On the path to simplicity, a big issue for me has been money.
My family wasn’t rich, and economics were a bit of a black cloud over my head throughout my life at home: money was something despised and elusive; when there was some money, it was spent quickly, and it looked like we were always at the edge of bankruptcy, or so it felt.
Growing up, I didn’t have an idea of how to budget: I started working, and I got my salary, which I spent in the first half of the month, scrapping bits of leftovers for the rest of the month, until new oxygen, in the form of my next paycheque, would materialise in my bank account. A vicious circle that was very, very hard to break and which, I have to admit, I still struggle with from time to time today.
I never put anything on the side, and a couple of days before my salary was due again, pasta with tomato sauce and beans in a can was what I ate.
No emergency fund, no savings for rainy days, Christmas or the future. I’m lucky that my employer made it easy to put aside money for my pension, since they contribute the same amount I put in before it appears on my payslip, so I don’t even notice it going out. My ex-husband opposed to this, since we needed every penny in his opinion. Thank goodness I still went ahead and signed for the pension fund.
You see, I always had the intention to put my finances in order. I thought that, the day I would have lots of money, I would put some aside. It never occurred to me that even then I could have started putting money aside, by adjusting my lifestyle and making a few key choices. I tried putting together spreadsheets with income and expenses, but they would work for 10 days max; I would then even forget I had spent two hours putting them together. I lacked motivation and a simple enough method that was a no brainer to follow.
Then everything changed. I separated from my husband. I had a kid to take care of and another one on the way.
I maxed out the credit card I had, buying cheap furniture in Ikea and a small, used car and paying for the deposit towards the rent of my new flat. I also extended a loan I had taken years before. I had to pay huge solicitors’ bills. Life was a mess. By the time I had my second child, I had to sign a debt management plan because I fell in arrear with all the creditors, including the solicitor.
At the darkest of times, especially after my car broke down for good the night my second child was born, and I couldn’t afford to replace it until he was 9 months old, I didn’t have money to buy a bag of carrots for his baby puree. I broke my children’s piggy bank to get the few coins that would make a difference that day.
It wasn’t the easiest nor the happiest time of my life.
I came back to work, but I was still relying every week on Government’s child benefits to do my weekly grocery shopping, because my salary just covered the bills and debts.
I was still on the black book of banks – and I will be firmly there for another 4 years – and didn’t have any emergency fund. The time came, though, that the Government re-did their calculations, and because I wasn’t on maternity anymore, they cut my benefits by two thirds. After paying rent, bills, nursery, debts and other essentials, I was left with around £50 a week, which in southeast England is next to nothing, and that needed to be my emergency fund as well as my food shopping fund, and anything-else-that-cropped-up fund. The day I opened the envelope and learned this, I felt utterly desperate.
My lifeline had gone. Now I had to feed myself and my children with very little money and what if the car broke down? What if I got sick and needed medicines? All these dramatic scenarios crept on me.
I was STUCK. Big time.
So, after the first few days of shock, I decided to make this work. In the end of the day, I still had a job and a roof above my head, I just needed to cut back here and there and try and increase a little my income. I started researching on the internet for bloggers that could help with my quest: how do I budget?
I’ll explain here the methods that have worked for me, and helped me change my ways with money. I’ve used a combination of them at different times, and now I quite like to combine the envelope method with Mindful Budgeting, plus a few shopping bans here and there.
The biggest revelation for me, though, came from losing my benefits. Beyond the practicality of learning to be better at managing my money, I learned not to be complacent, to take control of my finances and, with that, of my life.
So, yes, it was a blessing.
One of the oldest budgeting methods (I read somewhere that it was commonly used by housewives managing their husbands’ salaries when people got paid in cash), the envelope method works simply by assigning specific budgets for different categories of expenses. The one I found the simplest to follow is by Fun, Cheap or Free. In summary, once you have established your income and likely expenses for the month, including savings and debt repayments, you start by taking out the money needed for essential items and regular expenses as soon as you get your paycheque: rent and bills, for example. At the same time, take out any savings, before they are eaten by everything else. Then use just one envelope per month for any budget left, divided in the middle in ‘groceries’ (which includes also any toiletries, kitchen stuff, cleaning supplies etc.) and ‘other’ (under which fall all the stuff you ‘want to have’ rather than ‘need to have’, for example haircuts, gym membership, new makeup, presents, going out money, new clothes, etc.). Admittedly, this category for me was shrunk to a minimum, since I didn’t have a lot of spare money left after rent, bills, nursery fees and groceries were accounted for. You then write down every expense you incur into under the relevant category, for which you have assigned a budget. You can keep the receipts in the envelope. Wonderful to keep in check your expenses, and keep yourself accountable.
