Why You Really Need a Budget

calculator
If you want to stop being poor you really need to start budgeting

I get fed up of reading blog posts where people say they don’t budget or they don’t need a budget. It makes me mad! You may be one of those people that finds the thought of having a budget rather boring, but it’s essential. If anyone tells you that you don’t need a budget they are lying. Not having a budget means that your bills don’t get paid on time. It also means you may have to get into debt just to be able to pay for the basics in life.

In the world of Financial Independence/Retire Early there is a focus on making it sound fun and exciting. In reality, it can be hard work. Stephen Covey said that effective people are prepared to do things that other, less effective people, aren’t. Believe me, if you want to be effective in the field of early retirement and financial independence you’ve got to put in the work. This means having a budget. To some of you will seem like common sense, but I am always amazed at how many people don’t actually have a grip on their money.

So what does a budget look like?  

How to set up a basic budget

If you want to have any chance of getting control of your finances then you need to start looking at what you are spending your money on. If you don’t know how much is in your account and you are blindly handing over your credit/debit card to buy something that you don’t really need then you are in trouble.

You could start by keeping track of your expenses over the next few months, but really you need to look at a whole year. I’d recommend pulling out your old bank statements and having a look at where your money went.

Light bulb laying on grass
If you want to keep the lights on you need to start budgeting

Predictable Expenses – monthly

Let’s start with the easy part. Look at the regular bills that you are paying each month. For me these are gas, electricity, mortgage, council tax, water, phone and broadband and TV licence. I recommend setting up a separate account to pay these out of. You can automatically transfer a set amount to that account the day after payday. With that done you won’t be at risk of having the gas cut off.

Predictable Expenses – annually

Secondly, there are some bills that you only pay once a year. For me these are:

  • Car service
  • Car tax
  • MOT
  • Vehicle recovery
  • Car insurance
  • House insurance
  • Travel insurance

I also add money for medical expenses such as opticians, dentist, my physio appointments. Finally I add money towards my holiday fund. For some of the annual bills there is the option to pay them monthly by direct debit, but often this increases the annual total.

Make a list of all your one-off annual expenses, plus anything else that you want to save towards each month. Add up how much you spend on these in a year and then divide by 12. If you are going to have a second account for your monthly expenses you can then add this amount to your post-payday transfer every month. That way, when the yearly bill comes around you’ve already got the money saved. It also prevents those expensive months, as you spread the cost over the year.

Savings

If you haven’t yet got a grip on your spending, then finding some money to put away each month may not be at the top of your list. I would hope that as you’ve gone through all of your main expenses you will have discovered where you could make some savings. Hopefully you’ll have been amazed at how much you’ve wasted on things that in retrospect you could have done without. Once you’ve worked out how much you can afford to save it’s just a matter of transferring that amount to a savings account or preferably an ISA each month.

woman doing pilates
A Pilates class – one of my weekly expenses

The remainder

What you have left is yours to spend as you see fit. I have six categories for this money. They are food, petrol, toiletries, Pilates, social and miscellaneous. As I am someone who likes budgeting I allocate a certain amount to each category, but it’s entirely up to you how you spend this. As long as you don’t go overdrawn by the end of the month then you’re doing okay.

So there we are, a simple guide to start to get a grip of your expenses. It may seem like a lot of work to start with, but once it’s in place you won’t have to worry anymore when you get to the end of the month as to whether you’ve got enough money to pay the bills.

Do you have particular problems with your budget that you are trying to tackle? Let me know in the comments section or if you’d rather keep it private send me an email via the contact form and I’ll see if I can help you.

October Spending

A label saying October and some acorns
Did you make any progress on your money goals this month?

If you’ve landed here for the first time you may wonder why I am baring all about my finances. Since I discovered the FI/RE movement and started my journey towards being more financially secure, like others in this niche, I have jumped on the bandwagon of doing a monthly review.

Even if you don’t have a blog I can’t recommend it highly enough. It is such a good way of looking at what went well and examining areas in which you could have been more frugal. It’s not only a tool for looking back, but a monthly review helps you plan for the future. I have learnt where I need to increase my allowances for next year. For example, we seem to spend money each month on bird food, so it probably deserves its own category!

