again, our bills are less than the money that comes in.

On paper, we should be fairly comfortable financially.

Yet somehow, I find myself struggling to scrape the rent money together every single month.

I find myself going around the house turning off the heaters to save on electricity, because I don't have the spare cash to just pay to put more money on the meter.

And more often than not, I find myself going to my parents every few months to help me out with a loan when a big unexpected bill comes up - like when our car died recently and cost £600 to fix. I simply do not have £600 laying around.

In all honesty, I rarely have £50 spare in the bank.

But lately I've started to wonder about WHY this is happening.

Yes we live in one of the most expensive parts of the country. Yes we rent, which is obviously significantly more expensive than mortgage payments most of the time (and something we are looking to change at some point although a mortgage seems a long way off for us - although we are following the steps in this very helpful article to get us started). Yes we have three children.

But we only one car, it's not a new one that we need to make any monthly payments on...we own it.

We don't shop in M & S and Waitrose, or even Sainsburys. We don't have top of the line mobile phones, we don't even have credit cards so there are rarely additional bills to pay other than the standard rent and utilities.

So I wondered...where does the problem lie? WHERE exactly is my money going?

I decided to take a look back through my finances. And honestly, what I discovered shocked me.
The reason for our lack of readily available cash? Or at least a BIG part of why we don't have quite simply, me.

I am a frivolous spender.

If I'm honest, I sort of knew this deep down but never really wanted to look and work out just how much money I spend on things we don't really need...but I NEVER imagined the amount would be as shocking as it is.

The first thing that stood out to me when reading through my bank statements from 2018 so far was the fact that within the first 3 days of the year...I had already spent over £300.

Not on bills, not on food, certainly not on New Year celebrations or anything like that.

In all honesty, I don't really know what I spent it on.

And yes, January probably wasn't the best time to check...with the sales on, and hard to refuse offers everywhere (and I DID buy a fair few birthday gifts to put away for the boys) but £300 in 3 days?! And yet I sit and wonder why I'm struggling to make ends meet?!

As an example, I looked at what a random week's bank activity looked like for me:
The total amount spent: £1287...In a WEEK!!!

We did have a huge unexpected expense with the car needing significant urgent repairs in that week which cost £600, so with that aside it's actually £687 spent...But I still think that's a shocking amount for a week.
Now that amount does include some bills - I had a MUCH larger than usual phone bill this month thanks to Disneyland Paris's ridiculous customer service systems - the phone bill cost me £103 alone which is more than double what it usually is, I also had to pay my life insurance, TV license, Amazon Prime subscription and Virgin Media bill - so in total that's £234 for bills.
I also had a business expense come out for around £17.
We also didn't do one main food shop this week and instead did a few smaller shops, which ended up totalling up at a whopping £148....WAY more than a food shop would usually cost us, we tend to pay around £75 for a weeks shop when its done all at once.
I knew that doing smaller shops would cost more, but I didn't think it would be double!
But that still leaves a mystery £288 what was it spent on?

What disgusted me most was to see that we had spent £60 on takeaways and convenience food. In a week!!
To me an amount like that sounds like someone has lived on takeaways all week, but I honestly had no idea that what we had would add up to so much - Jon & I had a chinese takeaway on the Saturday night, which is something we do most weekends. And then the following Friday we all had a McDonalds for tea.
If you'd asked me what those "treats" had cost, I'd have guessed around £40...I had no idea it was £60!
We ALSO went to Costa one afternoon as a treat for the boys, which cost us another £30...I do remember being shocked at the total at the time, but two coffees, three babycinos, a couple of toasties between the boys and a cake each...and sure enough, it was £30. Things do get pretty pricey when there are 5 of you.
So that's now £90 spent unnecessarily on food when we'd already spent nearly £130 on groceries...ridiculous!
Then there were lots of frivolous purchases - £38 spent in Home Bargains and I can't even remember what I bought!, £3.50 spent on paper in Hobbycraft for a craft activity, £25.00 spent in The Works on books for Tyne's Home Ed activities, £5.00 on iTunes, £2.00 spent on a movie download, £18.00 spent on American sweets as yet another "treat" for the boys.

Jon & I also had a rare date night on this particular week, we went to the cinema which cost £33 and for dinner which cost £46.
The remaining £27 was spent on petrol.
In all honesty, I am horrified at how much money I have thrown away. I could cry with anger at myself.
And I DREAD to think what this would mount up to over the course of a year!
But I can't change what's already done so there's no use crying over spilt milk.
What I CAN do is be aware of my spending habits, and look at what could be changed.

For a start, a weekly planned food shop is a MUST. We could have easily saved £70 here. And it would also most likely have meant we wouldn't have had the McDonalds dinner either, making it a £100 potential saving from making that one change.

I think its unrealistic for us to declare that we won't have any more takeaways at all as I know we won't stick to that, but instead we need to set a budget that allows for one takeaway and stick to it.
I also need to curb the amount of money I'm spending on "treats" for the boys - one treat a week should be enough, however between the £30 Costa visit, the £18 trip to the American sweet shop and the £38 spent in Home Bargain which I imagine at least half of was for things for them - that's another potential £60 saving.

As for our date night, these are very rare occurrences so I don't want to beat myself up about the amount we spent too much - I do think its important to enjoy ourselves when we get the chance, or else what's the point in always working so hard?! But could we have better spent that £79?
Yes, with a bit more planning...absolutely! We ended up in a restaurant we didn't really enjoy because we hadn't made a booking anywhere. And we could also have used our Tesco Clubcard tokens for a meal if we'd planned in advance. So a potential £40 saving here.

So all in all, our spending could have been reduced from £687 to £487...saving us £200 per week just from making small changes.
If I was to start looking at ways to save money on my phone bill and virgin media bill too, we could potentially save even more money.
So - I've decided enough is enough.
I'm not happy to continue wasting so much money, and I need to start paying more attention to what I'm spending.
As budgeting is all totally new to me, I'm going to start small - I'm going to challenge myself to spend no more than £150 over the course of the next week including food shopping, petrol costs, etc. The only thing I won't include in that cost is any expected bills.

I'm setting a budget of £75 for food shopping to begin with (though I'd like to look at reducing this further eventually), £20 for one takeaway, £15 for petrol, £35 for a treat/day out for the boys and £15 for incidentals.
I hope to be able to reduce this much further once I get into practise with budgeting and we are already looking into cutting costs by switching energy suppliers and moving to SIM only plans , but that’s all in good time and I think baby steps will help me to begin with!

If you have any tips or useful advice for somebody taking their first steps into family budgeting, please do let me know about them - any apps, spreadsheets etc that you find useful, discounts or sites you use, I'd love to hear about them!
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