Becoming more frugal
I came across the 90-day budgeting boot camp by the Busy Budgeter, a free budgeting programme with an additional checklist of actions you can consider to regain financial health. The whole website of the Busy Budgeter is an endless resource for those that struggle with being frugal and budgeting, so definitely worth a check. In particular, I found the checklist invaluable: it goes through some 200 actions you can look at to cut your expenses or increase your income.As I said at the beginning, I didn’t have a clue, and every time I tried budgeting before, it didn’t last very long, because of lack of commitment or unrealistic expectations. So I started, going through the weekly tasks and the checklist, to save some money and simplify my life: the easiest was to tackle my food bill. I tried doing a weekly meal plan, but I ended up eating something completely different most days for different reasons (for example, I had more leftovers than expected), so instead, I started shopping for fruit and veg at the local market, with a vague idea of what I’d like to eat during the week, and a budget of £10. The market is often cheaper and has fresher, more seasonal products than supermarkets. I would build my meals around what I found at the market, and anything else I couldn’t find there, I would go to Aldi to buy (much cheaper and better quality than other supermarkets), with some odd items bought in Sainsbury’s. I also maximise the use of leftovers. This way, I managed to halve my food shopping expense.
Fear not – I will dedicate more posts on food and savings in the future.
More examples of actions I have taken to reduce expenses / increase income:
- I started making my own healthy cleaning products;
- I contacted all my energy and media suppliers and negotiated new deals;
- I sold lots of stuff via eBay and Facebook selling groups, especially baby equipment and clothes I didn’t need anymore;
- I cancelled any subscription that wasn’t adding real value to my life (I kept the most basic Netflix subscription, which at £6.99 a month ensures lots of entertainment for me and the children, offsetting more expensive options, and my subscription to Psychologies magazine, because it saves me the fees of a psychologist!);
- I started selling some of my crafts: rag dolls and toys, and giant knitted blankets, made mainly from recycled fabric and materials;
- I started looking at free ways to have fun with the children (like baking or watching a movie at home with homemade popcorn) and rediscovered running as a free and enjoyable way to exercise.
The best advice from that boot camp, though, was to wash your dishes and do your laundry every day. Yes, you read it right: the discipline and habit of keeping the basics at home ticking, provides a wonderful mind gym to train your brain to stick with your budget targets, and keep stress coming from mess at bay.
Do no use your credit card
I only recently had to take a credit card again, after having repaid my previous, maxed out one. The reason why I’ve taken up one again is that I want to build up my credit. However, it is a terrible temptation, just having it in your wallet, and looking at you saying: “Come on! You can afford it! Look at all this money inside me, it’s spare cash!”. NO, IT BLOODY ISN’T. I still fall into the trap for small purchases when I don’t have cash on me, it’s just easier to tap with the contactless credit card, but then I find myself with a higher than usual bill the month after and think how weak I am to still falling for that trap. Thank goodness, I still keep it below £150 a month, which I pay in full every month now. Would be better not to have it though… still working on that one.
Carry cash instead of your card with you
Then you’ll have to limit your expenses to that money, and can’t use your card. Money in a plastic card never feels real, and so it’s easier to spend.
Have a Spending Ban period
(Two weeks, a month, six months…whatever suits you). During this time, you are allowed to spend on only the very essential, and you will avoid any other expenses. Be careful not to just postpone your shopping spree to after the spending ban! Put the money you saved in your saving account instead. Read more about it on Cait Flanders’ blog here.
Use an app to put your savings away
I personally don’t believe in having several accounts for different expenses, although lots of financial advice points in that direction; it just makes my life more complicated. I only have a saving account and a current account, and I use an app called Moneybox to put aside some money for the longer term. I’m sure there are others out there that are also good, but I found this easy because it can automate my payments, and I only put small amount each week, which for me is the key for financial success – it takes away having to take a decision every time, and it’s only a little bit of money at the time.
I started calling money ‘freedom’
I heard it from Whitney Cummings, an American comedian, and I thought it was brilliant. Every time I feel like buying something that wasn’t planned, I think: “Is that worth 100 of my freedom”? Because that’s what money gives you: not happiness, but choice, and therefore freedom, whether you like it or hate it.
I discovered Mindful Budgeting by Cait Flanders, and through that, how to create a simple budget with clear goals, and keep my motivation to stick to it by being mindful of what’s in it.
Budgeting per se doesn’t work. You need to ask yourself WHY you are doing it. Having a clear goal in mind, something you want to do which is specific with the money you will save, is fundamental, or you soon will lose motivation. Do you want to save to repay your debts? Do you want to create an emergency fund? (Both in my opinion should be prioritised) Do you want to go to Disneyland next year? Do you want to buy yourself a new car because yours doesn’t suit your family? Have that goal in mind. I didn’t set a deadline to achieve my goals in my head, but I’m working steadily towards those, a little bit at the time – goals often don’t work out as we set them, and you don’t want to lose motivation by being disappointed.
The best advice from Mindful Budgeting I find is that you re-evaluate what was the best purchase of your week, and what you could have done differently.
Podcasts and the advice out there
While I wash the dishes, I listen to the Budgets & Cents podcasts, a great, light-hearted series of podcasts on budgeting and money. But there are lots out there you can learn from. Learn from someone that has been there, has done that and has bought the t-shirt, as they say.
Did I not mention a foolproof method to budgeting? Let me know!’