How did October go for you moneywise? For me it was a more expensive month than usual. Some of my regular spending was less, but there were some unexpected expenses. Let’s see how it went…

Income

My only source of income is my monthly salary. Last month I received a backdated pay rise, but in October it returned to the usual amount which is £2726.17.

Household Bills

We are plodding on with our quest to reduce the mortgage. The standard monthly payment was £520.18 and then we made an overpayment of £591. This leaves the balance on the mortgage standing at £74,354.86. As we overpay every month by over £500 our monthly payment decreases the next month and Mr Simple then usually increases the overpayment amount. Instead of decreasing the term of our mortgage Mr Simple suggests that we should aim to get the monthly payments down to a very low amount where we hardly notice that we’re paying it and then just let the mortgage run to term. What’s your view on this?

Gas and electricity was £95.35. This is our usual direct debit. We are £191.44 in credit and I am hoping that will be enough to carry us over the winter so that our monthly payments don’t increase next year.

We paid the standard amounts on these bills which we can’t change:

  • Council Tax £258.00
  • Water £40.50
  • TV Licence £12.83

Okay, actually we could reduce the water bill, which is metered, and it is lower than last year when we spent a lot of the hot summer watering the new lawn that we had had laid.

This is going to cost us nearly £30 a month from November

Our internet and phone bill was £27.85. We are currently with John Lewis who are putting up our bill by £2 per month. As usual they are offering a £20 a month deal for new customers, but loyal ones like us will be paying almost £10 more than that. At the moment we are paying for free evening and weekend calls, when in fact we rarely use the landline. Mr Simple is going to see if we can drop that and hopefully get the price down. John Lewis’s service is provided by Plusnet so we may change our package to them if we can’t reduce the monthly payments.

Any suggestions for broadband and phone providers? We were with TalkTalk at our previous home and they were completely useless so we certainly won’t be returning to them even if they are cheap.

Savings and interest

My savings are a grand total of £36,227.74. My Vanguard stocks and shares ISA made a loss and stands at £9,072.69.  As usual I saved £185.00 to Vanguard and £250.00 to Nationwide. My savings account with the Nationwide matures in November and so I will get some interest, but the rate will decrease. I plan to close the account and move the money to my ISA.

Interest on my Marcus account, which I am using for stoozing, was a grand total of £8.43. Part of me wonders whether this stoozing is worth the bother as I am not making a fortune, but I suppose it is free money and I’ll keep going for the time being. I am getting to the limit on my Tesco credit card so I may not be able to use it much longer without either getting the limit increased or paying off each month what I spend. Even with the latter arrangement I would be able to keep £10,000 in my savings account, which is giving me 1.75% and over the next 8 months (until my 0% interest rate runs out) I would make about £100 to add to the interest I have already made.

General spending

Food £114.39 – under budget by £25.61. We ate a lot of food out of the freezer; mainly meals that I cooked over the past few months and froze. I also bought some dried fruit and nuts which I purchase online.

Petrol £109.57 – under budget this month. Yet again I had a week off so did fewer miles.

Pilates £24.00 – managed to get to three sessions this month. It’s good to get back to a regular class.  

Toiletries £13.90 – this was two extra large bottles of lysine tablets which I am using to try to prevent the cold sore virus in my ear erupting. It was on special offer at the health food shop and so I splashed out. Otherwise it was a very cheap month.

Watching a film in the village hall cost me £9.50

Social £55.40 – this included a ticket for the village cinema, plus a very frugal £2 spent on the raffle and snacks. The price of the ticket, which was £7.50, included a very large glass of red wine, which I would happily forego if I could pay less for the ticket, but it doesn’t appear to be an option. I paid the balance on two Christmas meals, which put my spending over the budgeted amount of £50, but fortunately not by much.  

Miscellaneous £181.97– I massively overspent in this category. It was mainly due to purchasing a blind and lampshade for the spare bedroom (although we did get them at 40% off in the sale) and buying a new handbag. I have a very old canvas bag that I bought from Next donkeys years ago and have been looking for something similar for a long time. Mr Simple calls it ‘the grand sac’ – a reference to the fact that I use it a lot when we are on holiday in France each year. Unfortunately it is very torn at the front and so I decided that I needed a new one. Canvas bags don’t seem that popular, but when we were away in Somerset I found a great shop in Dunster selling lots of canvas bags and they had one in just the size that I wanted. It was £32.99, which in the world of handbags, isn’t a lot.  

