Financial independence

Five budgeting essentials to help you get a grip on your financial life today

I used to be really bad with money. At first it made sense that I couldn’t save – I lived in London, and was working minimum-wage internships. I had to pick up two extra side hustles to pay rent. Then I started earning more – I could comfortably afford my monthly expenses and would have had plenty left over… except that I started spending more.

I’ve changed how I look at money since then, and created new habits for myself. I want to help you use the same tools to improve your financial life.

One of my long term goals is ‘Financial Independence’ – to get to the point where I have enough money saved that I can choose how and when I work. It’s not as much of a fanciful dream as it might sound. For a great introduction to the topic, I recommend reading ‘Your money or your life’ by Vicki Robin and Joe Dominguez.

Photo by Steve Johnson on Unsplash

To get near to achieving Financial Independence there are two key things to master: increase your savings rate (i.e. the amount of money you put into savings from your salary each month), and decrease the amount you spend regularly. When I was saving for the deposit, I aimed for about a 60% or higher savings rate… The mortgage has pretty much nixed that… but I’m trying to figure out what the new possible is.

In this short article, I want to share the practices that have had the biggest impact on my savings rate, which in many ways is the key to this whole long-term financial independence thing. Improving that saving rate has honestly taken three years and it’s still not there – there are good months and bad months, peaks and troughs.

The best thing to help me keep to budget is discipline and willpower.  If I slack and spend where I don’t need to, sacrifice my longer term goal for 10 minutes of take-away satisfaction, then that savings rate will suffer. You can go down fun rabbit holes about how to calculate savings rates, but I’ll skip that for now – whichever method, lowering your spending will up your rate. These are the 5 super assists to budgeting that can make the biggest difference.

1. Order your weekly shop online

We, human type folk, are terrible at maths. Ask us to keep a running total as we go around a busy, distracting supermarket or add up between trips and you’re going to be as accurate as a blunderbuss sniper. While many FIRE writers advise hitting up Aldi, Lidl and Iceland to get those cheap prices, I feel that you’re still running the mathematical gauntlet, unless you shop identically each week.

Ordering online and using a comparison tool like My Supermarket will let you get a total spend for your shopping and tell you the cheapest place overall for that list – if said retailer delivers, you may even save overall by getting it delivered. After all, time has value and you may save more than enough to cover the delivery charge.

Photo by Jonathan Borba on Unsplash

Ok, you may lose out on unexpected ‘reduced price’ items, but you are spared the willpower drain of resisting impulse purchases – purchases the stores are designed to encourage. Plus, My Supermarket will let you know when there are cheaper deals available and you can swap out items in your basket for the cheapest available.

Sitting at home, tea in hand, you can see the total and make an informed decision – if you budget £50 a week for food, you won’t get a nasty surprise at the till and can adjust as you go. Ordering online will let you stay in budget, the only caveat is…

2. Meal prep, no excuses

…you have to actually stick to that food plan and eat what you bought. That seemingly sarcastic advice is in fact truly important and sincere. We waste horrendous amounts of food in the UK – I’m looking at you, salad leaves – and a lot of that is us failing to stick to meal plans and popping into Pret to spend 5 times as much as our home cooked food would have cost us. Fetch the sackcloth and ashes, this is my biggest regular failing – if I haven’t sorted my lunch, 2 minutes away is £6 of pre-prepped, carb heavy solution.

Photo by Ella Olsson on Unsplash

Hey, they’ve got a great business model, but I’m not in this for their bottom line. So, by batch cooking, pre-packaging and packing, you can resisting the Subway siren call and keep to that budget.

It helps that I enjoy cooking a great deal – I like going out to cocktail bars for creative new drinks too, but by prepping at home I both saved a lot of money and know a lot more about cocktail design. On that note the Gibson is a vastly underrated martini, though I still love a dry, dirty martini.

This is an older post from a former blog: all of this is a lot easier in the time of COVID-19! No more popping to a shop for a Pret salad, or chilling out in a pub for ages…

3. Phone

It’s a very simple rule – if you’re going to say ‘Millennials are strapped and can’t spare any money for savings, FIRE is for elites only’, you’re going to have to show me your phone. 95% of UK residents aged 16-34 own a smartphone, which drops to only 91% of 35-44 year olds.