Expenses from bills account – expected annual/regular expenses

Physio session £64.00

Staycation and weekend away £217.46. Most of this was for the hotel and the evening meals.

Car battery – £80.87 – you may remember that my car broke down and it was the battery that was the problem.

Invested £125 on blogging – lots of studying to do over the winter

The blog – £124.63 – I have never spent money on blogging courses before, but I was persuaded to buy the Genius Blogger’s Toolkit. This is a package of about 100 courses. It must be worth thousands of pounds. I have downloaded a couple of the courses and started working my way through it. Mr Simple (who doesn’t know about the blog) is disparaging about blogging as a career, but there is so much more to it than there seems at first glance.

The first course that I started suggested moving from WordPress.com to WordPress.org, which means managing the site yourself. The good thing about this is that you can start adding plugins, a lot of which are free. With WordPress.com you have to be on their business package which is about £200 a year to get plugins. The downside of the move was that I needed to move my hosting to another providers. I chose Siteground as it is adequate for what I need and was a reasonable price.

So there you have it. Any observations? Where could I have saved more money? What do you think about our mortgage tactics? Should we reduce the term instead of the monthly payments?

The Pleasures of Autumn

We can enjoy the beautiful colours of autumn now

It’s the 1st of November. I always used to tell myself that I didn’t like autumn and winter, but I have realised that there are many aspects of this time of year that I do enjoy.

Beautiful scenery

At the end of last week we went to Somerset for a few days in order to see the autumn colours. Unfortunately as the weather has been fairly mild the trees hadn’t changed colour as much as we would have liked. It was a little disappointing, but then today I realised we have beautiful places on our doorstep, one of which I pass through on the way to work several times a week. It is a small wooded area and this morning the colours were absolutely beautiful.

Opening your eyes to the beauty around you is a simple and free pleasure. Even if you live in an urban environment I expect there are some trees about. As a child I used to walk to school in the London suburb where we lived and the journey in autumn was often taken up kicking the piles of leaves that had fallen off of the plane tress.

Let podcasts keep you company on the dark drives home

New ideas

As well as the looking at the beautiful scenery I was also enjoying listening to Ryan Holiday talking about stoicism. It’s something new I’ve discovered whilst listening to the Afford Anything podcast. His work, which is a modern interpretation of ancient philosophers, is really interesting. At the moment I have only just scratched the surface, but am looking forward to learning more.

You can listen to him here being interviewed by Paula Pant.

On these dark nights there can be little to look at, so keep yourself company with one of the many podcasts there are. Only today a colleague was complaining about long journeys that she has had to make recently and I suggested several podcasts that she could listen to. Make your commute something to look forward to as you lose yourself in the infinite world of podcasts.

chestnut in spiky casing
Sweet chestnuts can be roasted in the oven

Simple Pleasures

Whilst we were away last week Mr Simple collected sweet chestnuts. He was amazed that there were so many on the ground. Maybe due to the mild weather they hadn’t all been eaten by the squirrels. He has been roasting them this evening. We probably don’t do enough of this. Autumn is the time when the hedgerows are laden with blackberries. We didn’t go picking them as we still have a couple of boxes in the freezer from last year. The season is now over, but it’s something to look forward to for next year.

Although the weather is pretty miserable, one of the joys of this time of year is snuggling up on the sofa in front of the wood burner. Like most people we have central heating, but there is something lovely about a naked flame. I look forward to weekend evenings with Mr Simple watching a bit of TV whilst sitting cosily in front of the fire. All of the wood comes from trees that we have had cut down in the garden so it feels like we’re getting it for free.

Be grateful

So, as we go into the weekend I hope that you’re finding something to enjoy. Even if it’s just being grateful that you’re inside warm and dry as the rain lashes against the windows outside.

Everyday Ideas for Saving Time and Money

In this modern and hectic world everyone seems to be so busy, but there are easy ways to save time, along with making some financial savings as well. This is particularly important if like me you are interested in the financial independence/retire early movement. Making small savings every day can help you to increase your savings and having more time might just help you find a few hours each week to work on a side hustle. Therefore, here are some ideas how you can save time and money every single day.

Do less washing – you won’t be smelly – I promise!

Laundry

Wash items less

Washing clothes is time-consuming, costs money and is bad for the environment. The first way to save time and money on laundry is to hang up your clothes after wearing them once, instead of washing them. Now I don’t mean underwear, just items like trousers, skirts and jumpers. I wear those several times before washing them. I also wear blouses and t-shirts twice. In between the first and second wear I put them on a hanger on the front of the wardrobe door. This stops them from getting creased, allows them to air and reminds me that I have already worn them once.

Use an airer

If you use a tumble dryer the cost of electricity can be astronomical. To dry our clothes we have a washing line outside, which in our lovely British weather is only useful so many months of the year. When it’s too cold or wet outside, in order to save money I use airers to dry our clothes. I don’t think that hanging clothes on radiators is a good idea. For a start, I think that it restricts the heat coming into the room and I find it’s too hot for many of the clothes and they can go a little crispy. A much better idea is to just hang them on the airer and stand it next to the radiator. It may sound a bit pedantic, but made sure each item is laying flat. I used to have a flatmate that would hang her knickers on the airer whilst they were still crumpled up. This meant that they took longer to dry and again seemed to have a ‘crispy’ feel once they were dry.

Reduce the ironing pile

As well as putting clothes in the washing machine and hanging them up to dry there is also ironing. Fortunately since Mr Simple got made redundant a couple of years ago I have saved hours of my life as I no longer have to iron his work shirts very often. He spends most of his time working from home and just shoves on a t-shirt and jogging bottoms. About once a fortnight he wears a shirt and like me, he will wear it more than once, so now it’s only one shirt a month that I have to iron.

If you do a lot of ironing, in order to save money I would suggest trying to do a large pile in one go. Heating the iron up several times a week to iron a few items will cost you more money than putting it on once and keeping it at that temperature until you’ve finished the whole pile.

Colouring your hair yourself is easier than you think

Personal care

Dye your own hair

Since discovering the financial independence/retire early movement I have significantly cut the amount of services that I purchase and even before that I wasn’t a great consumer of the beauty industry. When you get to the ripe old age of 50 (and for me long before that) grey hair is a fact of life. Some people choose to embrace this and are happy to go grey, but I just think that I would look so much older, so I choose to dye my hair. This used to involve going to the hairdressers once every six weeks and paying about £60 for a colour, cut and blow dry. I’d never really considered dying it myself, but after reading about Mrs Frugalwoods cutting her own hair I thought that I would give it a go. It is a bit messy, but it saves me so much money. A pack of ‘Nice and Easy’ Dye is just £6. I then just go for a wet cut every few months, i.e. I turn up with wet hair, the hairdresser cuts it, gives it a quick blow with the hairdryer to get out the worst of the moisture and I’m off. That only costs me £20.

Make fewer trips to the salon

So how does this save me time? When I went to the salon to have my hair dyed I would be there for about two hours. By the time they had put the dye on, left it a bit, washed my hair, cut it, dried it and then straightened it, most of the morning would be gone. My hairdresser would often ask me what I was doing later, expecting me to say that I was going out somewhere nice to show off my new haircut. In fact most of the time as soon as I got home my hair went up in a clip and I got on with some household chores or gardening. All that drying and straightening, which I can do perfectly well myself, was a complete waste of time and money. On top of the time and money spent at the salon there was the travel time and if I took the car, the cost of petrol. It’s only a mile away, but it all adds up.

As well as my hair I am now plucking my own eyebrows instead of getting them waxed and using hair removal cream on my other facial hair. Each task only takes a few minutes, saving another trek into town and yet more money.

Cleaning

Be tidy

One of the best ways to save time on cleaning is not to make a mess in the first place. When you’ve finished with something, put it away. When you pick up the junk mail on the way in the door put it straight into the recycling bin rather than leaving it on the side to pile up. Eventually you’ll have to sort through it.