The average monthly phone bill is £45.60 and many people I know signed up for a year’s contract of £63 a month… which doesn’t include the handset. In total, that’s £756 a year, not including what gets spent on the latest model of the phone as the start-up cost. This is what I call skintessential – something supposedly quintessential to modern life that drains your bank account mercilessly. I think I found some potential savings for the journalists saying FIRE is only for the elites.

Sorry, I got a little light headed up on my soapbox there.

As friend of the blog and excellent chap The Escape Artist has shown, you don’t need to be spending more than £7.50 a month. At £10 per month with GiffGaff, I’m splurging relatively. That more than covers the phone calls and texts I make, though the data usage can be tight… but here’s the thing – I adjust my habits.

The easy response when you find yourself hitting a limit is to spend more on that thing. But often it’s far better to try and change your habits and spend less. In this case, knowing that hours of internet video watching isn’t a super productive use of my time, I cut down on it and only do data heavy watching off my home broadband.

If you don’t want to pull up the calculator app, the difference between a £10 gift bag with GiffGaff and a £63 contract with Apple is £636 a year. It’s not peanuts, is it?

4. Monzo

I’m going to write a longer report on this, Monzo has really changed how I spend in the last two years. Monzo is not the only digital bank, but it is the first one I noticed, partly because of the bright orange debit cards. It feels like the GiffGaff of the banking sector, and I mean that as a major compliment.

The key appeal of Monzo is the automatic budget tracking and setting and I would suggest that it’s pretty essential if you want to get more in touch with your finances. Many folk check their spending at monthly budgeting sessions, and I’ve seen many a recommendation to literally write down on a notepad everytime you spend money for a month. That would work, but it’s laborious.

Monzo takes the laboriousness away, automatically tracking the spend for you and guessing at the category of that spending.  This is merciless, but brilliant. You can also set yourself a monthly spending budget for how much you want to spend overall, and also budget limits for sub-categories like travel (remember when we could leave the house?!) and groceries. At any point, I can check how I’m doing against my budget and this reins me in – when I see exactly how much I’ve got left this month, I can’t cloud this potential purchase in mental fog and write it off with… ‘eh, it’ll be fine at the end of the month.’ Nope, it’s there and that reality check has really helped me.

Photo by Toa Heftiba on Unsplash

The other lovely feature of Monzo is its automated round-up savings pots – this is a really easy way to painlessly set aside small amounts as the banking app automatically rounds up the money you pay to the nearest pound and adds that extra into a sneaky little pot. Over the past two years I’ve saved probably nearly £500 total through their sneaky, delightful savings pot. This is a great way to gradually build up a fun fund without even noticing that you’re doing so.

But the final big kicker to help you manage your money?

5. Monthly budgeting together

This may be the simplest and most impactful method – sitting down and consciously doing your monthly finances with a partner. If you don’t have a partner, maybe you could make an accountability buddy? Maybe you have flatmates who also want to work on their longer term financial goals? These monthly conversations are a great chance to be honest about how that month went, to share success and not brush slip-ups aside.

Our tricksy psychology is great at making us drop higher order wants in order to satisfy short term cravings – in a similar way, it’s a lot easier to write mistakes off if it’s only to ourselves. While this is ultimately an individual matter, checking in objectively with another person is a power assist to keep to your goals.

My fiancee is much more disciplined with her money than I am, so for real, the first few times we sat down to go through it together I found myself cringing with frustration at seeing how much I was spending in black and white. Which was totally compensated for in the pride she felt in me (and I felt in myself) when I started really hitting good savings rates.

Have you tried any of the actions we suggest on this list? What are you going to have a go at next? What is your biggest budgeting challenge?

2 thoughts on “Five budgeting essentials to help you get a grip on your financial life today”

    1. Yup – we definitely like to do the same before we head out anywhere, and review it when we get back to keep an eye on how we’re doing. The monthly sit down to go over our budget (with a glass of wine, often!) also helps us each to keep track of how we’re doing and prompt us to keep track of our goals.

      The peace of mind part is really important too – knowing I’ve had a good month just gone and I’ve got sensible plans for the next one allows me to relax in a way that my former, much more hectic approach to money never could.

      Like

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