Ban ornaments

I’ve never been a great fan of ornaments, but I think that if you want to save time on cleaning it’s really important to keep your environment simple. I can never understand ‘collectors’ – shelves and shelves of figurines or fancy teapots. To my mind these are just dust collectors which you have to spend hours of your life keeping clean. So, save time and money – by not buying them and therefore not having to dust them. If you really must have something, keep it simple and buy just a couple of things that will be easy to move when you need to dust that shelf.

So there we are, just a few simple ways to make life easier, giving you more time and saving you a few pennies.

Simple and Healthy Meals from the Freezer

Make simple and healthy meals that you can freeze

I have mentioned several times that this month, in a bid to save money, we are eating out of the freezer. For Mr Simple and I, eating out of the freezer means eating home cooked meals that one of us made extra of last week or last month. As a rule, I tend to use these as we go along, particularly if I am going to be home late or if Mr Simple has to cook, which often happens on a Wednesday now, as I go to my Pilates class. It isn’t that he can’t cook, in fact he is a better cook than I am, but he is reluctant to spend too much time on meal preparation when he’s got a lot of DIY to do.

I find that there are many benefits to eating this way and it takes a lot of the stress out of meal planning and preparation. In particular, the benefits of eating this way are that it is:

Cheap

Many of the meals that freeze well are made with inexpensive ingredients such as vegetables and beans. We mainly used tinned beans e.g. chick peas, kidneys beans, but you can use dried as well. The dried versions are cheaper, but they take more preparation as you need to soak them overnight and boil them for over an hour. Another frugal ingredient is lentils, which sometimes need soaking, but a lot less than the dried beans. I find pouring on boiling water instead of cold water when soaking speeds up the process. Red split lentils don’t need any soaking at all and are especially good at thickening stews and curries. Particularly as we come in to autumn and winter you can use root vegetables which are very cheap, such as carrots and potatoes.

Carrots – cheap, good for you and they last in the fridge for ages

Easy to make

You don’t need to possess amazing culinary skills to make many of these meals. It just takes a bit of peeling and chopping and opening a tin or a packet. Food such as curry or vegetable stew can be made in one pot and then you do some rice on the side. You can make it even easier and have some crusty bread with it instead. Keeping it simple means that there won’t be a lot of washing up afterwards.

Healthy

As the meals are heavy on vegetables and beans it’s easy to get in your five a day and they contain high levels of protein. To make it even healthier stick to accompaniments of brown rice, quinoa or mashed sweet potato.

Time saving

Once you’ve cooked and eaten what you want the rest can go in the freezer. The next time you want to eat it you just have to remember to take your dinner out of the freezer in the morning or the night before. Then you can have your evening meal ready quickly by just heating up your defrosted food and adding a grain or other carb of your choice.

Make courgette and feta cakes – they freeze really well and are delicious

Below are some examples of what we are eating this month, along with where to go for examples of recipes, to give you some ideas if you want to save time and money on what you eat.

Veggie chilli – this is a staple in our household. Usually it is made by Mr Simple as he would say that I am too tame with the chilli and he likes it a bit hotter than I do. We have several of Hugh Fearnley-Whittingstall’s books and the recipe comes from one of those, but it is also on his website. Instead of the usual kidney beans he uses pinto beans, but I am sure you can use whatever you have in stock.

Black bean curry – I currently have the ‘Curry Guy Veg’ out of the library and he has a recipe for black-eyed bean curry. I used black beans instead. He doesn’t appear to have a website, but here is a similar recipe for you to try.

Courgette and feta cakes – these are something slightly different as they are a bit fiddly to make, but delicious and they freeze really well. It is a Delia Smith recipe and they are a good way to use up a glut of courgettes.

Veggie burgers – I find that most, if not all, vegetarian burger recipes freeze well. This month I found we had four different types in the freeze rso got them all out and Mr Simple and I had them with polenta chips and a salad.

So there we go, I hope you feel inspired to start filling your freezer with healthy and delicious meals which will save you time and money. After a long day driving to work and back, sometimes in the dark, it is good to come home to something warm and comforting which you haven’t had to spend a lot of time cooking.